4.1 A number of exemptions from Central Excise duty (about 130 exemption entries) are being withdrawn. These include some cases where the rate of duty is Nil by tariff. A nominal duty of 1% ad valorem is being imposed on these items with the condition that no credit of the duty paid on input and input services is taken. For ease of reference, this rate is being prescribed through a common notification no. 1/2011-CE dated 1st March, 2011. The statutory/ tariff rate for those items that hitherto attracted a Nil rate (by tariff) has been fixed at 5% ad valorem. Bill entries contained in the Tenth Schedule to the Finance Bill, 2011 may be referred to for this purpose. For the remaining items in whose case the statutory/tariff rate is not Nil, a general effective rate of 5% is being prescribed (without any condition) through notification no.

2/2011-CE dated 1st March, 2011. This would enable those manufacturers who wish to avail of Cenvat credit to pay a concessional duty of 5%.

4.2 In the case of jewellery of gold, silver or other precious metals as well as articles of these metals falling under heading no. 7114, the levy would apply only to goods either bearing a brand name or sold under a brand name. Full exemption from excise duty is being retained for unbranded products of this class.

4.3 The following amendments have been made in the Cenvat Credit Rules, 2004 for the implementation of the 1% scheme:

(a) The definition of “exempted goods” has been amended to include goods in respect of which the benefit of notification no.1/2011-CE is availed. This would imply that the credit attributable to such goods would have to be reversed when common inputs and input services are used for both these goods and otherwise dutiable goods.

(b) Credit of duty paid on inputs or input services would not be available to a manufacturer of these goods. Credit of the duty paid on items that are being subjected to the levy of 1% would not be available to a manufacturer or service provider who buys them.

(c) It is also being prescribed in the Cenvat Credit Rules that the manufacturer of these goods cannot discharge the duty liability on them by utilizing Cenvat credit otherwise available in his books of accounts. For these provisions, amendments in the Cenvat Credit Rules, 2004 contained in Notification No. 3/2011-CE (NT) dated 1st March, 2011 may be referred to.

4.4 Many of the manufacturers of these goods may be fresh registrants under Central Excise law. It may kindly be ensured that they are provided the necessary facilitation and guidance in securing registration and complying with Central Excise formalities and that coercive measures are not used in the immediate aftermath of the Budget for the implementation of the levy.

4.5 Full exemption was hitherto available to paper manufactured from non-conventional raw materials for the first clearances not exceeding 3500 per metric tonne per annum made from a unit. This exemption is being withdrawn.

4.6 Full exemption from excise duty available to automatic looms and projectile looms is being withdrawn. Full exemption on micro-processors, other than motherboards; floppy disc drive; hard disc drive; CD-ROM drive; DVD drives/ writers; flash memory and combo drives meant for fitment inside a laptop/CPU is also being withdrawn. All these goods would be chargeable to a concessional rate of 5%.

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September 2021