SPECIAL PROCEDURE FOR SPECIFIED GOODS - CBEC Manual (OLD) - Central Excise

CHAPTER 12 SPECIAL PROCEDURE FOR SPECIFIED GOODS PART-I STAINLESS STEEL PATTIS/PATTAS, AND ALUMINIUM CIRCLES 1. Introduction 1.1 Under rule 15 of the Central Excise Rules, 2002 (hereinafter referred to as the 'said Rules'), special central excise procedures have been framed with the view to facilitate the trade in specified goods, viz. Stainless Steel Pattas/ Patties and Aluminium Circles. These procedures deal with all aspects of central excise such as payment of duty, maintenance of records, filing of returns etc. 2. Duty payable under special procedure 2.1 By Notification No. 34/2001-Central Excise dated 28.6.2001 (effective from 1st July, 2001) an assessee shall have an option to pay the duty of excise on the basis of the cold rolling machine installed for the manufacture of Stainless steel pattis/pattas, falling under Chapter 72, or Aluminium circles falling under Chapter 76 of the Schedule to the Central Excise Tariff Act, 1985(5 of 1986) by the process of cold rolling. The rates of duty per cold rolling machine; per month are, as follows: S. No. Item Rate of Duty per cold rolling machine per month (1) stainless steel patties or pattas Rs.15,000 (ii) Aluminium. circles produced from sheets manufactured on cold rolling machines (a) where the length of the roller is 30" or less Rs. 7,500 (b) where the length of the roller is more than 30" Rs. 10,000 .2.2 The rate of duty is fixed subject to the condition that no credit of duty paid on any raw materials, component part or machinery or finished products used for cold rolling of Stainless steel pattis/pattas, or Aluminium circles under CENVAT Credit Rules, 2004 shall be taken and further that the specified procedure is followed. 3. Application to avail special procedure 3.1 The manufacturer shall make an application in the form specified to the Superintendent of Central Excise for this purpose and the Superintendent, may grant permission for the period in respect of which the application has been made. 3.2 The application shall be made so as to cover a period of not less than twelve consecutive calendar months, but permission may be granted for a shorter period for reasons to be recorded in writing, by the Deputy/Assistant Commissioner of Central Excise. 3.3 If at any time during such period the manufacturer fails to avail himself of the procedure contained in this notification, he shall, unless otherwise ordered by the Assistant Commissioner or the Deputy Commissioner, be precluded from availing himself of such procedure for a period of six months from the date of such failure. 3.4 If the manufacturer desires to avail himself of the procedure even after the expiry of the period for which his application was granted, he shall, before such expiry, make a fresh application to the Deputy/Assistant Commissioner of Central Excise and on his failure to do so, he shall, except as be precluded from availing himself of such procedure for a period of six months from the date of such expiry. 3.5 An application made by a manufacturer, under erstwhile sub-rule (1) of rule 96ZA of the Central Excise Rules, 1944, shall be deemed to be an application made under the said Notification. 4. Discharge of duty liability on payment of certain sum. A manufacturer whose application has been granted shall pay. a at the rate specified in the said notification, subject to the condition therein laid down. Such payment shall be in full discharge of his liability for duty leviable on his production of such cold re-rolled Stainless steel pattas/patties, or Aluminium circles during the period for which the said sum has been paid. However, if there is revision in the rate of duty, the sum payable shall be recalculated on the basis of the revised rate, from the date of revision and liability for duty leviable on the production of the said goods from that date shall not be discharge unless the differential duty is paid. In case the amount of duty is paid. In case the amount of duty so recalculated is less than the sum paid, the balance shall be refunded to the manufacturer. 4.2 When a manufacturer makes an application for the first time for e procedure contained in this notification, the duty liability for the month in which the application is granted shall be calculated pro-rata on the basis of the total number of days in that month and the number of days in the month from the date of such grant. 4.3 The sum payable under the said notification shall be calculated by application of the appropriate rate to the maximum number of cold rolling machines installed by or on behalf of such manufacturer in one or more premises at any time during three calendar months immediately preceding the calendar which the application under the said notification is made. 4.4 The sum shall be tendered by the manufacturer along with the application. 5. Manufacturer's declaration and accounts 5.1 The manufacturer who has been granted the required permission make an application in the form specified in Annexure 29 (See Part 7) to the said notification to the Superintendent in charge of the factory for permission to the Stainless steel pattis/ pattas, or Aluminium circles from his premises the ensuing month, declaring the maximum number of cold rolling machines installed by him or on his behalf, in one or more premises at any time during three calendar months immediately preceding the said calendar month in which such application is made. 5.2 If such application is not made to the Superintendent of Central Excise within the specified time limit, the manufacturer shall, unless, otherwise directed by the Deputy/Assistant Commissioner of Central Excise, and in exceptional circumstances, be liable to pay duty on his entire production of in1ess steel pattis/pattas, or Aluminium circles during the month or part thereof in respect of which the application was to be made, at the rate prescribed in the Schedule to the Central Excise Tariff Act, 1985 (5 of 1986) read with any relevant notification or notifications issued under sub-section (1) of section 5A of the Central Excise Act, 1944 (1 of 1944). 5.3 The manufacturer shall also intimate the Superintendent of Central Excise in writing of any proposed change in the number of cold rolling machines installed by him or on his behalf, and obtain the written approval of such officer before making any such change. 