BUDGETARY CHANGES IN CENTRAL EXCISE

[Mr. M. GOVINDARAJAN]

The Finance Minister submitted the Finance Bill, 2017 (‘Bill’ for short) in the Lok Sabha on 01.02.2017.  In this article the changes reflected due to the Finance Bill and the notifications issued besides the bill  in central excise are to be discussed.

Changes in Central Excise Act, 1944

The Bill does not bring many a change in the Central Excise Act.  Only changes are brought in the provisions related to Advance Rulings and Settlement Commission.  The provisions relating to Advance Rulings are dealt with in Chapter IIIA of the Act from Sections 23A to 23H.  The provisions relating to Settlement of cases are dealt with in Chapter V of the Act from Sections 31 to 32PA.

Changes in relation to Advance Ruling

Definition of ‘Authority’

Clause 111 of the Bill seeks to substitute the definition of ‘Authority’ under Section 23A(e) of the Act which defines the term ‘Authority’ as the Authority to Advance Rulings as defined in clause (e) of Section 28E of the Customs Act, 1962.

Omission of Section 23B

Clause 112 of the Bill seeks to omit Section 23B which provides that no proceeding before, or pronouncement of advance ruling by, the Authority under this Chapter shall be questioned or shall be invalid on the ground merely of the existence of any vacancy or defect in the constitution of the Authority.

Enhancement of fee for Advance Ruling

Section 23C (3) of the Act provides for the payment of fee for filing application before Authority for Advance Ruling.  The said section provides that the application shall be made in quadruplicate and be accompanied by a fee of two thousand five hundred rupees.  Now the fees is enhanced four times vide clause 113 of the Bill.  The new fee leviable is ₹ 10,000/-.

Disposal of application for advance ruling

Section 23D (6) provides that the Authority shall pronounce its advance ruling in writing within ninety days of the receipt of application.  Clause 114 of the Bill seeks to substitute six months for ninety days.

Transitional provision

Clause 115 of the Bill seeks to insert Section 23-I.  The new section provides that on and from the date on which the Finance Bill, 2017 receives the assent of the President, every application and proceeding pending before the erstwhile Authority for Advance Rulings (Central Excise, Customs and Service Tax) shall stand transferred to the Authority from the state at which such application or proceeding stood as on the date of such assent.

Changes in relation to settlement of cases

Application by any person other than an assessee

Section 32E of the Act provides for the procedure to file application for settlement of cases.  Clause 116 of the Bill seeks to insert a new sub section (5) to Section 32E.  The new Section 32E (5) provides that any person other than an assessee, may also make an application to the Settlement Commission in respect of a show cause notice issued to him in a case relating to the assessee which has been settled or is pending before the Settlement Commission and such notice is pending before an Adjudicating Authority, in such manner and subject to such conditions as may be prescribed.

Report to be furnished to Settlement Commission

Section 32F (3) of the Act provides that where an application is allowed or deemed to have been allowed to be proceeded, the Settlement Commission shall, within seven days from the date of order, call for a report along with the relevant records from the Principal Commissioner of Central Excise or Commissioner of Central Excise having jurisdiction and the Commissioner shall furnish the report within a period of thirty days of the receipt of communication from the Settlement Commission.

Clause 117 (i) of the Bill seeks to substitute, for  the words ‘Commissioner of Central Excise having  jurisdiction and the Commissioner’, the words ‘Commissioner of Central Excise or Principal Additional Director General of Central Excise Intelligence or Additional Director General of Central Excise Intelligence, as the case may be, having jurisdiction and such Commissioner or Additional Director General’.

Rectification of mistake

Section 32F (5) provides for the issuance of order by Settlement Commission.  Clause 117 (ii) of the bill seeks to insert a new sub section (5A).  The newly inserted Section 32 (5A) provides that the Settlement Commission may, at any time within three months from the date of passing of the order under Section 32F (5), amend such order to rectify and error apparent on the face of record, either suo motu or when such error is brought to its notice by the jurisdictional Principal Commissioner of Central Excise or Commissioner of Central Excise or Principal Additional Director General of Central Excise Intelligence or Additional Director General of Central Excise Intelligence or the applicant.  No amendment which has the effect of enhancing the liability of the applicant shall be made under this sub-section, unless the Settlement Commission has given notice of such intention to the applicant and the jurisdictional Principal Commissioner of Central Excise or Principal Additional Director General of Central Excise Intelligence or Additional Director General of Central Excise Intelligence, as the case may be, and has given them a reasonable opportunity of being heard.

