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TMI BlogChanges in excise, customs and service tax through Finance Bill, 2003X X X X Extracts X X X X X X X X Extracts X X X X ..... d components 5) Motor Cars The duty incidence on all these items will be 24% (16% Cenvat + 8% SED) as against 32% earlier. 1.2 The 4% rate of excise duty without Cenvat has been abolished. Some of the items attracting this rate have been exempted from excise duty and rest have been taken to 8% rate. The 8% rate will now be with Cenvat credit. As a consequence, the following items have been exempted from excise duty: 1) Bicycle and parts 2) Toys 3) Mosaic tiles 4) Utensils and kitchen articles of metals 5) Knives, spoons and similar items of kitchenware/tableware 6) Unbranded surgical bandages 7) Articles of wood 8) Imitation zari 9) Adhesive tape 10) Tubular knitted gas mantle fabric for use in incandescent gas mantles 11) Umbrellas 12) Walking sticks, riding-crops and like 13) Articles of mica 14) Kerosene pressure lanterns 15) Glasses for corrective spectacle lenses, flint buttons 16) Registers, accounts books, etc. In addition, the following goods have also been exempted from excise duty: * Recorded audio CDs * Slag arising in the manufacture of iron and steel * Gold arising in the course of copper/zinc smelting 1.3 The following items, whic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... render the product marketable to the consumers has been declared as amounting to manufacture. 5) Excise duty on chassis of motor vehicles has been increased from 16% to 16% plus ₹ 10,000/- per chassis. 1.6 Cement Excise duty on cement has been increased from ₹ 350/- per metric tonne to ₹ 400/- per metric tonne. Excise duty on cement cleared in bulk has been increased from ₹ 332 per metric tonne to ₹ 382 per metric tonne. Excise duty on cement clinkers and on cement made by mini cement plants has been increased from ₹ 200/- to ₹ 250/- per metric tonne. 2. Textiles 2.1 Major changes have been proposed in the duty structure applicable for textiles so as to remove a large number of exemptions, withdraw deemed credit scheme and to complete Cenvat chain right from fibre/yarn to the garment stage. In brief, the following are the important changes: (a) Yarns: 1) 8% excise duty is being retained only for cotton yarn, not containing any other textile material. 2) 16% excise duty on fibres of polyester, viscose, acrylic remain unchanged. 3) Uniform rate of 12% excise duty has been prescribed on polyester cotton, cotton viscose and all oth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... come into effect immediately w.e.f. 1.3.2003, the withdrawal of exemptions, removal of scheme of deemed credit and removal of goods from SSI exemption scheme will come into force w.e.f. 1.4.2003. The Government have also decided that job work facility will be made available to the textile sector and a separate procedure would be devised to ensure that the large number of powerlooms in the decentralized sector are not inconvenienced in any way and are exempted from maintenance of central excise records. The duty liability will be on the supplier of the raw materials to the job workers. The Government is very keen to see to it that there is absolutely no harassment to the manufacturers coming into excise net for the first time. Chief Commissioners and Commissioners are requested to meet all those sectors of the trade who would be liable to pay excise duty w.e.f. 1.4.2003 and get their views and suggestions as how best to implement the provisions. Board desires that you should send a report positively by 10.3.2003 after consultation with the trade so that a suitable procedure convenient to all can be prescribed. 3. National Calamity Contingent Duty (NCCD) For replenishment of the Na ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rn. 8.2 Value of exempted goods (excluding exports) will be included for calculating the limit of ₹ 3 crores for eligibility under SSI exemption with effect from 1.4.2003. 9. Medicinal & Toilet Preparations Changes have been made in respect of duty structure applicable to medicines and toilet preparations containing alcohol under the M&TP Act, 1955. These are given below: 1) The amendment to M&TP Act, 1955 carried out vide Finance Act, 2000 will now come into force w.e.f. 1st March, 2003. 2) Duty on toilet preparations containing alcohol or narcotic substances has been reduced from 50% to 16%. 3) Duty on medicines containing alcohol or narcotic substances has been reduced from 20% or specific rates to 16%. 4) Full exemption on Ayurvedic/Unani/Indigenous medicines, containing self-generated alcohol and not capable of being consumed as alcoholic beverage, has been retained. 