Circular No.981/5/2014-CX, Dated- 11th February, 2014

Subject: Effective date for levy of excise duty on cigarettes at the enhanced rates vide Finance Act, 2012 – Clarification – Regarding.

I am directed to invite your attention to the above mentioned subject.

2.         In the Budget 2012-13, vide Finance Bill, 2012 as introduced in the Lok Sabha on 16.03.2012, the basic excise duty rate was increased on various lengths of cigarettes by imposing an ad valorem component in addition to the specific duty, through clause 141 of the Finance Bill read with the Seventh Schedule as under:

(i)     The lowest length slab of cigarettes upto 60 mm was expanded to include cigarettes upto 65 mm while maintaining the existing duty applicable to erstwhile 60mm cigarettes.

(ii)    An ad valorem component of 10% chargeable on 50% of Retail Sale Price was added to other slabs beyond 65 mm.

3.         By a declaration under the Provisional Collection of Taxes Act, 1931 (hereafter referred to as the PCT Act), the above increase in the excise duty was made effective immediately on the expiry of the day on which the Finance Bill, 2012 was introduced i.e. w.e.f. 17.03.2012.

4.         Subsequently, by virtue of Government amendment to the Finance Bill, 2012 as introduced, the ad valorem component of 10% was converted to a specific rate. Consequently, the basic excise duty on cigarettes was levied at specific rates which were higher than the excise duty rates proposed in the Finance Bill as introduced. The Finance Bill, 2012 received the assent of the President on 28.05.2012. Thus, the provisions of the Finance Act, 2012 came into effect from 28.05.2012.

5.         The issue that arises for consideration is whether the excise duty levied on cigarettes at higher specific rates by virtue of the Government amendments to the Finance Bill, 2012 would be applicable w.e.f. 17.03.2012, immediately on the expiry of the day on which the Finance Bill, 2012 was introduced or w.e.f. 28.05.2012, when the Finance Bill, 2012 received the assent of the President.

6.         In the post-Budget letter issued under F.No.334/1/2012-TRU dated 01.06.2012, it was clarified that since clause 141 of the Finance Bill, 2012 read with the Seventh Schedule, by virtue of which the excise duty on cigarettes was increased, was declared under PCT Act, therefore the rates proposed in the Finance Bill came into effect from 17.03.2012. And, since the rates proposed in the Finance Bill have been revised through Government amendments, the revised rates will apply with effect from 17.03.2012.

7.         However, representations have been received from trade and industry as well as field formations stating that the increase in the excise duty would be effective from 28.05.2012 and not w.e.f. 17.03.2012, as clarified in the said letter.

8.         In view of the conflicting views on the issue, the matter was examined in consultation with the Ministry of Law and Justice. Ministry of Law & Justice has opined that under section 3 of the Provisional Collection of Taxes Act, 1931 (PCT Act) a declaration can be made by the Central Government while introducing the Bill for imposition or increase of a duty of customs or excise in the public interest. Under section 4(1) of the PCT Act, a declared provision shall have the force of law immediately on the expiry of the date on which the Bill containing it is introduced. Under sub-clause 2 (a) of this section, a declared provision ceases to have the force of law when it comes into operation as an enactment with or without amendment.

8.1        In view of above legal position and also in view of the declaration made while introducing the Finance Bill, 2012, the excise duty as provided through said Bill will have the force of law from the date on which the Finance Bill was introduced i.e. 17.03.2012. Since the amendments proposed to the Finance Bill were in the form of official amendments and no separate Bill was required for the said purpose, no declaration under the PCT Act is permissible. However, in view of the provisions of section 4(2)(a) of the PCT Act, the declaration made ceases to have force of law once the enactment comes into operation.

8.2        In the light of the above legal position, as the amendments were proposed to the Finance Bill, 2012 only on 08.05.2012 and assented by the President on 28.05.2012, the same will have its applicability only from the date of assent by the President. Thus, insofar as the levy of excise duty on cigarette at enhanced rates, as contemplated in the amendments moved on 08.05.2012, is concerned, the amended provisions will have effect only from the date of assent of President i.e. from 28.05.2012.

9.         The above opinion of the Ministry of Law & Justice has been accepted by the Government. It is, thus, clarified that the tariff rate of duty on cigarettes levied vide amendments in the Finance Act, 2012 shall be applicable from the date of enactment of the said Finance Act i.e. 28.05.2012 and not from 17.03.2012.

10.        Trade Notice/Public Notice may be issued to the field formations and taxpayers.

11.        Difficulties faced, if any, in implementation of this Circular may be brought to the notice of the Board.

Hindi version follows.

F.No.345/01/2013-TRU

(Rajkumar Digvijay)

Under Secretary (TRU)

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