Changes in Rules

Change in Central Excise Rules, 2002 – Remission of duty

Notification 5/2017-Central Excise (N.T.), dated 02.02.2017 provides for the insertion of Section 21(2) in Central Excise Rules.  Rule 21 provides that where it is shown to the satisfaction of the Principal Commissioner or Commissioner, as  the case may be that goods have been lost or destroyed by natural causes or by unavoidable accident or are claimed by the manufacturer as unfit for consumption or for marketing, at any time before removal, he may remit the duty payable on such goods, subject to such conditions as may be imposed by him by order in writing.

The first proviso provides that where such duty does not exceed Rs.10,000/- the provisions of this rule shall have effect as if for the expression Principal Commissioner or Commissioner, as  the case may be, the expression " Superintendent of Central Excise" has been substituted:.

The second proviso provides that where such duty exceeds  ₹ 10,000/-  but does not exceed ₹ 1 lakh, the provisions of this rule shall have effect as if for the expression Principal Commissioner or Commissioner, as  the case may be, the expression "Assistant Commissioner of Central Excise or the Deputy Commissioner of Central Excise, as the case may be," has been substituted.

The third proviso provides that where such duty exceeds  ₹ 1 lakh  but does not exceed  ₹ 5 lakhs, the provisions of this rule shall have effect as if for the expression ‘Principal Commissioner or Commissioner’, as  the case may be, the expression "Joint Commissioner of Central Excise or Additional Commissioner of Central Excise, as the case may be" has been substituted.

Para 2 of the Notification seek to renumber Section 21 as 21(1) and insert the new sub-rule 21(2) which reads as follows:

Rule 2(2) provides that the authority referred to in sub-rule (1) shall, within a period of 3 months from the date of receipt of the application, decide the remission of duty.  The period specified in this sub rule may, on sufficient cause being shown and reasons to be recorded in writing, be extended by an authority next higher than the authority before whom the application for remission of duty is pending, for a further period not exceeding 6 months.

This amendment in Rule 2 comes into effect from 02.02.2017.

Changes in CENVAT Credit Rules, 2004

Rule 6(3D) of CENVAT Credit Rules, 2004 provides that payment of an amount under sub-rule (3) shall be deemed to be CENVAT credit not taken for the purpose of an exemption notification wherein any exemption is granted on the condition that no CENVAT credit of inputs and input services shall be taken.

Para 2 of Notification No.4/2017- Central Excise (NT), dated 02.02.2017, seeks to insert a proviso to Rule 6(3D) – Explanation (3).  The proviso provides that this clause shall not apply to a banking company and a financial company, engaged in providing services by way of extending deposits, loans or advances.

Rule 10 provides for the procedure for transfer of CENVAT Credit. Para 3 of the Notification seeks to insert sub-rule (4).  The new sub rule (4) provides that subject to the provisions contained in sub-rule (3), the transfer of CENVAT credit shall be allowed within a period of three months from the date of receipt of application by the Deputy Commissioner of Central Excise or Assistant Commissioner of Central Excise, as the case may be.  The period specified in the sub-rule may, on sufficient cause being shown and reasons to be recorded in writing, be extended by the Principal Commissioner of Central Excise or Commissioner of Central Excise, as the case may be, for a further period not exceeding six months.

The said changes come into effect from 02.02.2017.

Change in Pan Masala Packing Machines (Capacity Determination and Collection of Duty) Rules, 2008

Vide Notification No. 2/2017-Central Excise (NT), dated 02.02.2017 provides to substitute item (iv) of Form No. 2 which is described as follows:

Sl. No.	Duty	Duty ratio for plan masala	Duty paid (in Rs.)	Duty ratio for pan masala containing tobacco	Duty paid (in Rs.)
(1)	(2)	(3)	(4)	(5)	(6)
1	The duty leviable under the Central Excise Act	0.3725		0.7864
2	The additional duty of excise leviable under Section 85 of the Finance Act, 2005	0.1765		0.1165
3	National Calamity Contingent Duty leviable under Section 136 of the Finance Act, 2001	0.4510		0.0971
4	Education Cess leviable under Section 91 of the Finance Act, 2004	0.0		0.0
5	Secondary and Higher Education Cess leviable under Section 136 of the Finance Act, 2007	0.0		0.0

This notification comes into effect from 02.02.2017.