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Changes in Excise
March, 03rd 2007

Tinkering with excise duty rates has continued yet again this year. For instance, the excise duty on umbrellas, imposed in 2006, has been reduced from 16 per cent to 8 per cent. Major change has been brought about in rate of duty on cement. The duty has been reduced from Rs 400 per tonne to Rs 350 per tonne for cement with a retail sale price per bag of less than Rs 190. The duty has been hiked to Rs 600 per tonne where the price is more than Rs 190 per bag. The rate of duty for mini-cement plants has also undergone change.

The rate of duty for tobacco this year has been raised by 5 per cent. Biscuits with retail sale price lesser than Rs 50 per kg have been fully exempt from excise duty. Earlier, exemption for biscuits was based on the RSP of one individual packet. Now, low-priced biscuits of any weight would be eligible for this exemption.

Mixes exempt

In a move to integrate the duty on food items of the West and India, the Government has now exempted instant mixes, such as that of idlis and dosas, and brought it on a par with pasta and ice-cream, which were exempted last year. Simultaneously, realising that this exemption would result in excess consumption of fast food, the Government has reduced the rate of duty on `pan masala not containing tobacco' commonly known as mouth fresheners.

Computers and computer peripherals have been brought under MRP-based valuation. SSI exemption limit has been increased from the present Rs 1 crore to Rs 1.5 crore.

However, there is no change in the turnover limit of Rs 4 crore for determining the eligibility for SSI exemption. From April onwards, it would be mandatory for large manufacturers who have paid excise duty of over Rs 50 lakh in cash in financial year 2006-07, to pay excise duty electronically through Net banking, for instance.

In a welcome change, an explanation has been introduced after sub-rule 4 of Rule 8 of Central Excise Rules 2002 to the effect that the term `duty' would now include `amount' payable under the Cenvat Credit Rules 2004. `Clearance of Cenvat availed inputs or Capital Goods as such' would now require payment on the 5th/15th of the subsequent month. Upward revision has been carried out in the monetary limits under Rule 21 of the Central Excise Rules 2002 for remission of duty.

The penalty under Rule 25 and Rule 26 of Central Excise Rules, 2002 as well under Section 37 of the Central Excise Act, is proposed to be brought down to Rs 2,000, which comes as a surprise especially in the wake of the introduction of stringent measures to tackle tax evaders and backed by massive advertisement campaign in January.

Excise valuation for the last 18 years for job workers was based on the landmark decision of the Supreme Court in the Ujagar Prints case.

Now, on the lines of the draft circular issued recently, specific provision has been brought for dealing with the valuation of goods manufactured on job-work basis which would capture the ultimate selling price of the principal manufacturer, including profit margin of the principal manufacturer.

Joseph Prabakar
(The author is a Chennai-based advocate.)

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