Budget 2010-11: Major Amendment in Central Excise Duty

Note: Changes come into effect immediately unless otherwise specified.

Major proposals about Central Excise duty are the following:

A. General CENVAT Rate for non-petroleum goods:

The standard rate of excise duty of 8% on non-petroleum products is being increased to 10% with a few exceptions where exemptions/concessions have been given.

B. CEMENT

Consequent to enhancement of the standard rate of duty from 8% to 10%, the specific rates of duty on cement and cement clinker is also being revised upwards as follows:

Mini cement plant:

Other than mini cement plant:

C. AUTOMOBILE SECTOR

Ad-valorem component of excise duty on large cars, Multi Utility Vehicles and Sports Utility Vehicles etc. and chassis thereof is being increased from 20% to 22%. There is no change in the specific component, which will continue to be levied as applicable.

D. PETROLEUM PRODUCTS

The rates of excise duty on Motor Spirit (petrol) and HSD (diesel) are being increased by Re.1 per litre. The revised rates of duty on these items are as under:

Note: * Includes Rs.2 Additional Excise Duty and Rs.6 Special Additional Excise Duty. ** Includes Rs.2 Additional Excise Duty.

E. TOBACCO PRODUCTS

1) The existing slab of filter cigarettes of length not exceeding 70 mm is being broken up into two slabs: filter cigarettes of length not exceeding 60 mm; and filter cigarettes of length exceeding 60 mm but not exceeding 70 mm. Suitable rates are being prescribed for these slabs. The basic excise duty (BED) on other cigarettes is being revised. The revised rates of excise duty including basic excise, additional excise and NCCD on cigarettes are as under:

Note: BED, AED and NCCD stands for Basic Excise Duty, Additional Excise Duty and National Calamity Contingent Duty respectively.

2) At present, cigars, cheroots and cigarillos of tobacco attract ad valorem rate of basic excise duty (BED) of 8% plus Additional Excise Duty (Health Cess) of 1.6%. These rates are now being replaced with a composite rate of “10% or Rs.1227 per thousand, whichever is higher” (BED) and “1.6% or Rs.246 per thousand whichever is higher” (AED). Cigars, cheroots and cigarillos of tobacco substitutes will now attract BED of “10% or Rs.1473/1 000” whichever is higher.

3) Basic excise duty on branded unmanufactured tobacco and tobacco refuse is being increased from 42% to 50%.

4) Basic excise duty on branded ‘hookah’ or ‘gudaku’ tobacco is being increased from 8% to 10% while that on chewing tobacco, preparations containing chewing tobacco, jarda scented tobacco, snuff and its preparations, tobacco extracts and essences etc. has been increased from 50% to 60%.

5) Basic excise duty on branded homogenised or reconstituted tobacco is also being increased from 50% to 60%.

6) Basic excise duty on items of other smoking tobacco (branded) is being increased from 34% to 40% while the duty on such unbranded tobacco is being increased from 8% to 10%.

7) Basic excise duty on smoking mixtures of pipes and cigarettes is being increased from 300% to 360%.

8) Basic excise duty on cut tobacco is being increased from Rs.50 per kg. to Rs.60 per kg.

9) Excise Duty on Chewing Tobacco and branded unmanufactured Tobacco packed in pouches with the aid of packing machines will now be levied based on capacity of production under Section 3A of the Central Excise Act, 1944 (compounded levy). The levy will come into effect on 8^th March, 2010.

F. CLEAN ENERGY CESS

Clean Energy Cess is being imposed on coal, lignite and peat produced in India. This cess would be levied and collected as a duty of excise with effect from a date to be notified after the enactment of the Finance Bill, 2010.

G. SECTOR SPECIFIC RELIEF MEASURES:

I. FOOD/AGRO PROCESSING AND AGRICULTURE SECTOR

1) Full exemption from excise duty presently available to 20 specified equipments for preservation, storage or transport of agricultural produce is being extended to apiary, horticultural, dairy, poultry, aquatic & marine produce and meat as well as processing thereof.

2) Full exemption from excise duty is being extended to self-loading/self-unloading trailers & semi trailers for Agricultural Purposes (tariff item 8716 20 00).

II. ENVIRONMENT FRIENDLY AND ENERGY SAVING GOODS

1) A uniform concessional rate of duty of 4% is being prescribed for parts, namely batteries including battery chargers, electric motors and AC or DC motor controllers required for manufacture of all categories of electrical vehicles including cars, two wheelers and three wheelers (like ‘Soleckshaw’) subject to actual user condition. This concession will be available till 31 .03.2013. Such vehicles will also be charged to excise duty @ 4%.

2) Excise duty is being reduced from 8% to 4% on LED lights/lighting fixtures.

