New Budget 2008 Changes in Central Excise Duty.

General CENVAT Rate: (Notification No. 2/2008-CE)

The general rate of excise duty (CENVAT) has been reduced from 16% to 14%. This reduction applies to all goods that hitherto attracted this general rate of 16%. In some cases, a deeper reduction has been made, the details of which are indicated in the subsequent paragraphs. These changes have been carried out by notification. The other ad valorem rates of 24%, 12% and 8% have been retained.

Since the reduction in the general rate has been carried out by notification, the possibility of the same product/ item being covered by more than one notification cannot be ruled out. In such a situation, the rate beneficial to the assessee would have to be extended if he fulfils the attendant conditions of the exemption.

Drugs and Pharmaceuticals:
Excise duty on drugs and pharmaceuticals falling under Heading Nos. 3001, 3003 (except Menthol crystals), 3004, 3005 and 3006 (except 3006 60 and 3006 92 00) has been reduced from 16% to 8%. Thus, the general effective rate for all goods of Chapter 30 is now 8%. However, certain specified items such as life saving drugs continue to be fully exempt. Excise duty has been fully exempted on Anti-AIDS drug ATAZANAVIR, and bulk drugs for its manufacture.

Automobiles:
Excise duty on Small cars has been reduced from 16% to 12%. There is no change in the definition of small cars. Large cars will continue to attract duty at 24%. A concessional rate of duty of 14% has been provided for “Hybrid cars” driven by a combination of an internal combustion engine and an electric motor. The definition prescribed in the relevant notification may kindly be critically examined and if there are any suggestions for providing more clarity, the same may be conveyed to me at the earliest.

Electrically operated vehicles enjoy a concessional rate of duty of 8%. Of this category, full exemption has now been provided to Electric cars. Specified parts of electric cars have also been fully exempted on end-use basis. It may kindly be ensured that the exemption for parts/ components is monitored effectively and there is no misuse.

Excise duty on buses and vehicles for the transport of more than 13 persons has been reduced from 16% to 12%. Simultaneously, the duty on the chassis of such vehicles has also been brought down from ‘16% +Rs.10,000-’ to ‘12% +Rs.10,000/-.’

There is also a reduction in the excise duty on two-wheelers and three-wheelers (for the transport of upto 7 persons) from 16% to 12%.

Food Processing Sector:
5.1 Full exemption from excise duty has been provided to some more food products viz. tender coconut water; Paws, mudi (puffed rice) and the like; milk containing edible nuts and other ingredients; and Tea/ coffee pre-mixes containing tea/ coffee, milk and sugar.

On a few more food items - muesli, corn flakes & similar breakfast cereals; and ‘sharbats’, a concessional rate of duty of 8% has been provided.

On specified packaging material used mainly for packaging of processed foods, the rate of duty has been reduced from 16% to 8%. These items are: Open Top Sanitary (OTS) cans, aseptic packaging paper and aseptic bags.

There is already a full exemption for specified equipment for the installation of a cold storage, cold room or refrigerated vehicle, for the preservation, storage and transportation of agricultural produce on end-use basis. Another item has been added to this list.

Information Technology & Communication sector
Packaged software hitherto attracted excise duty of 8%. This has been enhanced to 12%. There is no change in the excise duty on other software. Excise duty has been fully exempted on Wireless data modem cards. Consequently, CVD shall also be exempted on imported cards. However, 4% additional duty of customs will be applicable.

Specified convergence products viz. MP3/ MP4/ MPEG4 player having video and audio reception facility have been provided a concessional excise duty of 8%.

Paper and Paper products
Excise duty on writing paper, printing paper and packing paper falling under heading nos. 4802, 4804, 4805, 4807, 4808 and 4810 has been reduced from 12% to 8%.

Excise duty has been fully exempted on paper and paper products, manufactured from non-conventional raw materials, upto first clearance of 3500 metric tonne in a year from a unit.

