Application of section 3A of the Central Excise Act, 1944 to Re-rolling Mills and Induction Furnaces - Reg. - Central Excise - 331/47/97-CX

Circular No. 331/47/97-CX dated 30/8/97 F.No. 314/61/97-TRU Government of India, Department of Revenue Tax Research Unit, New Delhi Subject: Application of section 3A of the Central Excise Act, 1944 to Re-rolling Mills and Induction Furnaces - Reg. I am directed to refer to the Ministry's letter No. B-31/7/97- TRU, dated 25.7.97 (Circular No. 326/42/97-CX) relating to application of section 3A of the Central Excise Act, 1944, to re-rolling mills, letter B-31/4/97-TRU (Circular No. 325/41/97-CX), dated 25.7.97, issued relating to induction furnace units and letter B-31/7/97-TRU, dated 1.8.97 (Circular No. 327/43/97-CX), and to say that some changes have been made (in these schemes) as indicated below. Now, section 3A of the Central Excise Act, 1944 in respect of induction furnace units and re-rolling mills would come into force w.e.f. 1.9.97, instead of 1.8.97 as originally intimated. For the goods cleared during the month of August, 1997, duty shall be charged at the rates prescribed in Notification No. 50/97-CE, dated 1.8.97. 2. Notification Nos. 56/97-CE to 59/97-CE and 43/97- CE(NT) to 45/97-CE(NT), all dated the 30th August, 1997 have been issued to amend Notification Nos. 47/97-CE, 48/97-CE, 30/97-CE(NT), and 31/97-CE(NT), all dated 1.8.97 and Notification No. 24/97-CE(NT), dated 25.7.97. Three Corrigendums dated 30.8.97 have also been issued to make certain corrections of typographical nature in Notification Nos. 51/97-CE 52/97-CE, both dated 1.8.97 and Notification No. 24/97-CE(NT), dated 25.7.97. Copies of all the above notification alongwith the corrigendums are enclosed herewith. 3. There is no major change in the basic scheme announced on 25th July, 1997 and 1st August, 1997 in both the cases i.e. for the induction furnace units and the hot re-rolling mills. 4. The modification made are indication below:- (a) There is a small modification in the definitions of 'd' and 'i' factors. The term "nominal central distance" has been re-defined vide amended Explanation II in sub-rule (3) of rule 3 of Hot Re-Rolling Steel Mills Annual Capacity Determination Rules, 1997, as the pinion center distance of the pinion stand connecting the last rolling mill drive of the finishing mill excluding any pinch roll, which is not a finishing stand. This should facilitate determination of 'd' for a hot re-rolling mill. The 'i' factor has been re-defined as the "reduction ratio of the gear box or of the pulley system or combination thereof." While determining the 'i' factor, speed increasers/ decreasers, if any, attached to the re-rolling mill may also be kept in view. (b) The values of 'w' factor have been modified. The slabs of nominal center distance and the values of 'w' have been changed. Rolling mills with 'd' of size above 410 mm, have been excluded from the purview of section 3A scheme. For value of 'w' against each slab of 'd' Notification No. 45/97-CE(NT) may kindly be seen. It may be seen that the slabs have been changed to "upto 110mm", "111 to 160mm" and so on upto "361 to 410mm". The slabs above "410mm." have been deleted thereby excluding such mills from the purview of section 3A. Such mills, that is with 'd' of size above 410 mm shall pay duty under section 3 of Central Excise Act at the rate of 15 per cent ad valorem. (c) Rule 5 has been added in the Hot Re-rolling Mills Capacity determination Rules, 1997, providing that in a case where the capacity determined as per the prescribed formula falls short of the actual production of the mill during the financial year 1996-97, the capacity will be deemed to be higher or the two i.e. the determined capacity on the basis of the formula or the actual production during the last financial year. Thus, if the capacity as determined by the formula is less than the actual production of 1996-97, then the annual capacity now shall be deemed to be equal to last year's production. (d) Explanations to notification Nos. 30/97-CE(NT), 31/97-CE(NT), 47/97-CE and 48/97-CE, all dated 1.8.1997 have been slightly modified. For details, please refer to the amending notification Nos. 56/97-CE and 43/97-CE (NT), both dated 30.8.97. (e) Rule 96ZO has been amended to allow abatement of duty, under sub-section (3) of section 3A of the Central Excise Act, 1944, for the induction furnace units which remain closed for seven or more days. If an induction furnace unit operating under section 3A is continuously closed for not less than 15 days, then per-payment of duty for the closure period is not to be insisted upon provided the unit has fulfilled all the conditions stated in sub-rule 2 of rule 96ZO. However, the above claim should be subject to verification by the jurisdictional Assistant Commissioner of Central Excise. If such a closure is for a reasonably long period, periodic verification about the continued closure should be done by the jurisdictional Assistant Commissioner of Central Excise. (f) The induction furnace units have also been allowed to pay duty in two equal instalments in a month instead of one. They can now pay duty in two equal instalments, the first instalment latest by the 15th of the month and the second instalment latest by the last day of the same month. There is no change in the amount of duty to be paid in a month. (g) For hot re-rolling mills of nominal centre distance below 161 mm. (instead of earlier 200 mm), a concessional rate of duty has been prescribed. The rate of duty will be Rs. 150/- per metric tonne vide first amended proviso to sub-rule (3) of rule 96ZP. It may also be observed that the stocks of re-rolled products lying with such mills will also be allowed to be cleared at a concessional rate of Rs. 150/- per metric tonne vide amended S.No. 3 of notification No. 50/97-Ce, dated 1.8.97. the rate of duty of Rs. 150/- per metric tonne will now be applicable w.e.f. 1.9.97 of units with mill size below 161 mm. is the place of earlier mill size upto 200mm. (h) Deemed Modvat credit has been provided to the downstream manufacturers who directly procure the hot re-rolled products from the manufacturing units operating undersection 3A. The payment for such procurement should be made by cheque drawn on his own bank account by the down stream manufacturer directly to section 3A manufacturers of the re-rolled products. A down stream manufacturer shall be given deemed credit of 12 per cent of the invoice price of section 3A manufacture. the manufacturer's invoice under section 3A may include freight, insurance, sales tax and other charges, etc. (i) The facilities of 'Job-Work' and 'Captive Exemption' are, however, being disallowed to induction furnaces and hot re-rolling mills paying duty under section 3A. Notification No. 214/86-CE, dt. 25.3.86 and 67/95-CE, dt. 16.3.95 have been suitably amended vide Notification No. 59/97-CE, dt. 30.8.97. 5. The modified schemes would come into operation from the 1st September, 1997. The goods manufactured during the month of August, 1997 can be cleared on a lumpsum payment of excise duty as was in the case of goods lying in stock on 31st July, 1997 and cleared subsequently. No Modvat credit, which lapsed on 1.8.97 shall be allowed to be utilised for this purpose. 6. The instructions contained in Ministry's letters referred to above in this letter may kindly be read in conjunction with the changes which have now been made. 7. For details, the notifications may kindly be referred to. Necessary action may be taken to implement the schemes. Any difficulty or doubt, error or omission may be brought to the notice of the undersigned urgently. Sd/- (P.R. Chandrasekharan) Director (TRU)