CA Vinamar Gupta
Articles of Jewellery [Defined in Chapter Note No.9]
For the purposes of heading 7113, the expression “articles of jewellery” means:
- any small objects of personal adornment (for example, rings, bracelets, necklaces, brooches, ear-rings, watch-chains, fobs , pendants, tie-pins, cuff-links, dress-studs, religious or other medals and insignia); and
- articles of personal use of a kind normally carried in the pocket, in the handbag or on the person (for example, cigar or cigarette cases, snuff boxes, cachou or pill boxes, powder boxes, chain purses or prayer beads)
These articles may be combined or set, for example, with natural or cultured pearls, precious or semi-precious stones, snythetic or reconstructed precious or semi-precious stones, tortoise shell, mother-of pearl, ivory, natural or reconstituted amber, jet or coral.
Note:
Fobs are for holding keys of vehicles.
Dress studs are decorative fastners that fit into button hole
Insignia is badge
Cochou box is box for tablet to mask bad breath
- “Articles of goldsmiths’ or silversmiths’ wares” [Note 10]
Expression “articles of goldsmiths’ or silversmiths’ wares” includes such articles as :
a) ornaments,
b) table-ware,
c) toilet-ware,
d) smokers’ requisites and
e) other articles of household, office or religious use
Scope of Excise Duty on Jewellery
- The excise imposed upon Jewellery items is not applicable to non jewellery items of precious metals like gold etc.
- Hence, duty is not applicable on all articles of gold. As far as other articles of gold it depends upon the nature of goods and many have been exempted.
- In respect of Non Jewellery articles of gold like ornaments, table-ware, toilet-ware, smokers’ requisites and other articles of household, office or religious use, rate of duty is 1% for branded items as per Item 200(I) of N/N 12/2012 without credit and 6% with credit as per Item No. 49 of N/N 1/2011 and full exemption for non branded items as per Item No. 192 of N/N 12/2012
- Change in purity of gold i.e. it may be 18K, 22K will not impact the duty liability
- If the Jewellery house is purchasing the ready Jewellery and selling the same to customers, there is no activity of manufacture and hence the same shall not be subjected to excise duty
Silver Jewellery
- The excise duty levy would not be applicable to branded or unbranded silver Jewellery, which are fully exempted from excise duty, however if such silver Jewellery is studded with diamonds, ruby, emerald or sapphire then the same shall suffer excise duty irrespective of the fact whether it is branded or not.
- Silver Jewellery studded with gold is not taxable.
Platinum Jewellery
- Jewellery of platinum is covered under heading 7113. Hence, the same is also liable to duty of excise similar to gold article.
- Imitation Jewellery
Imitation Jewellery is already under excise duty net under Tariff Heading 7117 and is taxable @ 6% and there is no change in the same. - As per Note No.11 of Chapter 71:
For the purposes of heading 7117, the expression “imitation jewellery” means articles of jewellery within the meaning of paragraph (a) of Note 9 above (but not including buttons or other articles of heading 9606, or dress-combs, hair-slides or the like, or hairpins, of heading 9615), not incorporating natural or cultured pearls, precious or semi-precious stones (natural, synthetic or reconstructed) nor (except as plating or as minor constituents) precious metal or metal clad with precious metal.
Branding is also manufacturing
- For the purposes of headings 7113 and 7114, the processes of affixing or embossing trade name or brand name on articles of jewellery or on articles of goldsmiths’ or silversmiths’ wares of precious metal or of metal clad with precious metal, shall amount to “manufacture”.
- In this Chapter, “brand name” or “trade name” means a brand name or trade name, whether registered or not, that is to say, a name or a mark, such as symbol, monogram, label, signature or invented words or any writing which is used in relation to a product, for the purpose of indicating, or so as to indicate, a connection in the course of trade between the product and some person using such name or mark with or without any indication of the identity of that person.
- A jeweller “ABC Jewellers” gets his articles of jewellery from gold smiths/job-workers who put a mark/sign/initials, etc. on the article of jewellery. This is only to identify that the article of jewellery was received from a particular goldsmith, etc. This is not branded jewellery and will not attract the tax.
- ABC jewellers”, when it sells articles of jewellery to customers, puts a distinctive sign/mark/initials etc. on the jewellery. This is again for the purpose of identification so that when the jewellery is returned to ABC jewellers, they will recognize the jewellery as their own. ABC jewellers does not sell the jewellery under a brand name
- This again is not branded jewellery, and will not attract the tax.
- “ABC jewellers” advertises and sells its products under the brand “Star”. It also puts the same brand name or an abbreviation thereof or a mark which has a connection with such brand name on the article of jewellery. Such jewellery will be branded jewellery and will be liable to the tax.
- As regards ‘hallmarked’ gold jewellery, it is observed that ‘hallmarking’ is the accurate determination and official recording of the proportionate content of precious metal in gold. Hallmarks are thus only official marks used as a guarantee of purity or fineness of gold jewellery, and cannot be treated as ‘branding’ for the purposes of the excise levy
- Whether a particular name or mark or symbol etc. is a brand name or not is a matter of fact, and can be ascertained as how the name is understood in commercial parlance. In the jewellery trade, there are certain well known brand names like ‘ Tanishq’, ‘Sangini’, etc. and the scope of the levy is only with respect to jewellery marketed and sold under such brand names as clearly understood in the trade.
Excise Duty Exemption vide N/N 6/2002 [CE-dtd. 01-03-2002]
Against S.No. 171 of the NN 6/2002, full exemption was granted in respect of
(I) Articles of –
(a) gold; (b) silver; (c) platinum; (d) palladium; (e) rhodium; (f) iridium; (g) osmium; or (h) ruthenium;
(II) Ornaments and the like articles made of gold or silver or platinum or any one or more of them, whether or not set –
(a) with stones or gems (real or artificial), or with pearls (real, cultured or imitation); or
(b) with stones, gems and pearls of the kind mentioned at (a) or any combination thereof;
(III) Strips, wires, sheets, plates and foils of gold, used in the manufacture of articles of jewellery and parts thereof;
(IV) Precious and semi-precious stones, synthetic stones and pearls
Excise Duty Exemption vide N/N 6/2002 [CE-dtd. 01-03-2002]
Explanation.- For the purposes of entries (I), (II) and (III), as the case may be, –
(i) “ornament” means a thing, in any finished form, meant for personal adornment or for the adornment of any idol, deity or any other object of religious worship, made of, or manufactured from, gold or silver or platinum or any one or more of them, whether or not set with stones or gems (real or artificial) or with pearls (real, cultured or imitation), or with all or any of them and includes parts, pendants or broken pieces of ornaments;
(ii) “metal” shall include,-
(a) any alloy in which any of the metals specified in this entry at item No. (I) above predominates by weight over each of the other metals specified in such item or any other metal in such alloy;
(b) any alloy in which the gold content is not less than 37.5 per cent. by weight;
(iii) “articles” in relation to gold shall mean any thing (other than ornaments), in a finished form, made of, or manufactured from or containing, gold and includes any gold coin and broken pieces of an article of gold but does not include primary gold, that is to say, gold in any unfinished or semi-finished form including ingots, bars, blocks, slabs, billets, shots, pellets, rods, sheets, foils and wires.
Branded Articles of Jewellery brought under Excise Duty
- Condition No. 20A Imposed against S.No. 171 of N/N 6/2002 dtd 01-03-2002 vide N/N 5/2005
- This exemption shall not be applicable to articles of jewellery of heading 7113 on which brand name or trade name is indelibly affixed or embossed on the articles of jewellery itself.”
