Indian Tax Solution

Budget 2012 : A Bird's eye view on the over all changes in Central Excise
Budget 2012 :  A Bird's eye view

on the over all changes in    Central Excise


The standard rate of Central Excise duty for non-petroleum products has been


from 10% to 12% ad valorem.

The merit rate of excise duty for non-petroleum goods that  hitherto

attracted 5% has been increased to 6%.

The rate of duty of 1% imposed on  130 items in the last Budget has been

increased to 2%. The exceptions to this increase are:

Goods of heading no. 2701, i.e. coal; All goods of Chapter 31, other than those clearly not to be used as fertilizers; Articles of jewellery of heading 7113; and Mobile handsets and cellular phones of heading 8517.

The rate  of excise duty on Medicinal and Toilet Preparations under the

M&TP (Excise Duties) Act has

also been increased from 10% to 12% ad valorem.


The rates of duty applicable to mini-cement plants were lower  compared to

non-mini plants. Now, a uniform rate of duty is being prescribed regardless of


RSP per bag although a difference in the rates applicable to mini and non-mini

cement plants is

being retained. The details of these changes are as under:


S.No. Des cription of goods Earlie r rate Re vise d rate
1. Packaged cement manufactured in a mini-cement plant –    
  (i)         Of retail sale pr ice not exceeding ` 190 per 50 kg  bag or of per tonne RSP  not exceeding `3800 10% ad valorem       6% ad valorem + `120 PMT
  (ii)        Of  retail sale  pr ice  not  exceeding  `190 per 50 kg  bag or of per tonne RSP  not exceeding `3800 10% ad valorem + `30 PMT


2. Packaged cement manufactured in a pla nt other than a mini-ceme nt plant –    
  (i)         Of  retail sale  pr ice  not  exceeding  `190 per 50 kg  bag or of per tonne RSP  not exceeding ` 3800 10% ad valorem + `80 PMT       12%  ad valorem + `120 PMT
  (ii)        Of  retail sale  pr ice  not  exceeding  `190 per 50 kg  bag or of per tonne RSP  not exceeding `3800 10% ad valorem + `160 PMT
3. Cement, not c leared in packaged for m 10%  ad valorem 12% ad valorem
4. Cement clinker 10%  ad valorem + `200 PMT 12% ad valorem

Another important change in respect of Portland cement is that the item is

being notified

under section 4A of the Central Excise Act. Accordingly, the value for the

purpose of charging

duty on packaged cement would be determined on the basis of the Retail Sale

Price. An

abatement of 30% from the RSP is also being notified.


Rates of excise duty applicable to motor vehicles falling under heading nos.8702


8703 have been enhanced in the following manner:

S. No. Des cription of goods Earlie r rate Re vise d rate
I.          Le ngth not excee ding 4 me tres    
1. Engine capacity not exceeding 1200cc (petrol, LPG or CNG) 10% ad val 12% ad val
2. Engine capacity not exceeding 1500 cc (diesel) 10% ad val 12% ad val
II.        Othe rs    
1. Engine capacity not exceeding 1500 cc 22% ad val 24% ad val
2. Engine capacity exceeding 1500 cc 22% + ` 15000 per unit 27% ad val

Cigarettes and biris:

A 10% ad valorem duty is being imposed in addition to the existing specific duty

on all slabs of cigarettes other than filter and non filter cigarette of length

not exceeding 65 mm.

Cigarettes have been notified under section 4A of the Central Excise Act.


the value for the purpose of charging the ad valorem component of duty would be

the Retail

Sale Price (RSP) printed on the pack less abatement of 50%

The excise duty on Cigars, Cheroots and Cigarillos is also

being enhanced

The rate of excise duty on Biris is being increased by Rs.2

per thousand for both handmade and machine made biris.

