Indian Tax Solution

Why this “dramabaji” ?  Recent Order of  TRU Dt .2-3-2012  on 1% Central Excise duty is  a shocker  for tax sleuths   


Why this

“damabaji” ?  Recent Order of  TRU Dt .2-3-2012  on 1% Central Excise duty 

is  shocker  for tax sleuths   


 

Thrilling story

of 1% Central Excise Duty on Jewellery took a new turn when TRU, CBEC issued a

order to over turn  its own clarification  issued almost a year back on

25-3-2011 .In the order  it  has given a fresh lease of life to the 

Notification No -5/2006 dt.1-6-2006 and borrowed its concept of levy in complete

disregard of the current Notification No-1/2011 dt.1-3-2011  .

The Order says “5. It is

clarified that the excise duty leviable on precious metal jewellery,

manufactured or sold under a brand name, is attracted only on such jewellery on

which the trade/brand name or any such mark or symbol or even a number which is

cross referred with such trade/brand name (not being a house mark used by

jewellers for identification of jewellery at the time of exchange/resale) is

indelibly marked or embossed. If such brand name is not affixed or embossed on

the jewellery or article itself but appears on the packing such as the jewellery

box or pouch or even on the warranty card or certificate of quality, such goods

will not be treated as branded jewellery and thus will not be liable to excise

duty. The clarification issued in this regard vide D.O.F. No.B-1/3/2011-TRU,

dated the 25th March, 2011 stands modified to this extent.”.

Taxing is a burden whatever may

be its forms and  it’s the common who has to shoulder it and so tax exemption is

always welcome but this order  seems to lead to a potemtial legal

infringement because of its mistake apparent  resulted from its desperate 

attempt to relive a ghost in order to kill the live one. And in the process it

managed to pick out a condition out of its context while if the condition is

read with its serial no ,i.e. 24II of Notification No -5/2006 dt.1-3-2006 it

would not sense much as  the serial no 26 where in sub head 7113 was

described is omitted now.

When in 2006 the first 2% Central

Excise duty was imposed vide Notification No 5/2006 dt. 1-3-2006  it came up

with  following serial no for the purpose :-

24.  71 (I) Articles of- (a) gold, (b) silver, (c) platinum, (d) palladium, (e) rhodium, (f) iridium, (g) osmium, or (h) ruthenium; Nil 8
    (II) Ornaments and the like articles made of gold or silver or platinum or any one or more of them, whether or not set- (a) with stones or gems (real or artificial), or with pearls (real, cultured or imitation); or (b) with stones, gems and pearls of the kind mentioned at (a) or any combination thereof; Nil 8
    (III) Strips, wires, sheets, plates and foils of gold, used in the manufacture of articles of jewellery and parts thereof; Nil -
    (IV) Precious and semi-precious stones, synthetic stones and pearls Explanation.-For the purposes of entries (I), (II) and (III), as the case may be,- (i) `ornament` means a thing, in any finished form, meant for personal adornment or for the adornment of any idol, deity or any other object of religious worship, made of, or manufactured from, gold or silver or platinum or any one or more of them, whether or not set with stones or gems (real or artificial) or with pearls (real, cultured or imitation), or with all or any of them and includes parts, pendants or broken pieces of ornaments; (ii) `metal` shall include,- (a) any alloy in which any of the metals specified in this entry at item No.(I) above predominates by weight over each of the other metals specified in such item or any other metal in such alloy; (b) any alloy in which the gold content is not less than 37.5 per cent by weight; (iii) `articles` in relation to gold shall mean any thing (other than ornaments), in a finished form, made of, or manufactured from or containing, gold and includes any gold coin and broken pieces of an article of gold but does not include primary gold, that is to say, gold in any unfinished or semi-finished form including ingots, bars, blocks, slabs, billets, shots, pellets, rods, sheets, foils and wires. Nil -
25.  71 Silver, platinum, palladium, rhodium, iridium, osmium and ruthenium in their primary forms, that is to say, any unfinished or semi-finished form including ingots, bars, blocks, slabs, billets, shots, pellets, rods, sheets, foils and wires. Nil  -
26. 7113 Article of jewellery on which brand name or trade name is indelibly affixed or embossed on the articles of jewellery itself 2% -


With following condition:-

8. This exemption shall not be applicable to articles of jewellery of heading 7113 on which brand name or trade name is indelibly affixed or embossed on the articles of jewellery itself.