Excise duty on paper and paper products, manufactured from non-conventional raw materials, beyond clearance of 3500 metric tonne per year from a unit (not having an attached bamboo/wood pulp plant) has been reduced from 12% to 8%.


Other Concessions:
Excise duty has been fully exempted on composting machines and menthol/ menthol crystals.

Excise duty has been reduced from 16% to 8% on water filtration and purification devices, veneers & flush doors, heat resistant rubber tension tape and inks for writing instruments such as marker pens, highlighters, magic pens etc.

Excise duty on pan masala, not containing tobacco, with betel nut content not more than 15%, has been reduced from 16% to 8%. It has also been exempted from National Calamity Contingent Duty. The exemption is available subject to the fulfillment of certain conditions.

Cement:
Excise duty has been revised on bulk cement from Rs.400 per tonne to “ 14% or Rs. 400 per tonne, whichever is higher”. However, there is no change in the rates of duty applicable to cement manufactured and cleared in bulk by mini-cement plants.
9.2 Excise duty has been increased on cement clinkers from Rs.350 per tonne to Rs.450 per tonne.

Cigarettes:
10.1 Excise duty rates on non-filter cigarettes have been enhanced to bring them at par with filter cigarettes of corresponding length. The revised rates of excise duty (basic + NCCD + Health Cess) on non-filter cigarettes are as under:

Enhancement of duties (basic + NCCD + Health Cess) has been made through suitable schedule entries in the Finance Bill, which are covered by the declaration under the Provisional Collection of Taxes Act, 1931.

Petroleum
The duty rates on MS/HSD intended for sale without a brand name have been converted from ‘ad valorem + specific rate’ to pure ‘specific rate’ as under:

Motor Spirit from 6% + Rs.13 per litre to Rs.14.35 per litre
HSD from 6% + Rs.3.25 per litre to Rs. 4. 60 per litre

The duty rates on branded fuels would continue to attract the present ad valorem cum specific rates i.e. as under:

a) Motor Spirit : 6% + Rs.13 per litre
bb) HSD : 6% + Rs. 3.25 per litre

NCCD: (Clause 117 of the Finance Bill, 2008)
National Calamity Contingent duty (NCCD) at the rate of 1% has been imposed on mobile phones. The CENVAT Credit Rules have been amended to provide that input or capital goods credit of other duties of excise cannot be utilized for the payment of this NCCD.br />
NNCCD of 1% hitherto leviable on Polyester filament yarn has been withdrawn. Suitable bill entries have been incorporated in the Finance Bill to delete this item from the NCCD Schedule. Till the enactment of the Finance Bill, however, an exemption notification has been issued.

Export Oriented Units:
The effective rate of duty applicable to clearances of goods to domestic tariff area from export oriented units, software technology parks, electronic hardware technology parks etc. has been revised from ‘25% of the basic customs duty + excise duty payable on like goods’ to ‘50% of the basic customs duty + excise duty payable on like goods’.

SSI Exemption:
General SSI exemption has been extended to HDPE/ PP tapes consumed captively in the manufacture of sacks/ bags. This change will come into effect from 1st April, 2008.

Miscellaneous
Excise duty exemption on “shuttle-less looms” has been withdrawn. These goods will now attract 8% excise duty/CVD.br />
Consequent upon reduction of excise duty rates, abatement rates allowed from maximum retail sales price for various items have been suitably reduced. [notification No.14/2008-CE (NT) refers].

Notification No. 108/95-CE dated 28.08.1995 exempts, among other things, goods supplied to projects funded by the U.N. or other international organizations subject to the fulfillment of certain conditions. For the removal of doubts, an explanation has been inserted in the notification to clarify that the benefit is available to goods brought into a project that are not withdrawn by the supplier or the contractor. The intention is to clarify that the exemption is not available to goods brought for temporary use in a project. It has also been provided that the expression “goods are required for the execution of the project” shall be construed accordingly. While extending the benefit of this exemption, the field formations may ensure that essentiality certificates issued by the sponsoring authority take into account this clarification. A similar explanation has been inserted in the corresponding Customs Notification No. 84/97-Cusltoms dated 11.11.1997.