6. Exemption from certain provisions etc. 6.1 During the period in respect of which any manufacturer has been permitted to avail himself of the procedure of the said notification, he shall be exempt from the operation of rule 8 of the said Rules. 6.2 Except in accordance with such terms and conditions as the Central Government may by notification specify in this behalf, no rebate of excise duty shall be paid under rule 18 of the said Rules, in respect of any Stainless steel pattis/pattas, or Aluminium circles exported out of India, out of the stock produced by such manufacturer during such period. 7. Provisions regarding new factories and closed factories 7.1 In the case of a manufacturer who commences production for the first time or who recommences production after having ceased production for a continuous period of not less than three months, and who has been permitted by the Deputy/Assistant Commissioner of Central Excise to avail of the special procedure, the amount payable by him for the first month or part thereof, as the case may be, shall be provisionally calculated on the basis of his declaration of the maximum number of cold rolling machines that are or are likely to be installed by him or on his behalf during such period. 7.2 At the expiry of the period, the amount payable shall be recalculated on the basis of the maximum number of cold rolling machines actually installed and if the initial payment falls short of the total liability so determined, the deficiency shall be recovered from the manufacturer and where the total liability is less than the initial deposit, the balance shall be refunded to the manufacturer. 8. Power to condone failure to apply for special procedure 8.1 Notwithstanding anything contained in the said notification, the Additional/Joint Commissioner of Central Excise may, at his discretion, for reasons to be recorded in writing, and subject to such conditions as he may deem fit, apply the provisions contained in the said notification to a manufacturer who has failed to avail himself of the special procedure, or to comply with any condition laid down in this notification. 9. Provision regarding factories ceasing to work or opting for the normal procedure 9.1 Where a manufacturer who had availed himself of the special procedure contained in the said notification ceases to work (i.e. for more than one or two shifts only) or reverts to the normal procedure, the duty payable by him in the month during which he has availed the procedure shall be calculated on the basis of the maximum number of cold rolling machines installed during the last month in the prescribed manner and the amount already paid for the month shall be adjusted towards the duty so calculated. If on such adjustment if there is any excess payment it shall be refunded to the manufacturer and any deficiency in duty shall be recovered from him. 10. confiscation and penalty 11.1 If any manufacturer contravenes any provision of the said cc in respect of any excisable goods, then all such goods shall be liable to confiscation, and the manufacturer shall be liable to penalty under rule 25 of the said rules. PART-I (APPLICABLE ONLY FOR THE RELEVANT PERIOD) Textiles and textile articles. - (1) Notwithstanding any thing contained in these rules, every person (not being an export-oriented unit or a unit located in economic zone) who gets yarns or fabrics falling under Chapter 50, 51, 52, 53, 54 55, 58 or 60, readymade garments falling under Chapter 61 or 62 or made m articles falling under Chapter 63 of First Schedule to the Tariff Act] produced or manufactured on his account, on job work (herein after referred to re said person" shall obtain registration, maintain accounts, pay duty leviable on such goods and comply with all the relevant provisions of these rules, an if he is an assessee: Provided that the job worker may, at his option, agree to obtain registration, maintain accounts, pay the duty leviable on such goods, prepare the invoice and comply with the other provisions of these rules. In such a case the provision of these rules shall not apply to the said person. The job worker, may, at his option, authorize the said person to, on his behalf as his agent, maintain accounts, pay duty, prepare invoice and comply with any of the provisions of these rule except that of rule 9: Provided further that the job worker may make an option to undertake the activities mentioned in this sub-rule as an agent or person authorized by the said person and in such a case, the said job worker shall be deemed to be the said person. (2) If the said person desires clearance of excisable goods for home consumption or for exports from the premises of the job worker, he shall pay duty on such excisable goods and prepare an invoice, in the manner referred to in rules 8 and 11 respectively except for mentioning the date and time of removal of goods on such invoice. The original and the duplicate copy of the invoice so prepared shall be sent by him to the job worker from whose premises the excisable goods after completion of job work are intended to be cleared, before the goods are cleared from the premises of the job worker. The job worker shall fill up the particulars of date and time of removal of goods before the clearance of goods. After such clearance the job worker shall intimate to the said person, the date and time of the clearance of goods for completion of the particulars by the said person in the triplicate copy of the invoice. (3) The said person may supply or cause to supply to a job worker, the big goods, namely:- (a) inputs in respect of which he may or may not have availed CENVAT credit in terms of the CENVAT Credit Rules, 2002, without reversal of the credit thereon; or (b) goods manufactured in the factory of the said person without payment of duty; under a challan, consignment note or any other document (herein after referred to as "document") as described in sub-rule (4), duly signed by him or his authorized agent. In case the job worker has undertaken to pay the duty then the duty paying document shall be endorsed in the name of the said job worker. (4)(a) The document shall be in duplicate, in printed (including computer printed) format, having printed running serial numbers on a financial year basis. The document, before it is issued shall be signed by the sender, of the goods referred to in sub-rule (3) or his authorized representative, as the case may be. Before making use of the said document, the serial numbers of the same shall be intimated to the Superintendent of Central Excise having jurisdiction. (b) The