Tax Rate on Branded Articles of Jewellery
[NN 5/2005-C.E. DATED 1-3-2005 S.No.14]
- Article of jewellery on which brand name or trade name is indelibly affixed or embossed on the articles of jewellery itself @ 2%
N/N 6/2002 suceeded by 5/2006
- This position as it stood in N/N 6/2002 and vide its amended through N/N 5/2005 was succeded and reiterated vide N/N 5/2006 dtd 01-03-2006 vide S.NO. 24 and 26 (on articles of branded jewellery @ 2%) except that Silver, platinum, palladium, rhodium, iridium, osmium and ruthenium in their primary forms, that is to say, any unfinished or semi-finished form including ingots, bars, blocks, slabs, billets, shots, pellets, rods, sheets, foils and wires were also charged to NIL rate of duty vide S.NO. 25 of N/N 5/2006]
Tax Rate on Branded Articles of Jewellery reduced to NIL in 2009
However N/N 5/2006 was amended by N/N 15/2009 dtd 07-07-2009, where before S.No. 26 of N/N 5/2006 which dealt with Article of jewellery on which brand name or trade name is indelibly affixed or embossed on the articles of jewellery itself and was being taxed @ 2% was reduced to NIL rate of duty.
1% Excise Duty on Branded Jewellery re introduced in 2011
Subject to Non availment of Cenvat Credit on Inputs and Input Services, 1% excise duty was imposed by N/N 1/2011 dtd. 01-03-2011 in respect of following items covered by
a) S.No. 88 of said notification as covered by Tariff Heading 7113 i.e.:
Articles of jewellery manufactured or sold under a brand name
b) S.No. 89 of said notification as covered by Tariff Heading 7114 i.e. Articles, other than jewellery, of –
(a) gold,
(b) silver,
(c) platinum,
(d) palladium,
(e) rhodium,
(f) iridium,
(g) osmium, or
(h) ruthenium,
manufactured or sold under a brand name.
Concessional Excise Duty on Branded Jewellery replaced by Concessional excise duty on both branded and unbranded jewellery
- S.NO. 88 and 89 of N/N 1/2011 imposing concessional 1% excise duty on branded articles of jewellery and non jewellery were withdrawn by N/N 16/2012 dtd 17-03-2012.
- Hence concessional taxation of 1% excise duty on Jewellery and non jewellery articles was withdrawn because of N/N 12/2012 bringing 1% excise duty for branded as well as unbranded jewellery.
Concessional Taxation for Branded and Unbranded Jewellery where Cenvat not claimed
- (I) Articles of jewellery under Tariff Heading 7113 at S.No. 199 of N/N 12/2012 were brought to tax @ 1% .
- subject to Condition No. 25 that no credit under rule 3 or rule 13 of the CENVAT Credit Rules, 2004, has been taken in respect of the inputs or input services used in the manufacture of these goods. ; [
- However the excise duty was rolled back by N/N 23/2012 dtd 08-05-2012 declaring Articles of Jewellery being taxable at Nil Rate.
- Later N/N 23/2012 also stood withdrawn by N/N 27/2012 dtd 30-05-12.
- In lieu of withdrawl of N/N 23/2012, Fifth Schedule to Finance Act 2012 provided that NIL rate be charged against S.No. 199 so that excise duty on jewellery is exempted wef 17-03-2012]
- (II) Articles of silver jewellery under Tariff Heading 7113 at S.No. 199 were fully exempted
Condition No. 25 modified vide N/N 36/2015 dtd 17-07-2015
New Condition No. 25
If the said excisable goods are manufactured from inputs or by utilizing input services on which appropriate duty of excise leviable under the First Schedule to the Excise Tariff Act or additional duty of customs under section 3 of the Customs Tariff Act, 1975 (51 of 1975) or service tax under section 66B of the Finance Act, 1994 (32 of 1994) has been paid and no credit of such excise duty or additional duty of customs on inputs or service tax on input services has been taken by the manufacturer of such goods (and not the buyer of such goods), under rule 3 or rule 13 of the CENVAT Credit Rules, 2004.” ;
Explanation added to Condition No. 25 vide N/N 39/2015 dtd 21-07-2015
Explanation.— For the purposes of this condition, appropriate duty or
appropriate additional duty or appropriate service tax includes nil duty or
Nil service tax or concessional duty or concessional service tax, whether or
not read with any relevant exemption notification for the time being in force
S.No. 199 of N/N 12/2012 substituted vide N/N 12/2016 dtd 01-03-2016 for Tariff Heading 7113
- (I) Articles of jewellery @ 1% subject to Condition No. 16
- Condition No. 16 as amended by N/N 36/2015 dtd 17-07-2015 and explanation added by N/N 39/2015 dtd 21-07-2015:
- If the said excisable goods are manufactured from inputs or capital goods on which appropriate duty of excise leviable under the First Schedule to the Excise Tariff Act or additional duty of customs under section 3 of the Customs Tariff Act, 1975 (51 of 1975) has been paid and no credit of such excise duty or additional duty of customs on inputs or capital goods has been taken by the manufacturer of such goods (and not the buyer of such goods) under rule 3 or rule 13 of the CENVAT Credit Rules, 2004.]
- Explanation. – For the purposes of this condition, appropriate duty or appropriate additional duty includes nil duty or concessional duty, whether or not read with any relevant exemption notification for the time being in force.]
- Note : However The person liable to pay duty is entitled to avail credit of service tax paid on input services (different from input goods or capital goods) used in or in relation to manufacture and clearance of goods on which duty is payable
- (II) Articles of silver jewellery, other than those studded with diamond, ruby, emerald or sapphire are taxable at NIL rate
Full Rate of Excise Duty on Jewellery where Cenvat Credit Availed
As per S.No. 48 of N/N 2/2011, 5% excise duty was imposed on branded jewellery without any restriction regarding non availment of cenvat credit in respect of covering Tariff Heading 7113 :Articles of jewellery manufactured or sold under a brand name
- S.No. 48 later replaced by N/N 20/2012 amending N/N 2/2011
to cover “Articles of jewellery” meaning there by that both branded as well as unbrnded jewellery got covered and tax rate was increased to 6% vide N/N 19/2012
- S.No. 48 has now been Omitted by N/N 10/2016 dtd 01-03-2016
- Hence articles of jewellery shall be taxed @ 12.5%, if cenvat credit is availed as per Central Excise Tariff Rates.
5%/6% Tax for Non Jewellery Branded Articles of Gold, Silver, Platinum etc where Cenvat Credit claimed
Vide S.No. 49 of N/N 2/2011 for Tariff Heading 7114 for
Articles, other than jewellery, of –
(a) gold,
(b) silver,
(c) platinum,
(d) palladium,
(e) rhodium,
(f) iridium,
(g) osmium, or
(h) ruthenium,
manufactured or sold under a brand name, 5% Excise Duty was
imposed which was later was increased to 6% by Notification No.
19/2012 dtd 17-03-2012
- S.No. 49 later modified by N/N 20/2012 dtd 19-03-2012 to cover following items under Chapter heading 7114:
- Articles of goldsmiths’ or silversmiths’ wares of precious metal or of metal clad with precious metal, bearing a brand name, except gold coins of purity 99.5% and above and silver coins of purity 99.9% and above.
