The present article provides highlights of important amendments made to Central Excise legislation as well as relevant CENVAT Credit amendments vide Union Budget 2016-2017.
Important Non-tariff amendments
• Rate of interest
Section 11AA of Central Excise Act, 1944 (CEA) provides for payment of interest in cases of delayed payment of duty. The rate of interest is rationalised to 15% p.a.1 with effect from 1-4-2016 as against 18%.
• Annual return
Presently, specified manufacturers are required to furnish to the Superintendent of Central Excise, annually by 30th April of each financial year, a declaration about goods manufactured or to be manufactured, details of principle inputs and quantitative details of such inputs and finished goods. Also, a monthly return of principal inputs received and consumed with respect to goods manufactured has to submitted.
Now, with effect from 1-4-2016, specified manufacturers or service providers shall submit to the Superintendent of Central Excise, one single annual return for each financial year, by 30th November of succeeding year.
• Revised Returns
Rule 12 of Central Excise Rules, 2002, provides for types, format of returns which are required to be filed under Central Excise Laws. Existing rules do not provide for filing of revised returns. A new sub-rule (8) has been introduced with effect from 1-4-2016 which allows assessee (including 100% EOU – Rule 17(6)) to file revised return (including annual return) by the end of the calendar month in which the original return is filed.
It has been further proposed that, the ‘relevant date’ for issuance of Show Cause Notice (SCN), will be the date of submission of revised return.
• Single registration facility to interlinked manufacturing set ups:
Presently, Section 6 of CEA read with Rule 9 of Central Excise Rules, 2002, prescribes compulsory registration of manufacturers and other specified persons. As per Notification No. 36/2001-CE (NT) dated 26-6-2001, if 2 or more premises of same factory are separated by public road, railway line or canal, the Principal Commissioner/Commissioner may allow a single registration.
Now, with effect from 1-3-2016, a single registration2 would be granted if 2 or more premises are located within a close area in the jurisdiction of a Range Superintendent subject to following conditions:
o Manufacturing process are interlinked; and
o Units are not availing benefit of area based exemptions.
• Increase in normal period of limitation
Hitherto, SCN may be issued within 1 year from the relevant date in bona fide cases. However, in mala fide cases, SCN may be issued within 5 years from the relevant date3. Now, it is proposed to increase the time limit of 1 year to 2 years for issuance of SCN i.e. normal period of limitation is proposed to be increased to 2 years from the relevant date.
The amendment would be effective from the date of enactment of Finance Bill, 2016.
The increase in time limit would provide more time to departmental officers to issue SCN. During the transitional period, department now has liberty to issue SCNs to assessees even for past dues which have already crossed the present time limit of 1 year.
• Indirect tax Dispute Resolution Scheme, 2016
The scheme is applicable to appeals pending before Commissioner (Appeals) as on 1-3-2016 and the declaration may be made till 31-12-2016. The scheme would be effective from 1-6-2016 and the declarants shall get immunity from all proceedings under CEA subject to specified exclusions and conditions.
Since the Scheme does not appear to be attractive, the relief is expected for pending litigation of penalties only.
• Other Important amendments
o Rule 11(8) of Central Excise Rules, 2002 has been amended to dispense with the requirement of carrying of self-certified copy of duplicate invoice for transportation in case the invoice is digitally signed with effect from 1-4-2016.
o Rule 26(1) of Central Excise Rules, 2002, has been amended to provide that in cases where the proceedings have been concluded against the person liable for duty then penalty proceedings initiated against other persons will also be dropped with effect from 1-4-2016.
o Presently, Notification No. 21/2004-CE (NT) dated 6-9-2004 prescribed for various conditions for claiming rebate of duty on goods used in export goods. One of the pertinent conditions for grant of rebate is that AC/DC has to verify the correctness of input-output ratio mentioned in the rebate application. With effect from 1-3-2016, AC/DC may grant permission on the basis of Certificate from Chartered Engineer.4
o The requirements for removal of goods at concessional rate of duty have been simplified and new Rules; namely; Central Excise (Removal of Goods at Concessional Rate of Duty for Mfg. of Excisable & Other Goods) Rules, 2016 have been prescribed. Now, with effect from 1-4-2016, the removals under these Rules can be made without having any approval from the Central Excise Department.
o As per Central Excise Rules, 2002, in case of provisional assessment, interest needs to be paid from the first day of the month succeeding the month for which such amount is determined, till the date of payment thereof. Now, with effect from 1-3-2016, interest would be paid for the period starting with the first day after the due date till the date of actual payment, whether such amount is paid before or after the issue of order for final assessment.
o Section 37B of CEA provides for the powers to issue instructions to departmental officers for uniformity in classification of goods or with respect to levy of excise duty. The gamut of the said Section is proposed to be expanded to cover even matters other than classification and levy. The change would be effective from the date of enactment of Finance Bill, 2016.
o Section 5A(5) of CEA prescribes that every notification has to be published & offered for sale on the date of issue by the Directorate of Publicity and Public Relations and Customs and Central Excise, New Delhi, under the Central Board of Excise and Customs. It is proposed to dispense with the requirement of publication and offer for sale of new notifications. The change would be effective from the date of enactment of Finance Bill, 2016.
Important Tariff Amendments (affecting Central Excise Duty Rate)
• Introduction of Central Excise Duty on Jewellery
Duty of Excise @ 1% (without CENVAT Credit) or 12.5% (with CENVAT Credit) is introduced on articles of Jewellery (other than silver jewellery) with effect from 1-3-2016. An exemption from payment of duty has been granted to jewellery manufacturers for the initial clearances upto ` 6 crore provided the total value of clearances is less than ` 12 crore in previous financial year. For the month of March, 2016, the limit of 6 crores is proportionately kept at ` 50 lakh. Further, various facilities such as centralised registration, registration of retail shops etc. is provided for trade facilitation.