document for the movement of goods from the said person to the job worker shall contain the following information, - (1) the name, address and registration number of the said person; (ii) the Range, Division and the Commissionerate with whom the said person is registered; (iii) the description, quantity (in terms of kg./m/Sq.m) and the value of the goods being sent for the job work; (iv) the date of dispatch of such goods; and (v) the name and address of the job worker. (c) The document pertaining to movement of goods from a job worker to another job worker or from a job worker to the said person shall contain, - (i) the name and address of the job worker (the sender). (ii) The description and quantity (in terms of kg./m/Sq.m) of the goods being sent. (iii) The date of dispatch of such goods. (iv) The name and address of the job worker/the said person to whom the goods are being sent (the receiver). (d) The responsibility in respect of accountably of the goods, referred to in sub-rule (3) shall lie on the said person. (5) The job worker, on receipt of the goods mentioned in sub-rule (3) or, as the case may be, from another job worker sent by him in terms of clause (ii) to sub-rule (7), shall duly acknowledge the receipt of the goods on the said document. (6) Notwithstanding any thing contained in these rules, the job worker shall not be required to get himself registered or shall not be required to maintain any record evidencing the processes under taken for the sole purposes of undertaking job work under these rules unless he has exercised his option in terms of the first or the second proviso to sub-rule (1). (7) The job worker, with or without completing the job work, may, - (i) return the goods without payment of duty to the said person; or (ii) send the goods without payment of duty to another job worker; or (iii) clear the goods for home consumption or for exports subject to receipt of an invoice from the said person, as mentioned in sub-rule (2). The job worker shall clear the goods after filling in the time and date of removal and authenticating such details. The rate of duty on such goods shall be rate in force on the date of removal of such goods from the premises of the job worker. No excisable goods shall be removed except under an invoice: Provided that the goods may be sent under a proforma invoice in terms to sub-rule (1) of rule 11. (8) The provision of rule 128, mutatis mutandis, be applicable to the pods in the nature of the waste, by-products or like goods arising during the course of manufacture of the goods mentioned in sub-rule (1). (9) Nothing contained in Central Excise Rules, 2002 shall apply to the sent from or to an export oriented unit or a unit located in a special I zone. Explanation 1. - For the purposes of rule 12B, "job worker" means a person engaged in manufacture or processing on behalf and under the instructions of the said person from any inputs or goods supplied by the said person or by another job worker or by any other person authorized by the said son, so as to complete a part or whole of the process resulting ultimately in manufacture of 1 or fabrics falling under Chapter 50, 51, 52, 53, 54, 55, 58 or readymade garments falling under Chapter 61 or 62 or made up textile articles falling under Chapter 63 of First Schedule to the Tariff Act and the term "job work" shall be construed accordingly. Explanation 2. - For the removal of doubt, it is clarified that any goods or part thereof is lost, destroyed, found short at any time before the clearance of or fabrics falling under Chapter 50, 51, 52, 53, 54, 55. 58 or 60 or readymade garments falling under Chapter 61 or 62 of First Schedule to the Tariff Act or waste, by-products or like goods arising during the course of manufacture of h goods, the said person shall be liable to pay duty thereon as if the such goods were cleared for home consumption. PART-III SPECIAL PROCEDURE FOR TEXTILES AND TEXTILE ARTICLES INCLUDING READY MADE GARMENTS In the Union Budget 2003, a special thrust has been given for rationa1ization of excise duties of textile sector. The proposals involve lowering excise duty rates, completion of CENVAT credit chain, replacement of credit on deemed basis by actual, removal of excise duty exemption on unprocessed en and knitted fabrics, and restricting the exemption on processing of fabrics only for pure hand processed fabrics. Government was aware that these changes might initially create certain problems of compliance for large number of powerlooms and processors who have been hitherto exempted from excise duty. Having regard to this, these changes have come into effect from 1.4.2003, and a Simplified system of procedures has been worked out for the units liable to excise duty for the first time. 2. The salient features of the new textile rules and procedure are as follows: • Yarn processors, powerlooms, hand processors and power processors, who do only job work for others, need not take any excise registration or maintain records or pay duty. For such job workers, all formalities would be undertaken by the trader/master weaver/the owner of goods, who gets the job work done. • The movement of goods in such cases would be under a simple (printed and serially numbered) challan, a practice that is already followed by the trade even now. Such challans can be prepared in local language also, in addition to English. The procedure permits movement of goods from one job worker to another and also final clearance of the goods from job worker's premises. The job worker only has to make entries in the challan. • The trader/master-weaver/owner has been permitted to clear goods directly from the premises of the job worker on payment of duty. • In case the job worker wants to clear goods on payment of duty, he can do so. In such cases, after taking registration, he can also authorize the trader/supplier to make payment of duty on his behalf. • The procedure for registration (for those who would be paying duty) has been simplified. There is no need for the assessee to visit Central Excise office for this purpose. The help of the office bearers of the trade associations is solicited in this regard. Individual assessee can collect the forms from the associations, fill the same and hand it over to the office bearers. The office bearers can approach the jurisdictional Commissioners for instant registration of the units. A special cell for this purpose has been opened in all Commissionerates. Normally no verification