Notification No. 49/2003-CE dated 10.6.2003 provides exemption to specified goods manufactured by new units or units undertaking substantial expansion in the State of Uttarakhand or Himachal Pradesh. The goods or activities to which this exemption is applicable are specified in the schedule. Entry at Sl. No. 13 of the schedule has been amended so as to provide exemption to printers and monitors capable of connecting to a computer or network.

Some editorial changes have been carried out in the First Schedule to the Central Excise Tariff Act through a notification issued under section 5 (1) of the said Act. The details are as under:

((i) Section 2(f) (iii) of Central Excise Act contains definition of “deemed manufacture”. Similarly, the Notes in some of the chapters of the Tariff also define certain processes as amounting to “manufacture”. In respect of the processes of labeling and relabelling and packing/repacking, the definitions in the chapter notes are not aligned with the definition contained in Section 2(f) (iii). The chapter notes have been amended suitably.

(ii) The First Schedule of the Central Excise Tariff Act has been amended so as to align entries related to parts and accessories of printers falling under heading 8443 of the Excise Tariff with the corresponding entries in the Schedule to the Customs Tariff.

Sl. No. 7 of Notification No. 64/95-CE dated 16.3.1995 provides exemption to goods meant for use in the launch vehicle project or a satellite project of ISRO. Inadvertently, the description of goods in Col. 2 was printed under Col. 3 pertaining to conditions. This has now been rectified.br />
Other amendments in Customs Act and Central Excise Act:
[To come into effect on enactment of Finance Bill, 2008, unless otherwise specified]

aa) Section 2 of the Central Excise Act, 1944 is being amended to insert an explanation in clause (d) to provide that for the purposes of this clause, “goods” include any article, material or substance which is capable of being bought and sold for a consideration and such goods shall be deemed to be marketable.

b) Section 3A is being inserted in the Central Excise Act, 1944 empowering the Central Government to charge excise duty on the basis of capacity of production in respect of notified goods, and to notify the procedure for the same. br />
c) Section 11B of the Central Excise Act, 1944 is being amended to provide for the refund of interest paid on any duty of excise.

dd) According to the provisions of Section 11D of the Central Excise Act, 1944, a person liable to pay duty is required to deposit with the Central Government any amount that he collects as representing duty of excise in excess of the duty assessed or determined and paid on any excisable goods. As such, recovery of amounts collected in this manner is possible only from persons who are liable to pay duty. Sub-section (1A) has now been inserted to enable the Central Government to recover such amounts from any person. Besides, it has also been provided that any person who recovers an amount representing it as duty of excise on excisable goods, which are wholly exempt or chargeable to Nil rate of duty, would also be required to deposit it with the Central Government. Consequential amendments have been carried out in section 11 DD to enable recovery of interest on such amounts if they are not deposited in time. The analogous provision contained in section 28 B of the Customs Act has also been amended in the same manner.

e) Orders passed in appeal by Commissioner (Appeals) are currently examined by a Committee consisting of two Commissioners of Central Excise under section 35B of the Central Excise Act, 1944. This provision does not cover a situation where there is a difference of opinion between the two Commissioners about the filing of appeal against the appellate order. It is now being provided that the Committee would refer such cases to the jurisdictional Chief Commissioner specifying the points of difference so that he may decide whether or not to accept the appellate order. A similar amendment has been carried out in section 129A of the Customs Act.

f) Orders passed in appeal by a Commissioner of Central Excise are currently reviewed by a Committee consisting of two Chief Commissioners of Central Excise under section 35E of the Central Excise Act, 1944. This provision does not cover a situation where there is a difference of opinion between the two Chief Commissioners about the filing of appeal against the order in original. It is now being provided that the Committee would refer such cases to the Board specifying the points of difference so that the Board may decide whether or not to appeal against the order to the Tribunal. A similar amendment has been carried out in section 129D of the Customs Act.