Articles of goldsmiths’ or silversmiths’ wares
- As per Chapter Note No. 10, For the purposes of heading 7114, the expression “articles of goldsmiths’ or silversmiths’ wares” includes such articles as :
a) ornaments,
b) table-ware,
c) toilet-ware,
d) smokers’ requisites and
e) other articles of household, office or religious use
Explanation.- For the purposes of this exemption,-
(1) “brand name” means a brand name or trade name, whether registered or not, that is to say, a name or a mark, such as a symbol, monogram, label, signature or invented words or any writing which is used in relation to a product, for the purpose of indicating, or so to indicate, a connection in the course of trade between the product and some person using such name or mark with or without any indication of the identity of that person;
(2) an identity put by a jeweller or the job worker, commonly known as ‘house-mark’ shall not be considered as a brand name
[Note : Branded Pure Gold Coins seperately exempted/taxed as per S.No. 191,192, 200(I) of N/N 12/2012]
1% Concessional Tax for Non Jewellery Branded Articles of Gold/Silver Smiths’ with out credit
As per S.No. 200(I) Articles of goldsmiths‘ or silversmiths‘ wares of precious metal or of metal clad with precious metal, bearing a brand name covered by Tariff Heading 7114 are taxed @ 1% subject to Condition No. 25 that no credit under rule 3 or rule 13 of the CENVAT Credit Rules, 2004, has been taken in respect of the inputs or input services used in the manufacture of these goods ;
Excise Duty on Gold and Silver Coins
- Gold coins of purity 99.5% and above and silver coins of purity 99.9% and above, bearing a brand name when manufactured from gold or silver respectively on which appropriate duty of customs or excise has been paid are taxed at NIL Rate as per Item No. 200(II) of N/N 12/2012
- Gold coin of purity not below 99.5% manufactured or produced during the process of copper smelting starting from the stage of copper ore or concentrate in the same factory is taxable @ 9.35% vide S.No. 191 of N/N 12/2012
- Silver Coin of purity not below 99.9% % manufactured or produced during the process of copper smelting starting from the stage of copper ore or concentrate in the same factory is taxable @ 8.5% vide S.No. 191 of N/N 12/2012
- Unbranded Gold Coins being covered by definition of “Article” as per explanation to Item No. 192 of N/N 12/2012 are fully exempt
Full Exemption for Unbranded Non Jewellery Articles of Gold/Silver Smiths
Full Exemption from Excise Duty vide S.No. 192(I)of N/N 12/2012 comprising
(I) Articles of goldsmiths‘ or silversmiths‘ wares of precious metal or of metal clad with precious metal, not bearing a brand name;
As covered by Chapter 71
As per Explanation appended:
- (i) “metal” shall include,—
- (a) any alloy in which any of the metals specified in this entry at item No. (I) predominates by weight over each of the other metals specified in such item or any other metal in such alloy;-
- (b) any alloy in which the gold content is not less than 37.5 per cent by weight
- (ii) “articles” in relation to gold shall mean anything (other than ornaments), in a finished form, made of, or manufactured from or containing, gold and includes any gold coin and broken pieces of an article of gold but does not include primary gold, that is to say, gold in any unfinished or semi-finished form including ingots, bars, blocks, slabs, billets, shots, pellets, rods, sheets, foils and wires.
Hence unbranded gold coins fully exempt from excise duty
Full Exemption for Strips etc used in Manufacture of Jewellery
- Full Exemption from Excise Duty vide S.No. 192(II) of N/N 12/2012 comprising (II) Strips, wires, sheets, plates and foils of gold, used in the manufacture of articles of jewellery and parts thereof As covered by Chapter 71
- Also Full exemption for Strips, wires, sheets, plates and foils of silver vide Sno. 196 of N/N 12/2012 as covered by Tariff Heading 7106
Full exemption for precious and semi precious, synthetic stones and pearls
- Full Exemption from Excise Duty vide S.No. 192(III) of N/N 12/2012 comprising
- (III) Precious and semi-precious stones, synthetic stones and pearls
- As covered by Chapter 71
Full Exemption on Primary Gold
- N/N 5/2006 as amended by N/N 15/2009 (which fully exempted the articles of jewellery) was succeeded and superceded by N/N 12/2012-CE dtd 17-03-2012, where in vide :
- S.No. 188, Primary gold converted with the aid of power from any form of gold other than gold ore, concentrate or dore bar was reduced to NIL rate of duty
- Explanation.-For the purposes of this entry, ―primary gold‖ means gold in any unfinished or semi finished form and includes ingots, bars, blocks, slabs, billets, shots, pellets, rods, sheets, foils and wires
- Hence there is no exemption if conversion into primary gold is not with aid of power.
- Further, there is no exemption if conversion into primary gold is made by using gold ore, concentrate or dore bar
Full exemption was granted on Gold Bars (Not on Tola Bars) vide N/N 12/2012
- S.No. 189 Gold bars, other than tola bars, bearing manufacturer‘s engraved serial number and weight expressed in metric units manufactured in a factory starting from the stage of-
- (a) Gold ore or concentrate; (b) Gold dore bar; or (c) Silver dore bar were also exempted
- Explanation. – For the purposes of this entry , gold dore bar‘ shall mean dore bars having gold content not exceeding 95% and silver dore bar‘ shall mean dore bars having silver content not exceeding 95% accompanied by an assay certificate issued by the mining company, giving details of composition
- Hence Tola Bars were taxable
Full Exemption on Gold Bars Withdrawn and subjected to Concessional Taxation
S.No. 189 has been substituted by Notification No. 12/2016-CE, dated 1-3-2016, w.e.f. 1-3-2016 as under :
Gold bars, other than tola bars, bearing manufacturer’s engraved serial number and weight expressed in metric units manufactured in a factory starting from the stage of—
(i) (a) Gold ore or concentrate;
(b) Gold dore bar; or
(ii) Silver dore bar
taxed @ 9.5% further reduced to 9.35% vide N/N 22/2016-C.E., dated 5-5-2016.
Explanation. – For the purposes of this entry, ‘gold dore bar’ shall mean dore bars having gold content not exceeding 95% and ‘silver dore bar’ shall mean dore bars having silver content not exceeding 95% accompanied by an assay certificate issued by the mining company, giving details of composition
Tax Rate on Manufacturing of Silver Manufacturing Increased
- S.No. 190, Silver manufactured in a factory starting from the stage of- (a) Silver ore or concentrate; (b) Silver dore bar; or (c) Gold dore bar was taxed @ 4% vide N/N 12/2012 which was enhanced to 8.5% by N/N 12/2016
- Explanation. – For the purposes of this entry, gold dore bars‘ and silver dore bar‘ shall have the same meaning as in S. No. 189
Tax on Gold Bars, Coins and Silver produced during Copper Smelting
- S.No. 191
- The following goods manufactured or produced during the process of copper smelting starting from the stage of copper ore or concentrate in the same factory namely : –
- (i)gold bars, other than tola bars, bearing manufacturer‘s or refiner‘s engraved serial number and weight expressed in metric units and gold coin of purity not below 99.5% which were taxed @ 3% enhanced to 9.5% vide N/N 12/2016 AND reduced to 9.35% vide N/N 22/2016 dtd 5-05-2016;
- (ii)Silver in any form, except silver coins of purity below 99.9%, was taxed @ 4% enhanced to 8.5% vide N/N 12/2016
- [Note:Smelting is a form of extractive metallurgy; its main use is to produce a base metal from its ore. This includes production of silver, iron, copper and other base metals from their ores.]
Tax on Silver/Gold produced during Zinc/Lead Smelting
- Vide S.No. S.No. 191A of N/N 12/2012 Silver produced or manufactured during the process of zinc or lead smelting starting from the stage of zinc or lead ore or concentrate which was exempt has been taxed @ 8.5% vide N/N 12/2016
- However Gold arising in the course of manufacture of zinc by smelting [at S.No. 198 of N/N 12/2012 having Tariff Heading 7108] is still enjoying 100% exemption
Primary Platinum etc also exempted
At S.No. 193, Platinum, palladium, rhodium, iridium, osmium and ruthenium in their primary forms, that is to say, any unfinished or semi-finished form including ingots, bars, blocks, slabs, billets, shots, pellets, rods, sheets, foils and wires are also exempted vide N/N 12/2012
Taxability of Dust and Powder
- Dust and powder of synthetic precious or semi- precious stones covered by S.No. 194 are taxed @ 6% [S.No. 194]
- Dust and powder of natural precious or semi-precious stones; waste and scrap of precious metals or metals clad with precious metals, arising in course of manufacture of goods falling in Chapter 71 are fully exempted vide S.No. 195 of N/N 12/2012
Exemption on Silver
- Silver, other than silver mentioned in Sl.Nos.190 and 191, 191A vide S.No. 197 has been exempted vide N/N 12/2012
- Silver manufactured in a factory starting from the stage of-(a) Silver ore or concentrate;(b) Silver dore bar; or(c) Gold dore bar is taxable @ 8.5% [S.No. 190]
- silver in any form, except silver coins of purity below 99.9%, manufactured or produced during the process of copper smelting starting from the stage of copper ore or concentrate in the same factory is also taxable @ 8.5% [S.No. 191]
- Silver produced or manufactured during the process of zinc or lead smelting starting from the stage of zinc or lead ore or concentrate is also taxable @ 8.5% [S.No. 191A]
Tariff Value @ 30% of Transaction Value imposed in 2012 was Withdrawn
- NOTIFICATION NO.9/2012-C.E.(N.T.)
