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Indirect Taxes
Excise Duty & Customs
A Excise Duty
Legislative Changes
Amendments to the Central Excise Act, 1944
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To give effect to the proposed introduction of Section 73A
into the Finance Act, 1994 (corresponding to Section 11D of the Central Excise
Act, 1944), which provides for the payment of any excess amount collected as
Service Tax into the credit of the Central Government, an amendment to Section
12C of the Central Excise Act, 1944 has been introduced so as to facilitate
the credit of such excess Service Tax into the Consumer Welfare Fund.
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The jurisdiction of the Authority for Advance Ruling ("AAR")
is proposed to be enhanced to cover the question of determination of
excisability of any article, by way of an amendment to Section 23C of the Act.
This amendment shall overcome the view held by the AAR that it has no
jurisdiction to decide questions whether the activity undertaken amounts to
"manufacture"
Amendments to the Central Excise Tariff Act, 1985
To overcome the effect of the judgment of the Supreme Court
in Metlex (India) Pvt. Ltd. vs. Commissioner of Central Excise [2004 (165)
ELT 129 (SC)], Chapter Note 16 is proposed to be inserted to Chapter 39 of
the Tariff whereby the process of metallization of plates, sheets, etc. of
plastic shall amount to manufacture.
The Supreme Court in Collector of Central Excise vs.
Technoweld [2003 (155) ELT 209 (SC)] had held that the drawing of
wire from wire bars/rods does not amount to manufacture. To overcome the
effect of the judgment, Section Note 10 was inserted in Section XV to maker
the drawing/redrawing of wires from rods/wires or other similar articles as
amounting to manufacture. However, the judgment of the Supreme Court in Vee
Kayan Industries vs. CCE [1996 (83) ELT 262 (SC)] and of the Tribunal in
Shree Ram Wire Industries vs. Commissioner of Central Excise [2003 (151)
ELT 593 (Tri.)] appeared to cover the drawing of bright bars from wire
rods/ bars de hors the issue before the Supreme Court in Technoweld.
This is now proposed to be addressed by the introduction of Chapter Note 4
to Chapter 72, whereby the process of drawing or redrawing a bar, rod, wire
rod, round bar or any other similar article, into bright bar, shall amount to
"manufacture".
The Supreme Court had held in Tega India Limited vs.
Commissioner of Central Excise [2004 (164) ELT 390 (SC)] that the coating
of tubes or pipes by plastics, etc., does not amount to manufacture. The
effect of the said judgment was partially overcome by way of introduction of
Chapter Note 5 to Chapter 73 which resulted in the process of coating with
cement or polyethylene of other plastic material of articles falling under
headings 7304 and 7305 of the Tariff as amounting to manufacture. The scope of
the Chapter Note is proposed to be extended to cover all pipes, tubes and
hollow profiles including those covered by heading 7306 as well.
Another change proposed to take effect from 1-1-2007 is the
complete alignment of the Central Excise Tariff with the legal text of the
International Convention on the Harmonised Commodity Description and Coding
System.
Such an alignment will make the HSN extremely relevant
in matters of classification.
Changes in Rate of Excise Duty
Reduction in rate
Aerated Waters
Small Cars length not exceeding 4 meters
Petrol cars ( up to 1200 cc)
Diesel Cars (up to 1500 cc)
From 16% to 8%
Specified printing, writing and packing paper and
paperboard
Man made fibers and filament yarns
Heat resistant latex rubber thread
Compact Fluorescent Lamps
From 8% to NIL
Processed meat, fish and poultry products
Increase/Introduction in rate
Excise duty of 8% with CENVAT credit imposed on
Articles of wood
100% wood free plain or pre-laminated particle or
fiberboard, made from sugarcane bagasse or other agro-waste
Excise duty of 16% imposed on
Parts and components of motor vehicles transferred to a
sister unit for manufacture of goods falling under chapter 87.
Lay flat tubing
Cigarette filter rods
Glassware
Stainless Steel patti / pattas Rate of compounded levy
increased from Rs.15,000/- per machine to Rs.30,000/- per machine.
