Finance Bill, 2003 — Salient features of the post budget amendments - Service Tax - B3/5/2003-TRU

Finance Bill, 2003 Salient features of the post budget amendments Letter F.No. B3/5/2003-TRU, dated 30-4-2003 Government of India Ministry of Finance (Department of Revenue) Central Board of Excise Customs, New Delhi The Finance Bill, 2003 has been passed by the Lok Sabha today. Consequent to the changes announced by the Hon'ble Finance Minister while moving the said bill for passing, Notification Nos. 67 to 69/2003-Customs, 34 to 38/2002-C.E. and 40 to 41/2003-C.E. (N.T.) all dated 30-4-2003 have been issued today. The salient features of the post-budget 2003-04 changes are indicated below (changes through notifications are effective from 30-4-2003): Amendments to the Finance Bill : 1.1 A new clause has been introduced in the Finance Bill, 2003 so as to increase the tariff rates of basic customs duty on vanaspati, margarine and other similar edible preparations and preparations of animal or vegetable fats and oil, falling under chapter headings 1516, 1517 and 1518, from 30% to 100%. However, there is no change in the effective rate of the customs duty applicable in respect of the said products. 1.2 Clause 129 which seeks to amend section 4A so as to enable the Government to ascertain the retail sale price (RSP), in cases where either RSP is not declared or incorrect RSP is declared, has been amended so as to provide that the RSP in such cases shall be determined in the manner prescribed by the Government. Consequently, the Government will only need to prescribe the manner for ascertaining the RSP, while the actual ascertainment of RSP is delegated to the field officers. 1.3 In this year's budget, the service tax on authorized automobile services has been sought to be extended to multi-utility vehicles and accordingly, in clause 151, the definition of "authorized service station" was sought to be expanded to include "maxicabs". As per the Motor Vehicle Act, "maxicab" means a vehicle capable of carrying upto twelve persons, excluding the driver, for hire or reward . Vehicles for personal use may not come under this category. However, the intention was to cover the service tax on all such motor vehicles capable of carrying upto twelve persons excluding the driver. Hence "light motor vehicle" has now been defined in clause 151 and the service tax on "authorized service station" will now be extended to repair or service of light motor vehicles. Amendments have also been made to clause1.4 150 and the Fifth Schedule to bring out the legislative intent clearly. Customs : 2.1 Basic customs duty on RBD palm oil and RBD palmolein has been reduced from 85% to 70% (S. No. 434 of Notification No. 21/2002-Customs as inserted by Notification No. 67/2003-Customs, dated 30-4-2003 refers). They have been exempted from SAD also (S. No. 5A of Notification No. 23/2002-Customs as inserted by Notification No. 68/2003-Customs, dated 30-4-2003 refers). 2.2 Basic customs duty has been reduced from 25% to 15% on decorative transfer films and dyestuffs used in the manufacture of writing instruments (S. No. 396 of Notification No. 21/2002-Customs as amended by Notification No. 67/2003-Customs, dated 30-4-2003 refers). 2.3 Basic customs duty has been reduced on fine and coarse animal hair and flax from 15% to 5% (S. Nos. 435 436 of Notification No. 21/2002-Customs as inserted by Notification No. 67/2003-Customs, dated 30-4-2003 refer) and on rags from 25% to 5% (S. No. 437 of Notification No. 21/2002-Customs as inserted by Notification No. 67/2003-Customs, dated 30-4-2003 refers). 2.4 Lists 45 and 46 of Notification No. 21/2002-Customs, prescribing a concessional basic customs duty of 5% for specified textile machinery/equipment and their parts for manufacture of the corresponding textile machinery/equipment, have been expanded (Notification No. 67/2003-Customs, dated 30-4-2003 refers) to cover more specified capital goods for the synthetic/artificial fibre/yarn industry and technical textiles, specified woolen textile machinery, electronic dobby and jacquard. 