Withdrawal of exemption of CVD on import of certain Drugs, Medicines, Diagnostic kits and Life Saving Drugs vide Notification No. 6/2016-Cus. Dated 28.01.2016 – An Analysis on impact under Customs and Central Excise

[surya narayana]

Dear TMI Readers,

All of you are kindly aware, on 28.01.2016 CBE & C issued Notification No. 6/2016- Cus. Withdrawing the exemption by way of omitting certain products from payment of CVD on import of certain Drugs, Medicines, Diagnostic kits and life saving Drugs (covered under List 3 and 4 ) provided under Sl.No. 147 A of the Notification No. 12/2012-Cus. dated 17.03.2012 as amended without any condition.

Through this article I am putting a sincere effort to analyse the impact of the amendment by the above notification on importers and more specifically on the assesses of Pharmaceutical Industry under Central Excise. While doing so, I have discussed different aspects as detailed below:

Background:

• The exemption given under Sl.No. 147A of the Notification ibid was also extended (covered under List 3 & 4 of Customs Notification No. 12/2012-Cus) to Central Excise for the said products manufactured in India from payment of Excise Duty under Sl. No. 108A of Notification No. 12/2012-CE Dated 17.03.2012 as amended without any condition. Accordingly, the assessees who are manufacturing such Drugs (Bulk Drugs) and Medicines (Formulations or P or P Medicines and diagnostic kits) are availing this exemption from payment of excise duty.

• In terms of Section 5A(1A) of Central Excise Act,1944, when there is an absolute exemption available from payment of duty, no assessee can pay duty on his own volition and necessarily have to avail the exemption .This mandatory requirement was made effective from 13.05.2005.

In view of the above, once the assessee availing exemption under central excise, they have to fulfill the conditions prescribed under Rule 6 of Cenvat Credit Rules,2004 . The important conditions under the said rule briefly, are….

1. Not to avail Cenvat Credit on the exclusive inputs, Capital Goods and Input services used in such exempted Goods;
2. Maintain separate accounts for the common inputs and input services used in both the exempted and dutiable products;
3. If separate accounts for common inputs not maintained, required to reverse an amount equal to certain percentage ( 6%) on the value of the exempted product at the time of clearance; or
4. to reverse the proportionate Cenvat credit as per the formulae prescribed under Sub - rule 3A following the procedure including intimating the option chosen in this regard to the Excise Authorities which cannot be withdrawn during the remaining period of the Financial year in which such option is exercised.etc.,

Effect of withdrawal of the exemption:

1. The importers of the omitted/deleted items under Notification No. 6/2016-Cus, Dated 28.01.2016 have to pay Additional Duty of Customs (CVD) on the imports effected from 28.01.2016.

2. The manufacturers of such omitted/deleted products in India are also required to pay the applicable rate of excise duty and need not required to follow the procedures under Rule 6 of Cenvat Credit Rules,2004 on the clearances made on or after 28.01.2016.

3. The manufacturers/Assessees can now take Cenvat Credit on exclusive and common inputs and input services received on or after 28.01.2016 used in such products.

4. The manufacturers/Assessees can also avail proportionate cenvat credit on such exclusive/common inputs/input services lying in stock and also on the inputs/input services contained in work-in-progress and Finished Products lying in stock as on 28.01.2016 after intimating the Department by way of a letter submitting the detailed workings of such proportionate credit.

5. Indeed it is going to be a great relief to the assessees from the mandatory Compliance requirements on the Procedures of Rule 6 of Cenvat Credit Rules,2004 for cenvat credit availment.

For more clarity, the contents of Notification No.6/2016-Customs Dated 28.01.2016 together with the names of the items omitted /deleted from List 3 & 4 detailed below for ready reference and benefit of the readers.