- The Central Government, hereby fixes tariff value in respect of articles of jewellery (other than silver jewellery), falling under sub-heading No. 7113 of the First Schedule to the Central Excise Tariff Act, 1985 (5 of 1986), at the rate of 30% of the transaction value as declared in the invoice.
- Provided that nothing contained in this notification shall apply to articles of jewellery manufactured from precious metal or old jewellery provided by the retail customer.
- Explanation:—For the purposes of this notification “transaction value” shall have the meaning assigned to it in section 4 of the Central Excise Act, 1944 (1of 1944)].
- NOTIFICATION NO.7/2016-C.E. (N.T.), DATED 1-3-2016 has withdrawn the above notification
SSI Exemption in 2012
- In 2012, SSI exemption was available up to Rs. 5 crores for units having turnnover to Rs. 13.33 crores. But the impost was withdrawn after agitation by jewellers.
SSI Exemption vide N/N 8/2016 [Amending N/N 8/2003]
- First clearances of the articles of jewellery for home consumption, 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 First Schedule upto an aggregate value not exceeding six crore rupees made on or after the 1st day of April in any financial year, from the whole of the duty of excise specified thereon in the First Schedule are exempt:
SSI Exemption where TO <= 12 Cr in last year
- Provided that aggregate value of clearances of all excisable goods for home consumption by a manufacturer of the articles 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 First Schedule, from one or more factory or premises of production or manufacture, or from a factory or premise of production or manufacture by one or more manufacturers, does not exceed rupees twelve crore in the preceding financial year
SSI Exemption for March 2016
- Provided that during the period starting from 1st March, 2016 and ending on 31st March, 2016, the exemption shall apply to the first clearances of the articles of jewellery for home consumption, 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 First Schedule, up to an aggregate value not exceeding fifty lakh rupees
- For this purpose, a certificate from a Chartered Accountant, based on the books of accounts for 2014-15, shall suffice
Calculation of clearances
- For the purposes of determining the first clearances upto an aggregate value not exceeding one hundred and fifty lakh rupees made against serial number 1 or upto an aggregate value not exceeding six crore rupees made against serial number 3, of the said Table, as the case may be, on or after the 1st day of April in any financial year, the following clearances shall not be taken into account, namely clearances of excisable goods without payment of duty
(i) to a unit in a free trade zone; or
(ii) to a unit in a special economic zone; or
(iii) to a hundred per cent export-oriented undertaking; or
(iv) to a unit in an Electronic Hardware Technology Park or Software Technology Park; or
(v) supplied to the United Nations or an international organization for their official use or supplied to projects funded by them, on which exemption of duty is available under notification of the Government of India in the erstwhile Ministry of Finance (Department of Revenue) No. 108/95-Central Excise, dated the 28th August, 1995, vide number GSR. 602(E), dated the 28th August, 1995.
(b) clearances bearing the brand name or trade name of another person, which are ineligible for the grant of this exemption in terms of paragraph 4;
(c) clearances of the specified goods which are used as inputs for further manufacture of any specified goods within the factory of production of the specified goods;
(d) [* * *]
(e) clearances, which are exempt from the whole of the excise duty leviable thereon under notifications No. 214/86-Central Excise, dated the 25th March, 1986 [G.S.R. 547(E), dated the 25th March, 1986], or No. 83/94-Central Excise, dated the 11th April, 1994 [G.S.R. 375(E), dated the 11th April, 1994], or No. 84/94-Central Excise, dated the 11th April, 1994 [G.S.R. 376(E), dated the 11th April, 1994].
Exemption is not available for value of clearance bearing the brand name of other person.
While computing the above said value of clearances, the value of Exports or the value of traded goods i.e. purchased and sold or the goods manufactured with the brand name of others (on which duty has to be paid) should not be counted.
CA Certificate for Exemption Limit
Similarly, for determining the eligibility for availing of the SSI exemption from 2016-17 onwards, a certificate from a Chartered Accountant, based on the books of accounts for 2015-16, shall suffice.
Cenvat Credit on Articles of Jewellery
Notification No. 13/2005-C.E. (N.T.), dated 1-3-2005, w.e.f. 1-3-2005, R. 2(naa) as under :
- ‘(naa) “manufacturer” or “producer” in relation to articles of jewellery falling under heading 7113 of the First Schedule to the Excise Tariff Act, includes a person who is liable to pay duty of excise leviable on such goods under sub-rule (1) of rule 12AA of the Central Excise Rules, 2002;’
- Proviso to Rule 4(1) of Cenvat Credit Rules Inserted by Notification No. 13/2005-C.E.(N.T.), dated 1-3-2005, w.e.f. 1-3-2005 as amended by Notification No. 9/2011-C.E. (N.T.), dated 24-3-2011, w.e.f. 24-3-2011.
- Provided that in respect of final products, namely, articles of jewellery or other articles of precious metals falling under heading 7113 or 7114 as the case may be of the First Schedule to the Excise Tariff Act, the CENVAT credit of duty paid on inputs may be taken immediately on receipt of such inputs in the registered premises of the person who get such final products manufactured on his behalf, on job work basis, subject to the condition that the inputs are used in the manufacture of such final product by the job worker
- As per Rule 4(1) The CENVAT credit in respect of inputs may be taken immediately on receipt of the inputs in the factory of the manufacturer or in the premises of the provider of output service or in the premises of the job worker, in case goods are sent directly to the job worker on the direction of the manufacturer or the provider of output service, as the case may be [Underlined words added by Notification No. 6/2015-C.E.(N.T.), dated 1-3-2015, w.e.f. 1-3-2015]
- Proviso to Rule 4(1) should be amended to provide Cenvat Credit on goods directly received by Job Worker in case of articles of jewellery
Proviso to Rule 6 [NOTIFICATION NO.13/2005-C.E. (N.T.), DATED 1-3-2005]
- Provided that the CENVAT credit on inputs shall not be denied to job worker referred to in rule 12AA of the Central Excise Rules, 2002, on the ground that the said inputs are used in the manufacture of goods cleared without payment of duty under the provisions of that rule
Cenvat Credit not allowed for Concessional Taxation under N/N 1/2011
N/N 3/2011 –CE(NT) dtd 01-03-2011
- Goods covered by N/N 1/2011 were defined under exempted goods, there fore cenvat credit of capital goods also can not be availed, along with inputs and input services.
- Further as per Rule 3(1), CENVAT credit of duty of excise shall not be allowed to be taken when paid on any goods—(a) in respect of which the benefit of an exemption under Notification No.1/2011-CE, dated the 1st March, 2011 is availed; or
- Further as per 2nd Proviso to Rule 3(4), CENVAT credit shall not be utilized for payment of any duty of excise on goods in respect of which the benefit of an exemption under Notification No. 1/2011-CE, dated the 1st March, 2011 is availed.
No Cenvat Credit on Inputs up to Clearance of six crores except under brand name[N/N 8/2016]
- Provided that the manufacturer of the articles 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 First Schedule shall not avail the credit of duty on inputs under rule 3 or rule 11 of the said rules, paid on inputs used in the manufacture of these goods cleared for home consumption, the aggregate value of first clearances of which, as calculated in the manner specified in the said Table does not exceed six crore rupees :
- Provided further that nothing contained in this sub-paragraph shall apply to the inputs used in the manufacture of specified goods bearing the brand name or trade name of another person, which are ineligible for the grant of this exemption in terms of paragraph 4;
No Cenvat Credit on capital goods where clearances lesser than limit [N/N 8/2016]
- The manufacturer also does not utilise the credit of duty on capital goods under rule 3 or rule 11 of the said rules, paid on capital goods, for payment of duty, if any, on the aforesaid clearances, the aggregate value of first clearances of which does not exceed one hundred and fifty lakh rupees, as calculated in the manner specified in the said Table
- Provided that the manufacturer of the articles 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 First Schedule also does not utilise the credit on capital goods under rule 3 or rule 11 of the said rules, paid on capital goods, for payment of duty, if any, on the aforesaid clearances, the aggregate value of first clearances of which does not exceed six crore rupees, as calculated in the manner specified in the said Table
Cenvat Credit on capital goods
R.4(2)(a) The CENVAT credit in respect of capital goods received in a factory or in the premises of the provider of output service 58[or outside the factory of the manufacturer of the final products for generation of electricity for captive use within the factory,] 58a[or in the premises of the job worker, in case capital goods are sent directly to the job worker on the direction of the manufacturer or the provider of output service, as the case may be,] at any point of time in a given financial year shall be taken only for an amount not exceeding fifty per cent of the duty paid on such capital goods in the same financial year:
Provided also that where an assessee is eligible to avail of the exemption under a notification based on the value of clearances in a financial year, the CENVAT credit in respect of capital goods received by such assessee shall be allowed for the whole amount of the duty paid on such capital goods in the same financial year :
For the removal of doubts, it is hereby clarified that—
(i) an assessee engaged in the manufacture of articles 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 First Schedule of the Excise Tariff Act, shall be eligible, if his aggregate value of clearances of all excisable goods for home consumption in the preceding financial year, computed in the manner specified in the said notification, did not exceed rupees twelve crore
(Explanation added by N/N 13/2016)
Job Work in the article of Jewellery or other articles of precious metals.