2.5 The concessional basic customs duty of 10% available for two for one or three for one twisters and rewinding machines used in the silk sector, has been extended to such twisters and rewinding machines irrespective of the sector of use. Parts for manufacture of and spares for maintenance of such twisters and rewinding machines will also attract a concessional basic customs duty of 10% (changes in List 32 and S. No. 426A of Notification No. 21/2002-Customs vide Notification No. 67/2003-Customs, dated 30-4-2003 refer). 2.6 Basic customs duty has been reduced from 15% to 10% on specified capital goods for IT/electronics sector (Notification No. 25/2002-Customs as amended by Notification No. 69/2003-Customs, dated 30-4-2003 refers). 2.7 Nickel oxide sinter and unwrought nickel for manufacture of steel, and metcoke for manufacture of pig-iron or steel using a blast furnace or COREX technology or for manufacture of ferro-alloys have been exempted from the special additional duty of customs (SAD) subject to end-use condition (S.Nos. 8A, 41A and 41B of Notification No. 23/2002-Customs as inserted by Notification No. 68/2003-Customs, dated 30-4-2003 refers refer). 2.8 S. No. 373 of Notification No. 21/2002-Customs has been amended ( vide Notification No. 67/2003-Customs, dated 30-4-2003) so as to extend the concessional rate of 5% to spare parts of hearing aids irrespective of their classification. Central Excise : Textiles The following turn over based exemptions 3.1 have been given to textile sector :- (i) Knitted and woven readymade garments or clothing accessories have been fully exempted from excise duty upto their first clearance of Rs. 25 lakhs per annum provided such garments do not bear the brand name of other manufacturer and if the annual clearances of these goods do not exceed Rs. 30 lakhs. (Notification No. 34/2003-C.E., dated 30-4-2003 refers). The manufacturer should keep the purchase documents of inputs i.e. fabrics. This exemption is given with a presumption that fabrics used in such garments/accessories are duty paid. There should be no checking of such units opting for this exemption, unless authorized by the Commissioner. For purposes of this notification, clearances, if any, made in the financial year 2003-04, prior to the issue of the notification, will be excluded. (ii) Similarly, unprocessed fabrics made by power looms have been fully exempted from excise duty upto their first clearance of Rs. 20 lakhs per annum provided the annual clearances of these goods do not exceed Rs. 25 lakhs (Notification No. 35/2003-C.E., dated 30-4-2003 refers). The manufacturer should keep the purchase documents of inputs i.e. yarns. This exemption is given with a presumption that such yarns are duty paid. There should be no checking of such units opting for this exemption, unless authorized by the Commissioner. For the purposes of the notification, clearances, if any, made in the financial year 2003-04, prior to the issue of the notification, will be excluded. (iii) Rubberised textile fabrics, Cotton belting woven/unprocessed and round mesh mosquito net fabrics have been fully exempted from excise duty upto their first clearance of Rs. 25 lakhs per annum provided annual clearances of such goods do not exceed Rs. 30 lakhs (Notification No. 36 /2003-C.E., dated 30-4-2003 refers). 3.2 Excise duty on hand processed fabrics of pure cotton, which after having undergone bleaching, dyeing or printing without the aid of power or steam have been subjected to certain specified finishing processes (with the aid of power or steam), has been reduced to 5% and 8% respectively (Notification No. 38/2003-C.E., dated 30-4-2003 refers). In this case, the processors should certify that the fabrics in respect of which the 5% or 8% duty is being claimed has been subjected to the process of bleaching, printing or dyeing or one or more of these processes without the aid of power or steam. In other words, if the fabrics have been bleached or printed or dyed, and if power or steam is used in any of these processes, 5% or 8% rate will not apply. 