of premises by the officers would be conducted. Assessees not having Income Tax PAN would also be granted registration. [This relaxation is not required now and therefore the assessees should follow normal procedure available for other assessees]. • A simplified procedure for filing of return has been prescribed. Those manufacturing yarn preparatories (i.e. twisting, warping, doubling of yams), unprocessed fabrics and readymade garments can file quarterly return in a simplified format. The duty in respect of clearances for a particular month has to be paid by the 5th of the succeeding month. • In case a person requires passing on the credit on goods sold by him without being manufactured by him, he can take registration as a registered dealer. • Facility of endorsement of duty paying documents has been made available to those who are undertaking non-excisable or exempted process. Such persons simply have to endorse the duty paying documents to the next persons to whom they sell the goods. • Provisions have been made for allowing credit in respect of inputs (namely, yarn and fabrics) lying in stock, inputs in process and inputs contained in finished goods lying in stock as on 31.03.2003. There will be no need to produce duty paying documents for this stock and the assessee can take the entire credit himself based on the formula which has been prescribed. What the assessee or the trader (who is registered) has to do is to give a declaration of the description; quantity and value of the stock (yarn, unprocessed fabrics lying with the dealers/manufacturers, and processed fabrics lying with the manufacturers only) and take credit on the strength of this declaration, which can be utilized, for payment of duty on his clearances . (Not needed now and accordingly be deleted). • Credit of duty paid on inputs used by a job worker can be utilized for payment of duty, when the job worker clears goods on payment of duty. . It also being provided that for procedural mistakes, no penalty or cm action will be taken. • Considering the trade practices, a system of sending the goods on proforma invoice to the buyer has been prescribed. The seller can issue the final invoice within five days from the removal of goods, after the same has been accepted by the buyer. 3. Related changes in the Central Excise Rules and Cenvat Credit Rules (a) Central Excise Rules, 2002 have been amended so as to prescribe i p for Textile and Textile articles. Rule 12B introduced vide Notification No. 24/2003 E (N.T.) dt. 25.3.03 from F. No. B3/1/2003 TRU vide which a separate procedure for Job Work in Textiles and Textile Articles including Ready Made garments has been prescribed. Under the special the duty liability, accountability and the responsibility for complying with the excise procedures (such as registration, return filing, maintenance of records) would rest with the person who gets yarns, fabrics or ready made garments manufactured or processed on job work. Such person would normally be the owner of the raw material who gets finished products manufactured on of job charges. He can take credit of the goods which are used in job work. In such a case, the job worker (such as power looms, hand processor and power processors) would be totally free from the duty burden as well as from the procedural requirements. The job worker, however, at his option, can take upon himself to comply with the excise law and pay duty. He can also do so on behalf of the owner of the goods working as his agent. Conversely, such a registered job-worker can authorise a broker/arhatia to pay duty on his behalf. Such persons, who manufacture goods or get goods manufactured on job work basis, registered and pay duty, would be treated at par with actual manufacturer. (b) The rules also provide for situations when the goods move from one worker to another during the course of completion of its manufacture. Such r would be under simple Challans which would contain certain minimum information and would be printed (including computer printed) and serially numbered. Considering the literacy level, such Challans could also be in a1fvernacular language. (c) It is also provided that the owner of the goods can, if he so desires, clear the finished products directly from the premises of the job worker on payment of duty. (d) The owner of the goods can take credit of duty paid on inputs, which are used by the job worker. In certain cases, an actual manufacturer (e.g. a yarn manufacturer) may also send some goods to a job worker for further manufacture and receive back the goods after job work, and if such manufacturer has a credit balance in respect of inputs used in other goods (including goods manufactured on job work basis), the same can be utilized for payment of duty on clearances of the goods received after job work. (e) In case a person wants to pass on the credit on goods sold by him without any manufacture, he is required to undertake registration as registered dealer. (f) In certain cases, some of the intermediate processes may be either exempt (for example, being carried out without aid of power or steam) or are not excisable (such as sizing of yam). In order to ensure that the credit chain remains unbroken, it is proposed to permit endorsement of the duty paying document issued in favour of a person undertaking such exempted/non-excisable activity in favour of either the buyer of the goods or to another person who is undertaking a subsequent excisable activity. Such person simply has to endorse the duty paying document to the next person to whom they sell the goods. It would not be necessary for the person endorsing to be registered with the department. However, the person undertaking such exempted/non-excisable activity, can, at his option, get himself registered as a registered dealer. This would enable him to issue dealers' invoice in favour of the person undertaking a subsequent excisable activity. (g) Normally, the assessees not covered under SSI exemption are required to file monthly return as well as they are required to pay duty on a monthly basis. As a measure of facilitation, it is proposed that in the case of yarn preparatories (i.e. twisting, warping, doubling of yams), unprocessed fabrics and readymade garments (made by units availing of SSI exemption scheme), the manufacturers would be required to file only quarterly returns in a simplified format. The duty, however, would be paid on monthly basis. (h) Processors who undertake job work and also