CA Pradeep Jain & Hushen Ganodwala

Recently, Our Finance Minister, Arun Jaitley has increased the rate of excise duty from 12.36% (Including Education Cess and SHE Cess) to 12.5% (without any Education Cess and SHE Cess) for most of the products. In addition to this, amendments have also been made in the exemption notification no. 12/2012-CE dated 17.03.2012. This article is an attempt to analyse the amendment in rate of excise duty made in chapter sub-heading 3923. The Fifth Schedule of the Finance Bill, 2015 in clause (b) for entry in column (4) specifies the rate of excise duty for tariff items 39232100, 39232910 and 39232990 as “18%”.

However, if the new serial numbers 148B, 148C and 148D inserted in the notification no. 12/2015-CE dated 01.03.2015 are pursued, it is found that exemption is also available for the product “sacks and bags”. The relevant entries are produced for the sake of convenient reference as follows:-

Sl.No. Tariff Heading Description of product Rate of duty
“148B 3923 21 00 Sacks and bags, other than for industrial use 15%
148C 3923 21 00 All goods, other than goods mentioned at Sl. No. 148B above 12.5% –
148D 3923 29 All goods 12.5%

 From the above table we find that rate of excise duty has been increased from 12% to 15% on Sacks and bags falling under 39232100 other than for industrial use. Alternatively, we can say that sale of sacks and bags to Industrial use, in such case excise duty attracts at the rate 12.5% and not 15%. Furthermore, the duty for all goods of 392329 is specified as 12.5% in the exemption notification. Consequently, the rate of excise duty for 39232910 and 39232990 is 12.5%.

It is submitted that the overall effect of the amendment is that the rate of excise duty for chapter 3923 pertaining to Sacks and Bags is as follows:-

Heading Rate of excise duty
39232100 other than industrial use 15%
39232100 for industrial use 12.5%
39232910 12.5%
39232990 12.5%

 It is further submitted that the net result is that the sacks and bags for other than industrial use will be leviable to excise duty at the rate of 15% whereas all other sacks and bags will be leviable to excise duty at the rate of 12.5%. In the opinion of authors, the practice of the government to resort to such a complicate procedure to specify the rate of excise duty for “sacks and bags” is not understandable. When the government had to keep rate of excise duty for all sacks and bags at 12.5% and those used for other than industrial use at 15% then what was the need to specify the rate of excise duty as 18%? And also the approach to amend the notification. All bags and sacks are chargeable general rate of 12.5%. The only exceptional rate applicable to 39232100 is 15% if have other than industrial use.

Well, the tactics of government are known to them best, but this amendments is surely going to keep the manufacturers of “Sacks and bags” busy in determining the rate of excise duty applicable on their product.

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  1. Bharat Patel says:

    Dear sir

    we manufactured plastic bag or pouch from plastic felxable extruded film

    material utilized in the above final product LLDPE / LDPE / TIE / BYNAL etc…

    now we are cleared our plastic bag or pouch with 12.50% excise duty under chapter id 3923 90 90 since 2000

    so you please help me we are write or not for paying excise duty

    thanking you.
    @Bharat Patel

  2. kartik says:

    Dear Sir,
    In chapter heading 39232100 it is has given two different rates as industrial use and other use. How can we classify industrial use and non industrial use. If we supply to another manufacturer can we take that as industrial supply. For this what record we have to maintain. Kindly clarify

  3. P. Chandrasekaran says:

    Dear All,

    Sacks and bags made out of Poly ethylene attracks 18% for industrial use and 15% for other use ( Fin bill 2015 says “(b) for the entry in column (4) occurring against the tariff items 3923 21 00, 3923 29 10 and 3923 29 90, the entry “18% shall be substituted”).

    Tariff item 3923 21 00 is Polymers of Ethylene which comes under tariff heading “3901” as Polymers of Ethylene in primary form also ). So if you make Bag or Sack from any form of polyethylene (LLDPE or LMDPE ), will hit 18%.

    There is no separate notification need to be issued by the govt. to increase tariff rate(18%) and it is necessary in case of any exemption from tariff rate.

    First tariff rate is increased to higher for revenue purpose and then reduced to lower by way of exemption notification for some concessions.

    So sacks or bags of polyethylene for other than industrial use is reduced to 15%
    by way of notification (12/2015 – central excise).

    And sacks or bags made from all other materials like polypropylene, etc, rate of duty is 12.50% for industrial uses or other uses.

    Please comment on…

    Best Regards,
    P. Chandrasekaran

  4. MAHESH says:

    DO LETTER clearly says that

    Chapter 39:
    1) Tariff rate of excise duty on all goods falling under tariff item 3923 21 00 and Chapter subheading
    3923 29 is being increased from 12% to 18%. However, the effective rate of excise
    duty on sacks and bags of polymers of ethylene [3923 21 00] other than for industrial use is
    being increased from 12% to 15%. Other sacks and bags falling under sub-heading 3923 29
    shall remain at 12.5%. Notification No.12/2012- Central Excise, dated 17th March, 2012 as
    amended by notification No.12/2015- Central Excise dated 1st March, 2015 [New S.
    Nos.148B, 148C and 148D] refers.


  5. CA Meenakshi Sundar says:

    Dear Sir,

    The Budget also seems to make a distinction between ‘Sacks and Bags’ of Poly Ethylene and Poly Proplyne.. The enhanced rate of 15% seems to be applicable for for PP bags/sacks and not PE bags/sacks. Need your views.

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October 2021