Excise Notifications

Dear Professional Colleague,

Mystery of Confusing Notifications on applicability of Excise Duty on Textiles, Mobile phone, Note books, Spectacles, Calculators, Water filters, Sauces and ketchups, Bicycles, etc.

The Central Board of Excise and Customs ("the CBEC" or "the Board") has issued three Central Excise Notifications apparently to clarify when manufacturers can avail exemption or concessional rates of CE duty.

·         Notification No.34/2015-Central Excise, Dated: July 17, 2015, amending Notification 30/2004-CE, which provides for an exemption for certain textile articles

·         Notification No.35/2015-Central Excise, Dated: July 17, 2015, amending Notification 1/2011-CE, which prescribes an effective rate of 2% duty on certain goods

·         Notification No.36/2015-Central Excise, Dated: July 17, 2015, amending Notification 12/2012-CE:

-         Condition 16: Exemption for certain goods either wholly or partly – steel, Aluminium, Tablet Computer, Mobile handsets

-          Condition 20 Clause (a): Exemption for certain goods – Copper

-          Condition 25: Exemption for certain goods – fertilisers, goldsmith wares

-          Condition 52A: Exemption for certain goods – bunker fuels, solar water heater

Objective of these amendments are that the Manufacturer seeking to claim Nil rate of duty or 2% duty or any other Concessional rate of duty under the amended notifications:  

·         Procure Inputs/capital goods which are used for manufacture of excisable goods, on which "appropriate duty has been paid", be it Central Excise duty or the Additional duty of Customs;

·         Input services which are utilized for manufacture of excisable goods on which "appropriate service tax has been paid".

·         Manufacturers claiming the exemption should not avail CENVAT credit of duty/tax paid on inputs, capital goods, input services.

Issues arise because of these amendments: Whether the Manufacturer cannot claim Nil rate of duty or 2% duty or any other Concessional rate of duty under the amended notifications if:

·         Inputs/ capital goods is not liable to excise duty or where excise duty is nil, i.e. No excise duty is paid on Inputs/ capital goods which are used for manufacture of excisable goods.

·         Input Services is not liable to service tax or where service tax is exempted.

Because of the said amendments, there is hue and cry among the diverse section of manufacturers, manufacturing – Readymade garments, Mobile phone, Note books, Spectacles, Calculators, Water filters, Sauces and ketchups, Bicycles, etc.

Mystery resolved by the Board:

Now, the Board has issued three Notifications No. 37/2015-CE, 38/2015-CE, 39/2015-CE, dated July 21, 2015, to correct the mystery created by the Notification Nos. 34/2015-CE, 35/2015-CE and 36/2015-CE dated July 17, 2015 and issued a Circular No. 1005/12/2015-CX dated July 21, 2015, clarifying apprehensions have been raised about the use of the phrase of "appropriate duty". In this regard, an Explanation has been inserted in the  Notifications No. 30/2004-CE dated July 9, 2004, Notification No.1/2011-CE dated March 1, 2011 and Notification No. 12/2012-CE dated March 17, 2012 so as to clarify that the appropriate duty or appropriate additional duty or appropriate service tax for the purposes of the said notifications/entries includes NIL duty/ tax or Concessional duty/tax, whether or not read with any relevant exemption notification for the time being in force.

Hence, the domestically manufactured goods covered under these Notifications/Entries continue to be exempt from Excise duty or subject to Concessional rate of excise duty, as the case may be as they were prior to July 17, 2015.

Hope the information will assist you in your Professional endeavours. In case of any query/ information, please do not hesitate to write back to us.

Thanks & Best Regards.

Bimal Jain

FCA, FCS, LLB, B.Com (Hons)