do processing on their own and obtain dye and chemicals under invoice issued in his name, can take credit of duty paid on such dyes and chemicals to pay duty on his dutiable clearances, even though some of these inputs were used for making goods cleared without payment of duty under the job work scheme. (i) Credit of duty paid on capital goods can be taken only by the manufacturer in whose premises the capital goods are installed. (j) As the manufacturer and traders are expected to have stock of inputs as on 31.03.2003, for which they may not be in a position to produce documents evidencing payment of duty, provisions are being made to give a one time credit for the inputs and/or inputs contained in the finished products lying in stock as on 31.03.2003. This facility would be available to all such persons, who would be required to pay duty or pass on the credit i.e. manufacturers, persons getting the goods manufactured on job work and registered dealers. All such persons would declare the stock of inputs (including those contained in process or are in stock of finished product) giving description, quantity (in unit length or weight, as the case may be) and value. If duty paying documents are available, credit will be allowed on the basis of these documents. Where no such documents are available, credit will be allowed on a deemed basis. In respect of yarn lying in stock, the credit amount has been notified vide notification No.35/2003-CE (N.T.) dated 10.4.03. In respect of fabrics lying in stock, credit will be allowed at the rates prescribed under notification No.54/2001-CE, or as the case may be under notification No.6/2002-CE (NT). As the duty payment for April, 2003 will have to be made only by 5th May 2003, credit would be admissible in respect of the stock lying on 31.3.2003, even if the rates are not notified on or before 1.4.2003. The assessee would work out the credit amounts and take credit accordingly. In the case of processed fabrics, only the stock lying with a manufacturer would be entitled for such credit. For unprocessed fabrics and yams, the credit would be available both for manufacturers/job workers, and also for traders who get registered. (Not needed now and accordingly be deleted). (k) In case a person gets goods manufactured on job work and clears the same for sale, the excise duty would be payable on the transaction value at which are sold. However, in case the job worker, i.e. a weaver or processor prefers to clear goods on payment of duty (even if he is actually undertaking job work and is not actually selling the goods back to the trader) the duty would be i the value calculated on the basis of the price of inputs i.e. yarn or grey fabric price plus the actual job charges. (l) It has been brought to notice that sometimes sale of yarns, fabrics or garments take place on approval basis. In such cases, the goods are C t under a challan or proforma invoice and the sale is finalised after the approval of the buyer, the buyer may reject part or whole of the goods or negotiate the price depending upon the quality. In order to accommodate such practice within the framework of the excise law, it is proposed to permit removal .of such goods under a proforma invoice. Such challan/ proforma invoice would also be printed and serially numbered and have all particulars except the details of the duty payable. Within five working days from the issuance of the proforma invoice, the manufacturer would prepare the final invoice after making adjustments in respect of the goods rejected and returned by the buyer. The proforma invoice and the invoice would have cross reference to each other by way of mention of their serial numbers. (m) The special procedure for textiles and textile articles is not applicable to Export Oriented Units (EOUs) and Units located in Special Economic Zones (SEZs). 4. There will be no visit to the premises of the new assessees, to verify the stock or premises (except in respect of traders), unless there is a specific intelligence. Such verification, if any, will be done only with the approval of the jurisdictional Assistant /Deputy Commissioner , who will record the reasons for such verification in Writing. 5. The application for registration for these new registrants would be in the same format prescribed under the existing rules. However, the information regarding PAN (if they do not have such number), details of boundaries, property holding rights, estimated investments, bank account number, business transaction number, business transaction numbers obtained from other government agencies, details about owner, partners etc. at the intial stages, if it is difficult for the assessee to provide these at the initial stages, may not be insisted upon . (At present these types of relaxations are not required to be given now, therefore, the new assessees follow normal registration procedure and the old assessees got registered in the last financial year should update their data at par with other assessees). 6. The purpose of the new rules is to allow the textile sector to carry on they have been doing all along, and not to disturb the trade practices. It would be sufficient if the manufacturers or the deemed. m keep account of production clearance, pay duty accordingly and take credit only on the strength of duty paying documents. Generally, there is no need for any physical verification of premises, goods or records unless there is a specific intelligence suggesting evasion. 7. In order to establish and continue the Cenvat chain, without causing to the exempt textile sectors, it has been permitted that an exempt unit or a trader in textile can endorse, in full, the duty paying document of his inputs in favour of the buyer of his goods. This can be done without being registered with the department. The buyer would be eligible for full credit of duty on the basis of this document. 8. Acknowledging the fact that in weaving and garment manufacturing sector, many units function in common premises, such individual units have been permitted to take separate registrations. The clearance-based exemption would also apply considering them as separate units. Special Procedure for Passing on of the credit of duty paid yarn by the exempted powerloom units to multiple buyers 01. Power loom weavers who avail exemption under notification No.35/2003-CE, dated 30th April, 2003, as amended by notification No. 47/2003-CE, dated 17th May, 2003 are allowed to pass on the credit available on their inputs, i.e. yarns by endorsing the duty paying document, in favour of the buyer (please refer to notification No. 25/2003-CE (NT) dated 25th March, 2003). However, the facility is- available to such weaver only in cases when the input documents are endorsed in full i.e. in favour of ONE person. For those who send their exempted grey fabrics, made from a single consignment of yarn (i.e. yarn covered under single input invoice), to various users, this option is not-available. 