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Budget 2015- Proposed Excise Duty Amendments- A detailed Analysis

AMENDMENTS IN THE CENTRAL EXCISE ACT, 1944:

1)   Sub section (3) of Section 3A, which empowers the Central Government to charge excise duty on the basis of capacity of production in respect of notified goods, is being amended so as to insert an Explanation to provide that factor relevant to production includes factors relevant to production, so as to enable the Central Government to specify more than one factor relevant to the production of such goods.    (Clause 90)

2)   Section 11A is being amended so as to:

(i)     Remove from the statute the category of cases where extended period of time applies but the transactions are recorded in the specified record;

(ii)    Amend the provision relating to relevant date to provide definition of relevant date in respect of cases where a return is not filed on the due date and where only interest is required to be recovered.

(iii) Provide that the provisions of section 1 1A shall not apply to cases where the non-payment or short payment of duty is reflected in the periodic returns filed and that in such cases recovery of duty shall be made in such manner as may be prescribed in the rules.                                                                                                                                                                                             (Clause 91)

3) Section 11AC is being substituted so as to rationalize the penalty as follows:

(iv) in cases not involving fraud or collusion or wilful mis-statement or suppression of facts or contravention of any provision of the Act or rules with the intent to evade payment of excise duty, in the following manner,-

a)     in addition to the duty as determined under sub-section (10) of section 11A, a penalty not exceeding 10% of the duty so determined or Rs. 5000 whichever is higher shall be payable;

b)     if duty and interest payable thereon under section 11AA is paid either before issue of show cause notice or within 30 days of issue of show cause notice, no penalty shall be payable and all proceedings in respect of said duty and interest shall be deemed to be concluded;

c)     if duty as determined under sub-section (10) of section 11A and interest payable thereon under section 11AA is paid within 30 days of the date of communication of order of the Central Excise Officer who has determined such duty, the amount of penalty shall be equal to 25% of the penalty so imposed shall be payable, provided that such reduced penalty is also paid within 30 days of the date of communication of such order; and

d)     if the duty amount gets reduced in any appellate proceeding, then penalty amount shall also stand modified accordingly, and benefit of reduced penalty (25% of penalty imposed) shall be admissible if duty, interest and reduced penalty is paid within 30 days of such appellate order.

(v) in cases involving fraud or collusion or wilful mis-statement of suppression of facts or contravention of any provision of the Act or rules with the intent to evade payment of excise duty, in the following manner,-

a)     in addition to the duty as determined under sub-section (10) of section 11A, a penalty equal to the duty so determined shall be payable. In respect of cases where the details relating to such transactions are recorded in the specified record for the period beginning with 8th April, 2011 and upto the date of assent to the Finance Bill, 2015, the penalty payable shall be 50% of the duty so determined.

b)     if duty and interest payable thereon under section 11AA is paid within 30 days of communication of show cause notice, the amount of penalty payable shall be 15% of the duty demanded, provided that such reduced penalty is also paid 30 days of communication of show cause notice and all proceedings in respect of said duty and interest shall be deemed to be concluded;

c)     if duty as determined under sub-section (10) of section 11A and interest payable thereon under section 1 1AA is paid within 30 days of the date of communication of order of the Central Excise Officer who has determined such duty, the amount of penalty shall be equal to 25% of the duty so determined, provided that such reduced penalty is also paid within 30 days of the date of communication of such order; and

d)     if the duty amount gets reduced in any appellate proceeding, then penalty amount shall also stand modified accordingly, and benefit of reduced penalty (25% of penalty imposed) shall be admissible if duty, interest and reduced penalty is paid within 30 days of such appellate order.    (Clause 92)

4) The proviso to sub-section (c) of section 31 relating to the provisions of Settlement Commission is being amended to delete the reference to “in appeal or revision, as the case may be” so as to provide that when any proceeding is referred back, whether in appeal or revision or otherwise, by any court, Appellate Tribunal Authority or any other authority to the adjudicating authority for a fresh adjudication or decision, then such case shall not be entitled for settlement.  (Clause 93)

5)     The proviso to sub-section (3) of section 32 provides that where a Member of the Central Board of Excise & Customs is appointed as the Chairman, Vice Chairman or Member of the Settlement Commission, he shall cease to be a member of the Board. As per the amended Customs and Central Excise Settlement Commission (Recruitment and Conditions of Service of Chairman, Vice Chairman and Members) Rules, 2000, Members of the Board are not eligible to be Member of the Settlement Commission. Hence, the proviso is redundant and is being omitted.   (Clause 94)

