J.Baskar
jbaskar

Central Excise duty on Jewellery though introduced initially for branded Jewellery and later extended to all Jewellery was subsequently withdrawn due to pressure from the industry.

However as Budget 2016 tax proposals, changes were made w.e.f. 1st March 2016, by withdrawing exemptions given earlier thereby extending the tax base of Central Excise to Jewellery sector as well w.e.f. 01.03.2016.

The scheme of levy and collection of Central Excise duty on articles of Jewellery is as under:

(a) The levy and collection of Central Excise Duty is on the manufacture of Jewellery (excluding silver Jewellery, not studded with diamonds, ruby, emerald or sapphire).

(b) It is applicable to both branded as well as unbranded Jewellery.

(c) The rate of duty on the Jewellery are as follows:

(i) 1% on transaction value [without Cenvat credit on inputs and capital goods. However credit on input services is eligible] or

(ii) 12.5% with Cenvat credit of inputs, input services and capital goods.

(d) The benefit of SSI exemption (exemption based on value of clearance) is available if the value of manufactured goods (on own or through job worker) cleared domestically has not crossed Rs. 15 Crores (all goods manufactured including silver Jewellery) in the financial year 2014-15. The benefit for March 2016 is 85 lakhs.

(e) Similarly if the domestic value of clearance has not crossed Rs. 10 (all goods manufactured including silver Jewellery) crores in the financial year 2015-16, for the financial year 2016-17, exemption upto 6 crores of value of clearances can be availed.

(f) The said exemption based on value of clearance is not available if manufacturer affixes the brand name of another person.

(g) For determining the eligibility for availing SSI exemption based on previous financial year as explained above, a certificate from a chartered accountant, based on books of account shall suffice and does not require any verification from the departmental officers’ side.

(h) 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.

There has been widespread protest by trade association. Conceding their few of demands, the Board has issued circular no. 1021/9/2016-CX dated 21.3.2016 clarifying the following:

(a) A High level Task force led by Ashok Lahiri with 3 industry representatives, legal expert, one officer nominated by Ministry of Commerce & Industry and CBEC representative will be formed;

(b) Extension of time for registration up to 30 April, 2016; However the payment of excise duty shall be with effect from 1st March, 2016 and as a special case for the month of March 2016, the assessee will be permitted to make payment of duty along with payment of excise duty for the month of April, 2016.

(c) Sub-committee will submit its report within 60 days and until this recommendation are finalised and notified, following will be adhered to…

(i) Payment of excise based on first sale invoice value

(ii) CBEC will not challenge valuation of product given in the invoice provided to weight of gold and carat weight of diamonds and precious gemstone is mentioned on invoice

(iii) Excise official will not visit shops/ residence/manufacturing unit

(iv) No arrests or criminal prosecution

(v) No search and seizure of stock by excise officer

(vi) Exporters will be allowed on self declaration on submission of LUT with need to ratify with excise. Present system will work.

(d) Terms of reference of committee will include all issues relented to excise including type of records, other procedure, forms to be filed and any other issues may be relevant to this subject

The Sub-Committee has given its report on 23.06.2016, which has been accepted by the Government.

In the above context, for manufacturers/principal manufacturers of articles of jewellery or parts of articles of jewellery or both, falling under heading 7113 of the Central Excise Tariff Act [hereinafter referred to as articles of jewellery], the Sub-Committee has made certain recommendations, which have been accepted by the Government and accordingly, following clarifications have been issued:

i. A manufacturer or principal manufacturer of articles of jewellery may also do trading of articles of jewellery from his central excise registered premises.

ii. for a jeweller [above the SSI excise duty exemption limit]:

(a) in case his first sale invoices show excise duty separately, the same will have to be paid to the Government; and

(b) in case his sale invoices do not show separately the excise duty, the value for VAT will be treated as cum excise duty value [that is value for excise duty plus excise duty] and duty payable will have to be determined accordingly.

iii. No excise duty will be payable on the sale of traded articles of jewellery [on which appropriate excise duty, including nil duty, has already been paid].

iv. Records maintained for State VAT and other private records, showing details of inputs, stocks, manufactured goods, sold/exported goods, etc., as per the scheme opted by the jewellery manufacturer [Refer rule 12 of the Articles of Jewellery (Collection of Duty) Rules, 2016], will suffice for central excise purposes also.

v. For articles of jewellery manufactured on job work basis, the procedure as prescribed in the Articles of Jewellery (Collection of Duty) Rules, 2016 is to be followed. Accordingly, the procedure prescribed for job work under notification No. 214/86-CE will not be applicable on manufacture of articles of jewellery on job work basis.

vi. Repairs and alterations, which do not change the identity, character and use of the goods and do not result in a new item, is not “manufacturing” and will not attract excise duty

  • Imposing 1% concessional duty on Articles of jewelries and nil rate of duty on article of silver jewelries other than that studded with precious stones subject to the condition that CENVAT Credit on inputs and capital goods are not availed. (Notification no 12/2016 CE dated 1/03/2016Sl.No.(xv) )
  • The above concessional duty has been extended to parts of articles of jewelleries (26/2016 CE dated 26/07/2016)
  • Excise duty payable on the articles of jewellery manufactured from jewellery provided by a retail customer or by mounting precious stones provided by the retail customeris restricted to the value of the additional material and labour charges used in the manufacture of the articles (27/2016 CE dated 26/07/2016). For claiming exemption under this head, the prescribed records need to be maintained.
  • First clearance of articles/ parts of articles of jewellery in ay financial year, up to Rs. 10 crores are exempted from payment of duty. For the for the period starting from 1/03/2016 to 31/3/2016 the exemption shall apply to the first clearances of articles of jewellery or parts of the articles of jewellery up to Rs. 85 lakhs.

This exemption is subject to the following conditions:

(1) the manufacturer of goods should not avail CENVAT Credit on inputs or capital goods used in the manufacture of goods for home consumption.

(2) In the case of manufacture from more than one location or clearances from more than one premises the aggregate value of first clearances should not exceed Rs. 15 crores in the preceding financial year for claiming exemption under this category.

(3) For the purposes of determining the aggregate value of Rs. 10 crores of first clearances for home consumption, the following clearances shall not be taken into account, namely:-

(a) 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 ;

(b) 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;

                                    (Notification no 28/2016 dated 23/06/2016)

Articles of jewellery or parts of articles of jewellery or both

1. Value at which such excisable goods are sold for the first time from the registered premises or from the centrally registered premises or branches of such centrally registered premises by the manufacturer or principle manufacturer.

2. Articles of jewellery or parts of articles of jewellery or both which are manufactured from the precious mental provided b retail customer Value which is the sum of:

(a) Cost of additional material used by the manufacturer or principal manufacturer as the case may be or making such articles of jewellery

(b) Labour charges charged by the manufacturer/ principal manufacturer from the retail customer

(c) Value of the precious metal provided by the customer

For the purpose of determination of the tariff value, registered premises or the centrally registered premises or branches of such centrally registered premises of the manufacturers or the articles of jewellery or parts of the articles of jewellery or both from where goods are sold for the first time shall be place o removal for such articles of jewellery.

