CA Swapnil Munot
Article Covers the Following Changes made by Finance Bill 2016:-
1. In Central Excise Act, 1944
2. in Central Excise Rules, 2002
3. in Cenvat Credit Rules, 2004
4. Miscellaneous Amendment Made to Other Rules and Related Notifications
♣ CHANGES MADE IN CENTRAL EXCISE ACT 1944 BY FINANCE BILL 2016:
(Provision of Finance bill 2016 will be applicable from the date when President of India gives ascent to the same and Finance Act 2016 is enacted and same is published in official gazette)
|SECTION||TYPE OF AMENDMENT||SUMMARY OF CHANGES||ANALYSIS|
|Sub – section substituted||Sec 5A( 5) is substituted as under:
“Every notification issued under sub-section (1) or sub-section (2A) shall, unless otherwise provided, come into force on the date of its issue by the Central Government for publication in the Official Gazette”
|Section 5A is being amended so as to omit the requirement of publishing and offering for sale any notification issued, by the Directorate of Publicity and Public Relations of CBEC.|
|Sec 11A||Amendment||Sec 11A deals with recovery of duties not levied or not paid or short levied or short paid. In case of ‘No fraud case’, excise officer can serve notice for recovery of duty not paid within 1 year. Now said period of 1 year is amended to 2 year.||Section 11A is being amended so as to increase the period of limitation from one year to two years in cases not involving fraud, suppression of facts, willful mis-statement, etc.|
|Sec 37B||Amendment||Sec 37B empower CBEC to issue order/instruction for uniformity in the classification of excisable goods or with respect to levy of duties of excise on such goods.
Now it is provided that CBEC can issue order / instruction for the implementation of any other provision of this Act
|Power of CBEC for issue of instruction / order is increased so that industry can get clarification at earliest.|
|Third Schedule of Central Excise Act 1994||Amendment||Third Schedule deals with Deemed manufacture cases in case of packing, repacking, labeling, relabeling for retail sale, as per sec 2(f)(iii) of CEA 1994.
Small amendment is made in 3rd schedule in goods falling under 3401, 3402, Aluminium foil, smart watches, and accessories of motor vehicle & some other goods.
♣ CHANGES MADE IN CENTRAL EXCISE RULES 2002 BY NOTIFICATION NO 8/2016 CE NT DATED 1ST March 2016:
(Effective Date– As per our understanding below provision is effective from 1st April 2016 unless other provided in this document. Also kindly note that, there is error in Notification w.r.t applicability of date of provisions which is communicated to Ministry of Finance by us.)
|RULE||TYPE OF AMENDMENT||SUMMARY OF CHANGES||ANALYSIS|
|Rule 7(4)||Substitution||Rule 7 of CER 2004 deals with Provisional Assessment. Rule 7 (4) deals with Interest Payable consequent of issue of Final Assessment Order.
Now Interest is payable from the period starting with the first day after the due date till the date of actual payment
( This amendment is effective from 1st March 2016)
|Earlier Interest was payable from the first day of succeeding month for which such amount is determined.
Now provision is re-aligned so as to calculate interested from Due date & not from first day of succeeding month.
|Explanation 1 to Second provision of Rule 8(1)||Substitution||Rule 8(1) prescribe due date for payment of Excise Duty. Second Proviso to Rule 8(1) prescribe due date in case of SSI assessee which is 5th/6th day of following quarter. Now Explanation 1 to said proviso provides that
1) In case of Assessee engaged in manufacture of articles of Jewellery ( other than articles of silver jewellery), he will be eligible for quarterly payment if his total clearance in preceding financial year is not more than Rs 12 Crores.
2) In other cases of assessee, he will be eligible for quarterly payment if his total clearance in preceding financial year is not more than Rs 4 Crores.
|· Earlier benefit of quarterly payment was available based on turnover limit of Rs 4 crore in preceding year.
