As the budget, 2010-11 has brought many changes in Excise Law. It varies from areas like applicable rate of excise duty, their Cenvat Credit allowable, exemption from excise duty and so many. The duty on umbrella and umbrella parts are closely affected due to applicability of new Notifications inserted in this Budget. Therefore, we are giving the analysis / comparison of notifications which will help to know how they will affect upon manufacturer at the time of purchase of materials as well as at the time of clearance of finished products.
EARLIER POSITION: –
Before coming of the Budget 2010-11 into force, the rate of duty was applicable on the manufacturer of umbrella parts was 8%. But the umbrella was cleared at the rate of 4% excise duty by virtue of notification no. 5/06 dated 03.01.2006. This exemption was listed at 5B of the aforesaid Exemption Notification. Moreover, the umbrella cloth panel was exempted from duty by virtue of notification no. 3/05 CE dated 24.02.2005. It is listed at serial no. 79 of the said notification.
The overall effect of the same was that the Umbrella parts manufacturer was paying duty from PLA while clearing their goods. But Umbrella manufacturers were procuring inputs at the rate of 8% and the finished goods were cleared at lesser duty of 4%. Thus, Cenvat credit of duty paid on raw material was accumulating continuously at the hands of manufacturer of umbrella and which was going to remain unutilised with them.
POSITION AFTER APPLICABILITY OF BUDGET 2010-11: –
Now the former situation has changed as Budget 2010-11 comes into force. In budget 2010-11, the exemption from umbrella cloth panel was deleted by virtue of notification no. 7/2010 dated 27.02.2010. On the other hand; Parts of Umbrella, Sun Umbrella including umbrella panels are chargeable to excise duty @ 4% by virtue of notification no. 11/2010 dated 27.02.2010.
END RESULT OF BUDGET 2010-11: –
The substantial effect of the deletion of earlier notifications applied to manufacturer of umbrella as well as insertion of new notifications in Budget 2010-11 is that it is proved to fetch simplicity in chain of supplier and purchaser as it brings universal rate of duty at every stage of purchase, production and clearance of umbrella. Now, onwards manufacturers of umbrella will not have any excess amount of Cenvat Credit lying with them unutilised.
But on the other side, manufacturer of umbrella parts are getting their steel inputs @ 8% and has to pay duty @ 4% only. Umbrella parts manufacturer will not be able to utilise the Cenvat credit and accumulation will start at their end.
Thus these amendments in Budget 2010-11 will prove beneficial for those manufacturers who manufacture and clear “umbrella as well as umbrella cloth panel” by two way. Firstly the universal rate of duty is applicable and secondly they will be able to utilise unused Cenvat credit.
Prepared By: CA Pradeep Jain, Mayank Palgauta, Bharat Rathore