Central Excise
CA. Hasmukh Kamdar

Major changes proposed in the Finance Bill, 2013-14 with regard to Central Excise are discussed here below:

Changes in Central Excise Act, 1944

  1. Section 9(1) of Central Excise Act provides that whoever commits any of the following offences:

1.1 Evades payment of any duty payable under the Central Excise Act or removes any excisable goods in contravention of any of the provisions of the Act or any rules made thereunder or in any way concerns himself with such removal.

1.2 Acquires possession of, or in any way concerns himself in transporting, depositing, keeping, concealing, selling or purchasing, etc. of any excisable goods which he knows or has reason to believe, are liable to confiscation under the Act.

1.3 Contravenes any provision of the Act or rules made thereunder in relation to credit of any duty allowed to be utilised towards payment of excise duty on final products.

1.4 Fails to supply or supplies false information is punishable:

  1. in case of offence relating to any excisable goods, duty leviable thereon exceeds thirty lakhs of rupees, with imprisonment for a term which may extend to seven years and with fine;

  2. in other case with imprisonment for a term which may extend to three years or with fine or with both.

Section 9(1) is amended so as to substitute the amount of thirty lakhs rupees with fifty lakhs rupees. Thus now an offence involving evasion in which duty leviable exceeds fifty lakhs rupees shall be punishable with term of imprisonment extending to seven years and fine. In other cases punishment may be imprisonment for a term which may extend to three years or with fine or with both.

  1. Section 9A of the Central Excise Act, 1944 is amended to provide that in case where the evasion of duty involved, or Cenvat Credit availed/utilised, in contravention of the provisions of Act or Cenvat Credit Rules 2004, is more than rupees fifty lakhs, such an offence shall be cognizable and non-bailable. Cognizable offence implies that an officer can arrest an offender without a warrant. In case of bailable offence, normally an offender is released on suitable bail upon his arrest whereas in case of non-bailable offence offender is not entitled to bail automatically but Court may still order him to be released on suitable bail-with or without conditions.

  2. Section 11 of the Central Excise Act –1944 is amended to provide recovery of excise dues from third party. The section now provides for:

3.1 Recovery of money due to the Government from any person other than from whom money is due after giving a proper notice, if that other person holds money for or on account of the first person.

3.2 The other person to whom such notice is issued is bound to comply.

3.3 If the other person to whom notice is served fails to comply, he shall be deemed to be a person from whom duty and any other sums of any kind payable under the Act have become due and face all the consequences under the Act.

  1. Section 11A of the Central Excise Act, 1944 is amended to provide that if a notice for demand is once served on assessee under this section then if further demand is raised on the same grounds as relied upon in first notice of demand then in case of second or subsequent demand if only a statement containing details of duty not paid, short levied or erroneously refunded is given then such a statement shall be deemed to be sufficient service of notice.

  2. Section 35C(2A) of the Act, provides that the Appellate Tribunal shall, where it is possible to do so, hear and decide every appeal within a period of three years from the date on which such appeal is filed. Further where an order of stay is made in any proceeding relating to an appeal, the Appellate Tribunal shall dispose of the appeal within a period of one hundred and eighty days from the date of such order. It is also provided that if such appeal is not disposed of within such period of one hundred and eighty days, the stay order shall, on the expiry of that period, stand vacated.

The intention of the Central Government in inserting the above sub-section did not have the desired effect in as much as the CESTAT is granting an extension of the stay initially ordered by relying upon, on the ground that the appellant is not, in any way, responsible for the pendency of the appeal.

With a view to put an end to this concept of "further extension of stay", a proviso is added to section 35(C)(2A) to provide that where an appeal in which a stay is granted, is not disposed of within the period of one hundred and eighty days of passing of stay, the Appellate Tribunal may, on an application made in this behalf by appellant and on being satisfied that the delay in disposing of the appeal is not attributable to such appellant, extend the period of stay to such further period, as it thinks fit, not exceeding one hundred and eighty five days, and in case the appeal is not disposed of within the total period of three hundred and sixty-five days from the date of second stay order, such stay order shall, on the expiry of the said period, stand vacated."

As a result of this amendment, after three hundred and sixty five days of passing of a stay order for the first time in any appeal, Department can initiate recovery proceedings, even if the appeal is still pending with the Appellate Tribunal.