3) Full exemption from excise duty is being provided to additional specified raw materials for the manufacture of rotor blades for wind operated electricity generators.

III. CAPITAL GOODS

Full exemption from central excise duty presently available to goods supplied against International Competitive Bidding is now being extended to goods supplied to mega power projects from which power supply has been tied up through tariff-based competitive bidding. The exemption would also be available where the mega power project has been awarded through tariff-based competitive bidding.

IV. MSME/ SMALL SCALE SECTOR

1) Changes are being made in the relevant provisions to provide certain facilities to Small Scale Industrial (SSI) units eligible for availing benefit under Notification No. 8/2003-CE as under:

a) full Cenvat credit on capital goods in one instalment in the year of receipt of such goods.

b) facility of payment of excise duty on quarterly basis.

The above changes come into effect from 1^st April, 2010 and will be applicable even if an eligible unit opts not to avail of the SSI exemption.

2) While retaining the system of filing quarterly returns, the due date for filing of Central Excise returns by SSI units is being advanced to the 10th of the month following the quarter.

3) The relaxation from brand name restriction under the general SSI exemption scheme is being extended to plastic bottles and plastic containers used as packing material.

V. GOLD AND SILVER

1) Refined serially numbered gold bars made from the ore/concentrate stage will now attract excise duty of Rs.280 per 10 grams (instead of 8% ad valorem) with Cenvat credit facility on inputs and capital goods.

2) Excise duty on DTA clearances of plain gold and silver jewellery manufactured by a 100% EOU is being increased from:

(i) Rs.500 per 10 gram to Rs.750 per 10 gram for gold jewellery; and

(ii) Rs.1000 per kg to Rs.1500 per kg. for silver jewellery.

H. OTHER RELIEF MEASURES

1) Following items are being fully exempted from excise duty:

a) Articles of bedding wholly made of quilted textile materials;

b) Toy balloons made of natural rubber;

c) Betel nut product known as “Supari”;

d) Dementholised oil, Deterpenated Mentha oil, Spearmint/ Mentha Piperita oils and all intermediates and by-products of Menthol.

2) Excise duty is being reduced from 8% to 4% on:

a) Replaceable kits for all household type water filters (except those operating on RO technology)

b) Corrugated boxes/ cartons manufactured by stand- alone manufacturers

c) Latex rubber thread.

3) Excise duty on goods covered under the Medicinal and Toilet Preparations Act is being reduced from 16% to 10% to bring it at par with standard Cenvat rate.

I. RATIONALIZATION MEASURES

1) At present, maize starch and tapioca starch are exempt from excise duty while potato starch attracts 8% duty. Excise duty on all these starches is now being unified at 4%.

2) In the last budget, concessional rate of 4% excise duty applicable to the ceramic tiles manufactured in kilns not using electricity was enhanced to 8% without Cenvat credit facility. Since, ceramic tiles in general also attracted 8% excise duty (standard rate) with Cenvat credit, this entry had become redundant. The rate of duty on all ceramic tiles, regardless of the fuel used for firing the kiln, is now being unified at 10% with Cenvat credit facility.

3) Umbrellas currently attract 4% excise duty while umbrella parts attract 8% excise duty and umbrella cloth panels are fully exempt. The rate of excise duty on umbrellas and all umbrella parts is being unified at 4%.

4) Currently, two different rates of excise duty (NIL and 4%) for rough ophthalmic blanks have been prescribed under two different notifications. Redundant entry prescribing 4% is being omitted.

J. WITHDRAWAL OF EXEMPTIONS/CONCESSIONS

1) Full exemption from excise duty on following items is being withdrawn. They will now attract excise duty of 4%.

a) Mosquito nets impregnated with insecticides;

b) Av gas;

c) Microprocessor for computers (other than motherboard), Floppy disk drive, Hard disk drive, flash drive, CD/DVD and Combo Drive meant for external use.

2) Full exemption from excise duty on baby & clinical diapers and sanitary napkins is being withdrawn. These items will now attract duty at 10%.

3) Concessional rate of excise duty on open tin sanitary (OTS) cans is being withdrawn. OTS cans will now attract duty at 10%.

4) Concessional rate of excise duty on goggles is being withdrawn except those used for correcting vision. These items will now attract duty at 10%.

K. AMENDMENTS IN CENTRAL EXCISE ACT, 1944

1) In section 11A (2B), an Explanation is being inserted to clarify that no penalty shall be imposed where duty along with interest has been paid before the issuance of a demand notice by the Department.

2) Section 32 dealing with Settlement Commission is being amended so as to restore certain provisions as they obtained prior to the enactment of the Finance Bill, 2007. Accordingly, the prohibition on filing of applications for the settlement of cases where an assessee admits short-levy for goods in respect of which he has not maintained proper records (i.e. cases of misdeclaration, clandestine removal etc.) is being removed. Similarly, the restriction that an assessee may seek only one­time settlement is also being relaxed. The Commission is being empowered to extend the time limit of nine months for disposal of applications by another three months, for reasons to be recorded in writing.