6)     Section 32B is being amended so as to enable Vice Chairman or Member of the Settlement Commission to officiate as Chairman in the absence of the Chairman of the Settlement Commission. (Clause 95)

7)     Sub-section (1A) to section 32E provides that in case of applications made prior to 1st day of June 2007, and where no order under section 32F (1) has been made before said date or applicant has not paid the amount so ordered by the Settlement Commission shall within thirty days from 1st day of June 2007 pay the accepted duty liability failing which his application shall be liable to be rejected. Since the actual operation of the said section provides for the payments to be made within thirty days from 1st day of June 2007, the said sub-section has become redundant and is being omitted.   (Clause 96)

8)     Sub-section (6) of section 32F provides that in respect of the applications filed before 31st day of May, 2007, Settlement Commission shall pass the final order of settlement under sub-section (5) of section 32F latest by 29th February 2008 and in cases filed after 31st day of May, 2007, within nine months. Since all the applications filed before 31st day of May, 2007 shall have been necessarily disposed of by 29th day of 2008, the reference to the said dates have become redundant. Therefore, the said sub-section has been amended so as to omit the phrase “in respect of an application filed on or before the 31st day of May, 2007, later than the 29th day of February, 2008 and in respect of application made on or after the 1st day of June, 2007”.    (Clause 97)

9)     Section 32H provides that Settlement Commission can reopen the completed proceedings in certain conditions. As per the first proviso to the said section no proceedings can be reopened after five years from the date of application, and as per second proviso to the said section Settlement Commission cannot reopen any proceedings in respect of an application made after 1st day of June 2007. Thus, Settlement Commission has no powers to reopen any completed proceedings after expiry of five years from 1st day of June 2007, thus making this section redundant. Therefore, this section is being omitted.  (Clause 98)

10)  Explanation to sub-section (1) of section 32K provides that in respect of the applications filed on or before 31st day of May 2007, Settlement Commission shall decide the applications as if the amendments made in the said section were not in force. Since all the applications filed by 31st day of May, 2007 have necessarily been disposed of by 29th day of February 2008, the said Explanation has become redundant and hence, is being omitted. (Clause 99)

11)  Section 32O provides the situations in which the person in whose case the order has been passed by the Settlement Commission cannot again approach the Settlement Commission. When the said section was amended in 2007, the said section made distinction in respect of the orders passed prior the commencement of section 122 of the Finance Act, 2007 and after that. In respect of the cases decided after the said commencement, the applicant was barred from making subsequent applications, whereas in the cases decided prior to that he could have made the application if his case was not covered by any of the clauses mentioned in sub-section (1). However vide the amendments made by the Finance Act, 2010, even in cases decided after commencement of section 122 of the Finance Act, 2007 the applicant was allowed to approach Settlement Commission if not hit by any of the clauses to sub-section (1). Thus, clauses (i) and (ii) of sub-section (1) of section 32O are being amended so as to omit the phrase “passed under sub-section (7) of the section 32F, as it stood immediately before the commencement of section 122 of the Finance Act, 2007 (22 of 2007) or sub-section (5) of the section 32F” as the same have become redundant.  (Clause 100)

12)  Sub-sections (4) and (5) of section 37 are being amended so as to increase the penalty from `2000 to `5000. (Clause 101)

13)  S.No.205A of notification No.12/2012-CE dated 17-3-2012 exempts railway or tramway track construction material of iron and steel from payment of excise duty on the value of rails, subject to condition that such rails have suffered excise duty and no credit of duty paid on them is taken under the CENVAT Credit Rules, 2004. This exemption is being made applicable retrospectively for the period from 17.03.2012 to 02.02.2014.   (Clause 102)

14)  The Third Schedule to the Central Excise Act, 1944 is being amended in the manner as specified in clause 105. (Clause 103)

The change at Para 1) and 14) will come into effect immediately owing to a declaration under the Provisional Collection of Taxes Act, 1931.

Proposals involving changes in rates of duty:

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

1)     Education Cess and Secondary & Higher Education Cess leviable on excisable goods are being fully exempted. Simultaneously, the standard ad valorem rate of duty of excise (i.e. CENVAT) is being increased from 12% to 12.5%.