Notification No. 12/2005-C.E. (N.T.), dated 1-3-2005, w.e.f. 1-3-2005 as amended by
Notification No. 8/2011-C.E. (N.T.), dated 24-3-2011, w.e.f. 24-3-2011.
Notification No. 8/2012-C.E.(N.T.), dated 17-3-2012, w.e.f. 17-3-2012
Explanation to Rule 12AA
- Explanation 1.—For the purposes of this rule, “job worker” means a person engaged in manufacture or processing on behalf and under the instructions of the said person from any inputs or goods supplied by the said person or by any other person authorized by the said person, so as to complete a part or whole of the process resulting ultimately in manufacture of articles of jewellery falling under heading 7113 of the First Schedule to the Central Excise Tariff Act, 1985, and the term “job work” shall be construed accordingly.
Principal Manufacturer liable for all formalities :R.12AA(1)
- Notwithstanding anything contained in these rules, every person (not being an export-oriented unit or a unit located in special economic zone)
- who gets article of jewellery or other articles of precious metals following under heading 7113 or 7114 as the case may be] the First Schedule to the Central Excise Tariff Act, 1985 (5 of 1986) (hereinafter referred to as the Tariff Act), produced or manufactured on his behalf, on job work basis, (hereinafter referred to as “the said person”)
- shall obtain registration, maintain accounts, pay duty leviable on such goods and comply with all the relevant provisions of these rules, as if he is an assessee
Option to undertake formalities by Job worker Omitted
- “Provided that the job worker may, at his option, agree to obtain registration, maintain accounts, pay the duty leviable on such goods, prepare the invoice and comply with the other provisions of these rules and in such a case the provisions of these rules shall not apply to the said person.“
Omitted by Notification No. 8/2012-C.E. (N.T.), dated 17-3-2012, w.e.f. 17-3-2012.
Payment of duty by Principal manufacturer and Exemption from mentioning date and time of removal of goods to Principal Manufacturer
- R.12AA(2) If the said person desires clearance of excisable goods for home consumption or for exports from the premises of the job worker, he shall pay duty on such excisable goods and prepare an invoice, in the manner referred to in rules 8 and 11 respectively except for mentioning the date and time of removal of goods on such invoice.
- [ As per Rule 11(2),The invoice shall be serially numbered and shall contain the registration number, 2[address of the concerned Central Excise division,] name of the consignee, description, classification, time and date of removal, mode of transport and vehicle registration number, rate of duty, quantity and value, of goods and duty payable thereon]
- Expl. 4 For the removal of doubts, it is hereby clarified that if any goods or part thereof is lost, destroyed, found short at any time before the clearance of articles of jewellery falling under heading 7113 of the First Schedule to the Tariff Act or waste, by-products or like goods arising during the course of manufacture of such goods, the said person shall be liable to pay duty thereon as if such goods were cleared for home consumption.
- But Duty may be remitted under Rule 21 for goods having been lost or destroyed by natural causes or by unavoidable accident or are claimed by the manufacturer as unfit for consumption or for marketing, at any time before removal
Original and Duplicate Copy of Invoice to be sent to Job Worker [R 12AA(3)]
- (3) The original and the duplicate copy of the invoice so prepared shall be sent by him to the job worker from whose premises the excisable goods after completion of job work are intended to be cleared, before the goods are cleared from the premises of the job worker.
Job Worker to fill up date and time of removal and Intimate [R.12AA(4) and 12AA(9)]
- (4) The job worker shall fill up the particulars of date and time of removal of goods before the clearance of goods and after such clearance the job worker shall intimate to the said person, the date and time of the clearance of goods for completion of the particulars by the said person in the triplicate copy of the invoice
- (9) The job worker shall clear the goods after filling in invoice the time and date of removal and authentication of such details. The rate of duty on such goods shall be the rate in force on date of removal of such goods from the premises of the job worker and no excisable goods shall be removed except under the invoice.
Supply of Goods to Job worker without reversal of credit and payment of duty[R.12AA(5)]
The said person may supply or cause to supply to a job worker, the following goods, namely :—
(a) inputs in respect of which he may or may not have availed CENVAT credit in terms of the CENVAT Credit Rules, 2004, without reversal of the credit thereon; or
(b) goods manufactured in the factory of the said person without payment of duty, under a challan, consignment note or any other document (herein referred to as ‘document’) with such information as specified in sub-rule (2) of rule 11 of the Central Excise Rules, 2002, duly signed by him or his authorised agent.
Responsibility lies on Principal manufacturer [R.12AA(6)]
(6) The responsibility in respect of accountability of the goods, referred to in sub-rule (5) shall lie on the said person.
Job Worker not required to obtain registration/ records of proceses of Job Work [R.12AA(7)]
- Notwithstanding anything contained in these rules, the job worker shall not be required to get himself registered or shall not be required to maintain any record evidencing the processes undertaken for the sole purposes of undertaking job work under these rules unless he has exercised his option in terms of the proviso to sub-rule (1)
- [Since option under Proviso to Sub-Rule 1 has been Omitted, the underlined part should also have been omitted]
- R.12AA(7) does not obviate requirement to maintain the record of goods received for Job Work and record of return/ clearance of goods after performing the Job Work
- Return/ Clearance by Job Worker without duty [R.12AA(8)]
- The job worker, with or without completing the job work may,—
- (i) return the goods without payment of duty to the said person; or
- (ii) clear the goods for home consumption or for exports,
subject to receipt of an invoice from the said person, as mentioned in sub-rule (4).
[ The Invoice is received under R.12AA(3) and not R.12AA(4), hence it might require correction]
- Explanation 2.—For the purposes of this rule, article of jewellery shall mean articles of jewellery on which brand name or trade name is indelibly affixed or embossed on itself.
- Explanation 3.—For the purposes of this notification, ‘brand name or trade name’ means a brand name or trade name, whether registered or not, that is to say, a name or a mark, such as a symbol, monogram, label, signature or invented words or any writing which is used in relation to a product, for the purpose of indicating, or so as to indicate, a connection in the course of trade between the product and some person using such name or mark with or without any indication of the identity of that person.
Registration [Rule 9 of CER]
- 9. (1) Every person, who produces, manufactures, carries on trade, holds private store-room or warehouse or otherwise uses excisable goods or an importer who issues an invoice on which Cenvat Credit can be taken, shall get registered:
- Provided that a registration obtained under rule 174 of the Central Excise Rules, 1944 or rule 9 of the Central Excise (No. 2) Rules, 2001 shall be deemed to be as valid as the registration made under this sub-rule for the purpose of these rules.
- (2) The Board may by notification and subject to such conditions or limitations as may be specified in such notification, specify person or class of persons who may not require such registration.