3.3 Full exemption from excise duty has been provided to fully finished ready made garments, which subsequent to their clearance and sale, have undergone processes like labeling, re-labeling (such as putting price tag, bar code, sellers name, instruction regarding usage etc.), repacking from bulk packs to retail packs, alteration or any other process to make the product marketable. However, the process of affixing of a brand name on such garments will continue to attract central excise duty. The exemption will be subject to condition that the retailers keep the purchase document (Notification No. 38/2003-C.E., dated 30-4-2003 refers). 3.4 Rule 9A of the CENVAT Credit Rules, 2002 has been further amended so as to change the relevant date for input stock declaration from 31-3-2003 to 1-4-2003. Consequently, the stock of inputs lying as on 1-4-2003 (instead of 31.03.2003) would now be eligible for one time credit under Rule 9A of the CENVAT Credit Rules, 2002. (Notification No. 40/2003-C.E. (N.T.), dated 30-4-2003 refers). Other changes : 3.5 The 8% central excise duty on refined edible oils has been replaced by a specific duty of Re. 1/- per kg. Similarly, the 8% duty on vanaspati and bakery shortening has been replaced by a specific duty of Rs. 1.25 per kg. Margarine has been exempted from central excise duty. The duty is leviable on all refined edible oils and vanaspati and bakery shortening irrespective of whether the same is branded and packed or not, at the stage of clearance from refinery/vanaspati factory. Refined edible oil and vanaspati manufactured respectively from duty paid refined edible oil and vanaspati shall be exempt from central excise duty (S. Nos. 244, 245 246A of Notification No. 6/2002-C.E. as amended by Notification No. 37/2003-C.E., dated 30-4-2003 refer). However, for removal of doubts, it is clarified that payment of Nil duty shall not be taken as duty payment for the purposes of this exemption as clarified in Board's Circular No. 667/58/2002-CX., dated 26-9-2002. 3.6 Nicotine Polacrilex gum, presently attracting 8% central excise duty, has been fully exempted from excise duty (S. No. 254 of Notification No. 6/2002-C.E. as amended by Notification No. 37/2003-C.E., dated 30-4-2003 refers). 3.7 Hand pumps and parts have also been exempted from central excise duty (changes in S. No. 35 and S. No. 52 of Notification No. 10/2002-C.E. as amended by Notification No. 37/2003-C.E., dated 30-4-2003 refer). 3.8 Central excise duty on ceramic tiles manufactured by units not using electricity/petroleum fuel for firing the kiln has been reduced from 16% to 8% (S. No. 275 of Notification No. 6/2002-C.E. as amended by Notification No. 37/2003-C.E., dated 30-4-2003 refers). 3.9 Central excise duty on wafer biscuits, cakes and pastries has been reduced from 16% to 8% (S. Nos. 273 274 of Notification No. 6/2002-C.E. as amended by Notification No. 37/2003-C.E., dated 30-4-2003 refer). Miscellaneous : 4.1 Vide clauses 142 to 145 of the Finance Bill, 2003, certain retrospective amendments have been proposed to the North East exemption notifications. It is clarified that for determining the liability of duty for the period from 8-7-99 to 22-12-2002, the entire period should be taken as a whole. Thus duty for the total clearances during the entire period should be worked out and from this, the total amount of credit of duty paid on inputs used in the clearances should be deducted to ascertain the amount of cash refund that is admissible, and if the cash refund has been paid in excess, the differential should be recovered. Similarly, for determining the amount of credit diverted and utilized for paying duty on non-exempted products, the entire period should be taken as a whole, and the amount should be worked out accordingly. 4.2 In the end, it is reiterated that all facilities must be provided to the powerlooms and readymade garments units, and manufacturers of other textile items who will now be required to pay excise duty and there should not be any case of harassment. The Finance Minister has made a commitment in the Lok Sabha today that a very serious view will be taken if there is any harassment of such units. The declaration made by these units should be accepted as correct, and credit of duty on inputs lying in stock may be given, on the basis of their declaration. Units opting for the exemption for small units should not be visited on the pretext of checking whether they are maintaining proper accounts or not.