TMI BlogChanges in excise, customs and service tax through Finance Bill, 2003X X X X Extracts X X X X X X X X Extracts X X X X ..... soft drinks 3) Polyester Filament Yarns 4) Air Conditioners and components 5) Motor Cars The duty incidence on all these items will be 24% (16% Cenvat + 8% SED) as against 32% earlier. 1.2 The 4% rate of excise duty without Cenvat has been abolished. Some of the items attracting this rate have been exempted from excise duty and rest have been taken to 8% rate. The 8% rate will now be with Cenvat credit. As a consequence, the following items have been exempted from excise duty: 1) Bicycle and parts 2) Toys 3) Mosaic tiles 4) Utensils and kitchen articles of metals 5) Knives, spoons and similar items of kitchenware/tableware 6) Unbranded surgical bandages 7) Articles of wood 8) Imitation zari 9) Adhesive tape 10) Tubular knitted gas mantle fabric for use in incandescent gas mantles 11) Umbrellas 12) Walking sticks, riding-crops and like 13) Articles of mica 14) Kerosene pressure lanterns 15) Glasses for corrective spectacle lenses, flint buttons 16) Registers, accounts books, etc. In addition, the following goods have also been exempted from excise duty: Recorded audio CDs Slag arising in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... will pay excise duty on the normal transaction value at depots. 4) For starches falling under heading 11.03, labeling, re-labeling of containers and packing from bulk to retail packs or adoption of any other treatment to render the product marketable to the consumers has been declared as amounting to manufacture. 5) Excise duty on chassis of motor vehicles has been increased from 16% to 16% plus ₹ 10,000/- per chassis. 1.6 Cement Excise duty on cement has been increased from ₹ 350/- per metric tonne to ₹ 400/- per metric tonne. Excise duty on cement cleared in bulk has been increased from ₹ 332 per metric tonne to ₹ 382 per metric tonne. Excise duty on cement clinkers and on cement made by mini cement plants has been increased from ₹ 200/- to ₹ 250/- per metric tonne. 2. Textiles 2.1 Major changes have been proposed in the duty structure applicable for textiles so as to remove a large number of exemptions, withdraw deemed credit scheme and to complete Cenvat chain right from fibre/yarn to the garment stage. In brief, the following are the important changes: (a) Yarns: 1) 8% excise duty is bei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y made garments. (c) Blanket of wool and shoddy yarn below certain price. The above list is not exhaustive. For full details, the Explanatory notes, clauses of Finance Bill and the notifications may be referred to. 2.2 While changes in the rates of excise duty in respect of textiles (except where the present duty is nil) will come into effect immediately w.e.f. 1.3.2003, the withdrawal of exemptions, removal of scheme of deemed credit and removal of goods from SSI exemption scheme will come into force w.e.f. 1.4.2003. The Government have also decided that job work facility will be made available to the textile sector and a separate procedure would be devised to ensure that the large number of powerlooms in the decentralized sector are not inconvenienced in any way and are exempted from maintenance of central excise records. The duty liability will be on the supplier of the raw materials to the job workers. The Government is very keen to see to it that there is absolutely no harassment to the manufacturers coming into excise net for the first time. Chief Commissioners and Commissioners are requested to meet all those sectors of the trade who would be liable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Drug intermediates used captively in the factory of production has been exempted from excise duty. 8. Small Scale Industries Exemption Scheme 8.1 With effect from 1.4.2003, SSI exemption will be withdrawn on - (a) Ceramic tiles. Printed ceramic tiles made from duty paid tiles outside the factory will, however, be exempt from excise duty. (b) Stainless steel patties/pattas. (c) Woollen yarn, shoddy yarn. 8.2 Value of exempted goods (excluding exports) will be included for calculating the limit of ₹ 3 crores for eligibility under SSI exemption with effect from 1.4.2003. 9. Medicinal Toilet Preparations Changes have been made in respect of duty structure applicable to medicines and toilet preparations containing alcohol under the M TP Act, 1955. These are given below: 1) The amendment to M TP Act, 1955 carried out vide Finance Act, 2000 will now come into force w.e.f. 1 st March, 2003. 2) Duty on toilet preparations containing alcohol or narcotic substances has been reduced from 50% to 16%. 3) Duty on medicines containing alcohol or narcotic substances has been reduced from 20% or specific rates to 16%. 4) Full exemptio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... duty would be leviable on the basis of such higher RSP affixed later on. (b) Assume powers to enable the government to ascertain the RSP of goods having no RSP declared or the declared RSP being tampered with, obliterated or altered; and (c) Assume powers to make rules for such ascertainment. 12. Service Tax 1) Rate of service tax is proposed to be raised from 5% to 8% (from the date of enactment of Finance Bill). 