· However as article of jewellery has high value, therefore accordingly limit of Rs 4 Crore is increased to Rs 12 Crores.
· Huge relief to Jewellery Industry. This will bring smile on the face of jewellery Industry
|Rule 11(8)||Amendment||This Rule provides that, invoice issued by a manufacturer may be authenticated by Digital signature.
However in proviso, Earlier it was provided that, “where ‘Duplicate copy of invoice meant for Transport’ is digitally signed, then same can be used for Transport of Goods. However such copy should be self-attested by manufacturer.”
Now requirement of self-attestation by manufacturer to digitally signed invoice copy is dispensed with.
|Now only Digitally Signed invoice is very much acceptable for Transport of Goods without self- attestation
Move Towards Digital India.
|Rule 12(2a & 2b)||Amendment & Sub Rule 12(2c) added||This Rule provides for filing of “Annual Financial Information Statement ( ER 4)”
|Now Name of return is replaced with “ Annual Return ( ER 4)”
Also now it is provided that “Annual Return ( ER 4)” is also to be filed by 100% Export Oriented Units as well.
|Rule 12(2A)||Omitted||This Rule provides for filing of Annual Installment Capacity Statement by 30th April of succeeding financial year.
Now requirement of filing of (ER7) is dispensed with.
|Very welcome and much awaited move.
This will reduce compliance to some extent
|Rule 12(8a) Rule 12(8b)
|Sub Rule Inserted||It is provided that, “An assessee, who has filed a return in the form referred to in sub-rule(1) within the date specified under that sub-rule or the second proviso thereto, may submit a revised return by the end of the calendar month in which the original return is filed”
An assessee who has filed Annual Return referred to in clause (a) of sub-rule (2) by the due date mentioned in clause (a) of that sub-rule, may submit a revised return within a period of one month from the date of submission of the said Annual Return.
An assessee, who has filed a return in the form referred to in sub-rule (3) of Rule 17 within the date specified under that sub-rule, may submit a revised return by the end of the calendar month in which the original return is filed.
|Again very welcome and much awaited move.
Now ER1 / ER 2/ ER3 / ER 4 revised return can be filed, provided original return is filed within due date.
Revised ER 1/ER 2/ ER 3 return can be filed by the end of the calendar month in which the original return is filed.
Revised ER 4 return can be filed within one month from the date of submission of said Annual Return.
♣ CHANGES MADE IN CENVAT CREDIT RULES 2004 BY NOTIFICATION NO 13/2016 CE NT DATED 1ST March 2016 :
(All below provisions are EFFECTIVE FROM 1ST April 2016 unless otherwise provided in this document)
|RULE||TYPE OF AMENDMENT||SUMMARY OF CHANGES||ANALYSIS|
|Rule 2(a)||Amendment||This Rule provides definition of capital goods. Three changes are done in said definition, which is as under:
1) Now “wagons of sub-heading 860692” is also included in definition of capital goods.
2) Now credit of capital goods will be allowed if it is used in the factory of the manufacturer of the final products. Words “ but does not include any equipment or appliance used in an office” IS REMOVED”
3) Now credit capital goods used outside the factory for pumping of water for captive use, is allowed.
|Scope of definition of Capital Goods is increased.
Also now Cenvat Credit of capital goods used in Factory Office is allowed.
BIG and Appreciable Move. Now credit of printers, air conditioner used in office will be allowed.
|Rule 2(e)||Amendment||This Rule provides Definition of exempted service. It now provided that, exempted service will not include “service by way of transportation of goods by a vessel from customs station of clearance in India to a place outside India”||( This amendment is effective from 1st March 2016)|
|Rule 2(k)||Amendment||This Rule provides definition of Inputs. Below amendment is done in said rule:
1) Now it is provide that inputs means all goods used for pumping of water for captive use.