An assessee who is availing exemption on value based clearances is allowed Credit on Capital Goods in the same financial year. Now, with effect from 1-3-2016, this benefit is extended to manufacturer of articles of jewellery, other than articles of silver jewellery, falling under Tariff ID 7113.
• Introduction of Central Excise Duty on Textile articles
Duty of Central Excise @ 2% (without CENVAT Credit) or 12.5% (with CENVAT Credit) is introduced on articles of textile with effect from 1-3-2016. The tariff value is fixed @ 60% of RSP5. For the month of March, 2016, the manufacturer is granted exemption for the initial clearances upto ` 12.5 lakh provided the total value of clearances in previous year is less than ` 4 crore (Small Scale Industries Exemption).
An exemption from payment of duty has been granted to goods having RSP up to ` 999/- irrespective of the fact whether the goods are bearing brand name/sold under the brand name or otherwise. Exemption in respect of unbranded goods has been continued.
• Introduction of Infrastructure Cess (IC)
IC would be levied as a duty of excise and will be applicable on motor vehicles (Tariff ID 8703) with effect from 1-3-2016. Effective rate of IC will be as follows:
3 wheeled vehicles, electrically operated vehicles, hybrid vehicles and other specially designed vehicles
Petrol/LPG/CNG driven motor vehicles, having length less than 4 m & engine capacity not exceeding 1200 cc
Diesel driven motor vehicles, having length less than 4 m & engine capacity not exceeding 1500 cc
All other categories of motor vehicles
Consequently, CENVAT Credit Rules, 2004 (CCR) are amended to provide that IC will not be eligible for credit and it cannot be paid through utilisation of credit.
• With effect from 1-3-2016, for all types of footware, the abatement rate has been increased from 25% to 30% of RSP6.
• Following goods have been added for the RSP based assessment with effect from 1-3-2016:
o Aluminium foils of thickness not exceeding 0.2 mm (Tariff ID: 7607) with an abatement of 25%
o Smart watches (Tariff ID: 851762) with an abatement of 35%
• Accessories of following goods would be taxed under RSP based taxation with effect from 1-3-2006 and accordingly, the Third Schedule to Central Excise Tariff Act, 1985 is amended with effect from 1-3-2006:
o Tyres of works truck
o Fork lift truck
o Self-propelled bulldozers, excavators, road rollers etc.
o Pile drivers & pile extractor.
Important CENVAT Credit amendments
CENVAT Credit Rules, 2004 have undergone a sea change vide Union Budget 2016-2017. Various CENVAT Credit amendments are already discussed in the article on Service tax amendments vide Union Budget 2016-2017. Some other CENVAT Credit amendments are summarised hereunder for ready reference:
• Reversal of Credit for Banking sectors
Every banking company and a financial institution including a non-banking financial company has to reverse every month an amount equal to 50% of total credit availed. Now, with effect from 1-4-2016, following 3 options have been granted to these assessees:
o Pay an amount equal to 6% of exempted goods / 7% of exempted services
o Determine reversal of credit on input and input services as per formula prescribed in Rule 6 (3A) of CCR
o Pay every month an amount equal to 50% of the total credit availed.
• Relevant date for refund in case of export of services
Manufacturer of exported goods or provider of output services can apply for refund of inputs and input services under Rule 5 of CCR. The relevant date for claiming refund for inputs and input services used in manufacturing of export goods and providing export services is provided in Section 11B of CEA. Section 11B of CEA only dealt with relevant date relating to manufacturer. Therefore, there is litigation with regard to interpretation of the term ‘relevant date’ for calculating period of 12 months.
Now, with effect from 1-3-2016, the ‘relevant date’ for service providers would be counted as under:
o Receipt of payment in convertible foreign exchange, where provision of service had been completed prior to receipt of such payment; or
o Issue of invoice, where payment for the service had been received in advance prior to the date of issue of invoice.
• Credit of National Calamity Contingent Duty (NCCD)
Credit of all Creditable duties and cesses is available for payment of NCCD. However, for push button mobiles (Tariff ID 85171210) and accessories and parts thereof (Tariff ID 85171290), only Credit of NCCD could be utilized for payment of NCCD. Now, with effect from 1-3-2016, for payment of NCCD (leviable under Section 136 of the Finance Act, 2001) on all specified goods, Credit of NCCD can only be utilised.
• Removal of goods from the factory of job worker
Normally, a principal manufacturer can clear goods from job worker’s premises with the permission of AC/DC. The permission of AC/DC is valid for a financial year. Now, with effect from 1-4-2016, the permission given by AC/DC for clearance of goods from the premises of Job worker will be valid for 3 financial years.
• Credit on moulds, dies, jigs, fixtures etc. when sent directly to other manufacturer or job-worker:
Credit is allowed in respect of inputs and capital goods sent directly to another manufacturer or to a job worker without bringing the same in his factory. Now, with effect from 1-4-2016, Credit will also be allowed on moulds, dies, jigs, fixtures, etc. sent directly to other manufacturer or job-worker without bringing the same to his factory.
• Credit on inputs and capital goods for pumping of water for captive use:
Inputs and Capital Goods must be used within the factory premises except where such goods are used in production of electricity outside the factory premises which is to be captively consumed. Now, with effect from 1-4-2016, Credit of inputs and Capital Goods used for pumping of water for captive use in the factory is also allowed where such capital goods are installed outside the factory.