5) Toilet preparations containing alcohol or narcotic substances, will be assessed on maximum retail price (MRP) basis, with an abatement of 40% on the MRP. As this levy pertains to the State Governments, it is requested that a copy of the relevant notification is given to the State Government so th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate to be notified). a) Commercial vocational institutes, coaching centers and private tutorials. b) Technical testing and analysis (excluding health and diagnostic testing), technical certification. c) Maintenance and repair services namely, Annual Maintenance Contracts (AMC) and other maintenance services; authorized repair services. d) Commissioning and installation services. e) Business promotion and support services including customer care services. These services include launching of products, customer education programmes, conduct of seminars, data warehousing, help desk services, managing front offices, enquiry bureaus, etc. However computer enabled services, namely, data processing, networking, back office processing, computer facility management shall not be subjected to Service Tax. f) Internet café g) Franchise services h) Extension of service tax on port services to minor ports. i) Extension of service tax on authorized automobile services to multi-utility vehicles. j) Extension of service tax on banking and other financial services to all FOREX brokers. Presently the services provided by banks and body corporates in relation to foreign exchange are co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be useful if some meetings with the assessees are also conducted in the Commissionerates to explain the features of Service Tax to them. 13. Default in payment of duty Under the existing procedure, in certain cases of default in payment of duty assessed under rule 8(3) of the Central Excise Rules, the manufacturer is denied the benefit of utilization of Cenvat credit for certain period. This is being done away with, and even in cases of default, there will be no denial of the credit nor the facility of paying duty in monthly instalments be withdrawn. A system of automatic payment of interest at the rate of 2% per month or ₹ 1,000 per day, whichever is higher, has been proposed starting from the date on which the duty was required to be paid till the date of payment (subject to the interest not exceeding the duty amount). Once the assessee pays the amount, there will be no need to issue SCN or pass an order. Provisions are also being made that in case of non-payment of the defaulted amount within a reasonable time, the goods in respect of which the payments are in default would be liable to confiscation and the amount in default may be recovered as if these are arrears of re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was ₹ 120/-. Subsequently, it is found out that the rate of duty was in fact 30%, and the assessee has not collected anything over and above ₹ 120/-. In such a case, the value for the purpose of charging duty will be: ₹ 120/1.3 = ₹ 92.3. 15.2 Rule 7 of the Valuation Rules provides as to how the value is to be determined in the case of goods sold from a depot etc. This provision is now being incorporated in section 4 of the Central Excise Act itself whereby Sub-section 3 has been amended to provide that "place of removal" will include a depot, premises of a consignment agent or any other place or premises from where the excisable goods are to be sold after their clearances from the factory. Suitable amendments have been made to provide that the time of removal in the case of goods removed from the place of removal shall be deemed to be the time of clearance of such goods from the factory. 15.3 Rule 5 of the Valuation Rules provides for deduction of actual cost of transportation when the price at the place of removal is not known. This is subject to production of actual invoice. It is proposed to allow deduction of freight worked out on an average basis. It ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vered under the above notifications, and the other outside. What they were doing was to utilize the entire input tax credit for payment of duty on the product not covered under the exemption notification, and paying full duty on the exempted goods and getting back full refund. 16.3 The amendments made in December, 2002 sought to plug this loophole. These provisions are now being given retrospective effect w.e.f. 8.7.1999[clauses 142 to 145 of the Finance Bill]. Consequently, all assessments from 8.7.1999 onwards in respect of these two notifications will have to be revised to ensure that the entire credit of duty paid on the inputs used in the manufacture of the exempted final products is used only for payment of duty on final products cleared under these notifications and refund is restricted to total duty paid less the total credit in respect of the duty paid on inputs. Thus, in the above illustration, refund will be restricted to ₹ 80/-, though the duty paid in cash was ₹ 100/-. Similarly, if any credit taken in respect of inputs used in the manufacture of goods cleared under notification No.32/99-CE and 33/99-CE , was used for payment of duty on other goods not ent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y, on enactment of the Finance Bill, 2003, all pending cases may be decided accordingly in the light of amendment made [clause 141 (1) of the Finance Bill]. 