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Acts, Rules, Regulation & Manual

Excise Rules

3 Rate structure for goods, other than petroleum:

3.1     The standard rate of excise duty (CENVAT) for non-petroleum goods has been increased from 8% to 10%. The increased rate would apply to all such goods that hitherto attracted the general rate of 8% except in a few cases where a fresh exemption or concession has been given. The lower rate of 4% is being retained. However, there are some items for which this rate has either been enhanced to the standard rate or fully exempted. These exceptions are discussed later.

3.2     Consequent to enhancement of the standard rate, the rates of duty on cement have also been revised upwards suitably. In the case of packaged cement manufactured by units other than mini-cement plants, excise duty has been increased from 8% to 10% for cement of declared retail sale price exceeding Rs. 190 per 50 kg bag or Rs. 3800 per tonne. On packaged cement of declared retail sale price not exceeding Rs. 190 per 50 kg bag or Rs. 3800 per tonne manufactured by such units, the rate of duty has been increased from Rs.230 per metric tonne to Rs.290 per metric. The composite rate of duty applicable to bulk cement manufactured by such units has been enhanced from „8% or Rs.230/- per metric tonne, whichever is higher‟ to „10% or Rs.290/- per metric tonne, whichever is higher‟. Corresponding changes have been made to increase the rates of duty applicable to cement manufactured by mini-cement plants too. The details are available in notification no.10/2010-Central Excise dated 27.2.2010.

3.3     Excise duty on cement clinker has been increased from Rs.300 per metric tonne to Rs.375 per metric tonne.

3.4     Large cars, Multi Utility Vehicles and Sports Utility Vehicles etc. and chassis thereof hitherto attracted excise duty rates of „20%‟ and „20% + Rs. 15,000 per unit‟. The ad-valorem component of both these rates has been increased from 20% to 22%. The specific component of duty on such vehicles remains unchanged.

4.     Petroleum Products:

4.1     The rates of excise duty on Motor Spirit (petrol) and HSD (diesel) have been increased by Re.1 per litre. The increase is applicable to both branded and unbranded products. The rates of duty on other petroleum products remain unchanged.

5.     Tobacco Products:

5.1     The rates of basic excise duty have been raised on all forms of tobacco and tobacco products (e.g. branded unmanufactured tobacco and tobacco refuse, branded „hookah‟ or „gudaku‟ tobacco, chewing tobacco, preparations containing chewing tobacco, jarda scented tobacco, snuff and its preparations, tobacco extracts and essences etc ; smoking tobacco, cut tobacco, smoking mixtures etc.), other than those which are already fully exempt. On some of these item notified under section 4A the rates of abatement are also being revised. The details are available in the Explanatory Notes. The rates of duty on „biris‟ remain unchanged.

5.2 The tariff sub-heading 240220 covering cigarettes has been restructured through suitable bill entries (clause 74 read with Ninth Schedule of the Finance Bill, 2010). The existing slab of filter cigarettes of length not exceeding 70 mm has been broken up into two slabs: filter cigarettes of length not exceeding 60 mm; and filter cigarettes of length exceeding 60 mm but not exceeding 70 mm. Corresponding changes have also been made in the Tariff Schedules for National Calamity Contingency Duty (NCCD) leviable under Finance Act, 2001 and Additional Excise Duty leviable under Finance Act, 2005. The basic excise duty (BED) on all cigarettes, other than cigarettes of length not exceeding 60 mm (both-filter and non-filter), has been increased. Some quarterly Post-Budget reports are being prescribed to monitor the production, clearance and revenue trend of cigarettes consequent upon these changes.

5.3     In respect of cigars, cheroots and cigarillos of tobacco, the basis of levy for both BED and AED is being changed from ad valorem to composite rates. The revised rates are: “10% or Rs.1227 per thousand, whichever is higher” (BED) and “1.6% or Rs.246 per thousand, whichever is higher” (AED). On the same basis, cigars, cheroots and cigarillos of tobacco substitutes will now attract BED of “10% or Rs.1473 per 1000, whichever is higher”.