3) In Section 37, a new clause is being inserted to provide rule-making powers to the Central Government for withdrawal of facilities or imposition of restrictions including restrictions on utilization of Cenvat credit on a manufacturer or exporter or suspension of registration of a dealer for dealing with evasion of duty or misuse of Cenvat credit.

The above changes will come into effect on enactment of the Finance Bill.

L. AMENDMENTS IN THE FIRST SCHEDULE TO CENTRAL EXCISE TARIFF ACT, 1985

1) In heading 2402, a new tariff item covering filter cigarettes of length not exceeding 60 mm has been inserted. Consequential changes have been made to other tariff items in the said heading.

2) In Chapter 27, sub-heading 2712 20 and the tariff items 2712 20 10 and 2712 20 90 are being substituted by 2712 2000 covering ‘Paraffin Wax containing by weight less than 0.75% of oil’. Further, tariff item 2712 90 40 covering ‘Paraffin wax containing by weight 0.75% and more of oil’ is being inserted.

3) In chapter 68, Note 3 is being inserted to provide that in relation to goods of headings 6802 and 6810 the process of cutting or sawing or sizing or polishing or any other process for converting stone blocks into slabs or tiles shall amount to “manufacture”.

4) In Chapter 76, Note 2 is being inserted to declare the process of drawing or redrawing of aluminium tubes and pipes as amounting to “manufacture’”

M. AMENDMENTS IN CENTRAL EXCISE RULES AND CENVAT CREDIT RULES

1) Rule 11 (5) of the Central Excise Rules, 2002 is being deleted so as to dispense with the requirement of pre-authentication of the invoice.

2) The Central Excise Rules, 1944, the Cenvat Credit Rules, 2000, the Cenvat Credit Rules 2001, the Cenvat Credit Rules 2002 and the Cenvat Credit Rules, 2004 are being amended retrospectively w.e.f. 01.09.1996 to 31.03.2008 (for periods as applicable to respective rules) to provide that where a manufacturer avails Modvat/Cenvat credit in respect of any inputs, other than fuel, to manufacture both dutiable and exempted goods, he can opt to reverse credit or pay an amount equivalent to credit attributable to inputs used for manufacture of exempted goods. It is being further provided that such manufacturer shall pay interest @ 24% p.a. from the date of clearance till date of reversal of the said credit or payment of equivalent amount. Such option will, however, be available only in such cases where disputes in this regard are pending on the date of enactment. This change will come into effect on the enactment of Finance Bill, 2010.

3) Rule 3(5) of the Cenvat Credit Rules, 2004 is being amended to provide accelerated depreciation in the case of computers and computer peripherals cleared after use at the same rates as applicable for similar capital goods of EOU/EHTP/STP units under Notification No. 52/2003-Customs.

4) Rule 4(5) (b) of the Cenvat Credit Rules, 2004 is being amended to permit sending of jigs, fixtures, moulds and dies to a vendor for production of goods according to the specifications of the principal manufacturer without reversal of credit.

5) Rule 6 (6) (vii) of the Central Credit Rules, 2004 is being amended so as to allow Cenvat credit on inputs used in the manufacture of goods supplied to such mega power projects from which power has been tied up through tariff-based competitive bidding or the projects awarded through tariff-based competitive bidding. Similar facility available to goods supplied against International Competitive Bidding available at present is also being continued.

6) Rule 15 of the Cenvat Credit Rules, 2004 is being amended to harmonize the penal provisions for incorrect availment of Cenvat credit of duty paid on inputs or capital goods or input services.

N. AMENDMENTS IN MEDICINAL AND TOILET PREPARATIONS (EXCISE DUTIES) ACT, 1955

Section 3 of the M&TP Act is being amended to exclude goods manufactured or produced by units in SEZ from excise duty leviable under that Act. This change will come into effect on enactment of the Finance Bill.

O.  AMENDMENTS IN CENTRAL SALES TAX ACT, 1956

The provisions of CST Act are being amended so as to provide for:

(i) reassessment by the assessing authority on the basis of new facts discovered or revision by a higher authority.

(ii) filing of appeals to the highest authority of every State against the orders made by assessing authorities on issues involving stock transfer or inter state sale including incidental issues relating to rate of tax, computation of assessable turnover, penalty and procedure.

(iii) filing of appeal against any order passed by the highest appellate authority of a State on disputes of interstate nature relating to stock transfer or consignments of goods to the CST Appellate Authority.

The above changes will come into effect on enactment of the Finance Bill.