(33/2016 CE (NT) dated 26/7/2016

  • Articles of jewellery collection of duty rules 26/07/2016

1. Important definitions

Assessee” means a manufacturer or principal manufacturer, as the case may be, of excisable goods

“Assessment” includes self-assessment of duty made by the assessee;

“articles” means articles of jewellery or parts of articles of jewellery or both falling under Heading 7113 of the Tariff Act, wherein the expression “articles of jewellery” shall have the meaning assigned to it as under chapter note 9 of chapter 71 of the Tariff Act;

“job work” means processing or working upon of raw materials or semi-finished goods supplied to the job worker, so as to complete a part or whole of the process resulting in the manufacture or finishing of articles of jewellery or parts of articles of jewellery or both falling under heading 7113 of the First Schedule to the Central Excise Tariff Act;

(h) “job worker” means a person engaged in manufacture or processing on behalf of a principal manufacturer, from any inputs or goods supplied by the principal manufacturer, so as to complete a part or whole of the process resulting ultimately in manufacture of articles.

(i) “principal manufacturer” means every person (not being an export-oriented unit or a unit located in a Special Economic Zone or any person who gives his pre-owned gold or any precious metal, ornaments or jewellery for the purpose of being re-made or re-conditioned or gives precious stones for the purpose of being mounted) who gets articles, produced or manufactured on his behalf, on job-work basis and causes the sale of the articles for the first time.

(j) “silver studded articles” means articles of jewellery of silver studded with diamond, ruby, emerald or sapphire falling under Heading 7113 of the Tariff Act, wherein the expression “articles of jewellery” shall have the meaning assigned to it as under chapter note 9 of chapter 71 of the Tariff Act;

(l) “Traded articles” means articles, on which appropriate duty (including nil duty) has already been paid at the time of their sale for the first time.

2. Date for determination of duty. The rate of duty applicable to the articles, shall be the rate in force on the date when such articles are sold for the first time by the manufacturer or principal manufacturer, as the case may be, from his registered premises or centrally registered premises or branches of such centrally registered premises.

3. Assessment of duty. The assesse shall himself assess the duty payable on any excisable articles.

4. Manner of payment of duty

(1) The duty on the articles sold for the first time by the manufacturer or principal manufacturer from his registered premises or centrally registered premises or branches of such centrally registered premises, during a month, shall be paid by the 6th day of the following month, if the duty is paid electronically through internet banking or by the 5th day of the following month, in any other case.

(2) In case of articles sold for the first time by the manufacturer or principal manufacturer, as the case may be, during the month of March, the duty shall be paid by the 31st day of March.

(3) Where an assessee is eligible to avail of the exemption under a notification based on the value of goods sold for the first time in a financial year, the duty on articles sold for the first time during a quarter of the financial year shall be paid by the 6th day of the month following that quarter, if the duty is paid electronically through internet banking and in any other case, by the 5th day of the month following that quarter, except in case of articles sold for the first time during the last quarter, starting from the 1st day of January and ending on the 31st day of March, for which the duty shall be paid by the 31st day of March.

(4) The duty on the articles sold for the first time from his registered premises or centrally registered premises or branches of such centrally registered premises in the months of March, April, May and June of 2016, by an assessee shall be paid by the 31st of July, 2016.

(5) An assessee, engaged in the manufacture or production of the articles 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 fifteen crore.

(6)The manner of payment as specified in this proviso shall be available to the assessee for the whole of the financial year.

(7) For the purposes of this rule,-

(a) The duty liability shall be deemed to have been discharged only if the amount payable is credited to the account of the Central Government by the specified date;

(b) If the assessee deposits the duty by cheque, the date of presentation of the cheque in the bank designated by the Central Board of Excise and Customs for this purpose shall be deemed to be the date on which the duty has been paid subject to realization of that cheque.

(8) Every assessee shall electronically pay duty through internet banking:

(9) An assessee may make payment of duty by any mode other than internet banking after conveying the reasons in writing to the AC/DC concerned.

(10) If the assessee fails to pay the amount of duty by due date, he shall be liable to pay the outstanding amount along with interest at the rate specified by the Central Government vide notification under section 11AA of the Act on the outstanding amount, for the period starting with the first day after due date till the date of actual payment of the outstanding amount.

(11) If the assessee fails to pay the duty declared as payable by him in the return within a period of one month from the due date, then the assessee is liable to pay the penalty at the rate of one per cent. On such amount of the duty not paid, for each month or part thereof calculated from the due date, for the period during which such failure continues.

5. Daily stock account. – (1) every assessee shall maintain separate records for receipt and sale of manufactured and traded articles, indicating the particulars regarding description of the manufactured articles, on a daily basis.

(2) All records and documents maintained by the assessee for manufactured articles, including records showing receipts of articles manufactured or received back from job worker’s premises, quantity of manufactured articles sold for the first time from the registered premises or centrally registered premises or branches of such centrally registered premises for home consumption, quantity of manufactured articles sold for the first time from the registered premises or centrally registered premises or branches of such centrally registered premises for exports or any other records and documents, shall be preserved for a period of five years immediately after the financial year to which such records pertain.

(3) All records and documents maintained by the assessee for traded articles, including records showing value of their traded stocks at the time of purchase or any other records and documents, shall be preserved for a period of five years immediately after the financial year to which such records pertain.

(4) All records of manufactured and traded articles maintained by the assessee under this rule shall be maintained on weight and caratage basis.

(5) The assessee at his own option may preserve records under this rule in electronic form with every page of the record so preserved authenticated by means of a digital signature.

6. Articles to be removed on invoice. –

(1) Excisable articles shall be sold for the first time by the assessee from his registered premises or the centrally registered premises or branches of such centrally registered premises, under an invoice (hereinafter referred to as the “first sale invoice”).

(2) First sale invoice shall be duly signed by the assessee or his authorised agent and shall be serially numbered. Such an invoice shall also contain the registration number, name of the consignee, description of articles, classification and date of removal by sale.

(3) First sale invoice shall show value of manufactured and traded articles separately so as to arrive at the excise duty payable on the manufactured articles.

(4) The invoice shall be prepared in duplicate and in the following manner, namely:-

(i) The original copy being marked as ORIGINAL FOR BUYER;

(ii) The duplicate copy being marked as DUPLICATE FOR ASSESSEE;

(5) The rules relating to digitally signed invoice under the Central Excise Rules, 2002 shall mutatis mutandis apply in relation to the digitally signed invoice under these rules.

7. Job work in articles of jewellery or parts of articles of jewellery. –

(1) A principal manufacturer who gets articles manufactured on his behalf, on job work basis shall obtain registration, maintain accounts, pay duty leviable on such articles and comply with all the relevant provisions of these rules, as if he is an assessee.

(2) The principal manufacturer may supply or cause to supply to a job worker any inputs or articles, so as to complete a part or whole of the process resulting in manufacture of articles under a challan, issue voucher or any other document which shall contain the following details, duly signed by the principal manufacturer or his authorised agent:

(a) Name and registration number of the principal manufacturer;

(b) Description and quantity of inputs or articles;

(c) Name of the person carrying the input or articles along with his signature and proof of identity; and

(d) Date of supply of inputs or articles.

(3) The principal manufacturer shall maintain records for the inputs or articles received back from the job worker against the inputs or articles supplied to them.

(4) 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.

 (4)  if any articles are lost, destroyed, found short at any time before the sale for the first time of the articles, the principal manufacturer shall be liable to pay duty thereon as if such articles were sold for home consumption for the first time from the registered premises or centrally registered premises or branches of such centrally registered premises, at a value equal to cost of raw material plus job charges paid by the principal manufacturer in case he had got such articles manufactured on job work basis. In other cases, the value of such articles shall be the value of raw materials plus the making charges charged by the manufacturer for similar articles.

8. Removal of inputs or semi-finished articles or finished articles for certain purposes.-

(1) A manufacturer or principal manufacturer, as the case may, may remove any inputs or semi-finished articles or finished articles for further processing, testing, repair, reconditioning, hallmarking, display in exhibitions or for any other purpose including as samples, to some other premises, without payment of duty, if such removal does not involve sale, under a challan, issue voucher or any other document prepared by him for this purpose, duly signed by the manufacturer or principal manufacturer, as the case may be, or his authorised agent.

