A. CHANGES IN EXCISE DUTY RATES
1) The cenvat rate is reduced from 16% to 14% from 1.3.2008. Consequently, the education cess will be computed on 14% and the rate including the education cess will be 14.42%.
- In some products like medicaments, the duty rate has been reduced to 8%. The cenvat credit availed by the manufacturer is not dependent on the duty rate of the final product. Therefore, whatever duty is paid by the manufacturer of the inputs, the credit of the same would be available to the manufacturer of the final product even if the rate of duty for such product is 8%. Thus, if a manufacturer of medicament buys bulk drug which attracts duty @ 14%, the credit of entire amount of duty would be available to the manufacturer. There will be no reduction in the quantum of credit available to the manufacturer.
- Credit on the stock with the trader as on 29thFebruary 2008.
Many of the first stage and second stage dealer who has stock as on 29th February may sell the product subsequent to March 2008. These products have borne the duty @ 16% plus cess. The traders will be able to pass credit to the customers who purchases the input of the entire amount of duty ie. duty at the rate of 16.48% paid on the inputs. The reduction in rate from 16% to 14% does not mean that the credit of duty for the stock outside the factory as on 29th February 2008 cannot be passed on to the customer.
- In view of the reduction in the rate, the manufacturer can clear the final product which is in stock in the factory as on 29th February 2008 at the rate of 14% plus the education cess. The basic excise duty has been reduced and it is not a new levy. Therefore, the reduced rate will apply even to the stock as on 29th February 2008.
- The manufacturer is advised to put the relevant notification number in the excise invoice prepared from 1st March 2008. The relevant notification for reducing the rate from 16% to 14% is 2/2008 dated 1.3.2008.
B) Boost to some of the pharma sector, paper industries and automobile industry
a) Pharma Sector
The notification no. 4/08 under serial number 62A to 62E reduces the excise duty on medicaments from 14% to 8%. The input for pharma products will attract duty @ 14% but the output will attract duty @ 8%. In case, the cost of raw materials is approximately Rs. 60 and the assessable value based on MRP after abatement is Rs. 100/-, the duty may be more or less equal to the excise duty payable on medicaments.
Exemption from payment of duty has been granted to units situated in Himachal Pradesh and Uttaranchal and many pharma companies have shifted to the said location to take advantage of the exemption from payment of duty. As the final product manufactured at these locations are exempt from payment of duty, the manufacturer cannot avail the credit of excise duty paid on the inputs. As mentioned above, the cenvat credit on inputs more or less equals to the cenvat duty payable on the medicaments. Therefore, the units may not have any advantage of excise. On the contrary, they will lose credit of excise duty paid on the capital goods and service tax paid on input services.
Consequent to reduction in the rate of duty, the abatement available from MRP is also reduced from 42.5% to 35.5%.
Export of goods
Many pharma companies have huge exports which uptil now was being done under LUT. The credit availed on the inputs used for manufacture on export products was utilized for products cleared for home consumption. As mentioned above, the credit of duty on inputs may more or l
ess equal to the duty payable on the output. Therefore, it will be difficult to utilize any accumulation of credit availed on capital goods, input services and also on account of inputs used for export. Therefore, it is advisable to export the goods under rebate of duty as against LUT.
b) Automobile sector :-
The excise duty rates have been reduced on:
a) Small cars from 16% to 12%.
b) Hybrid cars from 24% to 14%.
c) Electric cars from 8% to nil.
d) Specified parts of electric cars from 16% to nil on end-use basis.
e) Buses and other vehicle for transport of more than 13 persons from 16% to 12%, and on the chassis of such vehicles from ‘16% +Rs.10,000/-’ to ‘12% +Rs.10,000/-‘.
f) Two-wheelers and passenger three-wheelers (upto 7 persons) from 16% to 12%.
c) Paper and paper products
1) Excise duty on writing paper, printing paper and packing paper has been reduced from 12% to 8%.
2) Excise duty has been fully exempted on paper and paper products, manufactured from non conventional raw materials upto clearance of 3500 metric tones in a year from a unit.
3) Excise duty on paper and paper products, manufactured from non conventional raw materials, beyond clearance of 3500 metric tones per year from a unit (not having an attached bamboo/wood and pulp plant) has been reduced from 12% to 8%.
d) The excise duty rate on the package software has been increased from 8% to 12%.
C) Amendment in the statutory provisions :-
a) Definition of excisable goods :-
The explanation has been added to provide that goods shall include any article, material or substance which is capable of being bought and sold for consideration and such goods shall be deemed to be marketable.
b) Capacity based duty :-
The new section has been introduced which empowers the central government to charge excise duty on the basis of capacity of product in respect of notified goods. It is expected that some of the goods like bars and rods of iron and steel, textile products may be notified under this section for levy of duty based on the capacity.
c) The section 11B now specifically provides for refund of not only duty but also interest paid by the manufacturer.
d) Any person who has collected duty in excess of the duty paid on the excisable goods or collected any amount as representing duty on any excisable goods which are wholly exempt or chargeable to nil of duty, he shall pay the amount so collected to the credit of the Central Government. Earlier, this provision was applicable only to the manufacturer and now it applies to even trader or any other person.
e) Review of orders passed by jurisdictional Commissioners or appellate Commissioners
Presently, the committee of Chief Commissioners and Committee of Commissioners have been empowered to review the order of jurisdictional Commissioner or Commissioner (Appeals) and direct the central excise officers to file the appeal against the order, in case they are not satisfied that the order is legal or proper. There have been instances where committee which consist of 2 Chief Commissioners or Commissioners have differed. Now, it is specifically provided that in such a case, in case the two Chief Commissioners differ, the matter shall be referred to Board of Central Excise and Customs and in case of difference of opinion in Commissioners, it shall be referred to Chief Commissioners.
The review power shall be exercised within three months from the date of communication of decision or order.
f) Interest on amount of predeposit
Section 35FF now provides that where predeposit has been made under section 35F of the Central EXCISE Act and the department does not refund the amount within 3 months from the date of communication of such order to the adjudicating authority, the interest shall be paid to the appellants at the rate specified in section 11BB after the expiry of three months from the date of communication of the order to the adjudicating authority.
g) Granting of rebate of duty paid on exports made from the units located in Assam, Jammu Kashmir, Kutch etc. These units have exported the goods on payment of duty. The duty was paid through PLA as well as through cenvat account. The department granted the refund only to the extent of duty paid from the cenvat account but there was a dispute on granting of refund for duty paid from PLA. The retrospective amendments have been made in the Central Excise Rules and the Cenvat Credit Rules providing for granting of refund for the exports made from these units even when the duty has been paid from PLA.
D) Export oriented units
The notification no. 23/2003 has been amended and the exemption from payment of basic custom duty has been restricted to 50% of the basic custom duty as against 25% of the basic custom duty. Thus, the goods manufactured in EOU and cleared to DTA will now attract duty @ 50% of the basic custom duty plus CVD plus additional duty wherever applicable.