02. The power loom weavers who are availing of the aforesaid clearance based exemption i.e. full exemption upto first annual clearance of Rs. 25 lakhs, have represented that a mechanism may be devised so that they can pass on the credit even if their exempted final products, made from a single consignment of yarn and covered under single invoice, is sold to more than one user. The Board, having considered the issue, have devised the following procedure: • This will be an optional scheme for independent weavers of unprocessed fabrics falling under Chapters 51, 52, 54, 55, 58 or 60. • The person opting for the scheme shall file an application in the similar simplified format (See Annexure-1A in Part 7 to notification No. 35/2001-CE (NT), dated 26th June, 2001, as amended) as that in case of registration of textile manufacturers. (Please see notification No. 53/2003-CE (NT) dated 9th June amending notification No.36/2001-CE (NT) dated 26th June, 2001. The weavers may take assistance of trade association for filing such application. • Instead of granting registration to the person, he shall be allotted (within 24 hours of the receipt of the application) a declarant code which will be 12 digit code i.e. first two digit for Cominissionerate, 3rd and 4th digits for division, 5th and 6th digits for range and balance 6 digits would be running serial number of such assessee.The first six digits i.e. location codes should be as per the codes given by the Directorate General of Systems and Data Management. The balance six numbers would be running serial numbers, starting from 000001. • The exempted unit will receive inputs i.e. yarns under duty paying documents and retain the said documents. While clearing exempted fabrics, along with his commercial invoice/document, he shall enclose a pre-printed serially numbered challan (in triplicate), in a format prescribed under Notification No. 54/2003-CE (N.T.) dated 9th June, 2003. The challan would give details of (a) his input/inputs and the related invoice/invoices,(b) particulars of duty paid thereon and (c) the proportionate amount of excise duty paid on inputs i.e. yam, which is attributable to have been used in the manufacture of the fabrics being cleared under this challan. The ORIGINAL copy of this challan would be an eligible document for the buyer to claim CENVAT credit to the extent of such attributable duty. (Please see notification No. 54/2003- CE (N.T.), dated 9th June, 20031. . Such exempted units shall file a quarterly statement in a format prescribed under notification No. 54/2003- CE (N.T.), dated 9th June, 2003, showing the quantity and value of goods received as well as sold and the proportionate credit passed on. The person shall enclose all original copies (he may keep photocopies for his own records) of their input invoices (on the strength of which the credits were passed on) received and all the DUPLICATE copies of the challan issued during the year. Special Procedure for New Central Excise Registration for Powerloom Weavers/ Hand Processors/ Dealers of Yarns and Fabrics! Manufacturers of Ready Made Garments In this regard, Chapter-2 of this Manual may be referred. Certain clarification issued regarding excise duty structure on textile and textile articles Issue No.1: Vide notification Nos. 34/2003-CE and 35/2003-CE; both dated 30th April, 2003 exemptions have been given to fabrics and readymade garments and clothing accessories, upto specified clearance values. These exemptions are applicable to manufacturers having aggregate value of clearances below certain calculations of these limits, it has been, inter alia , prescribed that where these goods are cleared by one or more manufacturers from a factory, the will apply to the aggregate value of clearance from such factory and not separately for each manufacturer. In this regard, doubts have arisen regarding the application of this condition and scope of the term 'factory'. It has been reported that in certain cases a number of manufacturers of these items put up their sewing machines or looms in the same premises. In such cases, they share the manufacturing premises while having their individual manufacture and clearances not linked to each other. The manufacture is carried out by different legal entities. In this regard, it is clarified that in such cases, the entire premises having several manufacturers undertaking individual manufacturing activity should not be treated as a single factory. There may not be any physical separation between the different units but the fact that the machines/looms belong to different individuals/legal entities who carry out manufacturing unrelated to each other, gives them a distinct identity. Therefore, it is clarified that in such cases, the machines/looms belonging to a specific manufacturer should be treated as a factory for the purposes of these notifications and the total production from the premises should not be clubbed to calculate the eligibility limit for the exemption limit. To illustrate, if in the same there are three powerloom units A, B and C having 5, 6 and 7 looms respectively. In this case, the factory in respect of A, B and C will respectively to 5, 6 and 7 looms, and for determining the clearances of 'A' from the factory, only the clearances of 5 looms should be taken into account. Issue No. 2: In the aforesaid two notifications, an obligation has been placed on the manufacturers to keep the documents relating to purchase of their inputs i.e. yarns or fabrics. Under notification No.25/2003-CE (NT) dated 25.3.2003 as amended by notification No.28/2003-CE (NT) dated 1.4.2003, it has been provided that textile manufacturers fully exempted can endorse, in full, their input documents in favour of any other manufacturer, producer, first or second stage dealer. This facility is also available to the powerlooms or garment or accessories manufacturers availing the said notification No.34/2003-CE and 35/2003-CE. Such endorsement has to be made by the manufacturer on the original copy of