2) Service tax @ 8% is proposed to be imposed on the following services (to be effective from a date to be notified). a) Commercial vocational institutes, coaching centers and private tutorials. b) Technical testing and analysis (excluding health and diagnostic testing), technical certification. c) Maintenance and repair services namely, Annual Maintenance Contracts (AMC) and other maintenance services; authorized repair services. d) Commissioning and installation services. e) Business promotion and support services including customer care services. These services include launching of products, customer education programmes, conduct of seminars, data warehousing, help desk services, managing front offices, enquiry ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng companies registered as private limited companies, and dealers registered with any sales tax authority and whose turnover had exceeded ₹ 50 lakhs in the preceding financial year. Exemption from payment of service tax for these categories is now being given a legal backing through suitable amendments in the provisions of Finance Act, 1994 [clause 152(1) of the Finance Bill]. 12.3 Service tax will now cover a number of new assesses. It is imperative that the Commissioners apprise the potential assessees of the basic features of Service Tax Scheme, its procedures and obligations well in advance. It would be useful if some meetings with the assessees are also conducted in the Commissionerates to explain the features of Service Tax to them. 13. Default in payment of duty Under the existing procedure, in certain cases of default in payment of duty assessed under rule 8(3) of the Central Excise Rules, the manufacturer is denied the benefit of utilization of Cenvat credit for certain period. This is being done away with, and even in cases of default, there will be no denial of the credit nor the facility of paying duty in monthly instalments be withdrawn. A s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of excise duty. In this case the transaction value for charging excise duty shall be calculated as follows: Value = Price-cum-duty = ₹ 100/- (1 + Rate of excise duty) / 100 Subsequently, it was found that the price-cum-duty of the goods was in fact ₹ 140/- as the assessee had collected ₹ 20/- separately. Such additional consideration shall be deemed to include the excise duty payable on such goods. Accordingly, the revised value of such goods shall be calculated as follows: Value = Price-cum-duty = (120+20)/1.2 = ₹ 116.67/- (1 + Rate of excise duty) / 100 Illustration 3: Suppose the assessee has paid duty at 20% when price-cum-duty was ₹ 120/-. Subsequently, it is found out that the rate of duty was in fact 30%, and the assessee has not collected anything over and above ₹ 120/-. In such a case, the value for the purpose of charging duty will be: ₹ 120/1.3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f central excise duty on other products. Such diversion simply implied payment of a greater amount of duty through account-current on the products exempted under the said notifications thereby resulting in unintended benefit. The following illustration shows how the scheme was being misused: Illustration: Suppose duty payable on the goods was ₹ 100/- and the duty paid on inputs for the manufacture of said goods is ₹ 20/-. What the notification No.32/99-CE and 33/99-CE envisage is that the manufacturer will utilize the full credit in respect of inputs and pay only ₹ 80/- in cash, which would be subsequently refunded to him. However, there are cases where a manufacturer did not utilize the input credit and paid the entire duty of ₹ 100/- in cash. The credit of ₹ 20/- was being kept by him in reserve to be utilized on some other goods not covered under the exemption notifications. There were also situations when the assessee was manufacturing two goods, one covered under the above notifications, and the other outside. What they were doing was to utilize the entire input tax credit for payment of duty on the product not covered under the exe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Division, Indian Oil Corporation, Digboi (clause 146(1) of the Finance Bill). 16.6 Under rule 57R(8) of the Central Excise Rules, there were some disputes as to whether the credit was admissible in the case of manufacturers who claim revenue expenditure in respect of amount of duty paid on the finished goods in the profit and loss account. It was argued that the manufacturer can be said to have claimed revenue expenditure in respect of the duty paid on the finished goods through modvat credit. Consequently, it was argued that the credit taken of the duty paid on the capital goods was not permissible. 16.7 As this was not the intention, rule 57R(8) and 57R(5) have been amended retrospectively with effect from 23.7.1996 so as to delete the reference to revenue expenditure. Credit would be admissible so long as the manufacturer does not claim depreciation under section 32 of the Income Tax Act, 1961 in respect of that part of the value of capital goods which represents the amount of specified duty on such capital goods. Consequently, on enactment of the Finance Bill, 2003, all pending cases may be decided accordingly in the light of amendment made [clause 141 (1) of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oins has been reduced from ₹ 250 to ₹ 100 per 10 grammes. 