2) All capital goods which have a value upto Rs 10,000/- per piece.
|Again BIG and Appreciable Move. 100% Cenvat credit of capital goods whose value is upto Rs 10,000/- is allowed in first year only|
|Rule 2(d)||Amendment||This Rule provide definition of Input Service Distributor.
It is now provided that Input Service Distributor can transfer the credit of input service to Outsourced Manufactured
|Rule 3(4)||Proviso Added||It is provided that, CENVAT credit shall not be utilised for payment of Infrastructure Cess leviable under sub-clause (1) of clause 159 of the Finance Bill, 2016
( This amendment is effective from 1st March 2016)
|On goods specified in First schedule (heading 8703), Infrastructure cess @ 4% is levied for financing Infrastructure projects.
It is provided that, Cenvat credit shall not be utilised for payment of the same
|Rule 4(5)(b)||Substituted||Rule 4(5)(b) deals with allowability of Cenvat credit of jigs, fixture, moulds, dies & tools sent by manufacturer to another manufacturer/ job worker for production of goods.
Now it is provided that Cenvat credit will be allowed even though manufacture directly sent such jigs, fixture, moulds, dies & tools to another manufactuer / job worker for production of goods WITHOUT BRINGING THE SAME TO HIS OWN PREMISES.
|Simplification in procedure to avail credit of jigs, fixture, moulds, dies & tools without bringing the same to factory.
|Rule 4(6)||Amendment||Rule 4(6) deals with clearance of final goods from the premises of Job worker. However for this purpose, permission is required to be obtained from AC/AC which was valid for a Financial Year.
Now it is provided that such permission will be valid for THREE FINANCIAL YEAR.
|Simplification in the procedure of removal of goods from job worker premises.|
|Rule 4(7)||Proviso Inserted||Rule 4(7) deals with when Cenvat credit of service tax on input service can be availed.
Now it is provided that Cenvat credit of tax paid on service provided by way of assignment of right to use any natural resource, shall be spread over such period of time for which right to use has been assigned.
|As service of right to use of natural resource has longer period and has high value of service tax, it is now provided that Cenvat credit of the same is to be availed in proportionate to life of such contract of service.
Now more logical approach provided.
|Rule 6||Almost fully substituted||Rule 6 (LITIGATION PRONE RULE) deals with eligibility of Cenvat Credit when Exempted goods manufactured / exempted service is provided along with manufacture of excisable goods / provision of taxable service.
This rule is almost fully substituted with New Rules & Sub-rules.
Summarized important changes done is explained as under:
a) It is now provided that non excisable goods cleared for consideration will be called as Exempted Goods
b) Exempted services shall include an activity, which is not a service as defined in section 65B(44) of the Finance Act, 1994
c) Option of “Maintaining separate books of account for Excisable goods – exempted goods/ Taxable Service – Exempted service and accordingly to avail Cenvat credit w.r.t only excisable goods/taxable service” is removed.
d) If manufacturer or service provider opt to pay 6% of exempted goods / 7% of Exempted service, then it is now provided that this payment/reversal will be subject to maximum of total credit available in the account of the assessee at the end of the period to which such payment related.
e) Option provided in Rule 6(3)(iii) is omitted, as it was very complicated.
f) Procedure prescribed under Rule 6(3A) is now substituted with more clear provisions, removing erstwhile ambiguity in provisions.
g) In case payment as per calculation prescribed in Rule 6(3A) is not made within time, then it is payable with interest rate of 15%. Earlier interest rate was 24%.
Major relief with respect to interest payment and it is brought in line with interest as per market rate.
h) Cenvat credit of capital goods which is used exclusively for manufacture of exempted goods or for proviso of exempted service, can be now availed after 2 years of start of commercial production / provision of service. Earlier credit of such capital goods was not allowed at all.
(For detailed understanding of above amendment in Rule 6, one should refer Notification No 13/2016 ST dt 1.03.16)
|For this clarification & simplification brought in provisions, really government should be thanked & appreciated for its efforts after long period.