- (3) The registration under sub-rule (1) shall be subject to such conditions, safeguards and procedure as may be specified by notification by the Board
Option of Centralized Registration for Jewellers
- Notification No. 5/2016 – Central Excise (N.T.) dtd 01-03-2016
- In exercise of the powers conferred by sub-rule (2) of rule 9 of the Central Excise Rules, 2002,
- the Central Board of Excise and Customs hereby exempts from the operation of said rule,
- every manufacturing factory or premises engaged in the manufacture or production of articles 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 First Schedule to the Central Excise Tariff Act, 1985 (5 of 1986) (herein after referred to as the specified goods),
- where the manufacturer of such goods has a centralised billing or accounting system in respect of such specified goods manufactured or produced by different factories or premises
- and opts for registering only the factory or premises or office, from where such centralised billing or accounting is done and where the accounts/records showing receipts of raw materials and finished excisable goods manufactured or received back from job workers are kept.
Option of Centralized Registration for Jewellers
- 2. For availing the exemption contained herein, the manufacturer taking the centralized registration shall give details of all premises (other than those of job worker’s), from where such specified goods are removed for domestic clearance.
- 3. Notwithstanding anything contained in this notification, a manufacturer of specified goods may also take separate registrations for all factories or premises where the accounts/records showing receipts of raw materials and finished excisable goods manufactured or received back from job workers are kept.
Single Registration for Multiple premises in close area
- N/N 19/2016 dtd 01-03-2016 amending N/N 36/2001:
- If two or more premises of the same factory are located within a close area in the jurisdiction of a Range Superintendent, the manufacturing process undertaken therein are interlinked, and the units are not operating under any of the area based exemption notifications, the Commissioner of Central Excise, may, subject to proper accountal of the movement of goods from one premise to other and such other conditions and limitations as he may impose, allow single registration
PROCEDURE FOR REGISTRATION UNDER CENTRAL EXCISE
NOTIFICATION NO. 35/2001-CE(NT)
- Conditions, safeguards and procedures for registration and exemption in specified cases – In exercise of powers conferred by Rule 9 of the Central Excise (No. 2) Rules, 2001 (hereinafter referred to as the said rules), the Central Board of Excise and Customs hereby specifies the conditions, safeguards and procedures for registration of a person under the said rules and exemptions from registration in specified cases: –
Application for registration
(1) Every person specified under sub-rule (1) of rule 9, unless exempted from doing so by the Board under sub-rule (2) of rule 9, shall get himself registered with the jurisdictional Deputy or Assistant Commissioner of Central Excise by applying in the form provided for registration in the website www.aces.gov.in or Annexure-1A (Form A-2 – See Division Two) or Annexure-1B, (Form A-3, See Division Two) as the case may be.
Registration of different premises of the same registered person
(2) If the person has more than one premises requiring registration, separate registration certificate shall be obtained for each of such premises :
Provided that if such person manufactures or carries on trade in goods falling under Chapter 50, 51, 52, 53, 54, 55, 56, 57, 58, 59, 60, 61, 62 or 63 of the First Schedule to the Central Excise Tariff Act, 1985 (1 of 1986), and has more than one premises requiring registration, he may obtain a single registration for all such premises, which fall within the jurisdiction of one Principal Commissioner of Central Excise or Commissioner of Central Excise, as the case may be subject to condition that the such person, while making application in terms of clause (1) of this notification, declares the details of all such premises in the form specified in (Form A1 : See Division Two)
Online filing of application
(3) Application for registration or de-registration or amendment of the registration application shall be filed only online on the website www.aces.gov.in, in the forms provided in the website.
PAN based Registration (4)
- Applicant for registration shall mandatorily quote Permanent Account Number (PAN) of the proprietor or the legal entity being registered in the specified column in the application form.
- Government Departments are exempt from the requirement of quoting the PAN in their online application.
- Applicants other than Government Departments shall not be granted registration in the absence of PAN.
Applicant to quote e-mail address and mobile number (5)
Applicant shall quote his e-mail address and mobile number in the requisite column of the application form for communication with the Department.
Business Transaction Numbers
Business transaction numbers obtained from other Government departments or agencies such as Customs Registration No. (BIN No.), Import Export Code (IEC) Number, State Sales Tax /(VAT) Number, Central Sales Tax Number, Company Index Number (CIN), Service Tax Registration Number, which have been issued prior to the filing of Central Excise Registration application, shall be filled in the form and for the numbers subsequently obtained, the application shall be amended.
Registration Number and Certificate[ Pt No.6]
Pending post facto verification of premises and documents by the authorized Officers, registration application shall be approved by the Deputy Commissioner or Assistant Commissioner within two days of the receipt of duly completed online application form. A Registration Certificate containing registration number shall be issued online and a printed copy of the Registration Certificate which was issued online through the website www.aces.gov.in shall be adequate proof of registration and the signature of the issuing authority is not required on the said Registration Certificate.
Submission of documents [Pt. No.7]
The applicant shall tender self attested copies of the following documents at the time of verification of the premises:
(i) Plan of the factory premises;
(ii) Copy of the PAN Card of the proprietor or the legal entity registered;
(iii) Photograph and Proof of the identity of the applicant;
(iv) Documents to establish possession of the premises to be registered;
(v) Bank account details;
(vi) Memorandum or Articles of Association and List of Directors; and
(vii) Authorization by the Board of Directors or Partners or Proprietor for filing the application by a third party
Physical verification [Pt No.8]
(i) The authorized officer shall verify the premises physically within seven days from the date of receipt of application through online.
Where errors are noticed during the verification process or any clarification is required, the authorized Officer shall immediately intimate the same to the assessee for rectification of the error within fifteen days of the receipt of intimation failing which the registration shall stand cancelled.
The assessee shall be given a reason opportunity to represent his case against the proposed cancellation, and if it is found that the reasons given by the assessee are reasonable, the authorized Officer shall not cancel the registration to the premises.
(ii) On the physical verification of the premises, if it is found to be non-existent, the registration shall stand cancelled. The assessee shall be given a reason opportunity to represent his case against the proposed cancellation, and if it is found that the reasons given by the assessee are reasonable, the authorized Officer shall not cancel the registration to the premises recording the complete and correct address.
Jewellers exempted from physical verification
- Notification No. 6/2016-C.E.(N.T.), dated 1-3-2016, w.e.f. 1-3-2016
- Every manufacturing factory or premises engaged in the manufacture or production of articles 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 First Schedule to the Central Excise Tariff Act, 1985 (5 of 1986), shall be exempted from sub-clauses (i) and (ii) above
Transfer of Business or acquisition of factory [Pt. No.9]
- Where a registered person transfers his business to another person, the transferee shall get himself registered afresh.
- Where an applicant has acquired an old factory from a Bank or a Financial Institution, he shall get himself registered afresh.
Change in the Constitution[10]:
- Where a registered person is a firm or a company or association of persons, then in the event of any change in the constitution of the firm leading to change in PAN, he shall get himself registered afresh.
- In other cases of change in constitution of business, where there is no change in PAN, the same shall be intimated to the jurisdictional Central Excise Officer within thirty days of such change by way of amendment to the registration details to be carried out online in website www.aces.gov.in and this will not result in any change in the registration number.
De-registration [11]
- Every registered person, who ceases to carry on the business for which he is registered, shall de-register himself by making an online application in the website www.aces.gov.in, in the form specified in the website.
- Where there are no dues pending recovery from the assessee, application for de-registration shall be approved within thirty days from the date of filing of online declaration and the assessee shall be informed, accordingly.
Cancellation of registration [12]:
A registration certificate granted under rule 9 may be cancelled after giving a reasonable opportunity to the assessee to represent his case against the proposed cancellation by the Deputy Commissioner or Assistant Commissioner of Central Excise, in any of the following situations, namely:—
(i) where on verification , the premises proposed to be registered is found to be non-existent;
(ii) where the assessee does not respond to request for rectification of error noticed during the verification of the premises within fifteen days of intimation;
(iii) where there is substantial mis-declaration in the application form; and
(iv) where the factory has closed and there are no dues pending against the assessee.
Payment of Duty
- Payment of excise duty is effective from 01-03-2016. However excise duty for March 2016 may be paid along excise duty for April 2016 as per Cir. Dtd. 221-03-2016.