Domestic Petroleum Crude Oil Cess leviable under the Oil
Industry (Development) Act, 1974 has been increased from Rs.1,800 per tonne to
Rs.2,500 per tonne.
From NIL to 8%.
Computers and packaged software on electronic media
Others
Notification No. 22/2006-CE has amended Notification No.
23/2003-CE to exempt the goods manufactured and brought to any other place in
India by an EOU in excess of 25% of basic Customs Duty + Excise Duty leviable
on like goods.
B Customs Duty
Legislative Changes
Amendments to the Customs Act, 1962
Section 23(2) permits the importer to relinquish his title
over the imported goods prior to the order permitting clearance for home
consumption or warehousing. To overcome the possibility of patently illegal
imports taking advantage of Section 23(2), a proviso is proposed to be inserted
in Section 23 Subsection (2) so also in Section 68, where by the facility of
relinquishment of title will not be available where any offence appears to have
been committed, under the Customs Act or any other law.
Changes in Rate of Customs Duty
Peak rate on non-agricultural products reduced from 15% to
12.5%
Special Additional Duty extended to all Imports
The Special Countervailing Duty (Sp. CVD) of 4% introduced
last year in relation to ITA products has been extended to all imports. This
duty is to provide a level playing field to the importers vis-ΰ-vis domestic
manufacturers from the perspective of VAT charged on local sales. Articles of
jewellery would attract lower rate of 1%. Exemption has been provided in
relation to certain items such as:
Good which are fully exempt from VAT.
Gold, silver, rough and cut diamonds, precious metals,
precious and semi-precious stones
DTA clearances of EOU/EHTP/STP/SEZ units provided such
goods are not exempted from sales tax/VAT.
Import by EOU and units in the EHTPs / STPs and STZ.
Good which are exempted from both basic and CVD.
Petroleum, Kerosene for PDS, LPG for domestic supply,
petrol, diesel, coal, coke and petroleum gasses.
Gold concentrate, etc
This duty will not be included in the assessable value for
levy of Education Cess. Credit of such duty would be available only to
manufacturers. The provision does not allow credit of such duty to output
service providers.
Project Imports
The facility of Project Imports has been extended to Pipeline
projects for the transportation of crude oil, petroleum products and natural
gas. The sponsoring authority for issuance of Eligibility Certificate in respect
of these project would be the Ministry of Petroleum and Natural Gas.
Reduction in rate
From 15% to 5%
Mineral products of chapter 25 i.e. salt, sulpher, earths
and stone, plastering materials, lime and cement except for cement, marble,
granite and asbestos
MP3 Players
Man made fibres, filament yarns and spun yarns
Specified textile machinery and parts for manufacture of
machinery
From 10% to 7.5%
Primary and semi-finished forms of the following metals
Alloy steel, Aluminum, Copper, Zinc,
Catalysts under heading 3815
Refractories and raw materials for refractories
Reductions to 5%
Organic chemicals excepting Chloromethanes and
Trichloroethylene
Polymers of Ethylene, Polymers and Coplymers of
Propylene, Styrene and Vinyl Chloride.
Naptha.
Specified anti-cancer and anti-aids drugs
Natural gas including propane and butane
Two specified diagnostic kits and one equipment (exempt
from CVD).
Reductions from 5% to 2%
Mineral ores and concentrates
Styrene, Ethylene Dichloride and Vinyl Chloride Monomer
Set Top Boxes (plus 16% CVD plus 4% Special Additional
Duty)
Increase in rate
From 30% to 80%
Vanaspati, Bakery shortening, margarine and other
modified preparations of edible grade falling under heading 1516, 1517 and
1518.
Withdrawal of Exemptions/Concessions
Food preparations containing flour, meal, starch etc. in a
specified proportion meant for infant use and for retail sale.
Food products imported by hotels / tourism industry.
CVD on Gold concentrate.
Parts of outboard motors imported by specified agencies.
Specified goods for manufacture of capital good which are
used in the setting up of a unit with an investment of Rs.5 Crores.
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