This will reduce number of litigations relating w.r.t appropriation in exempted & non exempted.
|Rule 7||Almost fully substituted||
Rule 7 deals with Distribution of Cenvat Credit by Input Services Distributor (ISD). Said rule is substituted and following is summary of changes made in rule:
1) Now ISD can distribute credit to manufacturing unit, unit providing output service & OUTSOURCED MANUFACTURING UNIT.
2) Definition of Outsourced Manufacturing unit (OMU) is provided. It means (i) who is liable to pay duty under Rule 10A of CEVR 2000 on goods manufactured by him or (ii) manufacturer who manufactures the goods for ISD bearing brand of such ISD & liable to pay duty on value determined under Sec 4A of CEA 1944.
3) OMU is required to maintain separate account for input service credit received from each of ISD’s and shall use it only for payment of duty on goods manufactured for the ISD concerned;
4) Turnover of OMU shall be the turnover of goods manufactured by such OMU for ISD.
5) It is provided that provisions of rule 6 shall apply to the units manufacturing goods or provider of output service and shall not apply to the input service distributor.
(For detailed understanding of above amendment in Rule 7, one should refer Notification No 13/2016 ST dt 1.03.16)
|Two important changes done:
a) Now credit can be transferred to OMU.
b) VERY IMPORTANT Certificatory Provision inserted, to clarify that, duty liability under Rule 6 is to be determined at unit level and not at ISD level.
In Past, many SCN where issued on ISD for non-compliance of Rule 6.
|Rule 7B||New Rule Inserted||Rule 7B provides distribution of credit on inputs by warehouse of manufacturer. It is provided that:
1) A manufacturer having one or more factories, shall be allowed to take credit on inputs received under the cover of an invoice issued by a warehouse of the said manufacturer, who receives inputs under cover of invoices, issued in terms of the provisions of the Central Excise Rules, 2002, towards the purchase of such inputs.
2) The provisions of these rules or any other rules made under the Excise Act as applicable to a first stage dealer or a second stage dealer, shall, mutatis mutandis, apply to such warehouse of the manufacturer.
|Credit distribution from warehouse to various manufacturing units is now provided.|
|Rule 9A||Substitution||Rule 9A deals with Filing of Annual Principal Input Return ( ER 5) & monthly Principal Input Return ( ER6).
Now Requirement of filing of ER 5/ER 6 is removed.
However, it is provided that manufacturer or output service provider shall file Annual Return in the form specified by 30th Nov of succeeding financial year and provisions of Rule 12 of CER 2002 shall mutatis-mutandis apply to said Annual Return.
|1) MAJOR RELIF BY removing compliance of Filing of ER 5 & ER 6.
2) However, service provider is also now required to file Annual Return by 30th Nov.
|Rule 14(2)||Omitted||Rule 14(2) deals with mechanism how Cenvat credit is utilised, in case of wrong available of Cenvat credit.
However now said Rule 14(2) is omitted.
♣ OTHER MISCELLANEOUS CHANGES MADE IN CENTRAL EXCISE ACT 1944, CENTRAL TARIFF ACT 1984 AND RULES MADE THERE-UNDER:
(EFFECTIVE FROM 1ST MARCH 2016)
|SR. NO.||PARTICULARS||AMENDMENT EFFECTED VIDE||SUMMARY OF CHANGES|
|1||Facility of Centralized Excise Registration in case of Jewellery manufacturer.||Notification No 5/2016 CE NT||A notification, providing for an optional centralized central excise registration for jewellery manufacturers with centralized billing or accounting system is being issued under Rule 9 (2) of the Central Excise Rules, 2002|
|2||No physical Post verification while obtaining Excise Registration by Jewellery manufacturer||Notification No 6/2016 CE NT||Requirement of post physical verification of the premises has been also done away for manufacture of Jewellery other than articles of silver jewellery but inclusive of articles of silver Jewellery studded with diamond, ruby, emerald or sapphire, falling under chapter heading 7113 of the 1st Schedule to the CETA, 1985|
|3||Transaction value be assessable value for Jewellery manufacture||Notification No 7/2016 CE NT||Notification 9/2012 read with Sec 3(2) of CEA 1944, provided that in case of articles of jewellery (other than silver jewellery), falling under sub-heading No. 7113 of the 1st Schedule to CETA, 1985, tariff value will be 30% of the transaction value as declared in the invoice.
