Compounded Levy Scheme (Capacity based duty) - Central Excise Practice Manual (OLD) - Central Excise

Chapter No. 13 COMPOUNDED LEVY SCHEME Under compounded levy scheme duty is payable at fixed rate on the basis of the certain factors that are relevant for the production of goods such as scale of operation, capacity of the machines, size of the machines etc. Central government had specified the goods through notification, upon which duty can be paid on the basis of the Compounded Levy Scheme. It had also specified the procedure for payment of duty, abatement allowable, interest and penalty payable etc. Vide Finance Act, 2015 , Central government. has been empowered to specify more than one factor relevant to the production of such goods. Can assessee opt out of the scheme? It is an optional scheme i.e. the manufacturer can opt to pay duty either as per normal rules and procedures or as per compounded levy scheme. But once the assessee opts to pay duty as per above scheme he cannot opt out of the scheme and ask for normal assessment not at least upto the period mention in the application made by the assessee to avail the compounded levy scheme. Simultaneous availment of both the procedure is not permitted. Goods covered under the scheme: Government had specified the following goods [vide. Notification no.17/2007 dated 01 st March, 2007 ] under compounded levy scheme: Stainless steel pattas / patties and Aluminium circles Duty on the above goods is payable on the basis of the Cold Rolling Machine installed for the manufacture of the above goods. Presently the rates of duty on the above goods are: 1.Stainless steel pattas/ patties - ₹ 40,000 per cold rolling machine per month; 2. Aluminium circles -Rs.12,000 per cold rolling machine per month; Subject to the process of cold rolling with the aid of cold rolling machine. Procedure to avail compounded levy scheme: 1. Submission of application: - An application shall be made in Form A S P II to the Superintendent of Central Excise requesting availment of this scheme for the specified period. Application shall be made at least for a period not less than twelve consecutive months. In special cases permission may be granted for shorter period also by writing to AC/DC with the reasons thereof. Failing to avail this scheme: o If the manufacturer fails to avail this procedure with in the period mention in the application, he will not be allowed to avail this procedure for a period of six months from the date of such failure. o If the manufacturer fails to make new application to AC/DC before the expiry of the period in case where he wants to extend such procedure beyond the period mention in the application, he will not be allowed to avail this procedure for a period of six months from the date of expiry of the period. 2. Duty liability: - After the grant of application the duty shall be paid at the rate mention in the notification or at such revised rates as intimated from time to time. In case of revised rates the sum payable will be recalculated from the date of revision and differential duty will be payable if any or refunded if the duty decreases. The amount of duty will be calculated by application of the rate mention in the notification 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 month in which the aforesaid application made. Duty liability for the month in which the application is granted shall be calculated on pro-rata basis i.e. days left in that month after the date of grant / total days in that month. 3. Application for the removal of goods: - After the permission is granted an application shall be made in the specified form to the superintendent in charge of the factory for permission to remove the goods from the factory premises giving all the details, otherwise he will be liable to pay duty on his entire production during the month at the rate prescribed in the 1 st schedule of central excise with any relevant notification. The superintendent shall also be intimated for any change in the number of cold rolling machine in writing. After making payment as per above procedure, the manufacturer does not have to follow any procedure of excise regarding manner of payment of duty on a monthly or quarterly basis, storage and clearances of goods etc. except with such terms conditions as the central government may by notification specify in this behalf. Disadvantages of compounded levy scheme: 1. No export benefit: - no export benefit is available to the manufacturer i.e. rebate of excise duty will not be available to him for the period for which he has been given permission under above procedure. 2. No SSI exemption: - Aluminium circles are not eligible for SSI concessions under SSI exemption notification. 3. No cenvat credit: - Cenvat credit will not be available as duty under the compounded levy scheme is fixed on the condition that no cenvat credit shall be taken of duty paid on raw materials, component part or machinery or finished products used for cold rolling.