- If aggregate value of all clearances during preceeding financial year are not exceeding 12 crores, then assessee is eligible for SSI exemption and due date of tax payment is 6th of the month following quarter. If aggregate value of all clearances during preceeding financial year are exceeding 12 crores, then due date of payment is 6th of month following month. [Rule 8 of Central Excise Rule and N/N 8/2016]
Procedural Hassels being removed
Simple Return
Also, jewellery manufacturers will be eligible for a simplified return applicable for optional excise duty of 1%/2% without CENVAT credit under notification No.1/2011-CE, under Rule 12 of the Central Excise Rules, 2002
VAT/BIS Documents sufficient record
- Moreover, documents being maintained by the jewellery manufacturers for State VAT or Bureau of Indian Standards (in the case of hallmarked jewellery) shall suffice for Excise purposes also
- The private records of the jewellery manufacturers, giving details of daily stock for his own purposes, shall be accepted for the purposes of Rule 10 of the Central Excise Rules 2002
- Excise official will not visit shops/ residence/manufacturing unit. No arrests or criminal prosecution. No search and seizure of stock by excise officer
- The levy is based on self-assessment and therefore, no physical visits shall be made to registered units in the normal course
Practical Issues
Onerours Condition for claiming 1% Concessional Tax rate:
- As far as exemption relating to Jewellery directly are concerned, Sl. No. 199 of Exemption Notification No. 12/2012-CE dated 17.03.2012 gives exemption from duty beyond 1% for Articles of Jewellery. However this is subject to the following condition – If articles of Jewellery are manufactured from inputs or capital goods on which appropriate Central Excise Duty or CVD has been paid and no CENVAT credit of such duties has been taken. It is clarified by explanation that appropriate rate of duty includes ‘nil’ rate or concessional rate if duty is exempted.
- However it is not possible for manufacturer to prove that appropriate duty has been paid.
- Hence may be proposed that condition be changed to the effect that concessional rate of 1% shall be applied if no credit on inputs or capital goods has been taken by manufacturers
Cenvat Credit on Input Services
- Credit can be taken on all expenses satisfying the definition of input service. The illustration could be renting of showroom/premise, advertisement, branding, audit expenses, bank charges and similar other expenses incurred in the business of manufacturer. However if the credit is relating to both dutiable activity as well as exempted activity, the proportionate credit is eligible
- There are certain items excluded from the definition of input service such as construction of civil structure, renting of motor vehicles, expenses incurred for personal use or consumption of employees. Credit on these expenditure is not eligible.
- [FAQ 18 and 19 of ICAI Publication]
Where place of manufacture is different from place of sale
- Excise Duty has to be paid on removal of the goods from the place of manufacture, in case the place of manufacture and sale is one and the same, then in such case excise duty can be paid on sale to customer.
- In case the place of manufacture and the place of removal are different, then the excise duty has to be paid on removal of goods from place of manufacture (workshop) to place of sale (showroom). Even though liability arises at the time of removal, account of liability has to be kept and payment has to be made once a month/quarter
- [FAQ No. 35 of ICAI Publication]
Valuation where place of manufacture is different from place of sale
- Excise Duty has to be paid on transaction value of the goods, in case the place of manufacture and sale is one and the same.
- In case the place of manufacture and the place or removal (from where the goods are sold subsequent to removal from the place of manufacture) are different, then the excise duty has to be paid on the value of goods prevailing at the place of sale (showroom) at the time of removal from the place of manufacture (workshop)
- As per Circular No. 1021/9/2016 dated 21-03-2016 All payments of central excise duty will be based on first sale invoice value
- Note: This could be considered first sale invoice for the day
- Excise duty has to be paid on the value which is inclusive of the gold, other precious stones or any other consideration given by customers in any form.
Valuation for Excise Purpose where old jewellery supplied by Customer
- When old gold jewellery is brought by retail end-users, the jeweller ‘barters’ the same with ready-made jewellery. This is the case where consideration is given by customer in non monetary form. The manufacturing has been done by jeweller on its own. Hence, it shall be liable to duty of excise and the value shall be determined as per following:
- Value of jewellery supplied by customer + Additional material used by manufacturer in manufacturing jewellery +
- Jewellery making charges
[FAQ 47]
Valuation not to be challanged till recommendations are finalized
As per Circular No. 1021/9/2016-CX dtd 21-03-2016 , Till the recommendations of the Sub-Committee are finalized , The central excise authorities will not Challenge the valuation given in the invoice provided the caratage / purity and weight of the gold/silver With precious stones; and carats Of diamond/precious stones are mentioned on the invoice
Stock Lying on 29-02-2016 [Para 3.2.4 of TRU Letter-I]
- Excisable goods which were produced on or before 29.02.2016 but lying in stock as on 29.02.2016 shall attract excise duty upon clearance.
- Jewellery manufacturer shall keep a stock declaration of finished goods, goods-in-process and inputs as on 29.02.2016 in their records duly certified by a Chartered Accountant so as to enable the manufacturers to claim CENVAT credit on inputs or inputs contained in goods lying in stock as already provided for in Rule 3(2) of the CENVAT Credit, Rules, 2004, if he so desires.
- No stock declaration, will, however, be required to be made to the jurisdictional central excise authorities.
- If the goods were already cleared from the place of manufacture and are lying in stock in any other place like showroom, warehouse, stocking place, etc., are not liable for duty as goods were already cleared from the place of manufacture. This is for the reason that point of collection of duty is the point of clearance of goods from the place of manufacture. Since this event would have been already completed in these cases, there cannot be duty liability [FAQ No.30 ICAI Publication]
- It is suggested to have a certification from Chartered Accountant as to stocks lying at different places since duty liability differs depending upon where the stocks were situated as on 29.02.2016 [FAQ No. 31 of ICAI Publication]
Affixing Brand Name on Jewellery
- If after purchasing the Jewellery, the brand name of the purchasing jeweler is affixed, it would be leviable to central excise duty on the activity of branding, by way of trade/brand name or any such mark/symbol which is deemed to be an activity amounting to manufacture.
- [FAQ No. 28 of ICAI Publication]
Manufacturer Cum Trader
- The person who gets Jewellery manufactured on his behalf on job work basis could sell manufactured Jewellery and trade in Jewellery from same location.
- The duty on the Jewellery would have been already paid at the time of removal of goods from job worker’s place. Therefore all the goods in the said location would be duty paid or purchased.
- However there may be a requirement to establish the source of such goods at least on totality basis, though practically it may be difficult or may not be possible to show item to item basis
- [FAQ No. 32 of ICAI Publication]
Consideration for Jewellery paid in Gold
- Merely settling the consideration in gold for the purchase of the ready Jewellery shall not have any impact on the trader.
- However if the same was given on a job-work basis then excise duty shall be payable by the trader.
- Practically it is generally treated as job work in the books for VAT purposes. There cannot be different stand for different authorities.
- [FAQ No.27 of ICAI Publication]
Difficulties in collection of excise duty from the Customer
Excise duty is an indirect tax and can be collected from the buyer. However in case the goods are manufactured in the workshop and then the same are sold in show room, then in such case excise invoice cannot be raised on the customer and in such case explicit collection on the transaction value is not possible, the same has to be recovered as product cost.
[FAQ 41 of ICAI Publication]
Manufacturing on Jewellery Supplied by Customer
- Jeweller manufacturing the jewellery using gold supplied by customer shall be treated as job worker while the customer bringing the gold for getting it manufactured shall be considered as assessee under Rule 12AA of CER.
- The customer would be liable to pay duty and making compliances under the central excise subject to the benefit of SSI exemption.
- There is no liability on jeweller to charge and pay duty of excise in terms of exemption granted to job workers. It shall raise invoice for labour charges only.
- There should be clear mention on the invoice that the goods covered by invoice have been processed under Rule 12AA of CER on the material supplied by customer and the customer is liable to pay duty of excise if any. Identity of customer should be verifiable
- [FAQ 43 of ICAI]
Manufacturing on Jewellery Supplied by Customer
- A retail end-user may have a transaction for (say) Rs.2 lacs, but the job-worker may have transactions for several crores, As far as responsibility of retail end-user, since the value of goods manufactured on his behalf is less than exemption limit, there is no statutory compliance required from his end.
