1) The Finance Minister Shri P. Chidambaram while presenting his budget proposals on 28th February 2005 stated that imitation jewellery attracted an excise duty of 16 per cent. Since they were products predominantly consumed by the less affluent sections, he proposed to reduce the excise duty to 8 per cent. At the same time, expensive and premium jewellery that was manufactured and sold under alluring brand names was free of duty. He therefore recommended an excise duty of 2 per cent on such branded jewellery and clarified that there was no levy on unbranded jewellery, including unbranded gold jewellery. Accordingly an exemption notification 05/2006 CE dated 1-03-2006 was issued which exempted full duty in excess of 2% on article of jewellery on which brand name or trade name was indelibly affixed or embossed on the articles of jewellery itself.
2) Later the Finance Minister Shri Pranab Mukherjee while presenting his budget proposals for Budget 2009-2010 on July 6, 2009 proposed to fully exempt branded jewellery from excise duty. Accordingly exemption notification 05/2006 CE dated 1-03-2006 was amended vide notification No. 15/2009-C.E., dated 7-7-2009 which amended the entry no. 26 of the original notification replacing the rate 2% by the rate NIL.
3) The effect of the above amendment was that all articles of jewellery whether branded or unbranded were fully free from excise duty.
4) However while presenting his budget proposals for 2011-12 on 28th February 2011 the same Finance Minister Shri Pranab Mukherjee proposed certain changes in the Central Excise rate structure to prepare the ground for the transition to GST, beginning with a reduction in the number of exemptions. He stated that there were about 100 items that were exempt from Central Excise as well as State VAT. In addition, there were as many as 370 items that enjoyed exemption from Central Excise duty but were chargeable to VAT. He therefore proposed to withdraw the exemption on 130 of these items that were mainly in the nature of consumer goods. The remaining 240 items were to be brought into the tax net when GST is introduced.
5) Continuing further he stated that a nominal Central Excise duty of 1 per cent was being imposed on the 130 items that are entering the tax net. Stating further he said that in case of jewellery and articles of gold, silver and precious metals, this new levy would apply only to goods sold under a brand name. However precious metals and stones were exempted from this levy.
6) In order to bring these proposals into effect notification no. 5/2011 CE dated 1-3-2011 was introduced which omitted entry no. 26 of notification 05/2006 CE dated 1-03-2006 which provided for full exemption from duty to article of jewellery on which brand name or trade name was indelibly affixed or embossed on the articles of jewellery itself.
7) For the purposes of heading 7113, the expression “articles of jewellery” means:
(a) 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
(b) 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, synthetic or reconstructed precious or semi-precious stones, tortoise shell, mother-of-pearl, ivory, natural or reconstituted amber, jet or coral.
8) For the purposes of heading 7113, the processes of affixing or embossing trade name or brand name on articles of jewellery shall amount to ‘ manufacture’.
9) A new exemption Notification No. 1/2011-Central Excise dated 1st March 2011 was issued which ,at entry no. 88, exempted, inter alia, Articles of jewellery manufactured or sold under a brand name from duty in excess of 1% ad valorem. He explained that for the above purposes.
a. Hallmarking of the jewellery, which is an accurate determination and official recording of the proportionate content of precious metal in gold and is thus only official marks used as a guarantee of purity or fineness of gold jewellery, cannot be treated as “branding‟ for the purposes of the excise levy.
b. An identity put by a jeweller or the job worker, commonly known as house-mark‘ shall not be considered as brand name.
c. For attracting this levy, the article of jewellery must be marketed and sold under a brand name. What is a brand name.? 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.
10) Only such jewellery or other articles of precious metals which either bear or are marketed and sold under a brand name attract this 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 from the manner in which it is understood in commercial or trade parlance. The test of goods being branded would be if the buyer seeks to buy the goods because they bear or are sold under a particular brand. As such, a mere mark of identity put by a jeweller or the job worker, commonly known as a “house-mark‟ shall not be considered a brand name. Some illustrations are given below to explain the scope of the term “brand name:
a. A manufacturer, say “ABC Jewellers”, getting jewellery or other articles manufactured on his behalf from gold smiths/ job-workers who put a mark/sign/initials, etc. on the jewellery/ article. This is only to identify that the article or jewellery was received from a particular goldsmith, etc. This is not branded jewellery and will not attract duty.
b. “ABC jewellers”, when it sells articles of jewellery to customers, puts a distinctive sign/ mark/ initials etc. on the jewellery- very often a simple acronym of his name e.g. ABC. It may be noted that mere alphabets or numerals (unless stylized) cannot be registered as a brand name or trademark. This is again for the purpose of identification when the customer re-sells or returns the jewellery or article and goods bearing it would not attract the levy.
c. “ABC jewellers” advertises and sells its products under the brand “Star” or puts a logo like ABC or ABC i.e. in a stylized manner. It also puts the same brand name or an abbreviation thereof or a mark which has a connection with such brand name either on the jewellery or article itself or on the packing such as the jewellery box or pouch or even on the warranty card or certificate of quality. Such goods will clearly be treated as branded and will be liable to duty.
11) In case of branded jewellery where a brand owner gets jewellery or articles other than jewellery made from any other person, and supplies the raw materials such as gold/ silver/ gemstones etc. to the job-worker for such manufacture, the duty liability would be on such person who gets jewellery or articles made from the job worker, unless the job worker opts to discharge the duty liability. However, a person manufacturing jewellery bearing a brand name or sold under a brand name on his own account will be liable to pay excise duty and also be eligible to the benefit of the SSI exemption.
12) Unlike the earlier scheme , in the new scheme there is no requirement that brand name should be affixed on the product itself. Where the goods are sold under the brand name, that may be sufficient. Like case, packing material etc. would be sufficient to conclude whether articles are sold under brand name or not.
13) It is only that person (say Principal) who gets article of jewellery or other articles of precious metals produced or manufactured on his behalf, on job work basis, who 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. The responsibility in respect of accountability of the goods shall lie on the Principal.
14) 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 unless he has exercised his option in terms of the proviso to sub-rule (1).
|Compiled by: CA GULAB BUMB
Gulab & Co
|Edited by: CA LALIT MUNOYAT
B.Com.(Hons.), CS, FCA, DISA
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