2)     Duty of excise on “waters, including mineral waters and aerated waters, containing added sugar or other sweetening matter or flavoured” falling under Chapter sub-heading 2202 10 is being increased from 12% to 18%.

3)     Duty of excise on cigarettes is being increased by 25% for cigarettes of length not exceeding 65 mm and by 15% for cigarettes of other lengths. Increase in duty rates is also proposed on cigars, cheroots and cigarillos.

4)     Excise duty on cut tobacco is being increased from Rs. 60 per kg to Rs. 70 per kg.

5)     Tariff rate of excise duty on goods falling under Chapter sub-heading 2523 29 is being increased from Rs. 900 per tonne to Rs. 1000 per tonne.

6)     Tariff rate of excise duty on high speed diesel (HSD) falling under tariff item 27101930 is being increased from 14% + Rs. 5 per litre to 14% + Rs. 15 per litre. However, there is no change in the aggregate of various duties of excise on high speed diesel (HSD).

7) Tariff rate of excise duty on sacks and bags (including cones) of plastics falling under tariff items 3923 21 00, 3923 29 10 and 3923 29 90 is being increased from 12% to 18%.

(Clause 104)

The changes at 1) to 7) will come into effect immediately owing to a declaration under the Provisional Collection of Taxes Act, 1931.

I. PETROLEUM

1.     The Schedule Rates of the Additional Duty of Excise (commonly known as Road Cess) levied on Petrol and High Speed Diesel Oil is being increased from Rs. 2 per litre to Rs. 8 per litre. The effective rates of the Additional Duty of Excise (commonly known as Road Cess) levied on Petrol and High Speed Diesel Oil is being increased from Rs. 2 per litre to Rs. 6 per litre only.

(Clause 163 and 164)

2. Education Cess and Secondary and Higher Education Cess, presently applicable to petroleum products, including petrol and High Speed Diesel, are being exempted.

3.     Rates of duty of excise (CENVAT) on Petrol and High Speed Diesel Oil (both branded and unbranded) are also being revised.

4.     Tables below summarizes the changes in various duties applicable to petrol and diesel:
Duty rates applicable prior upto 28.02.021 05
Duty rates applicable with effect from 01 .03.2015
CENVAT Rs. / Litre
SAED Rs. / Litre
AED Rs. / Litre
EducationCesses
(as % of
aggregate of
duties of
excise)
Total
Rs. / Litre
CENVAT
SAED
AED
Edu‑
cation
Cesses
Total
Unbranded petrol
8.95                        6              2
3%
17.46
5.46
6
6
NIL
17.46
Branded petrol
10.10                      6              2
3%
18.64
6.64
6
6
NIL
18.64
Unbranded Diesel
7.96                       NIL            2
3%
10.26
4.26
NIL
6
NIL
10.26
Branded Diesel
14% +Rs. 5/litre or Rs.10.25 / litre,
whichever is lower
NIL
2
3%
12.62
6.62
NIL
6
NIL
12.62

 Thus, the total incidence of various duties of excise on petrol and diesel remains unchanged.

II. FOOD PROCESSING SECTOR:

1)     All goods falling under Chapter sub-heading 2101 20, including iced tea, are being notified under section 4A of the Central Excise Act for the purpose of assessment of Central Excise duty with reference to the Retail Sale Price with an abatement of 30%.

2)     Goods, such as lemonade and other beverages, are being notified under section 4A of the Central Excise Act for the purpose of assessment of Central Excise duty with reference to the Retail Sale Price with an abatement of 35%.

3)     Excise duty of 2% without CENVAT credit or 6% with CENVAT credit is being levied on condensed milk put up in unit containers. Condensed milk is also being notified under section 4A of the Central Excise Act for the purpose of valuation with reference to the Retail Sale Price with an abatement of 30%.

4)     Excise duty of 2% without CENVAT credit or 6% with CENVAT credit is being levied on peanut butter.

III. AUTOMOBILES:

1)     Excise duty on chassis for ambulances is being reduced from 24% to 12.5% subject to actual user condition.

2)     Concessional excise duty of 6% on specified goods for use in the manufacture of electrically operated vehicles and hybrid vehicles, presently available upto 31 .03.2015, is being extended upto 31 .03.2016.

IV. HEALTH:

1)     Excise duty on cigarettes is being increased by 25% for cigarettes of length not exceeding 65 mm and by 15% for cigarettes of other lengths. Excise duty on cigars, cheroots & cigarillos and cigarettes & cigarillos of tobacco substitutes is also being increased.