such input invoices and same has to be handed over to the subsequent purchaser of their products. In such cases, the said exempted manufacturer will not have the original document relating to the purchases of his inputs. In this regard, it is clarified that in such cases it would suffice if the said manufacturer keeps a photocopy of the invoices. This copy should suffice for satisfying condition No. (iv) of para 2 of the notification Nos. 34/2003-CE and 35/2003-CE relating to keeping of purchase documents. Issue No 3: The traders of textile and textile articles have been permitted (vide notification No. 28/2003-CE (NT) dated 1.4.2003) to endorse in full, their purchase documents in favour of a manufacturer, producer or another dealer without obtaining registration. However, in case the quantity purchased under one invoice is to be sold in parts (to different persons), such a trader has to obtain dealer's registration. It has been reported that in certain cases the field formations insist upon bringing such purchased goods by the trader to his registered premises first before such subsequent sale under endorsed invoice or dealer's invoice can be made. It is clarified that there is no obligation provided under the Cenvat Credit rules, 2002 where under the trader has to necessarily bring the goods to his registered premises before selling the same. In many cases, these goods are sold even without unloading from transport or even during transit. Thus, it is clarified that there is no requirement for the traders to necessarily bring the goods to their premises before they are being sold. Such resale can take place from the transporters premises or before such goods are unloaded from the vehicle or even during the transit of the goods. The registered dealer is, however, under obligation to maintain account of all the goods purchased, sold or have under stock. He is also required to maintain the accounts regarding the credit on the goods received by him and the credit that has been passed on to the subsequent buyer. Issue No.4: Whether the exemption of Es. 30 lakhs/Rs. 25 lakhs vide notification nos. 34/2003-CE and 35/2003-CE, both dated 30.04.2003 is available to a person (trader) who is getting readymade garments/grey fabrics, manufactured by a job-worker and the total value of turnover of the job-worker is more than the exemption limits i.e. Es. 30 lakhs/Rs.25 lakhs? Clarification: (a) Notification nos. 34/2003-CE and 35/2003-CE, both dated 30.04.2003, fully exempt first clearance for home consumption upto certain aggregated value (Es. 30 lakhs or Rs.25 lakhs, as the case may be) of specified goods, subject to certain conditions enumerated in the second paragraph of these notifications. These conditions are with respect to the 'manufacturer'. Clarifications have been sought as to whether, in case of goods manufactured on job work basis, the term manufacturer/manufacturers appearing in these notifications refers to (i) the job worker, who actually manufacturers the goods, or (ii) to the trader/ principal manufacturer/ master weaver/person, who gets his goods manufactured on job work, or (iii) to both. (b) The doubt appears to have arisen because of rule 2(h) of the CENVAT Credit Rules, 2002, which provides that the term 'manufacturer', in respect of certain types of yarns and fabrics etc. includes a person who is liable to pay duty under rule 12B of the Central excise Rules, 2002 (i.e. the master weaver). Rule 12B of the Central excise Rules, 2002 also mentions that a trader, who gets goods manufactured on job work, shall take registration, pay duty and follow procedures as if he is an 'assessee'. These provisions appear to have given an impression that even for the purposes of the said exemption notifications, the term 'manufacturer' would include such trader/ principal manufacturer/ master weaver/person, who gets his goods manufactured on job work. (c) Under central excise law and as interpreted by the courts, a job worker is treated as the manufacturer. There is thus no reason why a different view should be taken in case of the readymade garment and unprocessed fabrics manufactured on job work basis. The provisions of rule 2(h) of the CENVAT Credit Rules, and rule 12B of the Central Excise Rules are only for specific purposes, to enable the traders/principal manufacturer/mater weaver to undertake excise formalities and pay duty in place of the job worker and to enable taking credit of the input duty. These provisions therefore, do not alter the basic position that the job worker remains the manufacturer and any condition (imposed on a manufacturer) in an exemption notification applicable to goods manufactured (whether on his own or on job work) would be applicable to such actual manufacturer i.e. the job worker. (d) Doubts have also been raised as to whether for calculating the clearance value under notification nos. 34/2003-CE or 35/2003-CE, the value of clearance of goods, cleared on job work should also be taken into account. In this regard, it is clarified that the clearance value limits prescribed in these notifications include value of all clearances, whether it is of goods manufactured on job work or as independent weaver. Further, for all clearances, the value will be determined under Section 4 of the Central Excise Act and rules made there under (and not merely the job charges in case of job work clearances). (e) In case a weaver/garment manufacturer who either does job work (of one person or more than one persons) or makes clearances as independent weaver/manufacturer, there is no duty liability till he reaches the total clearance level of Rs.25 lakhs or Rs. 30 lakhs as the case may be. Consequently, till then, the trader, who is getting his goods manufactured on job, work, need not follow the Rule 12B procedure. It is relevant to note that Rule 12B authorizes the trader to pay the duty leviable on the job worker. Once the job worker is no longer entitled to duty exemption, the duty liability has to be discharged by the trader unless the job worker opts to pay the duty. Thus, once the total value of clearance exceeds the threshold limit of Rs.25 lakhs (or Rs. 30 lakhs, as the case may be), no further exemption would be available. In such cases, after the exemption limit is crossed, duty would be payable and the trader who is get the job work done would have to be registered and pay duty. In c the total clearance levels cross the eligibility limits of Rs.30 lakhs 40 lakhs, as the case may be) all