5.4     Another important change in respect of tobacco is the shift to compounded levy under section 3A of the Central Excise Act on chewing tobacco and branded unmanufactured tobacco packed in pouches with the paid of packing machines. Notifications specifying these goods under section 3A and prescribing the rates of duty and the rules of procedure are being issued along with the Budget notifications. The scheme is analogous to the one already in operation for „guthka‟ and „pan masala‟ with the difference that the facility of input credit of the duty paid on bulk packs of chewing tobacco shall be available to the manufacturer of packaged products subject to the levy. It may kindly be noted that the scheme would come into effect on the 8th of March, 2010. The intervening period may be utilized to examine the scheme in all its aspects, identify the potential taxpayers and ensure that requisite declarations are filed on the date of commencement of compounded levy. Any difficulties in the operation of the scheme may kindly be brought to my notice urgently.

5.5.     Pan Masala Packing Machines (Capacity Determination And Collection of Duty) Rules, 2008 have also been amended to effect certain technical changes. A manufacturer is now allowed to remove goods, other than notified goods, from his factory during the period of abatement specified in rule 10 and the notified goods already produced before the commencement of said period can also be removed within the first two days of the abatement period.

6.     Clean Energy Cess:

6.1     A Clean Energy Cess is being imposed on coal, lignite and peat produced in India. This cess would be levied and collected as a duty of excise from coal mines. The rate of the cess, the date from which it will be effective and the rules and procedure for its collection shall be notified after the enactment of the Finance Bill, 2010. This cess would apply to imported coal as CVD. Being a new levy, I would request you to identify the potential taxpayers and examine whether the provisions of the Central Excise Rules, 2002 require modification in order to implement this levy. I shall be grateful if feedback in this regard, especially from Zones or Commissionerates with potential taxpayers, along with any comments or suggestions for the smooth implementation of this levy is sent to us latest by 15th March, 2010.

7.     Withdrawal of exemptions/ concessions:

7.1     A few exemptions or concessions have been withdrawn for following items.
  • Mosquito nets impregnated with insecticides
  • Microprocessor for computers (other than motherboard), Floppy disk drive, Hard disk drive, flash drive, CD/DVD and
  • Combo Drive meant for external use
  • Baby & clinical diapers and sanitary napkins
  • Open top sanitary (OTS) cans
  • Goggles, other than those for correcting vision
8.     Relief Measures:

8.1     Full exemption from excise duty has been provided in the following cases:

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  • Betel nut product known as “Supari”
  • Dementholised oil, Deterpenated Mentha oil, Spearmint/ Mentha Piperita oils and all intermediates and by-products of Menthol
  • Toy balloons made of natural rubber
  • Articles of bedding wholly made of quilted textile materials
  • Excise duty exemption on specified plantation machinery is being
  • reintroduced upto 31.3.2011
  • Goods supplied to mega power projects –(i) from which power supply has been tied up through tariff-based competitive  bidding, or (ii) awarded through tariff-based competitive bidding. Rule 6 (6) of the Cenvat Credit Rules is also being amended so as to allow Cenvat credit of duty paid on inputs used in the manufacture of such exempted supplies.
  • Few more specified raw materials for the manufacture of rotor blades for wind operated electricity generators
  • Self-loading/self-unloading trailers & semi trailers for
  • agricultural purposes (tariff item 8716 20 00)
8.2     Full exemption from excise duty presently available to 20 specified equipments for preservation, storage or transport of agricultural produce has been extended to apiary, horticultural, dairy,
poultry, aquatic & marine produce and meat as well as processing thereof.

8.3     Full exemption from excise duty is being provided to security inks manufactured by Bank Note Press Dewas and supplied to Bank Note Press Dewas, Currency Note Press, India Security Printing Press, Nasik, Security Printing Press, Hyderabad etc. Similarly full exemption is also being provided to Circulation Coins, blanks etc and scrap generated in the manufacture of blanks by India Government Mints at Mumbai, Kolkata, Hyderabad and Noida. The exemptions to these units are being provided by name and therefore the ownership of these units is not relevant for being eligible for the said exemption.