17. Pre-budget stocks 17.1 You are aware that the restrictions on clearances on budget day have been removed this year with the result that all clearances upto midnight of 28.2.2003/1.3.2003 are entitled to pay duty at the rates prevailing on this date. All the budgetary changes, unless otherwise stated, will come into effect from midnight of 28.2.2003/1.3.2003 and clearances effected after this period will attract the new rates of duty. As regards the dutiability of the stocks manufactured prior to 28.2.2003/1.3.2003, pre-budget stocks will be leviable to excise duty at the rates prevailing on the date of their removal. In other words, the goods cleared after 28.2.2003 would be liable to pay duty at the new rates even if they were exempted on or prior to 28.2.2003. However, goods which were not subject to the levy at all, for instance, the levy of NCCD on new items, same will have to be treated differently. In this connection, your attention is invited to the decision of the Supreme Court in the case of CCE Hyderabad vs. Vaz ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Schedule to the Customs Tariff Act(read with any notification for the time being in force in respect of the basic customs duty) needs to be taken into account. Other duties such as anti-dumping duty, safeguard duty, etc. should not be taken into account. A view has been expressed that section 3A of the Customs Tariff Act does not permit such interpretation. To place the matter beyond doubt, it is proposed to amend section 3 and section 3A of the Customs Tariff Act so as to make it very clear that for computation of additional duty of customs, only the c.i.f. price, landing charges and basic customs duty will be included. Similarly for determining special additional duty of customs (SAD), only the c.i.f. price, landing charges, basic customs duty and the additional duty of customs will be included. Other duties such as anti-dumping duty, safeguard duty, etc. shall not be taken into account. This amendment will have effect from 1.3.2002. 24. As you would be aware, the 8 digit customs classification was introduced through an Ordinance on 1.2.2003. As a consequential change, some of the exemption notifications have been amended so as to incorporate the 8 digit headings. 25. Miscella ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entral Excise Act, and notifications issued under the Finance Acts. Scope of applicability is also being widened. 14) It is being provided that interest will be payable in respect of drawback claims after one month as against two months now. 15) The power of adjudication of Customs Officers is being raised. AC/DC will now have the power to adjudicate upto an amount of ₹ 2 lakhs as against ₹ 50,000/- now. For officers below the rank of AC/DC, the limit will be ₹ 10,000/- as against ₹ 2,500/- now. 16) Section 7 of the Customs Act, 1962 is being amended so as to delegate the powers of the Central Government to the Board for appointment of customs ports/airports/ICDs etc. 17) Section 15(1)(b) of the Customs Act is proposed to be amended so as to provide that the relevant date for determination of rate of duty on home clearance of warehoused goods would be the date of presentation of the ex-bond bill of entry for home consumption. 18) Section 25 of the Customs Act, 1962 is proposed to be amended to provide that no duty will be collected if the total amount of duty leviable is ₹ 100 or less. 19) Section 27(2) of the Customs Act is being amended to enab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cations. The information about the prices may kindly be supplied in the proforma at Annexure-II to this letter. You may kindly ensure that the information furnished is accurate since reliance will be placed on this data at the time of discussion of the Finance Bill in Parliament. The first report in this regard may be sent by 15th March, 2003 and subsequently at an interval of one month i.e. 15th of every month. 26.4 In the Explanatory Memorandum, we have asked for special reports in few cases. They may kindly be arranged to be sent on time after careful scrutiny. 27. I would take this opportunity to thank all of you, on my behalf and on behalf of the officers of the Tax Research Unit for the valuable suggestions you made in response to my earlier communication. These have provided valuable inputs. In fact, some of the proposals here are the direct outcome of such inputs. 28. It may kindly be ensured that in respect of units which would be required to pay excise duty w.e.f. 1.3.2003 for example, edible oil manufacturers, there is no hold up in clearances on the ground that procedural formalities have not been completed. You are requested to facilitate the registration of such un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... position as on 28.2.2003 and 7.3.2003 and should report should give position as on 15.3.2003 and so on. The first report should be sent so as to reach latest by 10.3.2003. Subsequent report should give the position as on 15.3.2003, 22.3.2003, 29.3.2003, 5.4.2003, 12.4.2003, 19.4.2003 & 26.4.2003 and should reach within 5 days after the expiry of the specified date. 5. While submitting the reports for the period subsequent to 15.3.2003, the detail submitted in the earlier reports may kindly be repeated. To illustrate, while submitting the reports for the period ending on, say, 29.3.2003, the details given in the report for 7.3.2003, 15.3.2003 and 22.3.2003 should also be repeated. 6. Copy of the reports meant for TRU should be sent by name to Shri D.K.Pandey, Under Secretary, Tax Research Unit, R.No.146, North Block, and New Delhi- 110001. 7. Reports should be in respect of items specified below:- (i) Petrol (ii) High Speed Diesel Oil (iii) Spun Yarn (other than pure cotton) (iv) Cement (v) Woolen Yarn and Fabric (vi) Polyester, Nylon and Viscose Filament Yarns (vi) Ceramic Tiles (vii) Cotton fabrics, processed (viii) Man made fabrics, processed (ix) Made-up textile art ..... X X X X Extracts X X X X X X X X Extracts X X X X
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