This condition   is available

only against 24II because 24I is also omitted .

Now the relevant  portion of

the current Notification No 1/2011 dt.1-3-2011 is as follows :

88       

7113

Articles of jewellery manufactured or sold under a brand name Explanation. -

1. For the purpose of this exemption, 'brand name' means a brand name or trade

name, whether registered or not, that is to say, a name or a mark, such as a

symbol, monogram, label, signature or invented words or any writing which is

used in relation to a product, for the purpose of indicating, or so to indicate,

a connection in the course of trade between the product and some person using

such name or mark with or without any indication of the identity of that person.

2. Hallmarking of the jewellery shall not be considered to be branding.

3. An identity put by a jeweller or the job worker, commonly known as

=house-mark‘ shall not be considered as brand name. 897114Articles, other than

jewellery, of—

(a) gold,

(b) silver,

(c) platinum,

(d) palladium,

(e) rhodium,

(f) iridium,

(g) osmium, or

(h) ruthenium,

manufactured or sold under a brand name.

Explanation. - 1. For the purpose of this exemption, ‘brand name’ means a brand

name or trade name, whether registered or not, that is to say, a name or a mark,

such as a symbol, monogram, label, signature or invented words or any writing

which is used in relation to a product, for the purpose of indicating, or so to

indicate, a connection in the course of trade between the product and some

person using such name or mark with or without any indication of the identity of

that person.

2. An identity put by a jeweller or the job worker, commonly known as

=house-mark‘ shall not be considered as brand name.

3.’articles’ in relation to gold shall mean anything ( other than ornaments), in

a finished form, made of, or manufactured from or containing, gold and includes

any gold coin and broken pieces of an article of gold but does not include

primary gold, that is to say, gold in any unfinished or semi-finished form

including ingots, bars, blocks slabs, billets, shots, pellets, rods, sheets,

foils and wires.

This

Notification has given no  indication that brand has to be indelibly

affixed or embossed on the article and further to make sure to remove this

restriction to bring  in the tax net all big fishes with huge brand

presence in the market , Notification No -5/2011 dt .1-3-2011 was issued . 

Relevant portion are as follows ;-

“(x)

against S. No. 24, in column (3), item (I) and the entries relating thereto in

column (4) and (5) shall be omitted;

(xi)

S. No. 26 and the entries relating thereto shall be omitted; “

From

above study of   Notification No 1/2011 and 5/2011 it is obvious that intention

of the levy was not  to restrict itself only the those jewellers who affix or

emboss its brand name on the product  but those who have a brand presence in

trade parlance . Tax experts all across India  coined simmilar views and 

for that matter TRU  had come up with clarification issued on 25-3-2011 

which was  correctly represented this intention though the same was not fool

proof .

The

Order of TRU dt 2-3-2012 declared that the  condition no 8 of  Notification

No -5/2006 dt.1-3-2006 mentioned against  serial no 24 II. is relevant without

mentioning anything about the serial no 24II  where in that  condition

no 8 was referred to. .

Description of the serial no 24 II  is  “(II) Ornaments and the like articles

made of gold or silver or platinum or any one or more of them, whether or not

set-(a) with stones or gems (real or artificial), or with pearls (real, cultured

or imitation); or(b) with stones, gems and pearls of the kind mentioned at (a)

or any combination thereof; “   and its definition  as given in the notification

itself was as follows :-

(i)                 

`ornament` means a thing, in any

finished form, meant for personal adornment or for the adornment of any idol,

deity or any other object of religious worship, made of, or manufactured from,

gold or silver or platinum or any one or more of them, whether or not set with

stones or gems (real or artificial) or with pearls (real, cultured or

imitation), or with all or any of them and includes parts, pendants or broken

pieces of ornaments;

This

description is not available in tariff  against  chapter sub head 7113 

.

TRU's

recent  order  dt .2-3-2012  not only opened up a huge can of

controversy  in its attempt to snub down a amending  notification with

the help of an amended one, can result in multi crore revenue loss .

This unprecedented move of TRU on the eve of Budget  is fur more mysterious

than the kolavari song . This reverse

stand not only embarrass and demoralize the entire field  formation , it

also failed to give guarantee to the trade because  this order  is

based on wrong legal footing  and has a dangerous proposition.

Why this summersault that too after

almost one year from its first clarification dt .25-3-2011? What was in 

stake ? Let us only hope Finmin would come out with some thing legal and logical

soon for this thriving 1 lakh crore industry  .

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