(2) Such challan or issue voucher or any other document shall contain the following details:-

(a) Name and registration number of the manufacturer or principal manufacturer, as the case may be;

(b) Description and quantity of articles;

(c) Name of the person carrying the articles along with his signature and proof of identity;

And

(d) Date of removal.

(3) The manufacturer or the principal manufacturer shall account for the articles removed and returned.

9. Receipt of duty paid articles for certain

(1) Where any articles on which duty had been paid at the time of their sale for the first time by the assessee from his registered premises or the centrally registered premises or branches of such centrally registered premises, are brought back as such, the assessee shall state the particulars of such receipt in his records as if they are traded articles and account for them in the trading stockaccount, provided no refund of excise duty is claimed.

10. Optional scheme.

(1) the manufacturer or principal manufacturer, as the case may be, dealing in both manufactured and traded articles, may also pay excise duty on his first sale value, by treating his first sales during a month solely as sale of manufactured articles, if the quantity of such sales during the month is less than or equal to the opening stock of manufactured articles at the start of such month, at his own option, by giving a written declaration to the excise authorities having jurisdiction by the 28th day of February of the previous financial year:

For the financial year 2016-17, such written declaration may be given to the Assistant Commissioner or Deputy Commissioner of Central Excise, as the case may be, having jurisdiction, by the 31st day of July, 2016:

For the period beginning from 1st March, 2016 to 31st March, 2016 such declaration may be given by the 31st day of July, 2016:

(2) An option given) shall be valid for whole of the financial year for which it is given by the manufacturer or the principal manufacturer, as case may be.

(3) For availing the optional scheme  a manufacturer or principal manufacturer, as the case may be, shall maintain,-

a) a record containing the stock details of manufactured articles and traded articles separately for silver studded articles; gold or platinum articles studded with diamonds; and other gold or platinum articles, on weight or caratage basis; and

b) A record of the value of such traded articles separately at their purchase prices.

(4) The opening stock, sales and closing stock of three types of articles, shall be calculated separately for assessing the excise duty payable during amonth.

(5) The sales in excess of opening stock of manufactured articles, during a month shall bedeemed to be sale out of the opening stock of traded articles on which no excise duty shall bepayable.

(6) If the sales during a month are in excess of the sum total of the opening stock of themanufactured articles and opening stock of traded articles, then such excess sales shall firstbe deemed to be that of manufactured articles received during that month and the balance, ifany, shall be deemed to be that of traded articles received during the month

(7) If the sales during a month are less than the opening stock of manufactured articles, then the balance stock of manufactured articles shall be carried forward and the opening stockof manufactured articles for the succeeding month shall be the sum total of such carriedforward stock of manufactured articles and quantity of manufactured articles received fromthe job worker’s premises or manufactured, during the month.

Notification no 34/2016 CE (NT) dated 26/07/2016

  • Every person who gets articles of precious metals falling under the heading 7114 of the Firstschdule to the Tarrif Act produced, manufactured on hIs behalf on job work basis shall obtain registration , maintain accountsduty  pay leviable on such goods and comply with all relevant provisions of these rulesas if he is the assessee.

(Notification no 35/2016 CE (NT) dated 26/07/2016)

  • Form of quarterly return 37/2016 CE(NT) dated 26/07/2016
  • Every person who gets articles of precious metals falling under the heading 7114 of the First schdule to the Tarrif Act produced, manufactured on hIs behalf on job work basis shall obtain registration by 31/07/2016. Ther shall be no requirement to submit the plan of the factory premises.

(No 38/2016 CE (NT) dated 26/07/2016)

FAQ on Central excise duty on jewellery with effect from 1/03/2016

1. Where in the Central Excise Tariff the goods relating to Jewellery industry is the mentioned?

The goods relating to Jewellery industry is mentioned in the chapter 71 of the Central Excise Tariff Act.

2. What are all the goods covered therein?

Following goods are covered in the chapter 71 of the Central Excise Tariff Act:

  • Coin
  • Jewellery including imitation Jewellery;
  • Metals clad with precious metal and articles therefore;
  • Precious metals,
  • Precious or semi-Precious stones,
  • Natural or cultured pearls,

3. What are the articles on which duty is leviable

Central Excise duty is leviable on all under CETA head 7113. The CETA 1985 Chapter71 head 7113 lists out the following articles.  There are 18 headings in the chapter starting from 7101 upto 7118. But the excise duty has been imposed in the Budget 2016-17 on products falling

Under chapter 7113. The products covered under these headings are below:

As per the CETA 1985, Central Excise Duty of 12.5 % is leviable on these goods.

4. What is Tariff Rate of Duty and how is it different from effective rate of duty?

Tariff rate of duty is the rate of duty set out in the schedule to the Central Excise Tariff Act, 1985. However effective rate of duty is the rate of duty which is effectively payable after considering exemption notifications if any.

5. What is manufacture in the context of Jewellery products?

The term ‘manufacture’ in general for Central Excise Purposes is understoodto be any process whereby the goods processed would change as to name, character or use as is known in the market

. The same is equallyapplicable even for Jewellery products as well.

In addition to this there is a concept of deemed manufacture wherein certain processes are deemed to be manufacture though it is not considered as  manufacture in the common understanding as explained above.

In the context of Jewellery articles in addition to normal understanding of manufacture, 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 is deemed to be “manufacture”

6. Does it mean mere affixing of brand name or trade name is manufacture?

Yes, as per the definition of deemed manufacture in the chapter note, mere process of affixing the brand name amounts to manufacture. But it is to be noted that the identity put by a jeweller or the job worker, commonly known as “house-mark” shall not be considered as a brand name. Hence, the process of affixing the house mark shall not amount to manufacture.

7. Is there any clarification with regard to house mark as against Brand name?

TRU vide its letter dated 25th March 2011 issued along with Budget 2011chages had clarified in this regard as follows:

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”:

(i) 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 Taxability, Valuation and Payment of Duty that the article or jewellery was received from a particular goldsmith, etc. This is not branded jewellery and will not attract duty.

(ii) “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.

(iii) “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 orarticle 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.

8. Who are all the persons liable to pay Central Excise Duty on Gold Jewellery

The manufacturers of jewellery made of precious metals, Principal Manufacturers are liable to pay Central Excise duty

9. Whether a job worker is liable to pay Central Excise Duty on articles of precious jewelleries or parts there of?

No job workers are not liable to pay duty on the articles of precious jewellery or parts there of

10. Are there any other exemptions for goods related to Jewellery manufacturing?

There are many exemptions from payment of duty relating to Jewellery related products. The important among them are listed as follows:

(a) No. 188 of Notification No. 12/2012-CE dated 17.03.2012 – Full Exemption for Primary gold converted with the aid of power from any form of gold. However it should not be out of gold ore, concentrate or Dore bar. This also covers conversion from old Jewellery to primary form of  gold

The primary form of gold means gold in any unfinished or semi-finished form and includes  ingots, bars, blocks , slabs, billets, shots, pellets, rods,  sheets, foils and wires

(b) No. 192 of Notification No. 12/2012-CE dated 17.03.2012 – Full exemption for

◊ Articles of goldsmiths’ or silversmiths’ wares of precious metal or of metal clad with precious metal, not bearing a brand name; if it is having a brand name, it is liable for 1% duty with the similar condition explained above for Jewellery.