past clearances become dutiable the trader/traders/weaver, would be required to discharge duty earlier clearances. (f) The following illustration are given to explain the above, - • Three traders A, B, and C get grey fabrics manufactured from job worker 'X'. The value (raw material cost + job charges the goods made on job work for each of the trader is Rs.20 lakhs. Since total clearance value of the job worker is R lakhs, he is not eligible to claim any benefit under notification 35/2003-CE. Duty is payable on his entire clearance. • Three traders A, B, and C get grey fabrics manufactured ft job worker 'X'. In addition, X also clears grey fabrics manufactured by him as independent weaver. His clearance as independent weaver is Rs.15 lakhs. Thereafter, he understand job work for A, B and C in a sequential manner. The value clearances for A is, say, Rs.5 lakhs that for B is, 7 lakhs and C is, Rs. 7 lakhs. For clearances made as independent weaver and on job work for 'A', there is no duty as the total clearance till then is below Rs.25 lakhs. The first clearances of Rs.5 Iakh for 'B' are also exempted. Thus, till then, 'B' need not follow Rule 12 B procedure. However, the balance Rs.2 lakh clearance for 'B' become dutiable, as the total clearances of 'X' have n crossed the limit of Rs.25lakhs. Thus, now 'B' has to t registration and pay duty on clearances of Rs.2 lakhs. As for his entire clearances of Rs. 7 lakhs are dutiable and he has follow rule 12B procedure for his entire clearances. It may mentioned that in case the clearances value for 'C' increases beyond Rs 8 lakhs, the total clearance value of 'X' would exceeds Rs. 35 lakh eligibility limit. Consequently, the entire clearance of 'X' would become dutiable and duty demand would arise against all i.e. 'A', 'B', 'C' and 'X' on their respective clearances. • A trader 'A' gets grey fabrics manufactured by job workers' 'Y' and 'Z' and the total clearance value of each of these workers is below Rs.25 lakhs. All the clearances from the workers are within the exemption limit for individual units. The trader has no obligation to register himself or pay duty terms of Rule 12B. In other words, he is out of the scope of the provisions of Rule 12B. Issue No.5: M/s A, M/s B and M/s C (three separate legal entities) purchase fabrics, cut them in their premises to the required shape for making readymade garments. The cut fabrics are sent to one job worker, M/s JW for stitching a packing. The packed fabrics are received back by M/s A, M/s B and M/s C. All three persons are availing benefit of Rs.30 lakhs exemption under notification No. 34/2003-Ce individually. M/s A, M/s B and M/s C claim that they are I manufacturers of readymade garments since they are cutting the fabrics required shapes and are individually eligible for exemption of the said notification, even though the total value of clearance of M/s JW is Rs.90 lakhs. Whether M/s B and M/s C are eligible for such exemption? Clarification: Cutting fabrics to required shape does not make M/s A, M/s B and M/s C, manufacturer of readymade garments as unless stitched, readymade garments in marketable form do not come into existence. In the instant case garment is manufactured by M/s JW. Thus, in view of the clarification given above, duty is chargeable on the entire clearance as the total clearance made by the job worker M/s JW is beyond the eligibility limit of Consequently, M/s A, M/s B and M/s C would have to follow the in terms of Rule 12B and pay duty. Issue No.6:- Whether a manufacturer of readymade garment or grey fabrics and availing exemption under Notification nos. 34/2003-CE or 35/2003-CE, as the case may be can send inputs or semi-finished goods for job work? Clarification: Independent manufacturers availing these exemptions do not have the facility of sending inputs or semi-finished goods, duty free, for job work unlike the units availing SSI exemption under Notification nos. 8/2003-CE, who can avail the benefit of notification nos. 83/94-CE and 84/94-CE. Issue No. 7 Levy of excise duty on readymade garments on the basis of Retail Sale Price (RSP). Clarification: Doubts have been raised as to whether readymade garments should be assessed to duty on the basis of RSP or on the basis of transaction value. The provisions of Section 4A do not apply to the readymade garments, ± have not been notified under that section. But under notification No.20/2001-C.E. (N.T.) dated 30.4.2001, tariff value (at the rate of 60% of the retail sale price declared or required to be declared) was fixed on readymade garments and other articles of apparel. Vide Board's letter F. No. B.3/4/2003, dated 01.04.2003, it was clarified that for valuation, the provision of section 4 i.e. transaction value, would apply in case the RSP is not required to be declared and is not declared. Section 39 of the Standards of Weights Measures Act, 1976 applies to commodities, which are cleared, sold, distributed etc. in packed condition. In of Rule 1 (1) of the Standards of Weights Measures (Package L Rules, 1977, a 'pre-packaged commodity' means a commodity, which, without the purchaser being present, is placed in a package so that the quantity of goods contained therein, has a pre-determined value and such value cannot be altered without opening the package. Further, in terms of the said the term 'package' is to be construed as package containing such pre - commodity. Therefore, only when such pre-packed commodities are sold in retail packages, the provisions of Standards of Weights Measures Act and rules regarding declaration of the retail sale price (and consequently valuation of the goods based on such RSP) arises. Many times, garments are cleared in bulk where the manufacturer neither packs the same nor declares the retail sale price therein. Such garments are ultimately displayed in the retailer's outlets, which may or may not attach a price tag thereto. Some times the dealer/retailer packs, r-packs, labels or re-labels the goods, which may result in such goods fall within the purview of Standards of Weights and Measures (Packaged Commodity) Rules. However, in such cases central excise valuation is not important, as such activities undertaken on duty paid goods are fully exempt vide notification No. 38/2003-CE dated 30.04.2003. Thus, it is clear that in such cases, the manufacturer of the garments is under no legal obligations to declare the retail sale price while clearing the garments from his factory in bulk and in unpacked condition.