CBEC Moves to Protect Domestic Manufacturing against Import in
Differential Duty Regime
Three
Notifications Released on 17 July to Over Ride March 2015 Supreme Court Ruling
in SRF Case
The CBEC has issued three notifications to
strengthen the differential duty regime to protect domestic manufacturing in
India under which a high 12.5 percent duty is levied
on imported goods compared to two percent on those
made in India without availing CENVAT credit on taxes paid on inputs. Three
excise notifications were issued on 17 July to strengthen the “CENVAT not
availed” condition so as to give the low duty benefit only to domestic
manufactures. It may be recalled that the Supreme Court ruling in the March
2015 allowed the low two percent duty benefits to
imported goods. The Court held that the discrimination against imported goods
was bad in excise law.
According to research on the implications of the
notifications conducted in the Academy of Business Studies (ABS), 144 entries
in excise notifications will be covered by the differential duty strengthening
measure. The entire textile industry is in the differential duty regime where
imports are charged 12.5 percent CVD of excise while
domestically produced goods move in a parallel zero excise duty stream. Other major items include Mobile Phone, Tablets, Coal,
Fertilizers, HR and CR Steel Coils, Jewellery articles, Aluminium plates and
sheets, and Copper for handicrafts. Another 132 items from the small and medium industry
sector are also in the differential duty regime.
The Director of ABS, Mr. Arun Goyal said that the
challenge to the differential duty regime arose from the Supreme Court
Judgement of 26 March 2015 in the SRF case in which two Members Bench of
Justice AK Sikri and Rohington
Nariman held that imported goods will be deemed in
the manufactured in India and are thus eligible to a concession duty applicable
on goods manufactured in India which do not avail of Cenvat
Credit. The Supreme Court interpreted the Section 3(1) of Customs Tariff Act to
say that if CVD can be levied on imported goods not manufactured in India under
the deeming provision, imported goods too can also be deemed to be manufactured
in India. They are thus deemed to fulfill the “CENVAT
not availed” condition.
The 17 July notifications say that only
manufacturers can benefit from the “CENVAT not availed” condition. Mere buyers
are specifically excluded. Further, the excise on inputs going into manufacture
must be paid in cash. This will over ride the concept
of “deeming fiction” which underlies the Supreme Court ruling.
The judgement forced many customs field formations
to clear imports at the low rate of duty applicable to goods manufactured in
India without Cenvat Credit. It dealt a blow to the
differential duty regime which gave protection upto
11.5 percent to goods manufactured in India who could
easily forego low incidence of input tax to get the benefit of virtual zero
excise on the final goods. On top of this, the customs revenue of the
government went for a sixer, specially on high volume imports of HR coils,
fertilizers and mobile phones.
The stage is now set for a massive recovery of CVD
at 12.5% for the month February-July period for consignments where low CVD of
2% or less was charged following the SRF ruling. Confrontation between Supreme
Court and the Government is expected as the importers go to the Supreme Courier
with the prayer to strike down the 17 July notification.
ABS News Service
[Central Excise
Notification No. 36 dated 17th July 2015]
In exercise of the powers conferred by sub-section (1) of
section 5A of the Central Excise Act, 1944 (1 of 1944), the Central Government
being satisfied that it is necessary in the public interest so to do, hereby
makes the following further amendments in the notification of the Government of
India in the Ministry of Finance (Department of Revenue), No.
12/2012-Central Excise, dated the 17th March, 2012, published in the Gazette
of India, Extraordinary, Part II, Section 3, Sub-section (i), vide number
G.S.R. 163(E), dated the 17th March, 2012, namely:-
In the said notification, in the ANNEXURE,-
(a) for condition No. 16,
and the entries relating thereto, the following shall be substituted, namely:-
|
“16. |
If the said excisable goods are manufactured from
inputs or capital goods on which appropriate duty of excise leviable under the First Schedule to the Excise Tariff Act
or additional duty of customs under section 3 of the Customs Tariff Act, 1975
(51 of 1975) has been paid and no credit of such excise duty or additional
duty of customs on inputs or capital goods has been taken by the manufacturer
of such goods (and not the buyer of such goods) under rule 3 or rule 13 of
the CENVAT Credit Rules, 2004.”; |
(b) in Condition No. 20,
in clause (a), for the existing entry the following entry shall be substituted
namely:-
“the said excisable goods are manufactured from inputs on
which appropriate duty of excise leviable under the
First Schedule to the Excise Tariff Act or additional duty of customs under
section 3 of the Customs Tariff Act, 1975 (51 of 1975) has been paid and no
credit of such excise duty or additional duty of customs on inputs has been
taken by the manufacturer of such goods (and not the buyer of such goods),
under rule 3 or rule 13 of the CENVAT Credit Rules, 2004;”;
(c) for condition No. 25,
and the entries relating thereto, the following shall be substituted, namely:-
|
“25. |
If the said excisable goods are manufactured from
inputs or by utilising input services on which appropriate duty of excise leviable under the First Schedule to the Excise Tariff
Act or additional duty of customs under section 3 of the Customs Tariff Act,
1975 (51 of 1975) or service tax under section 66 of the Finance Act, 1994
(32 of 1994) has been paid and no credit of such excise duty or additional
duty of customs on inputs or service tax on input services has been taken by
the manufacturer of such goods (and not the buyer of such goods), under rule
3 or rule 13 of the CENVAT Credit Rules, 2004.” ; |
(d) for condition No.