◊ Strips, wires, sheets, plates and foils of gold, used in the manufacture of articles of Jewellery and parts thereof;

◊ Precious and semi-precious stones, synthetic stones and pearls;

(c) SI. No. 195 of Notification No.12/2012-CE dated 17.03.2012 – Full exemption for Taxability, Valuation and Payment of Duty

◊ Dust and powder of natural precious or semi-precious stones; However if it is of synthetic precious or semi- precious stones, it is liable to duty at 6%.

◊ waste and scrap of precious metals or metals clad with precious metals, arising in course of manufacture of goods falling in Chapter 71;

(d) No. 196 of Notification No.12/2012-CE dated 17.03.2012 – Full exemption for Strips, wires, sheets, plates and foils of silver.

(e) No. 199 of Notification No.12/2012-CE dated 17.03.2012 – Full exemption for Articles of silver Jewellery, other than those studded with diamond, ruby, emerald or sapphire

(f) No. 200 of Notification No. 12/2012-CE dated 17.03.2012 – Full exemption for Gold coins of purity 99.5% and above and silver coins of purity99.9% and above, bearing a brand name when manufactured from gold or silver respectively on which appropriate duty of customs or excise has been paid;

Notification no 27/2016 CE dated 26/07/2016 exempts articles of jewellery manufactured,-

(i) From jewellery provided by a retail customer; or

(ii) By mounting of precious stones provided by a retail customer,

From so much of the excise duty leviable thereon, as is in excess of the duty of excise

Payable on a value which is sum of the cost of additional materials used by the manufacturer or principal manufacturer, for making such article of jewellery and labour charges charged by the manufacturer or principal manufacturer, from the retail customer. For claiming exemption under this notification, he manufacturer or principal manufacturer, shall maintain a proper record containing the following details, namely:-

(i) Name and address of the retail customer;

(ii) Weight and purity of the jewellery, weight of precious stone provided by the retail

Customer;

(iii) Receipt number and date;

(iv) Issue voucher number and date of sending such jewellery or precious stones to a job worker or to the manufacturing premises of the jeweller himself; and

(v) Value addition, including cost of additional materials and labour charges, charged by the jeweller, which shall also be mentioned separately in the invoice issued to the retail customer.

Explanation.-1 – For the purposes of this notification, weight refers to weight in grams

For precious metals; and in carats for precious stones.

Explanation.-2 – For the removal of doubts, it is has been clarified that for the purposes of

This notification, the expression “jewellery” shall not include precious metal in any form, other than jewellery provided by a retail customer for the manufacture of articles of jewellery to a manufacturer or principal manufacturer, as the case may be

11. Who is liable to pay duty when the goods are manufactured by job worker?

As per Rule 12AA of Central Excise Rules, 2002, as amended the person who gets the above mentioned goods manufactured or produced on his account on job work basis is liable to pay duty as if he is the assessee.

Further also all the legal compliance has to be done by such person. Through initially there was option to job worker also to get registration, but the same was omitted w.e.f. 17.3.2012. The omission corresponds to amendment in sub rule 7.

Effectively there is no option to job worker as the law stands today and it is compulsory for the person getting the goods manufactured to get registration and make all compliances.

12. What is the meaning of the term ‘job worker’?

Job worker has been defined under Rule 12AA of the Central Excise Rules as follows:

◊ Any person engaged on manufacturing or processing;

◊ On behalf of and under instruction of person getting the goods manufactured (said person);

◊ On any inputs supplied by said person or any person authorised by  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.

13. What is the applicable rate of duty and where is it mentioned?

When it comes to applicable rate of duty, Following are two options given.

(a) In case where the person liable to pay duty opts to avail credit of  duty paid on inputs and/or capital goods, then applicable rate of duty will be 12.5%(as per the Tariff rate set out in First Schedule to the Central Excise Tariff Act, 1985 at heading 7113 )

(b) In case where the person liable to pay duty opts not to avail credit of duty paid on inputs and/or capital goods, then applicable rate of duty will be 1%

(As per sl. No. 199 of Notification No. 12/2012-CE dated 17.03.2012 read with the condition No. 16 contained therein).

In both the options, 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.

14. What are the products on which concessional rate of duty of 1% has been allowed to be paid with effect from 1/03/2016 and what is the criteria for classification?

As per Notification no 26/2016 CE dated 26/07/2016, the concessional duty of 1% has been allowed in respect of the following products falling under the Head 7113 of CETA.

(I) Articles of jewellery

(II) Parts of articles of jewellery

(III) Articles of silver jewellery, other than

those studded with diamond, ruby, emerald or sapphire

Subject to the condition that, CENVAT credit on input material and capital goods are not availed.

Criteria for classification:

For the purposes of this exemption,-

An article of jewellery or part of article of jewellery or both, produced or manufactured from an alloy (including a s intered mixture and an inter-metallic compound) containing precious metal may be treated as an article of jewellery or part of article of jewellery or both of a precious metal, if any one precious metal constitutes as much as 2% by weight of the article of jewellery or part of article of jewellery or both (excluding the weight of the precious or semi-precious stones, mounted or set), in accordance to the following :

(i) an article of jewellery or part of article of jewellery or both, containing 2% or more,by weight, of platinum is to be treated as an article of jewellery or part of article of jewellery or both, of platinum;

(ii) an article of jewellery or part of article of jewellery or both, containing 2% or more,by weight, of gold but not platinum, or less than 2% by weight, of platinum, is to be treated as an article of jewellery or part of article of jewellery or both, of gold ;

(iii) Other articles of jewellery or parts of articles of jewellery or both, containing 2% or more, by weight, of silver are to be treated as articles of jewellery or parts of articles of jewellery or both, of silver

15. Whether entire credit of service tax paid on input services are eligible?

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.

16. Whether there is restriction on taking credit on any of the expenses?

There are certain items excluded from the definition of input service such as construction of civil structure, renting of motor vehicles, expenses incurred Taxability, Valuation and Payment of Duty for personal use or consumption of employees. Credit on these expenditure is not eligible.

17. Whether the Cenvat credit can be set off against the excise duty liability in case of Jewellery?

Yes. There is no restriction in the CENVAT Credit Rules, 2004 for utilizing CENVAT Credit. However the condition in case of concessional rate of 1% is only that CENVAT Credit of inputs and capital goods should not have been availed.

18. Whether the duty is restricted only for the gold Jewellery or it also extends to all articles of gold?

The duty has been imposed in Budget 2016-17 on articles of Jewellery falling under headings 7113. Article of Jewellery as per chapter notes means any small objects of personal adornment (for example, rings, bracelets, necklaces) and also includes articles of personal use of a kind normally carried in the pocket, in the handbag or on the person (e.g. cigar, snuff boxes etc.). The duty is imposed upon Jewellery item only and not on all the items. 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.

Articles of goldsmiths’ or silversmiths’ wares of precious metal or of metal clad with precious metal, brand name is liable to duty of 1%;

19. Whether there is any concession for silver Jewellery?

Yes. 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.

20. Whether the change in purity has any impact on dutiability?

No. Change in purity of gold i.e. it may be 18K, 22K will not impact the duty  liability.

21. Whether the duty has to be paid on silver products with gold plated?

Silver Jewellery plated with gold essentially remains the Jewellery of silver. Unless the Jewellery is studded with diamonds, ruby, emerald or sapphire, Central Excise Law and Procedure for Jewellery Industry there is no liability of excise duty on the same and thereby it is not liable for duty.

22. Whether the duty has to be paid on platinum Jewellery?

Jewellery of platinum is covered under heading 7113. Hence, the same isalso liable to duty of excise similar to gold article.