g) Section 35FF is being inserted in the Central Excise Act, 1944 to provide for payment of interest on pre-deposits made by appellants who succeed in appeal, if the amount of pre-deposit is not refunded within three months from the date of communication of the order of the appellate authority to the adjudicating authority. A similar provision (Section 129 EE) is being inserted in the Customs Act, 1962. br />
h) Note 16 of Chapter 39 to the Central Excise Tariff Act, 1985 is being amended to specify that the process of lamination or of lacquering shall also amount to manufacture in addition to the process of metallization.

i) Section 108 of the Customs Act, 1962 is being amended to give all customs officers powers to issue summons.

j) Section 117 of the Customs Act, 1962 is being amended to increase the maximum amount of penalty from the existing ten thousand rupees to one lakh rupees.

k) Section 141 of the Customs Act, 1962 is being amended to regulate the manner in which the imported or export goods may be received, stored, delivered, dispatched or otherwise handled in a customs area by any person and to specify by regulations
the responsibilities of person engaged in the aforesaid activities.

ll) Section 158 of the Customs Act, 1962 is being amended to increase the maximum amount of penalty from five hundred rupees to fifty thousand rupees for contravention of any of the rules, and from two hundred rupees to fifty thousand rupees for contravention of regulations.

Amendment in Rules:
a) Rule 18 of the Central Excise (No.2) Rules, 2001 is being amended to allow with retrospective effect, rebate of duty paid on excisable goods cleared from the factory for exports.br />
b) Rule 12 of the Central Excise Rules, 1944 is being amended to allow with retrospective effect, rebate of duty paid on excisable goods cleared from the factory for exports.

c) Rule 18 of the Central Excise Rules, 2002 is being amended to allow with retrospective effect, rebate of duty paid on excisable goods cleared from the factory for exports.

d) The CENVAT Credit Rules, 2004 are being amended to bring in the following significant changes:

(i) Rule 3 [except sub-rule (4)] is being amended to allow removal of capital goods outside the premises of the provider of the output service without any time restriction, if the same is for providing output service. This change shall come into effect from 1st April, 2008.

(ii) Sub-rule (4) of Rule 3 is being amended to provide that in case of National Calamity Contingent duty (NCCD) payable on mobile phones, credit of any duty of excise other than NCCD will not be utilized for payment of the said NCCD. This change shall come into effect from 1st March, 2008.

(iii) Rule 6 is being amended to provide,- Following options to a manufacturer, using common inputs or input
services for manufacture of dutiable as well as exempted goods and opting not to maintain separate accounts. Such manufacturers can: - either reverse the credit attributable (to be worked out in a manner prescribed in the rule) to the inputs and input services used in the manufacture of exempted goods; or - pay 10% amount of the value (to be determined in
accordance with the provision of section 4/4A of the Central Excise Act, 1944) of the exempted goods.

Following options to a provider of output services, using common inputs or input services for providing taxable as well as exempted services and opting not to maintain separate accounts. Such provider of output services can,- - either reverse the credit attributable (to be worked out in a manner prescribed in the rule) to the inputs and input services used for providing exempted service; or - pay 8% amount of the value (determined in terms of section 67 of the Finance Act, 1994) of the exempted services. This change shall come into effect from 1st April, 2008.

iv) A new rule 7A is being inserted to prescribe a procedure to enable the provider of output services to take credit on inputs and capital goods on the basis of an invoice/challan/bill issued by its other office. This change shall come into effect from 1st April, 2008.

v) A new rule 15A is being inserted to provide for general penalty uptoRs.5000/- in case of contravention of any of the provisions of the CENVAT Rules, 2004, for which no specific penal provision exists. This change shall come into effect from 1st March, 2008.

e) The Central Excise (Determination of Retail Sale Price of Excisable Goods) Rules, 2008 are being issued under section 4A(4) of the Central Excise Act, 1944 to provide the manner for determination of retail sale price, where the same is not declared on the packages or tampered or altered or obliterated. This change shall come into effect from 1st March, 2008.