8.4     Concessional duty of 4% has been prescribed in the following cases:

  • LED lights/lighting fixtures
  • Replaceable kits for all household type water filters (except those operating on RO technology)
  • Corrugated boxes/ cartons manufactured by stand- alone manufacturers, subject to conditions
  • Latex rubber thread
8.5     A uniform concessional rate of duty of 4% is being prescribed for parts, namely batteries including battery chargers, electric motors and AC or DC motor controllers required for manufacture of all categories of electrical vehicles including cars, two wheelers and three wheelers (like „Soleckshaw‟) subject to actual user condition. This
concession will be available till 31.03.2013. Such vehicles will also be charged to excise duty @ 4%.

8.6     Refined serially numbered gold bars made from the ore/concentrate stage will now attract excise duty of Rs.280 per 10 grams (instead of 10% ad valorem) with Cenvat credit facility on inputs and capital goods.

8.7     The relaxation from brand name restriction under the general SSI exemption scheme has been extended to plastic bottles and plastic containers used as packing material.

9     Miscellaneous increase and rationalization:

9.1     Excise duty on DTA clearances of plain gold and silver jewellery manufactured by a 100% EOU is being increased from:

        (i)  Rs.500 per 10 gram to Rs.750 per 10 gram for gold jewellery; and

        (ii)  Rs.1000 per kg to Rs.1500 per kg. for silver jewellery.

9.2     The rates of excise duty are being equalized/ unified in the following cases:

  • maize starch, tapioca starch and potato starch at 4%
  • umbrellas, umbrella parts and umbrella cloth panels at 4%
  • ceramic tiles manufactured in kilns fired by not using electricity, and other ceramic tiles at 10%, with Cenvat credit.
10     Procedural simplification measures:

10.1     Small Scale sector:

10.1.1 There are two significant procedural relaxations/ concessions that have been made for the SSI sector. These are:
(i) Full Cenvat credit on capital goods in one instalment in the year of receipt of such capital goods in the factory

 (ii) Payment of duty on quarterly rather than monthly basis

For this purpose, amendments have been made in the CENVAT Credit Rules, 2004 and Central Excise Rules, 2002. These amendments come into effect on the 1st of April, 2010. The important point about these relaxations is that they are available to any assessee who is „eligible’ to claim SSI exemption regardless of whether he actually claims it or opts to pay duty. An “eligible” unit has been defined as one whose aggregate value of clearances did not exceed Rs. 4 crore in the preceding financial year. Moreover, the benefit is available to a unit that is eligible for the entire financial year even if it crosses the limit of Rs. 4 crore (aggregate value of clearances) during the year.

10.1.2     The date of filing of quarterly returns by SSI units is being aligned with the date for non-SSI units so that all
returns are required to be filed by the 10th of the month following the said quarter.

10.2     Other measures

10.2.1     Some of the other procedural simplification measures that are contained in the budget proposals are as under:
  • Pre-authentication of invoices has been dispensed with.
  • Benefit of allowing Cenvat credit to be reversed on roportionate basis (when common inputs are used for the manufacture of dutiable and exempt products) is being extended retrospectively for pending cases. Suitable provisions have been incorporated in the Finance Bill, 2010 (clauses 68 to 72)
  • Accelerated depreciation of the credit amount has been allowed for reversing credit taken on computers and computer peripherals when they are cleared after use in the factory
  • Movement of moulds, dies, jigs and fixtures by the main manufacturer to vendors (other than job-workers) without loss of Cenvat credit has been facilitated by suitably amending the Cenvat Credit Rules
  • In cases of voluntary payment of duty under section 11A (2B) of the Central Excise Act, it is being clarified that no penalty shall be imposed
  • Settlement of cases through the Settlement Commission has been liberalized by removing restrictions on the nature of cases that may be settled and the number of times the Commission may be approached by an assessee
11.     Other Legislative Proposals :

11.1     Among the important legislative provisions is the amendment of section 37 of the Central Excise Act, 1944 to enable the Central Government to make rules providing for deterrent action through the withdrawal of certain facilities to deal with evasion.

11.2     In the First Schedule to the Central Excise Tariff Act, amendments have been made to–

(i) Carry out editorial changes in sub- heading no.2712 20 through the
deletion of the entry covering chlorinated paraffin wax and insertion of new entries for paraffin wax.

(ii) Prescribe that certain processes in respect of goods falling under
chapters 68 and 76 as amounting to manufacture. These would come into effect immediately as the relevant provisions have been declared under the PCT Act.

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