23. Whether the levy is applicable to traded Jewellery?

If the Jewellery house is purchasing the ready Jewellery and selling the sameto customers, there is no activity of manufacture and hence the same shall not be subjected to excise duty.As per Circular no 1043 /31/2016 CX dated 26/07/2016, no excise duty is payable on the sale of traded articles 0f jewellery on which appropriate excise duty, including nil rate of duty has already been paid.

24. Whether a manufacturer or principal manufacturer of articles of jewellery may also do trading of jewellery from his central excise registered premises?

Yes. As per Circular no 1043 /31/2016 CX dated 26/07/2016, a manufacturer or principal manufacturer of articles of jewellery may also do trading of jewellery from his central excise registered premises

25. If the consideration has been paid in gold for purchase of Jewellery by the jeweller for trading? Whether this would be having any impact?

Merely settling the consideration in gold for the purchase of the ready Jewellery shall not have any impact of 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.

26. Affixing brand on the ready Jewellery purchase and further sale in the market whether attracts excise duty?

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 bean activity amounting to manufacture.

27. Whether repairs, alteration, which do not change the identity of the jewellery is excisable?

Repairs, alterations, which do not change the identity, character and use of the goods and do not result in a new item is not “manufacturing” and will not attract excise duty.

28. From which date the duty of excise is liable to be paid?

For all the clearances from the place of manufacture on or after 1st March2016, duty is liable to be paid. Excisable goods which were produced on or before 29.2.2016 but lying in stockat the place of manufacture and are not removed as on 29.2.2016 shall attract excise duty upon clearance.

29. What is the taxability of stock as on 29.02.2016?

i. All jewellery manufactured and removed, on or before February 29, 2016, from the premises of the job workers or any other premises where such articles of jewellery were manufactured, and

(a) Lying at different premises (including branches) of the principal manufacturer, or

(b) Sent on approval to potential customers,

Will not be liable to excise duty. Furthermore, no stock declaration is required to be filed by a jeweller for this purpose with the jurisdictional central excise authorities.

ii. For the stock lying, as on February 29, 2016, with the job worker or any other premises where articles of jewellery were manufactured [including finished articles of jewellery as well as work in progress], the manufacturer or principal manufacturer, as the case may be, shall self-assess excise duty liability on such articles of jewellery or articles of jewellery manufactured out of such work in progress, received on and after 1st March, 2016, at the point of first sale of such articles of jewellery as per the Articles of Jewellery (Collection of Duty) Rules, 2016

(Circular no 1045 /33/2016- CX dated 26/07/2016)

30. Whether any declaration has to be made as to stock as on 29.02.2016?

No. There is no requirement of declaration of any stock to as on 29.02.2016to be made to department. However it is suggested to have a certification from Chartered Accountant / cost accountant as to stocks lying at different places since duty liability differs depending upon where the stocks were situated as on 29.02.2016.     Further as per Rule 7 of the Articles of jewellery collection of duty Rules 2016, the assesse is required to maintain the daily stock account of receipt and sale of manufactured articles, on a daily basis. So the stock of such articles on 29th 02.2016 would be required as opening stock for the next day.

31. Whether the person who gets Jewellery manufactured on his behalf on job work basis could sell manufactured Jewellery and trade in Jewellery from same location?

Yes. As per Circular no 1043 /31/2016 CX dated 26/07/2016, a manufacturer or principal manufacturer of articles of jewellery may also do trading of jewellery from his central excise registered premises

32. Who should take registration under the Central Excise Act 1944 and when?

The Manufacturers of articles of jewellery or parts thereof or both and the principal manufacturers of articles of jewellery or parts thereof or both are required to take registration under the Central Excise Act by 31/07/2016.(notification no 38/2016 CE(NT) dated 26/07/2016)

33. Who is manufacturer in the case of jewellery?

Any person engaged in manufacture of article of precious jewellery or part thereof in his factory completely or after getting the goods manufactured through job worker makes further processing like electro plating, or affixing marks, polishing etc before the articles of jewellery or send to the show room for sale are called manufacturer

34. Who is a principal manufacturer?

Principal manufacturer is a person who gets the articles of precious jewellery manufactured through job workers by supply of precious metal on payment of labour charges and the articles of jewellery so produced is directly sold by him in his show room without undergoing any further processing for the first time.  The principal manufacturer does not possess any factory.

(Rule 2 of the Articles of jewellery collection of duty Rules 2016)

35. Whether the manufacturer or the principal manufacturer is required to furnish the plan of the factory at the time of registration?

 No as per Notification no 38/2016 CE (NT) dated 26/07/2016, the manufacture or the Principal manufacturer are not required to furnish the plan of the factory premises.

36. What is the place of removal for the purpose of levy of Central Excise Duty on articles of jewellery

The  registered premises or the centrally  regi stered the first time shall beas the case maybe of articles of jewellery  or parts of articles of jewellery or both from where the  place of removal for such articles of jewellery and the time of removal shall be constured accordingly.

(Notification no 33/2016 CE (NT) dated 26/7/2016

37. Whether duty is payable even on Exports?

No. The goods exported will be free from duty in terms of Central ExciseRules, 2002. However the procedures that are set out in the rules may have to be followed.

38. If the sale is made to NRI, whether the same is exempted?

No, per se sale to NRI would not entitled the exemption, the conditions andprocedure laid down for the exports needs to be satisfied for claiming the exemption.

39. When the liability for payment of excise duty arises?

Excise duty arises on removal of the articles of jewellery or parts of such articles of jewellery or both from the registered premises of the manufacturer or the principal manufacturer as the case may be on first sale to a customer of such article of jewellery or parts of such articles of jewellery or both.  The manufacturer or the principal manufacturer shall ef assess the excise duty and calculate the liability.

40. When excise duty has to be paid?

The duty on the article sold for the first time by the manufacturer or the principal manufacturer as the case may be from his registered premises or cenrtally registered premises or branches of such centrally registered premises during a month shall be paid by 6th of the following month if the duty is paid electronicallyor 5th of the following month in any other case.  In the case of articles sold for the first time by the manufacturer or principal manufacturer as the case may be, during the month of March, the duty shall be paid by 31at March

(Rule 6 of the Articles of jewellery collection of duty Rules 2016.)

41. What is the valuation on which the duty has to be paid?

(i) In respectof articles of jewellery or parts or articles of jewellery or both other than those manufactured from the precious metal provided by the customer, the assessable value for the purpose of excise duty would be the value at which such excisable goods are sold for the first time from the registered premises or branches of such registered premises First sale value by the manufacturer or the principal manufacturer as the case may be.

(ii) In respect of Articles of jewellery or parts of articles of jewellery or both which are manufactured from the precious metal provided by the retail customer the assessable value would be :

(a) Cost of additional material used by the manufacturer or principal manufacturer as he case may be , for making such articles of jewellery

(b) Labour charges charged by the manufacturer or principal manufacturer as the case may be from the retail customer and

(c) Value of precious metal provided by the retail customer.

(Notification no 33/2016 CE (NT) dated 26/07/2016)

42. What is the meaning of “first sale value”?

In respect of articles of jewellery or parts of articles of jewellery or both other than those which are manufactured from the precious metal provided by the retail customer, value at which such excisable good are sold for the first time from the registered premises or from centrally registered premises or branches of such centrally registered premises by the principal manufacturer or manufacturere as the case may be is called the first sale vale.

(Notification no 33/2016 CE (NT) dated 2 6/07/2016)

43. How the valuation needs to be adopted in case of job work?

In case of job work the question of valuation does not arise at job workers premises as the job worker is not required to register and only the principal manufacturer is required to register and pay duty.  The articles of jewellery or the parts of such articles of jewellery can be removed from the premises of the job worker wihtout payment of duty.   Such articles when removed from the premises of the manufacturer or principal manufacturer the case may be, the duty shall be assessed on the first sale value.