- As far as responsibility of job worker i.e. jewellery shop is concerned, proper documents should be maintained as to receipt of the goods from the retail end-user and the same goods should be sent for processing for final products.
It is important to note that to be called as job worker the finished goods should be manufactured out of the raw materials supplied and not in exchange of goods.
[FAQ 46}
Conversion of Old Jewellery into Gold Bar
Old Jewellery is converted to gold bar by melting with aid of power. There is an exemption from payment of duty vide Sl. No. 188 of Notification No. 12/2012-CE dated 17.03.2012. However if it is not made using the aid of power, there seems to be no exemption
[FAQ 48]
Goods Sent on Approval Basis
Liability to pay duty arise on removal of goods whether on account of sale or otherwise. Hence, the goods must have suffered duty before or at the time of removal on approval basis. There could be following possibilities:
(i) Duty paid at the time of stock transfer from workshopto point of sale (showroom): Duty is paid at the time of removing the goods from workshop to showroom. Hence, duty need not be paid again at the time of removal from showroom on approval basis.
(ii) Duty paid at the time of removal of goods on approval basis: If the goods are manufactured at showroom/workshop and send directly from there on approval basis, duty needs to be paid at the time of such removal.
If the goods are returned back by customer under any of the above possibilities, the goods may be stored separately as duty paid stock. There is no liability on subsequent removal.
Relaxation for the payment at initial point of removal maybe sought from Government.
[FAQ 53]
Sale Return
- If the process undertaken on returned goods amount to manufacture, there would be duty liability on subsequent removal.
- Credit of duty paid earlier @1% would not be available taking a conservative interpretation.
- A representation could be made to government to provide credit of central excise duty paid on jewellery returned and melted and converted into new jewellery.
- [FAQ 54]
Suggestion to allow exemption on returned Goods
- Notification 31/2011, as applicable to textile sector exempts all goods bearing a brand name or sold under a brand name and falling under chapter 61, 62 or 63 (except 6309 and 6310) of the First Schedule to the Central Excise Tariff Act, 1985 (5 of 1986), from the whole of the duty of excise leviable thereon, when goods, on which appropriate duties of excise have been paid, are returned or brought back to the same premises or factory and cleared therefrom after being re-made, re-conditioned, re-packed or subjected to any other process ; provided the aggregate value of goods cleared from a factory or premises under this exemption in a financial year does not exceed 10% of the aggregate value of clearances for home consumption from the same factory or premises in the preceding financial year.
- Similar exemption may be extended for Jewellery Sector also.
Repair, Reconditioning of Goods
- If the process of repair/reconditioning etc. amounts to manufacture, duty needs to be paid at the time of second removal of goods as well. The duty needs to be paid on gross amount including the value of material. If the process does not amount to manufacture, there is no liability to pay duty.
- As per N/N 25/2012 there is exemption from service tax in respect of Carrying out an intermediate production process as job work in relation to cut and polished diamonds and gemstones; or plain and studded jewellery of gold and other precious metals, falling under Chapter 71 of the Central Excise Tariff Act ,1985 (5 of 1986);
Constitution of Sub- Committee of High Level Committee [Circular No. 1021/9/2016-CX dtd 21-03-2016]
1. In the Budget 2016-17, Central Excise duty at the rate of 1% (without input tax credit) and 12.5% (with input tax credit) has been imposed on all articles of jewellery (except for silver jewellery, other than those studded with diamond, ruby, emerald or sapphire).
2.In this regard, it has been decided to constitute a Sub-Committee of the High Level Committee to Interact with Trade & Industry on Tax Laws, chaired by Dr. Ashok Lahiri, which will consist of:
- three representatives of the trade [to be decided by the Government];
- one legal expert [to be decided by the Government];
- officer concerned from the Ministry of Commerce & Industry [MoC&I] to be nominated by the MoC&I; and
- high level officials from the central excise department to be nominated by the Central Board of Excise and Customs.
The composition of the Sub-Committee will be circulated once the names of its members are finalized.
3.All associations will be given an opportunity to submit representation before the sub-committee in writing and the all India associations to state their case in person.
TOR of Committee
Terms of reference of the Sub-Committee will include the issues related to compliance procedure for the excise duty, including records to be maintained, forms to be filled including Form 12AA, operating procedures and any other issued that may be relevant. The Sub-Committee will submit its report within 60 days of its constitution.
Following to be adhered till recommendations are finalized
Till the recommendations of the Sub-Committee are finalized, the following shall be adhered to:
a) All payments of central excise duty will be based on first sale invoice value;
b) The central excise authorities will not challenge the valuation given in the invoice provided the caratage / purity and weight of the gold/silver with precious stones; and carats of diamond/precious stones are mentioned on the invoice;
c) The central excise officers will not visit the manufacturing units/ shops/place of business/residence of the jewelers;
d) No arrest or criminal prosecution of any jeweler will be done;
e) No search or seizure of stocks by any central excise official will be effected;
f) Exporters will be allowed to export on self declaration and submission of LUT to customs without the need to get LUT ratified by central excise. Prevailing system will continue.
Registration under Central Excise
The registration of the establishment with the central excise department can be taken within 60 days from 1stMarch, 2016.
However, the liability for payment of central excise duty will be with effect from 1st March, 2016, and as a special case for the month of March, 2016, the assessee jewelers will be permitted to make payment of excise duty along with the payment of excise duty for the month of April, 2016.
Communication regarding Sub -Committee
Any further communications with the regard to the aforesaid Sub-Committee may be addressed to the Office of the High Level Committee (HLC), Suite No. 215, The Janpath Hotel, Janpath Road, Opp. BSNL Building, New Delhi-110001.
Circular No. 1025/13/2016 dtd 22-04-2016 regarding Committe
the composition of the Sub-Committee referred to therein would be as under:
(i) Dr. Ashok Lahiri, Chairman.
(ii) Shri Gautam Ray, Member.
(iii) Shri Rohan Shah, Legal expert [Managing Partner, Economic Laws Practice].
(iv) Shri Manoj Kumar Dwivedi, Joint Secretary [Department of Commerce].
(v) Shri Alok Shukla, Joint Secretary [Tax Research Unit, Central Board of Excise and Customs, Department of Revenue].
Names of the trade representatives in the Sub-Committee would be decided in consultation of with Dr. Ashok Lahiri, Chairman of the Sub-Committee.
Following names have been finalized vide Circular No. 1030/18/2016-CX dtd 18-05-2016
Sh. Konal Doshi, Past Convener, Jewellery Panel, GJEPC [Mobile 9820124106 Email doshi.konal@gmail.com]
Sh. Ashok Minawala, past Chairman, AIGJF, [Mobile 9821020011 ashok.minawala@gmail.com]
SH. Fatehchand Ranka, Chairman All India Action Committee on Jewellery AIACJ [Mobile 9823082661. Mail fatehchand@rankajewellerspvtltd.com, fatehchand@gmail.com]
Terms of reference of the Sub-Committee will include the issues related to compliance procedure for the excise duty, including records to be maintained, operating procedures and any other issues that may be relevant.
Any further communications with the regard to the aforesaid Sub-Committee may be sent through e-mail to highlevelcommittee@gmail.com or by post addressed to the Office of the High Level Committee (HLC), Suite No. 215, The Janpath Hotel, Janpath Road, Opp. BSNL Building, New Delhi-110 001.
Extension of Time Limit for taking registration-Circular 1026/14/2016-CX DTD 23-04-2016
- The time limit for taking central excise registration of an establishment by a jeweller is being extended up to 01.07.2016.
- Though, the liability for payment of central excise duty will be with effect from 1st March, 2016, the assessee jeweIlers may make the payment of excise duty for the months of March, 2016; April, 2016 and May, 2016 along with the payment of excise duty for the month of June, 2016.
Author Bio
If we purchase old gold ornaments i.e.,Unrealised Purchases and
Case:1.Without melting we just repolish and sell them
Case:2.We melt and repolish them
Is excise duty leviable in any of the above case?