Central Excise - Scheme of compounded levy for payment of duty by Independent textile processors effective from 1st May, 2001 - Central Excise - F. No. B.4/6/2001-TRU

F. No. B.4/6/2001-TRU Dated 30-4-2001 Government of India Ministry of Finance (Department of Revenue) Central Board of Excise Customs, New Delhi Subject : Central Excise - Scheme of compounded levy for payment of duty by Independent textile processors effective from 1st May, 2001 . I am directed to say that, as you are aware, on the 25th April, 2001 the Finance Minister had announced in the Lok Sabha the introduction of compounded levy scheme for independent textile processors that is to be effective from 1st May, 2001. This scheme has been notified by Notification No. 16/2001-Central Excise (N.T.) read with Notification No. 20/2001-Central Excise, both dated the 30th April, 2001. 2. The salient features of the compounded levy scheme are mentioned below. 3. The scheme is an optional one. The scheme does not apply to open air stenters. It applies only to hot air stenters. An independent processor, who is eligible for availing of the scheme, has to apply for an option through an application to be submitted to the Commissioner of Central Excise by the 20th May, 2001. One important condition for eligibility is that the original value of investment on plant and machinery in the factory of the processor is not more than Rs. 3 crores. For this purpose, the higher of the original value of the investment on plant and machinery that was installed as on 1-3-2001 and as installed on 1-5-2001 in the factory of processor is to be taken into account. For instance, if the original value of investment in the factory of an independent textile processor as on 1-3-2001 was Rs. 3.1 crores but the original value of investment as on 1-5-2001 happens to be Rs. 2.9 crores, the independent processor shall not be eligible to the compounded levy scheme. 4. The independent textile processor has to submit the application to the Commissioner evidencing the original value of investment as on 1-3-2001 and as on 1-5-2001 duly certified by a Chartered Accountant or Cost Accountant. The application may be accompanied by photo copies of the relevant documents like invoices. After the application has been furnished to the Commissioner, the textile processor can resort to payment of duty under the compounded levy scheme pending acceptance or rejection of the application by the Commissioner. 5. If the application is accepted by Commissioner, it would be deemed to have been accepted from the 1st May, 2001. If, however, the application is rejected, the textile processor shall be liable to pay excise duty on the entire clearances from 1st May, 2001 onwards as if the compounded levy was not applicable to him and the duty paid under the compounded levy shall be adjusted against his duty liability under ad valorem levy. 6. It is important to mention that any textile processor intending to avail of the compounded levy scheme for an existing factory has to do so for the entire period of the remaining part of financial year, namely, from 1st May, 2001 to 31-3-2002. It is immaterial if the ownership of the factory has changed during the period from 1-3-2001 to 1-5-2001. The textile processor is not allowed to revert to the ad valorem duty scheme at any point of time up to 31-3-2002. Also, the textile processor is not allowed to opt for the scheme from a date subsequent to 1-5-2001. However, in the case of new processor who commences production for the first time on or after 1-5-2001, and who is eligible to avail the scheme should apply before commencement of production and the Commissioner of Central Excise shall consider allowing him to avail of the provisions of compounded levy for the remaining part of the financial year. 7. Another important feature is that no abatement is permissible on the ground that a stenter is removed, closed or not in use for any reason. Similar kind of provision applies in respect of chambers. In other words, the duty liability is to be calculated with reference to the number of chambers as were installed as on 1-3-2001 and as are installed as on 1-5-2001, whichever is higher. If, however, any addition is made in the number of stenters or in the number of chambers subsequent to 1-5-2001, the duty liability shall get enhanced proportionately from the relevant date on which the addition is determined to be made. Thereafter, the duty liability shall continue to be on this basis for the subsequent period and no abatement shall be allowed even if any chamber is removed. 8. To illustrate, assuming that a textile processor had 4 chambers as on 1-3-2001 and has 3.2 chambers as on 1-5-2001, the duty liability shall be calculated with reference to 4 chambers. Assuming that the number of chambers is increased to 5.2 chambers as on 15-7-2001. In that event, the duty liability shall be calculated on the basis of 5.2 chambers for the period from 15-7-2001 to 31-2-2002 (sic), unless any further addition is made in the number of chambers during this period in which case the duty liability shall get enchanced on similar basis. Assuming, however, that the number of chambers is reduced from 5.2 to 3.8 on 10-9-2001. No abatement for this reduction will be allowed and the textile processor will be required to pay duty on the basis of 5.2 chambers even after 10-9-2001. 9. It is to be emphasized that abatement on closure of factory only is allowed. However, this is allowed only when the factory is closed for all its manufacturing activities. In other words, the factory does not undertake manufacturing operation whether in the form of stentering of fabrics or by way of any other operation like bleaching, dyeing or printing. However, the stocks of stentered fabrics lying in the factory are allowed to be removed during the period of closure. 10. The benefit of abatement on account of closure will be allowed only if the factory is closed for at least 30 days. For this purpose the procedure as mentioned in Rule 96ZNB is to be followed by the textile processor. 11. It is stipulated in the scheme that the textile processor will not be allowed to remove any fabrics unless it is stentered by himself. In other words, it would not be permissible to remove the fabrics as dyed or printed, etc., for stentering at any other premises. 12. The other features regarding average value of processed fabrics and manner of payment of excise duty are on the same lines as were applicable under the pre-budget scheme under Section 3A, except that 50% of the compounded levy for a month has to be paid by the 20th of the month and the balance 50% by the 5th of the succeeding month. 13. It is requested that the provisions of the new scheme may kindly be gone into carefully by the departmental officers and they may also be explained to the textile processors, bringing out their implications clearly. Any doubt or difficulty in the implementation of the new scheme may kindly be brought to the notice of the undersigned at the earliest. 14. The Commissioners are requested to send a report containing details of the number of independent textile processors who have opted for the scheme, the number of stenters and chambers installed in their factory under different duty slabs, the estimated monthly revenue from these processors as per the proforma enclosed by the 31st May, 2001. PROFORMA Name of the Commissionerate Total number of textile processors No. of processors who have opted for compou-nded levy Total no. of stenters installed in the factory Total no. of chambers installed in the factory No. of chambers Estimated revenue per moth @ Rs. 2.5 lakhs per month @ Rs. 3.0 lakhs per month @ Rs. 2.5 lakhs per month @ Rs. 3.0 lakhs per month