  1. Section 129C of the Customs Act, 1962, (which is applicable to central excise appeals in terms of section 35D of the Central Excise Act, 1944), is amended to allow single member of the CESTAT Benches to dispose of appeals involving amounts of up to ` 50 lakhs, as against the current limit of `10 lakhs, except in cases involving disputes related to classification or valuation of goods or services. This is a welcome amendment as a result of which, appeals filed with CESTAT, shall get decided on a more expeditious basis. This amendment should be specifically made applicable to all appeals and stay petitions pending to be heard by the CESTAT Benches.

  2. Under section 23A of the Act, an application for ‘advance ruling’ can be made in respect of any ‘activity’ of production or manufacture of goods. The definition of the term ‘activity’ is expanded to include any new business of production or manufacture proposed to be undertaken by the existing producer or manufacturer. Thus advance ruling can now be sought in respect of new products or goods proposed to be manufactured.

  3. Under section 23C of the Act, an advance ruling can be sought, inter alia, on the issue of admissibility of credit of excise duty paid or deemed to have been paid on the goods used in or in relation to the manufacture of excisable goods. This section is amended to extend the advance ruling provisions also to admissibility of the credit of service tax paid or deemed to have been paid on input services used in the manufacture of excisable goods.

  4. Under section 28E of the Customs Act, 1962, only a select category of persons are eligible for advance ruling. This includes joint ventures and resident public limited companies. However, the resident public limited companies are not eligible for advance ruling under the Central Excise law. Vide Notification No. 4/2013-CE(N.T.) dated 1-3-2013, the resident public limited companies are also specified as class of persons eligible for seeking advance ruling on central excise and service tax matters as is available on customs side.

  5. Section 37C of the Act is amended to specify the additional mode of documents; i.e. ,by speed post with proof of delivery or through courier approved by the Central Board of Excise and Customs.

Changes in cenvat Credit Rules 2004 (CCR)

Under Rule 3(5) (5A) (5B), when a manufacturer or a service provider removes inputs or capital goods, on which CENVAT credit is taken and if:

• Capital goods are removed as such or cleared as waste and scrap or written off either in part or full;

• Inputs are removed as such or written

Then the manufacturer or service provider fails to pay such amount, it can be recovered in a manner provided in Rule 14 for recovery of CENVAT credit wrongly taken and accordingly interest and penalty as provided in Central Excise Act or the Finance Act, 1994, as the case may be, are applicable.

Changes in the Central Excise Tariff Act, 1985 (effective from 1-3-2013)

Major changes in the rates of duty are as follows:

a. Exemption from duty

  1. Tapioca sago (Sabudana) and tapioca starch manufactured and consumed captively in the manufacture of tapioca sago.

  2. Henna powder or paste, not mixed with any other ingredient.

  3. Ships and other vessels. Consequently, there will be no CVD on these ships and vessels when imported.

  4. Hand made carpets and carpets and other textile floor coverings of coir or jute, whether or not hand made.

  5. Branded readymade garments and made-ups are fully exempted if no CENVAT credit availed. In case of cotton there will be zero duty at the fibre stage and in the case of spun yarn of man made fibres, there will be a duty of 12% at the fibre stage. The ‘zero excise duty route’ will be in addition to the CENVAT route now available.

  6. Intermediate goods manufactured and consumed captively by exempted units under Area Based Exemption Scheme in Himachal Pradesh and Uttarakhand.

b. Increase in rate of duty

  1. SUV – from 27% to 30% except in case of SUV registered as taxi.

  2. Silver manufactured from zinc/lead smelting – from NIL to 4%.

  3. Compounded levy on stainless steel "Patta Patti" – from ` 30,000 per machine per month to ` 40,000 per machine per month.

  4. Mobile phones of retail sale price exceeding ` 2,000/- from 1% to 6%

  5. Cigarettes – increase by about 18% on all cigarettes except cigarettes of length not exceeding 65 mm. Similar increases on cigars and cigarillos.

  6. Marble tiles and slabs – from ` 30 per square meter to ` 60 per square meter.

c. Rate of duty on truck chassis is reduced from 14% to 13%.

d. Branded Ayurvedic medicaments and medicaments of Unani, Siddha, Homeopathic or bio-chemic system are brought under MRP based assessment with abatement of 35% from MRP.