2)     Maximum speed of packing machine for packing of notified goods of various retail sale prices is being specified as a factor relevant to production for determining excise duty payable under the Compounded Levy Scheme presently applicable to pan masala, gutkha and chewing tobacco. Accordingly, deemed production and duty payable per machine per month are being notified with reference to the speed range in which the maximum speed of a packing machine falls.

V. ELECTRONICS/HARDWARE:

1)     Excise duty on wafers for manufacture of integrated circuit (IC) modules for smart cards is being reduced from 12% to 6%, subject to actual user condition.

2)     Excise duty on inputs for use in the manufacture of LED drivers and MCPCB for LED lights, fixtures and lamps, is being reduced from 12% to 6%, subject to actual user condition.

3)     Excise duty structure for mobiles phones is being changed from 1% without CENVAT credit or 6% with credit to 1% without credit or 12.5% with credit. NCCD of 1% on mobile phones remains unchanged.

4)     Excise duty structure of 2% without CENVAT credit or 12.5% with credit is being extended to tablet computers. Parts, components and accessories (falling under any Chapter) for use in manufacture of tablet computers and their sub-parts for use in manufacture of parts, components and accessories are being fully exempted from excise duty, subject to actual user condition.

5)     Excise duty on specified raw materials [battery, titanium, palladium wire, eutectic wire, silicone resins and rubbers, solder paste, reed switch, diodes, transistors, capacitors, controllers, coils (steel), tubing (silicone)] for use in manufacture of pacemakers is being fully exempted, subject to actual user condition.

6)     Suitable amendment is being carried out to expressly provide that LED lights or fixtures including LED lamps are liable to assessment of excise duty with reference to retail sale price. Similar changes are being made in the Third Schedule to the Central Excise Act, 1944.

VI. RENEWABLE ENERGY

1)     Excise duty on pig iron SG grade and Ferro-silicon-magnesium for manufacture of Cast components of wind operated electricity generators is being fully exempted, subject to certification by MNRE in this regard.

2)     Excise duty structure of NIL without CENVAT credit or 12.5% with credit is being prescribed for solar water heater and system.

3) Excise duty on round copper wire and tin alloys for manufacture of Solar PV ribbon for manufacture of solar PV cells is being fully exempted subject to certification by Department of Electronics and Information Technology (DeitY).

VII. CONSUMER GOODS

1) Excise duty on leather footwear (footwear with uppers made of leather of heading 4107 or 4112 to 4114), of Retail Sale Price of more than Rs. 1000 per pair is being reduced from 12% to 6%.

7) The entry “waters, including mineral waters and aerated waters, containing added sugar or other sweetening matter or flavoured” in the Seventh Schedule to the Finance Act, 2005 related to levy of additional duty of excise @ 5% is being omitted. Till the enactment of the Finance Bill, 2015, the said additional duty of excise of 5% leviable on such goods is being exempted. Simultaneously, the Basic Excise Duty rate on these goods is being increased from 12% to 18%.

VIII.          SWACHH BHARAT AND ENERGY SECTOR

1)     The Schedule Rate of Clean Energy Cess, levied on coal, lignite and peat, is being increased from ` 100 per tonne to ` 300 per tonne. The effective rate of Clean Energy Cess is being increased from `100 per tonne to `200 per tonne. The increase in rate of Clean Energy Cess will come into effect immediately owing to a declaration under the Provisional Collection of Taxes Act, 1931.  [Clause 188]

2)     Excise duty on sacks and bags of polymers of ethylene, other than for industrial use, is being increased to 15%.

IX.    EASE OF DOING BUSINESS AND MOVEMENT TOWARDS GST

1) Education Cess and Secondary & Higher Education Cess leviable on excisable goods are being subsumed in Basic Excise duty. Consequently, Education Cess and Secondary & Higher Education Cess leviable on excisable goods are being fully exempted. The standard ad valorem rate of Basic Excise Duty is being increased from 12% to 12.5% and specific rates of Basic Excise Duty on petrol, diesel, cement, cigarettes & other tobacco products (other than biris) are being suitably changed. However, the total incidence of various duties of excise on petrol and diesel remains unchanged. Other Basic Excise Duty rates (ad valorem as well as specific) are not being changed. Education Cess and Secondary & Higher Education Cess levied on imported goods as a duty of customs, however, will continue.