44. Whether the valuation shall also include the wastage, making charges and stone charges?

The valuation shall be the transaction value with the customer, which includes all charges and all additional consideration, which may be received from the customers.

45. Whether the gold or other precious stones given by customer needs to be part of the value for the payment of duty?

Yes, 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.

(Notification no 33/2016 CE (NT) dated 26/07/2016)

46. How the valuation needs to be done in case of monthly payment scheme?

Valuations shall be based on the transaction value with the customer, which shall be equivalent to the summation of the instalments. However, this happens only when the customer redeems the payment from the scheme and buys Jewellery.When the instalments are received from customer, it is considered either as deposit as advance, against which no excise duty is payable.  Only when the customer makes his final purchase and adjusts the consideration from out of the advance, the real sale takes place and the article is removed.  Hence the liability for payment of duty arises only at that point on the first sale value.

47. Whether excise duty can be collected from the customer?

Excise duty is an indirect tax and can be collected from the buyers by indicating separately in the invoice issued to the buyer.

48. What is duty liability on goods received for repair/reconditioning etc.?

Repairs and alterations, which do not change the identity, character and use of the goods and do not result in a new item, is not “manufacturing” and will not attract excise duty. 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.

(Circular No. 1043/31/2016-CX, dated: 26th July, 2016)

49. What are the implications of jewellery made for retail end-users who bring the gold required to make jewellery in the form of old jewellery of gold?

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 customers hould be verifiable]

50. When old gold jewellery is brought by retail end-users, the jeweller ‘barters’ the same with ready-made jewellery. What are the implications?

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 the gross first sale value of the new jewellery sold by the jeweller  would be the assessable value  before adjustment of any value of the old jewellery supplied by the retail customer,  if the same could not be arrived at, then  the assessable value ca be arrived at as, follows:

 — value of jewellery supplied by customer+

 –additional material used by manufacturer in manufacturing jewellery+

 –jewellery making charges

51. Old Jewellery is converted to gold bar by melting with aid of power. Whether it is liable to duty of excise?

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.

52. If a person purchases the Jewellery from another manufacturer bearing his brand name. Who shall be liable to duty of excise?

Where the goods are purchased from other manufacturer bearing the brand name of the manufacturer, the liability to pay duty of excise is on original manufacturer. However, if he is getting the jewellery manufactured through a job worker bearing the brand name of the principal manufacturer, the liability of duty will be on the principal manufacturer and not on the job worker.  If a jeweller purchases from another person bearing the brad name of the jeweller, then the first sale takes place at the premises of the original manufacturer who is liable to pay duty even though the jewellery bears the bra name of the jeweller.  Hence the jeweller is not liable to pay duty on sale from his premises as duty has already been paid on the same.

53. Whether sale of scrap is liable to duty of excise?

 As per Sl. No. 195 of Notification No. 12/2012-CE dated 17.03.2012 Dust and powder of natural precious or semi-precious stones is exempted from the payment of excise duty. Similarly, waste and scrap of precious metals or metals clad with precious metals, arising in course of manufacture of goods falling in Chapter 71 is exempted. However, if it is of synthetic precious or semi- precious stones, it is liable to duty at 6%.

54. Whether imitation Jewellery is liable to duty of excise?

Imitation Jewellery is already under excise duty net and there is no change in the same.

55. Whether duty liability arises on manufacturing and sale of gold coins?

If the gold coin is unbranded, it is exempted from payment of duty vide sl. No. 192 of Notification No. 12/2012-CE dated 17.03.2012. If it is branded, then exemption is available only if purity is 99.5% and above subject to other conditions in sl. No. 200 of the said notification.

57. What is duty liability on goods sent for approval basis? If it is rejected/returned by customer, how to adjust the tax already paid?

Taxability of the goods sent on approval basis:

 If the goods are removed from the job workers remises for the approval of the principal manufacturer, it is not sale hence no excise duty is playable.

If the jewellery is removed to the retail customer’s premises from the manufacture’s registered premises or the registered premises of the \Principal Manufacturer and such jewelleries are from the traded stock of the jeweller, then no excise duty is payable on such removal as it is not the first sale of the articles.

If the jewellery is removed to the retail customer’s premises from the manufacture’s registered premises or the registered premises of the \Principal Manufacturer and such jewelleries are from the stock of manufactured jewelleries, then the removal should be after payment of excise duty on the first sae value.

 If the customer returns the jewelleries subsequently, then as per Rule 11 of Articles of jewellery collection of duty Rules 2016, the assess shall state such particulars of receipt in his records as if they are traded articles and account for them in the trading stock account, provided no refund of excise duty is claimed.

58. Whether credit can be taken on sales return made by customer?

If the customer returns the jewelleries removed from the assesee’s registered premises on payment of duty, subsequently, as per Rule 11 of Articles of jewellery collection of duty Rules 2016, the assess shall state such particulars of receipt in his records as if they are traded articles and account for them in the trading stock account, provided no refund of excise duty is claimed.’

59. What is the periodicity of payment of duty?

The duty on the articles sold for the first time by the manufactured or principal manufacturer, as the case may be, from his registered premises or centrally registered premises or branches of such centrally registered premises, during a month, shall be paid by the 6th day of the following month, if the duty is paid electronically through internet banking or by the 5th day of the 5th day of the following month, in any other case. In case of articles sold for the first time by the manufacturer or principal manufacturer, as the case may be, during the month of March, the duty shall be paid by the 31st day of March.

60. How to arrive at duty liability in case of month of March where duty needs to be paid by 31st March? There may be clearance on 31st March also.

If possible, the removal from factory could be stopped in last few hours to determine the liability and its payment. If not possible, the duty may be paid provisionally and any shortfall/excess may be adjusted on the next working day along with interest @ 15%.p.a.

61. In case of meltars, stone setters, press and dia cutting people, the total value of the metal work done by them could be more than 12 crores in a year. Who shall be responsible for paying duty and maintenance of records?

These persons may be acting on job work basis and the liability to pay duty and maintenance of records would be on principal sending goods for processing. Vide rule 9 (4) of Articles of Jewellery (Collection of Duty) Rules, 2016.

62. What is enabling provision under the law which provides that the premise of manufacturer and job worker shall not be visited by department officers?

Notification No. 35/2001- CE (NT) has been amended vide Notification No. 6/2016 – Central Excise (N.T.) dated 1st March, 2016 to provide that manufacturer engaged in manufacturing of articles of jewellery shall not be visited by department. In case of job workers, the liability to pay duty and taking registration is on manufacturer as per rules 9 (4) of the Articles of Jewellery (Collection of Duty) Rules, 2016. Hence, the department cannot visit the job worker’s premise.

Small Scale Exemption

63. What is Small Scale Exemption?

Notification No. 8/2003- CE exempts small manufacturer from the payment of excist duty so that they are not burdened with compliance under excise. The exemption is available to manufacturer’s upto domestic clearance of Rs. 1.50 crore provided their total clearance in the previous year does not exceed Rs. 4 crore. The domestic clearance limit of Rs. 4 crore includes, clearance of exempted goods also…

64. Whether exemption of small scale industries from the payment of excise duty is applicable to Jewellery industry as well?

