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TMI BlogExcise duty on Ready Made Garments under Chapter 61, 62 and 63X X X X Extracts X X X X X X X X Extracts X X X X ..... Dear All, We are a Garment Manufacturing unit producing readymade garments on contract for certain brand. Our Brand Owner is not disclosing their RSP to us and hence we are not affixing Price Label. Hence, in such a case whether we are exempt from Excise Duty or whether we have to discharge excise duty under section 4 at transaction value. - Reply By KASTURI SETHI - The Reply = Textiles and readymade garments - Levy of Excise duty on readymade garments and made up articles of textiles bearing brand name or sold under a brand name having retail sale price of ` 1,000 or more - Clarification Circular No. 1031/19/2016-CX, dated 14-6-2016 - Reply By CS SANJAY MALHOTRA - The Reply = Dear Sanketh, If brand owner does not disclose his RSP to you, then you don't have to pay Excise duty. Labeling amounts to manufacture in Ch 61 62 , hence when the Brand owner affixes the price tag, he becomes liable to pay Excise Duty. - Reply By Ganeshan Kalyani - The Reply = Sir , the querist has manufactured the garment, hence excise duty shall become payable. It is payable by principal manufacturer or job worker. - Reply By CS SANJAY MALHOTRA - The Reply = Para 3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .1.2 of DOF Letter 334/8/2016-TRU dated 29.02.2016 (v) In cases where the brand name owner gets goods bearing its brand manufactured from other manufacturers (normally small units) without providing the raw materials or inputs, and if the RSP is not affixed or marked on such goods when they are cleared in the course of sale from the factory of a manufacturer to the brand owner, then no excise duty would be payable by such a manufacturers since the RSP of such goods is not disclosed to them by the brand owner. However, since the process of labeling or re-labelling constitutes a process of manufacture , duty on the tariff value (based on the RSP) would be payable as and when the brand owner labels the goods with the RSP of ₹ 1000 or above and clears them for further sale. - Reply By Sanketh Meri - The Reply = Dear Kasthuri Sir, The circular does not clarify my query - Reply By Sanketh Meri - The Reply = Dear Sanjay, From where does the exemption from excise come into picture in case RSP is not affixed by the contractor. Since notification 20/2001 very clearly says if RSP is not affixed then excise shall be chargeable on transaction value. Your suggestio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n was similarly given in budget proposal but has not been amended in the finance bill. It's because of that reason I have raised this query. - Reply By Sanketh Meri - The Reply = Dear Sanjay, The DOF letter has not been given effect in entirety in the act. It was a budget proposal. No notification is amended based on the para you have given from DO letter in central excise - Reply By Sanketh Meri - The Reply = Dear Sanjay, Thanks for taking pain in clarifying my query. But I have been trying to locate the effect of Para 3.1.2 of DOF Letter 334/8/2016-TRU dated 29.02.2016 in the finance bill or notifications. But I could not find anything. If you can help, it will be really great - Reply By YAGAY AND SUN - The Reply = Excise duty liability on readymade garments (Source of Info: LKS- Excise Update No. 14/16th June, 2016) The CBEC has issued Circular No. 1031/19/2016-CX dated 14.06.2016 wherein the excise duty liability on readymade garments has been clarified. Vide Budget 2016, readymade garments bearing a brand name or sold under a brand name and having an MRP of more than ₹ 1,000 have been made dutiable. CBEC has clarified that where ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a retail outlet affixes an MRP tag on the readymade garments, the said retail outlet will be liable to pay excise duty provided:- The goods bear a brand name or are sold under a brand name; The MRP of the goods is equal to or more than ₹ 1,000; and Such goods are not exempt under the SSI exemption. The CBEC also clarified that where the readymade garments are merely sold from a retail outlet which has a name say M/s XYZ and Sons, such readymade garments will not be liable to excise duty as they will not be considered as branded goods. Further, the CBEC has directed the field formations not to visit the individual retail outlets or retail chains, except based on specific inputs regarding duty evasion and with the approval of the jurisdictional Commissioner or Additional Director General or above. Issue The Supreme Court in the case of CCE vs. Australian Foods [2013(287) ELT 385] = 2013 (1) TMI 330 - SUPREME COURT wherein it was held that goods without the brand name when sold from exclusive single brand retail outlets or restaurants or stores will be deemed to be branded goods of that outlet. The ratio laid down by the aforesaid decis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion needs to be looked intoby the retail outlets. - Reply By CS SANJAY MALHOTRA - The Reply = Dear Sanketh, Your concern is valid and I too appreciate the same that it could have been factored into some Notification, which has not been done. Firstly the condition as mentioned in DOF letter dated 29.02.16 has limited applicability i.e. small units and not universally applicable, which may invite litigation on small units definition. Notf No 20/2001 as rightly stated by you provides for levy of duty at transaction value, but in the recent case, the levy is based on RSP than ₹ 1000/-, hence the scenario changes. This