52A, and the entries relating thereto, the following shall be substituted,
namely:-
|
“52A. |
If the said excisable goods are manufactured from
inputs or capital goods or by utilising input services on which appropriate
duty of excise leviable under the First Schedule to
the Excise Tariff Act or additional duty of customs under section 3 of the
Customs Tariff Act, 1975 (51 of 1975) or service tax under section 66 of the
Finance Act, 1994 (32 of 1994) has been paid and no credit of such excise
duty or additional duty of customs on inputs or capital goods or service tax
on input services has been taken by the manufacturer of such goods (and not
the buyer of such goods), under rule 3 or rule 13 of the CENVAT Credit Rules,
2004.”. |
[F. No. 336/4/2015-TRU]
Extract from Jumbo Excise Notification 12-CE dated
17 March 2012
|
SNo. |
Chapter/
Heading |
Item
Description |
Rate |
Condition
No. |
|
201
|
72 |
Hot rolled or
cold rolled sheets and strips cut or slit on job-work |
Nil |
16
and 17 |
|
222
|
7606 |
Aluminium plates and
sheets (other than circles), intended for use in manufacture of utensils |
Nil |
16
and 21 |
|
223
|
7606 |
Aluminium circles |
Rs.2500 per
metric tonne |
16
and 21 |
|
254A |
8471 30 |
Tablet computer |
2% |
16 |
|
263A |
8517 |
Mobile handsets
including cellular phones |
1% |
16 |
|
|
|
[12-CE/01.03.2015
– SNo. 263A amended; |
|
|
|
217
|
7409 |
Trimmed or
untrimmed sheets or circles of copper, intended for use in the manufacture of
handicrafts or utensils Explanation- For
the purposes of this entry, ‘copper’ means copper and copper alloys including
brass [12-CE/01.03.2013
– SNo. 217 amended] |
Rs. 3500 per metric tonne |
19
and 20 |
|
199
|
7113 |
(I) Articles of jewellery; |
1% |
25
|
|
|
|
(II) Articles of
silver jewellery |
Nil |
- |
|
200
|
7114 |
(I) Articles of
goldsmiths‘ or silversmiths‘ wares of precious metal or of metal clad with
precious metal, bearing a brand name; |
1% |
25
|
|
|
|
(II) Gold coins
of purity 99.5% and above and silver coins of purity 99.9% and above, bearing
a brand name when manufactured from gold or silver respectively on which
appropriate duty of customs or excise has been paid Explanation.-
For the purposes of this exemption,- (1)
“brand name” means a brand name or trade name, whether
registered or not, that is to say, a name or a mark, such as a symbol,
monogram, label, signature or invented words or any writing which is used in
relation to a product, for the purpose of indicating, or so to indicate, a
connection in the course of trade between the product and some person using
such name or mark with or without any indication of the identity of that
person; (2)
an identity put by a jeweller or
the job worker, commonly known as ‘house-mark’ shall not be considered as a
brand name, |
Nil |
- |
|
128
|
31 |
All goods, other
than those which are clearly not to be used as fertilisers
|
1% |
25
|
|
67
|
2701 |
All goods |
1% |
25
|
|
238A |
8419 19 |
Solar water
heater and system |
Nil |
52A |
|
Condn.No. |
Condition
(Old) |
Condition
(New) |
|
16.
|
If
no credit under rule 3 or rule 13 of the CENVAT Credit Rules, 2004 has been
taken in respect of the inputs or capital goods used in the manufacture of
these goods. |
If the said excisable goods are manufactured from
inputs or capital goods on which appropriate duty of excise leviable under the First Schedule to the Excise Tariff
Act or additional duty of customs under section 3 of the Customs Tariff Act,
1975 (51 of 1975) has been paid and no credit of such excise duty or
additional duty of customs on inputs or capital goods has been taken by the
manufacturer of such goods (and not the buyer of such goods) under rule 3 or
rule 13 of the CENVAT Credit Rules, 2004.”; |
|
20.