The Notification No. 8/2003 has been amended vide notification no. 28/2016 Central Excise dated 26/07/2016,  to provide increased exemption limit to Jewellery sector. Manufacturers of Jewellery items are entitled  for  exemptionfrom the whole of the duty of excercie inrespect of first clearance of articles of jewellery or parts there of or both for home consumption , other than articles of silver jewellery but inclusive of articles of silver jewellery studded wiht diamond, rubey, emerald, or suphhaire falling  under chapter heading 7113 of the First schedule up to an aggregate vlue not exceeding ten crore rupees  on or after the 1st day of April in any financial year .

The exemption for the month of March 2016, is limited to an aggregate value of cleanrances of the above articles up to a value of Rs.85 lacks.

The above exemption is available subject to the following conditions:

(i) that the manufacturer of  articles of jewellery or parts there or both other than articles of silver jewellery but including silver jewellery studded with diamond, ruby, emerald or saphire fallin under chapter heading 7113 of the first schedule shall not avail CENVAT credit of duty paid  on inputs used in the manufacture of these goods cleared for home consumption.

(ii) that the manufacturer of  articles of jewellery or parts there or both other than articles of silver jewellery but including silver jewellery studded with diamond, ruby, emerald or saphhire fallinf under chapter heading 7113 of the fist schedule shall not avail CENVAT credit of duty paid  on  capital goods  used inthe manufacture of  these goods .

  • The aggregate value of clearances of all excisable goods for home consumption by a manufacturer of the article of jewellery or parts of articles of jewellery or both other than artilces of siler jewellery but includng sliver jewellery studded whit diamiond, ruby, emerald or suphhaire falling under chapter heading 7113 of the First Schedule from one or more factory or premises of production or manufacture by one or more manufacturer does not exceed rupees fifteen crore in the preceeding financial year.

65. If a person who is treated as assessee has 3 different units, the exemption limit is counted for each unit or all put together?

 If a manufacturer have more than one factories (even at different places), the value of clearance of all factories have to be clubbed together for calculating SSI exemption limit of Rs. 10 crore and 15 crore.

66. How to calculate the SSI exmeption limit in case a manufacturer or a principal manufacturer has appointed a number of job workers?

Computation of eligibility of SSI exemption limit is to be done individully to each manufacturer/ principl manufacturer irrespective of the number of job workers appointed by him for the manufacture or the number of premises from which the job workers operates.

67. What are the items ofsale values which will not be counted?

As per circular no 1040/28/2016 CX dated 26/07/2016, for computation of eligibility of exemption limits for SSI exmeption, the value of exported articles of jewellery will not be counted.  Similary the value of the traded articles on which appropriate excise duty including nil rate of duty has already been paid also need not be couned.  In respect of jewellery manufacture red out of the jewellery or preious stones supplied by the retail customer, only the value addition shall be taken into consideration for computation of such limits.

68. If number of manufacturers or principal manufacturers operate from the same premises how the SSI exmeption limit is calculate?

As per As per circular no 1040/28/2016 CX dated 26/07/2016, mutiple manufacturers or principal manufacturers operating from the same premises and having seperate registeration under the state VAT Act, on or before 29/2/2016, will be allowed separate central excise registrations, but in such cases the value of clearances of all such manufacturers would be clubbed together for determining the eligibility of SSI exemption limit.  Thus the clubeed together value of clearances of all such manufacturers in the preceding year is more than 15 crores, then none of such manufacturers would be eligible for SSI exemption.  Similarly as and when the clubbed together value of clearances of such manufacturers in any financial year exceeds Rs. Ten crores, all such manufacturers are liable to pay excrcise duty on their clearences thereafter.

69. If a person manufactures and sells (not job work) it to brand owner with his brand name whether manufacturer is eligible for SSI exemption?

 SSI exemption is not available for the goods manufactured under brand name of other. The duty shall be leviable from the first clearance. However if the manufacturer is manufacturing the Jewellery under his own brand name, this restriction does not apply and is eligible for exemption.

68. Whether there is any exception to ineligibility of SSI exemption in case of using brand name of others?

SSI benefit may be claimed on branded goods in Jewellery sector even if the goods are manufactured under the brand name of other under following circumstances:

  • Goods manufactured in rural area: SSI benefit is available on goods manufactured under other’s brand name if goods are manufactured in rural area. Rural area means the area comprised in a village as defined in the land revenue records.
  • Manufacturer of packing material with brand name of other:
  • SSI exemption is available to manufacturer of specified packing materials even if they bear the brand name of other persons.

65. What is the manner of calculating SSI exemption benefit? Explain with an illustration.

SSI exemption calculation could be understood with the help of following example: Presuming domestic clearance of all the goods manufactured for FY 2014-15 is Rs. 10 Crs. The table here under gives some clarity on the subject

year turnover Clearnce during previous financiall year Exempted turnover Dutiable turnover
.2015-16 For the month of March 2016 Rs 1 crore. For the whole finacial year  Rs 8 crores Rs.12 crores Rs.85 lakhs Rs.15 lakhs
2016-17 10 crores 8 crores 10 crores nil
2017-18 16 crores 10 crores 10 crores 6 crores
2018-19 6 crores 16 crores nil 6 crores
2019-20 11 crores 6 crores 10 crores 1 crore

 Registration

70. What is the definition of Factory?

Factory is defined as any premise, including precincts thereof, wherein or in any part of which excisable goods are manufactured. It also includes any other place where any process connected with the production of these goods is carried on or ordinarily carried on.

71. In case of jewellers, which are all the premises that can be considered as factory?

Manufacturing of Jewellery takes place in workshop. This is factory for excise  purpose. If the workshop is adjacent to the showroom and certain incidental process is undertaken in the showroom  also, it shall also be considered as  factory.

72. Jewellery manufactured in the workshop is brought to showroom for affixing brand name or trade name. Which is factory?

The workshop is factory as the manufacturing activities is carried out at that  place. The process of affixing the brand name or trade name is deemed manufacturing. Hence, any place where such affixing the brand name or

Trade name is undertaking shall also be considered factory.

73. Who is required to get registration under central excise?

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, is required to get registration under central excise.

74. Which premises has to be registered in general?

Assessment under central excise is factory based. Any premise satisfying the definition of factory is required to get registration unless specifically exempted. If the person has been operating from more than one factory, generally separate registration certificate shall be obtained for each of such factories. However for Jewellery sector there is special provision wherein centralized registration is per mitted as discussed below.

The manufacturer having a centralised billing or accounting system could opt 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.

75. Whether details of all the premises (including job work) needs to be given in the registration application?

Manufacturer opting for centralised registration is required to give details of all the premises where manufacturing activities are carried out. However, details of job worker premise are not required to be given.

76. Is it possible to show workshops as job work unit so as not to disclose in the registration certificate?

Yes, each of the workshops may be considered as job work unit. If considered so, there is no need to give details of all such workshops in the registration application.

77.Is it compulsory to obtain centralised registration?

No, it is not necessary to obtain centralised registration. It is a facility not compulsion. Manufacturer may obtain separate registration for each of his workshops (factories) instead of obtaining centralised registration.

78.Which option is better; centralised registration or separate registration?

It depends upon the business model being followed by manufacturer. Ingeneral, it could be suggested to make one of the show rooms as nodalsales place where all the records are maintained. This could waive there quirement to take registration at other showrooms which may be used exclusively for trading of goods received from workshops along with goods purchased from other for trading purpose.

The showroom may be registered as Input Service Distributor to distribute the credits on input services to works shops. This credit may be utilized by workshops to utilize against their liability arising on removal of goods under both the options (1% or 12.5%).

79.What is process to take registration?

Application for registration shall be filed only online on the websitewww.aces.gov.in. Necessary documents are required to be submitted physically in support of the details furnished in the registration application.  Central Excise Law and Procedure for Jewellery Industry.

80.Whether premises of manufacturer is physically visited before granting registration?

