Indian Jewellery market is one of the largest markets in the world. It is second to Chinese market in this trade. Indian consumers are buying gold jewellery mainly for the wedding ceremony. Indian wedding generates 50 percent of the world annual gold demand. Over the next two decades, 15million weddings to be arranged. Therefore, there is a high demand for gold jewellery in India. Consumers are also buying gold jewellery for all occasions/festivals.
No commodity in the recent past has made the CBEC to work this much, when compare with the task undertook by them in streamlining the procedures for introduction of excise duty on the jewellery industry ( introduced w.e.f. 01.03.2016). As many as 12 Notifications and 6 circulars were issued in a single day (on 26.07.2016) apart from a TRU letter clarifying all on the same day!
It is pertinent to note that in order to hear the grievance of the trade, initially a Sub-Committee of the High Level Committee to interact with the Trade and Industry was formed. Meanwhile extension/further extension of time was granted to the industries for Registration/payment/filing of return etc.,. Finally the committee submitted its recommendations to the government on 23.06.2016 and the board without wasting time issued 12Notifications starting from Notfn. No. 26/2016 CE dt 26.07.2016 to 29/2016 dt 26.07.2016 and Notfn No. 33/2016 CE (NT) dt 26.07.2016 to 40/2016 CE (NT) dt 26.07.2016 apart from issuing 6 Circulars bearing No. 1040/28/2016, 1041/29/2016, 1042/30/2016, 1043/31/2016, 1044/32/2016 and 1045/33/2016 all dated 26.07.2016. Every situation is taken care of and tailor made to that commodity. Under Notfn No.34/2016 CE (NT) dt 26.07.2016 separate rules in the name and style of “Articles of Jewellery (Collection of Duty) Rules,2016” was announced. Finally the bell has been put on the cat! Now manufacturers of “articles of jewellery or parts of articles of jewellery” falling under heading 7113 of the First Schedule to the Central Excise Tariff Act, 1985 have to pay excise duty either @1% (without cenvat credit facility) or 12.5% (with cenvat facility).
Though the notifications and circulars covered almost all areas of dispute, the practice prevalent in jewellery industries in India on “charging for wastages” from the customers along with the cost of jewellery without delivering the actual recoverable wastages has not been looked into. Depending upon the design and composition of the jewellery, cost of certain quantity of gold is charged from the customer calculating based on the weight of the jewellery purchased,(it differs from jewellery to jewellery!,depending upon design etc.,) under the head “wastages” ranging from 5% to 25%. Though the amount is charged from the customers towards wastagesno quantityof wastage is handed over to the customer. Infact the wastages are retained by the jewellers. However in the modern era where most of the designed jewellery are machine made the wastages are very minimum.
Now the question before us is how the quantity of undelivered waste retained by the jewellers, the cost of which is recovered from the customers,will be accounted in the books of stocks/accounts?Further these recovered wastes are once again used in the manufacture of excisable goods
It is quite common in central excise, whenever there is a dispute regarding input output norms, the guidelines stated in the Exim policy is taken as the standard norms.
Handbook of Procedures (1st April 2015 to 31st March 2020) issued by Government of India Ministry of Commerce and Industry Department of Commerce as part of Foreign Trade Policy 2015-2020 prescribes wastage norms for gold jewellery which is reproduced below:
Paragraph 4.60:Wastage Norms Maximum wastage or manufacturing loss on gold/silver/ platinum jewellery and articles thereof is as follows:
|Sl No||Items of export||Percentage of wastage by weight with reference to Gold/ Platinum / Silver content in export item|
|Gold / platinum||Silver|
|a)||Plain jewellery, articles, and ornaments like Mangalsutra containing gold and black beads /imitation stones, cubic zirconia diamonds, precious, semi-precious stones||2.5%||3.2%|
|b)||Studded jewellery and articles thereof||5.0%||5.0%|
|c)||Mountings and findings manufactured (by nonmechanised process) indigenously||2.5%||3.2%|
|d)||Any jewellery/ articles manufactured by a fully mechanised process and unstudded.||0.9%||0.9%|
|e)||Mountings, whether imported or indigenously procured/ manufactured, used in studded jewellery||1.8%||1.8%|
|f)||Gold / silver / platinum medallions and coins (excluding coins of nature of legal tender)||0.2%||0.2%|
|g)||Findings and mountings manufactured by mechanized process.||0.9%||0.9%|
On going through the above table it is clear that the waste allowed in respect of gold jewellery is not more than 2.5% except studded jewellery where the norms fixed is 5%. When compare this with domestic jewellery market there exist a vast difference on the percentage of wastages.
Now we see the rules prescribing filing of certain returns which shall contain details of quanity of inputs used and outputs manufactured. Though Notfn No. 39/2016 CE (NT) dated 26.07.2016, specifically exempts this commodity manufacturers from filing the annual return in the form of ER 4 (required to be filed under rule12(2)(a) of the Central Excise Rules, 2002.) there is no such exemption granted in respect of the following returns:
|Name of the return||Periodicity of filing the return||Details to be furnished in the return||Relevant rule requiring filing of the return|
|ER 5||Annual||Details of quantity of goods manufactured and principal inputs||Rule 9A(1) of the Cenvat Credit Rules, 2004|
|ER 6||Monthly||Details of receipt and consumption of each principal inputs||Rule 9A(3) of the Cenvat Credit Rules, 2004|
|ER 7||Annual||Annual installed capacity||Rule 12(2A) (a) of the Central Excise Rules, 2002|
I once again come back to the original question, that is how the quantity of undelivered waste retained by the jewellers, the cost of which is recovered from the customers will be accounted in the books of stocks/accounts?. I conclude this article expecting CBEC to set up once again a Sub-Committee of the High Level Committee to interact with the Trade and Industry to sort this issue!
(Author is Superintendent of Central Excise, Chennai)