is my view and other experts may have different view. - Reply By YAGAY AND SUN - The Reply = We endorse the view of Sanjay Sir. Sanjay Sir, gone through your presentation on GST. It is a master piece. . We salute your hardwork and dedication which is reflected in GST presentation. - Reply By KASTURI SETHI - The Reply = With reference to M/s. Yagay and Sun's accolades for Sh.CS Sanjay Malhotra, Sir, I have the privilege to express my inner feelings that Sh.CS Sanjay Malhotra, Sir is, de facto, at the zenith of Discussion Forum ir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... respective of the number of queries replied. Quantity cannot override quality. - Reply By CS SANJAY MALHOTRA - The Reply = Dear Yagay and Sun Ji / Sh Kasturi Ji, Am speechless with the courtesy you people extend, but I learn lot from all my friends. Everyone has unique qualities for e.g Yagay and sun replies depicts competency in drafting legal matters, Sh Kasturi Ji depicts going to root cause and revert irrespective of output which enriches learning curve. Sh Ganeshan Ji, debate this involving experts to remain at Tmi platform, govindrajan ji, brain storming n coming out with articles. Salute to all and am sure that I will invite u all experts at GST summit one day. Thanks again Salute te to all - Reply By Sanketh Meri - The Reply = Dear Sanjay, Thanks for providing clarification on the matter. I am yet to read your presentation on GST. But i have gone through all experts replies and articles and i will not mince words but say that it has been of immense help to me in providing direction in lot of areas. That is why i like to post technical queries in this forum rather than any where else. With regard to your reply on my query, i differ with you since if you re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ad the notification 20/2001 , it clearly says that abatement of 60% will be available on RSP and not on transaction value. Hence, the mention of RSP clearly links it to Notification 1/2011 (amended by 2016 notification) which spells out that RSP 1000/- and above is taxable. Since it links it to RSP, they have given clarification in Notification 20/2011 that if a manufacturer does not affix RSP, then transaction value shall be the value for charging excise duty. My major issue is whether we can take DOF letter dated 29-2-2016 as the basis for taking decision or not. Since in many cases, courts have ruled against budget proposals which do not form part of the act. In this case, whether DOF letter has legal power to over rule the notifications. - Reply By KASTURI SETHI - The Reply = Sh.Sanketh Meri Ji, Neither DOF letters nor Circulars have a statutory force. Both help in understanding law. No doubt Board's circulars are binding on the department but they are devoid of legal force. These cannot override rules or notifications. - Reply By KASTURI SETHI - The Reply = Sh.Sanketh Ji, Does Para No.5 of Board's Circular No. 1031/19/20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 16-CX, dated 14-6-2016 not help you ? - Reply By Sanketh Meri - The Reply = No sir. Since, the context of Para 5 clearly talks about branded outlets liability to charge excise duty on affixing brand name and RSP Label. It does not talk from a contract manufacturer point of view. It does not clarify that contract manufacturer need not charge excise duty. - Reply By Ganeshan Kalyani - The Reply = Sir, can we not write to department seeking clarification in this case. As neither circular not Dof is clear in relation to the concern raised by you. I hope you will receive a response. However , I am too on a learning stage, so shall enrich my knowledge by going through the discussions of my learned experts. Thanks. - Reply By Ganeshan Kalyani - The Reply = Sri Kasturi Sir, I agree to your views/praise to Sri Sanjay Sir. The presentation on GST prepared by him was really helpful in understanding the basis of taxation in GST. The pictorial slides made easy to understand. The examples given depicting tax structure is very nice. In short it is simple and to precise. Thanks to his effort and for sharing the same with us. - Reply By Sanketh Meri - The Reply = Dear Ganesh sir, Can y ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ou guide me whom should I write to in CBEC. I would be more than happy to get clarification. - Reply By KASTURI SETHI - The Reply = None would give anti-revenue advice. One has to interpret the law oneself. In case clarification is given, it would take a long time.You cannot wait for. In my view CE duty is payable. Who will pay Job worker or Principal manufacturer ? It can be ascertained from the terms and conditions of the contract. Without examining the contract, we will be groping in the dark. Prima facie , CE duty is payable. I also think that query has not been properly drafted. Contract viz-a-viz billing system has to be checked for fool proof reply. Best option is to pay CE duty under protest and avoid interest and penalty. - Reply By CS SANJAY MALHOTRA - The Reply = Dear Sanket, Am in agreement with Sh. Kasturi ji that if you have doubts, then pay the duty under protest and seek for clarification, which would take time. Refer to Notification No. 09/2016-CE dated 01.03.2016 (amendment to Notification No. 01/2011-CE ) which has added Sr. No. 75A , which provides for leviable of Duty @ 2% (Duty for exempted goods), if the RSP is ₹ 1000/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... - This itself makes it precise that only RSP goods are subject to Duty. Just imagine, in case of exports, if you don't follow above scenario and pay duty