21. National Calamity Contingent Fund For replenishment of the above fund, a duty of ₹ 50 per metric tonne has been imposed on imported crude oil. A duty of 1% also has been imposed on polyester filament yarn, two-wheelers and motor cars. The imposition on these items will be valid for one year (upto 29.2.2004). The goods covered under the NCCD earlier under 7th Schedule of Finance Act, 2001, has been amended by the Thirteenth Schedule [read with clause 126(1) and 161 of the Bill]. 22. A number of legislative changes have been made in the Central Excise Act as also the Customs Act. Finance Bill may please be referred to for details. All these changes, unless otherwise specified, will come into force from the date of enactment of Finance Bill, 2003. 23. In the explanatory notes for the last year s budget it was clarified that for computing the CVD, only the value of imported article as determined under section 14 of the Customs Act, 1962 , including the landing charges, if any and the basic customs duty chargeable at the rates specified in the First Schedule to the Cus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed. 8) Interest on advance deposit not to be included in the case of goods made to specification of the buyer unless there is specific evidence that such deposit has the effect of lowering the price. 9) Finance Act, 1989 is being amended to provide for punishment of specified persons if the carrier fails to pay the Inland Air Travel Tax collected from the passengers to the credit of the Central Government. 10) The existing provision of prior approval of show cause notice by the Chief Commissioner/Commissioner is being withdrawn and the earlier position of approval by the proper officer is being restored. 11) The provisions regarding appeal to the High Court are being modified so as to provide that in respect of appeals against orders of the Tribunal passed on or after 1.7.2003, the High Court, instead of referring the issue to the Tribunal, will itself formulate the question of law and decide. 12) The name of the Customs, Excise and Gold (Control) Appellate Tribunal is being changed to Customs, Excise and Service Tax Appellate Tribunal. 13) The jurisdiction of the Advance Ruling Authority is being expanded so that it can decide on mat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be liable to pay duty on such goods. 24) Section 113 of the Customs Act is being amended so as to provide that this section applies to offences in relation to all exports, and not on dutiable or prohibited exports only. 26. Revenue statements 26.1 Though this issue is not directly linked with the budget, but is being reiterated in view of the difficulties faced in the Board regarding timely receipt of information on revenue realization. Despite clear instructions, revenue figures are not being posted in CRRS site by some of the Commissionerates by the due dates. I would like to reiterate that from this month onwards, all Commissioners must ensure that the revenue figures are put on the CRRS site on due dates. It has also been noticed that on many occasions, the revenue figures are being changed off and on. This needs to be avoided. 26.2 I am enclosing a copy of monthly revenue statement which should be sent by the Chief Commissioners in respect of the commissionerates in their jurisdiction. This statement for a particular month must be sent so as to reach by 25th of the next month positively (Annexure I). This statement is in addition to other revenue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 092634), Shri Alok Shukla, Deputy Secretary, TRU (Tel No.23092753) or Shri V. Sivasubramanian, Deputy Secretary, TRU (Tel No. 23092236). Copies of the FM s speech, notifications, Finance Bill etc, are forwarded herewith. These will also be available on the department s website soon after the conclusion of FM s speech. With regards, Yours sincerely, (Gautam Ray) To All Commissioners of Customs and Central Excise Annexure PRICE DATA Report for the period Commodity Chapter No Date Description of goods Heading/sub-heading No. Ex-factory Price (Rs.) Excise duty paid Wholesale price inclusive of all taxes (Rs.) Retail price Remarks 28.2.2003 7.3.2003 15.3.2003 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... RU should be sent by name to Shri D.K.Pandey, Under Secretary, Tax Research Unit, R.No.146, North Block, and New Delhi- 110001. 7. Reports should be in respect of items specified below:- (i) Petrol (ii) High Speed Diesel Oil (iii) Spun Yarn (other than pure cotton) (iv) Cement (v) Woolen Yarn and Fabric (vi) Polyester, Nylon and Viscose Filament Yarns (vi) Ceramic Tiles (vii) Cotton fabrics, processed (viii) Man made fabrics, processed (ix) Made-up textile articles (x) Ready made garments, including knitted garments (xi) Tyres (for replacement), also ADV tyres (xii) Medical equipment (xiii) Biscuits (xiv) Scented supari (xv) Paper made from at least 75% unconventional raw materials (xvi) Wood free particle or fibre board made from agrowaste (xvii) Refined edible oils (xviii) Vanaspati (xix) Bakery shortening (xx) Margarine and similar edible preparations (xxi) Matches (xxii) Aerated waters (xxiii) Motor cars (xxiv) Air conditioners (xxv) Sugar confectionery, excluding white chocolate (xxvi) Bicycles - Circular - Trade Notice - Public Notice - Instructions - Office orders Tax Management Indi ..... 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