GOVERNMENT OF INDIA

MINISTRY OF FINANCE

(DEPARTMENT OF REVENUE)

Notification No. 6/2016-Customs

New Delhi, the 28th January, 2016

In exercise of the powers conferred by sub-section (1) of section 25 of the Customs Act, 1962 (52 of 1962), the Central Government, being satisfied that it is necessary in the public interest so to do, hereby makes the following further amendments in the notification of the Government of India, in the Ministry of Finance (Department of Revenue), No. 12/2012-Customs, dated the 17th March, 2012, published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i) vide number G.S.R. 185(E), dated the 17th March, 2012, namely:-

In the said notification,-

(i) in the Table, against serial number 202, in column (3), in item (I), for entry in sub-item (g), the entry “NPK 13:05:26” shall be substituted;

(ii) in List 3, the goods specified against following item numbers shall be omitted, namely:-

(1), (3), (6), (8), (13), (14), (15), (20), (22), (24), (27), (30), (32), (35), (37), (39), (41), (43), (44), (45), (48), (51), (52), (55), (56), (57), (58), (59), (61), (62), (63), (65), (66), (72), (73), (77), (91), (95), (102), (105), (110), (113), (115), (116), (117), (118), (119), (120), (121), (125), (127), (128), (129), (130), (131), (132), (133), (139), (140), (171) and (179);

(iii) in List 4, the goods specified against following item numbers shall be omitted, namely:-

(1), (6), (12), (13), (40), (42), (55), (56), (73), (86), (95), (96), (97), (99) and (118).

[F.No. 332/24/2010-TRU (Pt.I)]

(Anurag Sehgal)
Under Secretary to the Government of India

Note: The principal notification No. 12/2012-Customs, dated the 17th March, 2012 was published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i) vide number G.S.R. 185(E), dated the 17th March, 2012 and last amended vide notification No. 4/2016-Customs, dated the 19th January, 2016, published vide number G.S.R. 86 (E), dated the 19th January, 2016..

Details of items omitted (deleted ) from the list 3 & 4 under the above Notifications

LIST – 3 ( 61 items omitted)

(1) Allopurinol
(3) Amiodarone
(6) Amifostine
(8) Atracurium besylate
(13) Carbidopa with Levodopa
(14) Cefoperazone
(15) Ceftizoxime
(20) Cefpirome
(22) Dacarbazine
(24) Desmopressin
(27) Dobutamine
(30) Disodium Pamidronate
(32) Gemcitabine
(35) Ifosfamide
(37) Interferon alpha - 2b/interferon alpha- 2a/Interferon NL/ Interferon alpha NL(LNS)
(39) Ketamine
(41) Levodopa (L-Dopa)
(43) Lamivudine
(44) Letrozole
(45) Leuprolide Acetate
(48) Mercaptopurine
(51) Methyl prednisolone
(52) Mitomycin
(55) Netilmicin
(56) Naloxone
(57) Nitroglycerine
(58) Micronised Progesterone or Injection Progesterone
(59) Octreotide
(61) Pilocarpine
(62) Podophyllotoxin
(63) Piperacillin
(65) Pralidoxime
(66) Prazosin
(72) Somatropin
(73) Streptokinase and Streptodomase preparations
(77) Tissue Plasminogen Activator
(91) Recombinant human Erythropoietin
(95) Lopinavir plus Ritonavir (co-formulation of Lopinavir and Ritonavir)
(102) Capecitabine
(105) Infliximab
(110) Interluekin-2
(113) Didanosine
(115) Indinavir
(116) Nelfinavir
(117) Nevirapine
(118) Stavudine
(119) Abacavir Sulphate
(120) Lopinavir
(121) Tenofovir Disoproxil
(125) Cisplatin
(127) Danazol
(128) Doxorubicin
(129) Etoposide
(130) Flutamide
(131) Ondansetron
(132) Paclitaxel
(133) Tamoxifen Citrate
(139) Exemestane
(140) Recombinant Human Interferon beta 1-a
(171) Rasburicase
(179) Posaconazole Oral suspension

LIst 4 ( 15 items omitted)

(1) Abciximab
(6) Anti-Haeomophilic Factor concentrate(VIII and IX)
(12) Anti-Rabies Normal Human Immunoglobulin
(13) Anti -D Immunoglobulin
(40) Follicle Stimulating Hormone [FSH]
(42) Filgrastim /Molgramostim (G- CSF/GM-CSF)
(55) Imatinib Mesilate
(56) Irinotecan
(73) Nalorphine
(86) Procarbazine
(95) Ritonavir
(96) Rivastigmine
(97) Rituximab
(99) Saquinavir
(118) Trastuzumab