However now said Notification No 9/2012 is rescinded. Therefore in such case, assessable value will be transaction value.
|4||Tariff Value of ready made garment is increased||Notification No 11/2016 CE NT||The tariff value as per Sec 3(2) of CEA 1994 for readymade garments and made up articles of textiles is being increased from 30% to 60% which shall apply to all goods mentioned in the notification No. 20/2001-CE NT dt 30.04.2001|
|5||MRP Valuation under Sec 4A of CEA 1994||Notification No 12/2016 CE NT||Below change is done in abatement rate of goods, in case of MRP valuation of goods in Notification No 49/2008 CE NT read with Sec 4A of CEA 1944
|6||Due date for claiming Refund under Rule 5 of Cenvat Credit Rule||Notification No 14/2016 CE||Notification No 27/2012 CE NT read with Rule 5 of CCR 2004 provides for refund procedure. For service provider, there was no clarity of due date to file refund application
Now it is provided that in case of service provider, before expiry of one year from the date of :
a) Receipt of payment in convertible foreign exchange, where provision of service had been completed prior to receipt of such payment; or
b) Issue of invoice, where payment for the service had been received in advance prior to the date of issue of the invoice.”
|7||Rate of Interest reduced to 15% in case of delayed payment of Excise Duty||Notification No 15/2016 CE NT||Notification No 05/2011 CE NT read with Sec 11AA of CEA 1944 is amended to reduce rate of interest in case of delayed payment of duty from 18% to 15%.|
|8||Amendment in Rule 18 Rebate Notification||Notification No 18/2016 CE NT||It is now provided in condition of rebate notification that,
1) Indian Market Price of the excisable goods at the time of exportation is not less than the amount of rebate of duty claimed.
2) Rebate applicable is to be filed within expiry of period mentioned in Sec 11B of CEA 1944 i.e. within 1 year from let export date.
|9||Single Excise Registration for two or more units located in close area in same range jurisdiction having interlinked operation||Notification No 19/2016 CE NT||Notification No 36/2001 CE NT read with Rule 9 of CER 2002 is amended now to provide for “Single Excise Registration for two or more units located in close area in same range jurisdiction having interlinked operation” subject to permission from Commissioner of Central Excise.
This is reduce Excise compliance by allowing common excise registration for all unit. Move towards Ease of Doing Business.
|10||Excise (Removal of Goods at Concessional Rate of Duty for Manufacture of Excisable and Other Goods) Rules 2016||Notification No 20/2016 CE NT||Notification 20/2016 CE NT read with Sec 37 of CEA 1944 replaced the Excise (Removal of Goods at Concessional Rate of Duty for Manufacture of Excisable and Other Goods) 2001 with new rule, so as to simplify the rules, including allowing duty exemptions to importer/manufacturer based on self-declaration instead of obtaining permissions from the Central Excise authorities.|
|11||Rebate of whole of the duty paid on material used in manufacture of excisable goods||Notification No 21/2016 CE NT||It is now provided that
1) Declaration as required in Notification No 21/2004 CE NT, is now required to be filed along with Chartered Engineers Certificate, so that AC/DC can give approval of the declaration on the basis of CE Certificate.
2) No CENVAT credit shall be availed by the manufacturer
3) Rebate applicable is to be filed within expiry of period mentioned in Sec 11B of CEA 1944 i.e. within 1 year from let export date
(Author is associated with S M Munot & Associates and can be reached at email@example.com)