CA Sudhir V S

CA Venkata Prasad

Exemption to RMC manufactured at site but not retrospectively – effect & FAQ’s:

The activity of getting the Ready Mix Concrete (RMC) by mixing various elements like sand, aggregate, cement etc., amounts to manufacture on which the excise duty is payable. Notification No. 12/2012-CE dated 17.03.2012 as amended (Sl. No. 144) gives excise duty exemption for “Concrete mix manufactured at the site of construction for use in construction work at such site” after referring to chapter 38 (Prior to 2012 also various notifications were issued from time to time containing the exact wordings).

However the question for consideration is whether the expression ‘concrete mix” can be construed to include RMC within its fold consequently avail exemption in terms of above referred notification.

Hon’ble Supreme Court decision in case of Larsen & Toubro Ltd. v. CCE 2015 (324) E.L.T. 646 (S.C.) resting all the litigation and held that Concrete mix & RMC are different therefore RMC is not eligible for the exemption.

Subsequently, several representations were made to Government to extend the exemption benefit to RMC and in the course of building ‘infrastructure’ sector as pillar to the current budget, government extended the exemption to RMC by amending the entry no. 144 of Sl. No.12/2012-CE dated 17.03.2012 vide notification 12/2016-CE dated 01.03.2016 w.e.f 01.03.2016. As a result RMC clearances upto 29.02.2016 are subject to excise duty and clearance after on or after 01.03.2013 would be exempted. An attempt has been made to provide the FAQ’s owing to exemption for the future and taxing the past period clearances.

1. What is the present amendment?

Upto 29.02.2016 only concrete mix manufactured and used at site was exempted from excise duty. However from 01.03.2016 the exemption is also extended to RMC manufactured and used at same site.

2. What if RMC production is being partly used at same site and partly cleared to other unit of same assessee/sold to third party?

In view of explanation to the exemption notification, RMC manufactured at site shall be solely used in same site. From this it appears, if RMC production even partially not used and cleared to other unit/sold to third party, exemption is not available even for the RMC used in that site and accordingly duty shall be payable on entire RMC production. 

3. Whether Duty is payable for the clearance prior to 01.03.2016?

Yes for the all the clearance prior to 01.03.2016 if not paid shall be liable for excise duty, however the same shall be subject to limitation as prescribed

4. For how many past years, should I pay excise duty?

Conservatively, last 5 years however since there was a confusion as to whether the exemption is applicable to RMC and matter was settled in Supreme Court and entire industry was availing the exemption, a view can be taken that excise duty can be paid only for past one year clearances. This fact of payment for past one year has to be intimated to Department in writing.     

5. Is there any other option available to get rid of past liability without paying?

Section 11C of Central Excise Act, 1944 permits Central Government to give exemption in case excise duty was not being paid due to practice prevailed (even though actually liable to be paid).

So representation can be made to government and seek exemption under section 11C of Central Excise Act, 1944.

6. What is the classification, excise duty rate applicable and other concessions in rates of duty?

Presently RMC is classifiable under tariff heading 3824 5010. There are two options available:

  1. Pay excise duty @ 6% availing CENVAT credit
  2. Pay excise duty @ 2% without availing CENVAT credit

7. Apart from above concessions are there any other exemptions available?

In terms of Notification No. 08/2003-CE dated 01.03.2003 as amended,  Exemption upto Rs. 150 Lakhs clearances can be taken subject to turnover of Rs. 400 Lakhs in previous year (popularly known as SSI exemption). for instance, during the FY 2014-15, if the total clearances (including removals to other unit/third party) is Rs. 390 Lakhs then  clearances made upto Rs. 150 Lakhs can be taken during the FY 2015-16.  

8. In case RMC was produced at 11.00 PM on 29.02.2016 however cleared for use at 12.30 AM on 01.03.2016. Is excise duty applicable?

Excise duty has to be paid on removal of the goods at the rate prevailing as on the date of removal As the exemption is available at the time of clearance, no rate of excise duty is ‘nil’

9. What are the interest rates for delayed payment of excise duty?

Interest has to be paid at 18% p.a for each day of delay upto 31.03.2016 and 15% p.a. from 01.04.2016

10. What is the value to adopt for paying excise duty?

  • 110% of cost of production – in case builder/contractor operating RMC plant for himself at site. For instance, M/s. XYZ infra ltd., is installed RMC plant at construction site wherein construction work also being executed by M/s. XYZ infra ltd.,
  • Cost of raw materials + job work charges – in case RMC plant is operated by third party on job work basis and RMC is being used at site by builder/contractor.

11. We have not registered RMC unit under Central excise till now. What should we do for the past period

Shall get registered and pay the excise duty as discussed above.

12. Can I surrender registration after discharging past liability since the no excise duty is required to be paid now on future clearances?

If the RMC production is being used solely for same construction site then registration can be surrendered to avoid compliance cost however if there is any prospects of using/selling RMC production for any other unit/third party then registration can be continued as there is no such exemption and entire production of RMC is liable for excise duty.

13. We have not registered till now and not paid excise duty and also not availed any CENVAT credit. What is the course of action?

Get registered and

(i) Pay excise duty @ 2% on RMC cleared upto midnight of 29.02.2016 without availing CENVAT credit

(ii) Pay excise duty @ 6% on RMC cleared upto midnight of 29.02.2016 availing CENVAT credit. However time limit of 1 year for credit availment (w.r.t. inputs) is applicable hence under this option last one year purchases/procurements only available for CENVAT credit.

14. What are the items on which we are eligible for CENVAT credit?

Major input for the RMC is cement and chemicals and CENVAT credit of the excise duty paid on the same can be availed subject to of time limit of one year. Another major item of CENVAT credit is excise duty paid on RMC plant/batching plant can be availed as capital goods, however deprecation on the CENVAT portion should not be claimed under the section 32 of the Income Tax Act, 1961.

15. We are engaged in construction business and operating RMC plant in the construction site. If we pay the excise duty for past now, can we take the credit of the same?

Generally service tax would be paid on valuation under Rule 2A of the Service Tax (Determination of Value) Rules, 2006 or claiming abatement under notification 26/2012-ST dated 01.03.2012 in both the cases CENVAT of excise duty paid on inputs are restricted and hence CENVAT would not be eligible

16. Presently we are paying excise duty and availing CENVAT credit. What are the changes in compliances to this effect?

Excise duty on clearances made on after 01.03.2016 (12.00 AM) has to be stopped and required to

  • Reverse/pay amount equivalent to credit taken on inputs lying in stock as on 01.03.2016 & proportionate inputs used in RMC cleared on or after 01.03.2016 (12.00 AM), if any
  • Further any CENVAT balance still remaining after above reversal shall lapse reverse the credit

17. Is there is any option of not to avail exemption w.e.f. 01.03.2016?

As the exemption is absolute (without any conditions), availing exemption is compulsory and no option is available to pay excise duty and not to avail exemption.

CA Sudhir V S and CA Venkata Prasad(For any feedback/queries mail to sudhir@hiregnage.com, venkataprasad@hiregange.com)

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