X.     MISCELLANEOUS:

1)     Full exemption from excise duty is being extended to captively consumed intermediate compound coming into existence during the manufacture of Agarbattis. Agarbattis attract NIL excise duty.

2)     S. No. 337 of Notification No. 12/2012-CE dated 17-3-2012 provided Nil excise duty on goods for setting up Ultra Mega Power Project specified in List No. 10 of the said Notification. In case of goods for a Project for which certificate regarding Ultra Mega Power Project status is provisional, the exemption is subject interalia to condition that the Chief Executive Officer of the Project furnishes a bank guarantee or fixed deposit receipt for a term of 36 months or more. This condition is being amended to prescribe furnishing of bank guarantee or fixed deposit receipts for a period of 42 months.

3)     S. No. 338 of Notification No. 12/2012-CE dated 17-3-2012 provided Nil excise duty on goods for setting up Mega Power Project specified in List No. 11 of the said Notification. In case of goods for a Project for which certificate regarding Mega Power Project status is provisional, the exemption is subject interalia to condition that the Chief Executive Officer of the Project furnishes a bank guarantee or fixed deposit receipt for a term of 36 months or more. This condition is being amended to prescribe furnishing of bank guarantee or fixed deposit receipts for a period of 66 months.

4)  Goods manufactured domestically and supplied against International Competitive Bidding are eligible for full excise duty exemption provided that such goods when imported attract Nil Basic Customs Duty and Nil CVD [S.No.336 of Notification No. 12/2012-CE dated 17-3-2012 read with Condition No.41]. The condition is being amended so as to provide that if imported goods are eligible for Nil Basic Customs Duty and Nil CVD subject to certain conditions, then the said conditions shall also apply mutatis mutandis to such goods when manufactured domestically and supplied against International Competitive Bidding for the purposes of availing of the said excise duty exemption.

MISCELLANEOUS

1)     The Second Schedule to the Finance (No.2) Act, 1998 which deals with levy of Additional Duty of Excise and Additional Duty of Customs (commonly known as Road Cess) on Motor Spirit commonly known as Petrol is being amended so as to increase the Scheduled rate from Rs. 2 per litre to Rs. 8 per litre. The effective rate of Additional Duty of Excise and Additional Duty of Customs (commonly known as Road Cess) on Motor Spirit commonly known as Petrol is being increased from Rs. 2 per litre to Rs. 6 per litre.

2)     The Second Schedule to the Finance Act, 1999 which deals with levy of Additional Duty of Excise and Additional Duty of Customs (commonly known as Road Cess) on High Speed Diesel oil is being amended so as to increase the Scheduled rate from Rs. 2 per litre to Rs. 8 per litre. The effective rate of Additional Duty of Excise and Additional Duty of Customs (commonly known as Road Cess) on High Speed Diesel oil is being increased from Rs. 2 per litre to Rs. 6 per litre.

3)     The Seventh Schedule to the Finance Act, 2005 is being amended so as to omit the entry relating to levy of Additional Duty of Excise of 5% ad valorem on waters, including mineral waters and aerated waters containing added sugar.

4)     The Tenth Schedule to the Finance Act, 2010 dealing with Clean Energy Cess is being amended so as to increase the Scheduled rate of Clean Energy Cess from Rs. 100 per tonne to Rs. 300 per tonne. The effective rate of Clean Energy Cess is being increased from `100 per tonne to ` 200 per tonne.

The changes at Para 1), 2) and 4) will come into effect immediately owing to a declaration under the Provisional Collection of Taxes Act, 1931.

Categories: Excise Duty

View Comments (31)

  • Resp Sir

    My name is ch srinivasa rao i am from hyderabad i want some clarification about central excise and service tax please help me sir

    1. Can i take credit of Education Cess and Secondary & Higher Education Cess on capital goods 2014-2015 invoices

    2. what are the examination for payment of service tax for transport of goods by road (GTA) and also is their any changes in duty of 12.36% or 14%.

    Thanking you sir

    Ch Srinivasa rao
    8978135459, 9059859706
    srnaiducsr@gmail.com, naiduepf@gmail.com, naiduesi@gmail.com

  • Respected Sir ,

    i am very confuse about job work income.can Excise duty charged on job work income & what is condition when excise duty charged 6% on job work income. please reply as soon as possible.

    Regards
    Ronak

  • we are going to manufacture Aluminium Foil Containers (HS Code 76151030)

    What will be Excise Duty on Such type of Sale of Product ??

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