It is provided in Notification No. 35/2001-CE (NT) that authorized officer shall verify the premises physically within seven days from the date of receipt of application through online.

But there is special provision to provide that the officer shall not visit the factory or premises of the person engaged in the manufacture or production of articles of Jewellery. Hence, there will not be any physical verification neither before nor after obtaining registration.

81. What is the time limit for granting registration?

The registration has to be granted within 7 days of receipt of duly completed application.  It is guided that in case of Jewellery assessee, registration is to be given within 2 working days.

Invoicing

83.When Invoice has to be raised and by whom?

Excisable goods needs to be removed from the registered premises of the manufacture based on invoice under Rule 8 collection of duty rules 2016.  The invoice needs to be issued by the person liable to take registration and pay the duty.  Namely the mnufacturer or the principal manufacturer.

84.In the case of a Manufacturer obtaining centralised registration atthe showroom, is it necessary to bring the goods to the showroom from workshops based on excise invoice?

No. If a manufacturer having the show room as his centaied registred premises, may remove any article from his work shop to the show room for display or for any other purpose.  Since no sale is involved in the removal of goods no excie duty need to be paid. When such removal can be made under a challan, issue voucher, or any other documents duly signed by the manufacturer / principal manufacturer or his authorised agent.Such challans or issue vouchers or any other documetns shall contain the following details:

1. Name and registration number of the manufacturer or principal manufacturer, as the case may be

2. Description and quantity of aticles

3. Name of the person carrying the articles along with his signature and proof of identity and

4. Date of removal

(Rule 10 of the articles of jewellery collection of duty rules 2016)

85. What is the first sale invoice?

As per rule 8 of the articles of jewellery collection of duty rules 2016, no excisable articles shall be sold for the first time by the assessee, from his centrally registered premises or his registered premises, except under an invoice .The invoice raised by the assesee for the first sale of the articles is called first salle invoice.

86. What is the procedure for the preparation of first sale invoice?

The first sale invoice shall be duly signed by the assessee or his authorised agent and shall be serially numbered.Such an invoice shall also contain the registration number, name of the consignee, description of articles, classification and date of removal by sale.

The first sale invoice shall show the value of manufacturered article and traded articles seperately so as to arrive at the excise duty payable on the manufactured article.

The invoice shall be prepared in duplicate and in the following manner:

1.The original copy is marked aas original for buyer

2. The duplicate copy is marked as duplicate for the assessee.

86. Whether goods should be removed based on invoice from the factory of job worker to person getting the goods manufactured?

Removal of goods from the premises of the job worker does not amount to sale.  Hence such movement of goods should be made under a challan, or issue voucher or any other document which shall contain the details as mentioned in quesion no. 84.

87. How many copies of excise invoice should be there?

Each excise invoice should be prepared in duplicatee. They are to be –

Original copy for buyer;

duplicate for the assessee.

88. Can the Central Excise Invoice be different form commercial invoice?

Yes, central excise invoice could be different from the commercial invoice. It is suggested to have separate invoice to avoid confusion between sales tax and Central Excise. Central Excise is applicable for manufactured goods movement and commercial invoice is for sale generally.

Procedures, Record Keeping and Returns (By way of FAQs)

89. What are the records to be maintained if 1% duty payment is opted without credit of duty paid on inputs and capital goods?

Following records are required to be maintained if duty is paid @ 1%

Daily Stock Account (Production Register)

: Normal records maintained by assessee shall be acceptable.

(ii) Input stock register : : In order to account for the materials received and issued from stores.

(iii)Input service credit register: To give details of input service credit availed.

90. What is the procedure and format of register to be maintained as to goods manufactured by job worker and duty being paid by principal?

(i)Procedure for sending goods to job worker the goods should be sent under a challan, consignment note or any other similar document.

(ii)Procedure for sending finished goods by job worker the job worker shall send the finished goods on the counterfoil of the challan,consignment note or any other document based on which goods were received from the manufacturer.

(iii) Job work register:

Job work register has to be maintained where in the details of goods sent for job work, corresponding receipt from the job worker and in case of removal from the job worker’s place details of such removal correlating to the goods sent are entered. .

91. What is the procedure and format of register to be maintained fo disposal of waste and scrap generated at job worker’s end?

Where scrap is generated at the job worker’s end, the following possibilities may be examined-

The job worker undertakes the responsibility to send the scrap back to assessee which can be done under the cover of a delivery Challan. In this case, he should link the scrap generated to the company’s

Delivery Challan under which the inputs had been sent to him.

The job worker can also send the scrap along with other items, which he is usually expected to return.

On return, the items will be separaely recorded in the scrap registe and taken to the area under stores control.

The duty will have to be paid if the scrap is removed as such and is of synthetic precious or semi- precious stones in due course. If the scrap items could be once again used to manufacture further Jewellery items it would be sufficient if the issue for manufacture of dutiable jewellery items is shown and documented properly.

92. What is the procedure and format of register to be maintained as to goods manufactured by own workshop but registered premises is different?

(i)Procedure for sending goods to workshop:

  • Receive the indent on priority Nos. /purchase order/job basis from the place of manufacturing (factory)
  • Raise the Returnable Outward Challan (System Generated).
  • Make an entry in the Stock Register for the issue of materials.
  • Make an entry in the Outward Processing Register to show the materials issues to workshop, which should give information.
  • Security on verification of the quantity should make the entry in the Outward Register. The security has to put its seal at the back of the ROC or OC.

(ii)Procedure for sending finished goods by workshop:

The work shop shall send the finished goods on the counterfoil of the challan, consignment note or any other document based on which goods were received from the manufacturer.

(iii)Workshop register: Workshop register has to be maintained where in the details of goods sent to workshop, corresponding receipt from the workshop and in case of removal from the workshop’s details of such removal correlating to the goods sent are entered. The format referred under job work route may be used with suitable modification.

CENVAT Credit Application of Rule 6

In a show room of the manufacturer the following types of sales take place Sale of own manufactured dutiable goods

1. Sale of own manufactured exempted goods

2. Sale of traded jewelleries without payment of duty as trading is a second sale and does sont attract duty

3. Sale of goods manufactured from the gold or precious stone supplied by the retail customer which is partially exempted

4. Total sale value of all the above articles is called the total turn over in the premises of registration

Exempted turn over

1.Sale of silver articles other than that studded whit semi precious and precious stones

2. Sale of traded articles

3. Sale of gold coins and other items of artisan jewellery

4. Sale of jewellery articles manufactured out of the god supplied by the retail customer.

CENVAT Credit on inputs

If the manufacturer of articles of jewellery opts to pay the concessional rate of 1 duty, then he is not eligible to avail credit on the duty paid on the input material and capital goods used in the production of dutiable goods.

CENVAT Credit on input services

The Cenvat credit of specific input services credit can be taken directly and used in payment of duty of the relevant articles.

In respect of common items of services such as show room rent, telephone charges, advertisement etc.after following the procedure in rule 6(c) proportionate credit can be availed by dividing the total credit available by the total turnover and multiplying with the dutiable turnover.

(Author is Partner with IndTaxSeva Consultants, Hosur and have Experience in the filed of Indirect tax for  more than 2 decades and can be reached at email: indtaxseva@gmail.com)

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Category : Excise Duty (4169)
Type : Articles (18224)

One response to “Taxability of Jewellery Industry Post Budget 2016-17”

  1. Amrit Dalmia says:

    A jeweller has taken registration under Central Excise on 26th November, 2016. Does he need to pay Excise Duty on all sales from 1st April, 2016 or pay duty only on sales made from 26th November, 2016?

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