on Transaction Value as MRP is not affixed, then would department give you refund of 2% duty. NO, they can't as 2% duty goods are exempted goods as per Notification No. 01/2011-CE . Mr. Ganeshan ji rightly shared his view to take up with CBEC. You may write to Chairman CBEC, North Block, New Delhi but you may / may not get reply. - Reply By KASTURI SETHI - The Reply = Sh. CS Sanjay Malhotra Ji, If any querist is not satisfied by any reason whatever may be, the better option for querist is to engage professional advocate or consultant. Sir, on this platform advice is given on the basis of construction of a query by the assessee and that too in the absence of statutory and non-statutory records.We do not know the facts of the case. We depend on the basis of what he says and give our opinion. I have seen many cases wherein the facts differed from that informed by the client, after examination of their records. My clients were highly qualified but failed to interpret and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... understand intricacies. (I do not blame the querist here I am talking what happens normally. All are not same.) So each and every words has to be xrayed before taking any decision by the assessee. - Reply By CS SANJAY MALHOTRA - The Reply = Dear Sh Kasturi Ji, Am in agreement with you. We can share , guide but finally Querist has to take call what best suits him. - Reply By KASTURI SETHI - The Reply = Yes Sir. We are are performing our moral duty in the interest of society, in turn, nation through TMI. - Reply By Ganeshan Kalyani - The Reply = Sri Sanket Ji, please refer Section 23A to 23H of Central Excise Act, 1944 which provides for Advance Rulings. You may take benefit of this provision. As said by Sri Sanjay Sir, you need to pay duty under protest and then file the application. Also, I agree to Sri Kasturi Sir's that it depends on agreement between you and your principal manufacturer as regard who shall pay the tax. Either of the person should pay and comply. Thanks. - Reply By Sanketh Meri - The Reply = Dear All, Thanks for spending time on clarifying my query. I am really grateful. With regard to clarity on the subject, we are contract manufactu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rers and not job workers. We shall purchase the materials and make the final product for the brand owner. It is a contract for sale and not works contract. In this, we shall be affixing the brand name of the brand owner and supply the material. In case of job work, Rule 4 (1)A clearly exempts job worker from liability if brand owner is discharging liability. However, we are not job worker. Hope this gives more clarification. With regard to notification 1/2011 , it clearly says 2% without cenvat credit can be charged for entry 75A which says RSP condition. However, the above notification is an isolated notification for benefit of items mentioned in it chargeable at 2% provided cenvat credit is not taken. Further, If you see the first schedule of Central Excise chapter 62 or 63 it says 12.5% on ready made garments. It does not say about RSP criteria. So if I do not apply the above notification of 2%, then I again fall under first schedule rate of 12.5% which does not talk about RSP criteria. The link between 12.5% and RSP is not available. This is my personal analysis. Please correct if I am wrong. Further, thanks for the opinion on paying tax under protest and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Advance ruling. Will surely do that. - Reply By KASTURI SETHI - The Reply = Sir, You are not the job worker. O.K. You are a manufacturer of ready made garment. O.K. Non-affixation of price label by any one cannot absolve you from payment of CE duty as a manufacturer. Some notifications are to be read in conjunction and some are to be in isolation.In this situation, In lighter vein, I am reminded of the proverb, Too many cooks spoil the broth. - Reply By YAGAY AND SUN - The Reply = Dear Sanketh Meri, You may opt to seek an Advance Ruling or write to CBE C for getting the clarification on this matter. Regards, YAGAY and SUN - Reply By KASTURI SETHI - The Reply = Just for additional information linked with the issue. Affixing the brand name is not only by way of tagging the price, labelling, relabelling, embossing etc.the product but also by way of maintenance of records in the factory of the manufacturer of excisable goods. In case nexus between the goods manufactured and 'brand name' is established from any record i.e. statutory as well as non-statutory maintained by the assessee in any way, such goods w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ould be treated as branded. There is no relaxation for ready made garments regarding the definition of 'brand name'. - Reply By Ganeshan Kalyani - The Reply = Thank you Sri Kasturi Sir for sharing additional point. It really enriches my knowledge. I was not aware of the same. Thanks. - Reply By MARIAPPAN GOVINDARAJAN - The Reply = I really wonder on 31 postings for a query. - Reply By Sanketh Meri - The Reply = Hi sir, I think you have a clear solution to the issue. Hope to listen your views on the matter - Excise duty on Ready Made Garments under Chapter 61, 62 and 63 - Query Started By: - Sanketh Meri Dated:- 13-9-2016 Central Excise - Got 33 Replies - Central Excise - Discussion Forum - Knowledge Sharing, reply post by an expert, personal opinion Tax Management India - taxmanagementindia - taxmanagement - taxmanagementindia.com - TMI - TaxTMI - TMITax ..... X X X X Extracts X X X X X X X X Extracts X X X X
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