|
If,-
(a) no credit of duty paid on inputs under rule 3 or rule 13 of the CENVAT
Credit Rules, 2004 has been taken; |
the said excisable goods are manufactured from
inputs on which appropriate duty of excise leviable
under the First Schedule to the Excise Tariff Act or additional duty of
customs under section 3 of the Customs Tariff Act, 1975 (51 of 1975) has been
paid and no credit of such excise duty or additional duty of customs on
inputs has been taken by the manufacturer of such goods (and not the buyer of
such goods), under rule 3 or rule 13 of the CENVAT Credit Rules, 2004 |
|
|
(b)
the entire amount of duty is paid in cash or through
account current: Provided that the duty shall not be payable by a
manufacturer who produces or manufactures trimmed sheets or circles from duty
paid untrimmed sheets or circles. |
No
Change |
|
25
|
If
no credit under rule 3 or rule 13 of the CENVAT Credit Rules, 2004, has been
taken in respect of the inputs or input services used in the manufacture of
these goods. |
If the said excisable goods are manufactured from
inputs or by utilising input services on which appropriate duty of excise leviable under the First Schedule to the Excise Tariff
Act or additional duty of customs under section 3 of the Customs Tariff Act, 1975
(51 of 1975) or service tax under section 66 of the Finance Act, 1994 (32 of 1994)
has been paid and no credit of such excise duty or additional duty of customs
on inputs or service tax on input services has been taken by the manufacturer
of such goods (and not the buyer of such goods), under rule 3 or rule 13 of
the CENVAT Credit Rules, 2004.” |
|
52A |
If
no credit under rule 3 or rule 13 of the CENVAT Credit Rules, 2004 has been
taken in respect of inputs or input service or capital goods used in the
manufacture of these goods |
If the said excisable goods are manufactured from
inputs or capital goods or by utilising input services on which appropriate
duty of excise leviable under the First Schedule to
the Excise Tariff Act or additional duty of customs under section 3 of the
Customs Tariff Act, 1975 (51 of 1975) or service tax under section 66 of the Finance
Act, 1994 (32 of 1994) has been paid and no credit of such excise duty or additional
duty of customs on inputs or capital goods or service tax on input services
has been taken by the manufacturer of such goods (and not the buyer of such
goods), under rule 3 or rule 13 of the CENVAT Credit Rules, 2004.”. |
[Central Excise Notification No. 34
dated 17th July 2015]
In exercise of the powers conferred by sub-section (1) of
section 5A of the Central Excise Act, 1944 (1 of 1944) read with sub-section (3)
of section 3 of the Additional Duties of Excise (Goods of Special Importance)
Act, 1957 (58 of 1957), the Central Government being satisfied that it is
necessary in the public interest so to do, hereby makes the following further
amendment in the notification of the Government of India in the Ministry of
Finance (Department of Revenue), No 30/2004-Central Excise, dated the 9th
July, 2004, published in the Gazette of India, Extraordinary, Part II,
Section 3, Sub-section (i), vide number G.S.R. 421(E), dated the 9th July,
2004, namely :-
In the said notification, in the opening paragraph, for
the proviso, the following proviso shall be substituted, namely:-
“Provided that the said excisable goods are manufactured
from inputs on which appropriate duty of excise leviable
under the First Schedule to the Central Excise Tariff Act or additional duty of
customs under section 3 of the Customs Tariff Act, 1975 (51 of 1975) has been
paid and no credit of such excise duty or additional duty of customs on inputs
has been taken by the manufacturer of such goods (and not the buyer of such
goods), under the provisions of the CENVAT Credit Rules, 2004.”.
[F. No.
336/4/2015-TRU]
[Central Excise
Notification No. 35 dated 17th July 2015]
In exercise of the powers conferred by sub-section (1) of
section 5A of the Central Excise Act, 1944 (1 of 1944), the Central Government
being satisfied that it is necessary in the public interest so to do, hereby
makes the following further amendment in the notification of the Government of
India in the Ministry of Finance (Department of Revenue) No. 1/2011-Central
Excise, dated the 1st March, 2011 published in the Gazette of India,
Extraordinary, Part II, Section 3, Sub-section (i), vide number G.S.R. 116(E),
dated the 1st March, 2011, namely: -
In the said notification, in the opening paragraph, for
the proviso, the following proviso shall be substituted, namely:-
“Provided that the said excisable goods are manufactured
from inputs or by utilising input services on which appropriate duty of excise leviable under the First Schedule to the Central Excise
Tariff Act, 1985 (5 of 1986) or additional duty of customs under section 3 of
the Customs Tariff Act, 1975 (51 of 1975) or service tax under section 66 of
the Finance Act, 1994 (32 of 1994) has been paid and no credit of such excise
duty or additional duty of customs on inputs or service tax on input services
has been taken by the manufacturer of such goods (and not the buyer of such
goods), under the provisions of the CENVAT Credit Rules, 2004.”.
[F. No.
336/4/2015-TRU]