The rates of excise duty on Chewing tobacco classified under tariff item 2403

99 10, unmanufactured tobacco classified under Heading 2401 and Jarda scented

tobacco classified under 2403 99 30, notified under section 3A is being enhanced

Ready-Made Garments, made-up articles and textiles:

The rate of excise duty applicable to ready-made garments and made-up

articles of  textiles falling under Chapters 61, 62 and 63 (heading

nos.63.01 to 63.08) of the Central Excise

Tariff except those falling under heading nos.63.09 and 63.10 when they bear or

are sold  under a brand name has been increased from 10% to 12%. However,

the tariff value for these

items has been revised and shall now be equal Retail Sale Price (RSP) less

abatement of 70%  instead of 55%. In other words, duty would be payable on

30% of the RSP.


The rate structure is being rationalized into two slabs. Thus, footwear with RSP

not exceeding ` 500 per pair has been fully exempted, while full duty

would be chargeable on footwear with RSP exceeding ` 500 per pair.  The

full exemption available to this item is subject to the fulfillment of the

condition that

the RSP should be indelibly marked or embossed on the footwear itself. It may

kindly be ensured  that this condition is complied with both for imported

footwear and footwear manufactured


Precious metals and jewellery:

Excise duty of 1% ad valorem was applicable to precious metal jewellery


or sold under a brand name. The levy would now apply to both branded and

unbranded goods

(except silver jewellery) although at the same rate of duty of 1%. The important

features of the

scheme are as under:

i. Duty would be chargeable on tariff value which is being prescribed under

section 3 of the

Central Excise Act.

ii. Tariff value would be equal to 30% of the “transaction value” declared on

the invoice and

transaction value shall have the same meaning as assigned to it under section 4

of the

Central Excise Act.

iii. The benefit of SSI exemption would be available to manufacturers of

precious metal

jewellery and the aggregate value of clearances (both for the purpose of

eligibility and

exemption) would be computed on the basis of tariff value.

Full exemption from excise duty is being provided to branded silver jewellery.

It may also be noted that in respect of articles of precious

metals, the levy would continue to apply only to those articles that are

manufactured or sold under a brand name. Full exemption from excise duty has

been provided to gold coins of purity

99.5% and above and silver coins of purity 99.9% and above when manufactured

from gold or  silver on which the appropriate duty of customs or excise has

been paid.

Excise duty on refined gold manufactured starting from the stage of ore,

concentrate or  dore bars has been increased from 1.5% to 3%. The same rate

has been prescribed for refined

gold produced from the smelting of copper. Refined silver obtained from the

smelting of copper shall henceforth attract excise duty of 4%.

Excise duty on gold jewellery sold from EOUs into DTA has been increased from 5%

to  10%.

Relief Measures:

Full exemption from excise duty has been provided in the following cases:

Specified raw materials viz. stainless steel tube and wire, cobalt chromium

tube, Hayness

Alloy-25 and polypropylene mesh required for manufacture of Coronary stents/


stent system and artificial heart valve on actual user basis.

Refills and inks in bulk packs (not meant for retail sale) used for

manufacture of pens of

value not exceeding ` 200 per piece.

The entry ntraocular lens. has been removed from Sl. Nos. 115 & 67 of Central


Notfn. Nos. 1/2011-CE & 2/2011-CE, both dated 1.3.2011 and will be exempted from

Central Excise Duty under CETH 9021.

Parts, components and specified accessories viz. battery chargers, PC


Cables, Memory cards and hands-free headphones required for the manufacture of


phones are fully exempt.

 However, standard rate is chargeable when such goods are cleared as 

spares. Concessional rate of excise duty of 2% is now being provided for such

spares on the

condition that no CENVAT Credit of any inputs or input services is availed of.

Excise duty has been reduced from 10% to 6% on:

Matches manufactured by “semi-mechanised” units – the latter being units that

carry out

the processes of frame-filling or dipping of splints with the aid of machines

LED lamps


Processed food products of soya 

Parts of Blood Pressure Monitors and Blood glucose monitoring systems (Gluco-

meters) on actual user basis

Specified raw materials viz. Polypropylene, Stainless Steel Strip and

Stainless Steel

capillary tube for manufacture of syringe, needle, catheters, and cannulae on

actual user


Important Legislative Amendments:

Barring legislative amendments involving an increase in the rate of duty for

which a

suitable declaration has been made under the Provisional Collection of Taxes

Act, all

amendments would come into effect on the date of enactment of the Finance Bill,

2012 i.e. the

date on which the Bill receives the assent of the President. The legislative

amendments relating

to Central Excise Act and Central Excise Tariff Act have been explained in the


Memorandum to the Finance Bill, 2012. The important ones are discussed/

highlighted below:

In terms of section 9(1)(i) of the Act, offences  involving excisable goods

where the duty leviable exceeds ` 1 lakh are punishable with

imprisonment for a term which may extend to seven years and with fine. It is

proposed to

enhance this duty amount to ` 30 lakh. [Clause 130 of the Bill refers]

Section 9A of the Act presently provides that all offences under the Act shall

be deemed

to be non-cognizable within the meaning of the Code of Criminal Procedure.

Sub-section (1) of

this section is proposed to be substituted to prescribe that offences, other

than offences

punishable with imprisonment of three years or more under section 9, shall be


[Clause 131 of the Bill refers].

Through clause 135 of Finance Bill, 2012, section 13 dealing with  the

power to arrest is being substituted with a new section 13 and section 13A. The


section 13 provides that offences punishable with imprisonment of three years or

more under section 9 shall be cognizable. Section 13A is being inserted to

provide that bail in the case of

offences punishable with a term of imprisonment of three years or more under

section 9 shall not be granted by a Court or Magistrate without an opportunity

being given to the Public Prosecutor

to present his case. However, in the case of minors, infirm and women the

Magistrate may grant bail. Further, it excludes the jurisdiction of police

officers to initiate investigation of offences

under the Central Excise Act, unless authorized in this behalf by the Central

Government, by a special or general order

Section 12F relating to search and seizure is being amended to align the

provisions with Customs Act (Clause 134). Section 18 is being substituted to

provide that save as provided under

the Central Excise Act, searches shall be carried out as per the procedure laid

down in the Code of Criminal Procedure [Clause 136]. As a corollary to these

changes, section 19 is being omitted

and some consequential amendments are being carried out in section 20.

Section 11AC provides for reduced penalty if the duty along with interest is

paid within 30 days of the communication of the order. It is being amended to

make available the benefit of

reduced penalty only if the reduced penalty is also paid within the specified

period of thirty days. [Clause 133]

Notification No.1/2010-CE dated 6th February, 2010 provides exemption from

Central Excise duty to goods cleared from new units or units that have

undertaken substantial expansion

in the State of Jammu and Kashmir for a period of ten years from the date of

commencement of  commercial production. Doubts were raised about the

interpretation of provisions of this

exemption relating to the date from which the ten years period is to be computed

in the case of  units undertaking substantial expansion. The notification

is being amended retrospectively from

the date of issue of the said notification i.e. 6th February, 2010 to provide

that for units  undertaking substantial expansion, the exemption period of

ten years would be computed from

the date of commercial production from the expanded capacity [Clause 139].

Amendments to First Schedule of Central Excise Tariff Act:

The First Schedule to the Central Excise Tariff is being amended so as to carry

out the

following changes:

i. omit the words “or polishing” in Note 6 of Chapter 25 so as to remove

doubts about the

correct classification of polished marble;

ii. revise the description of tariff items 2601 11 10 to 2601 11 90 covering

iron ore and

concentrates based on Fe content;

iii. insert a note in chapter 48 to provide that notwithstanding anything

contained in Note 12,

if the paper and paper products of heading 4811, 4816 or 4820 are printed with


character, name, logo, motif or format they shall remain classified under

Chapter 48 as

long as such products are intended to be used for further printing, to avoid



iv. insert a note in Chapter 71 to provide that for the purposes of headings

7113 and 7114,

the process of affixing or embossing trade name or brand name on articles of

jewellery or

on articles of goldsmiths. or silversmiths. wares of precious metal or of metal

clad with

precious metal, shall amount to “manufacture”;

v. insert a note in Chapter 72 to provide that the process of oiling and

pickling in respect of

goods of heading 7208 shall amount to “manufacture”;

vi. insert a note in Chapter 76 to provide that the process of cutting,

slitting and printing of

aluminium foils shall amount to “manufacture”;

vii. insert a note in Chapter 85 to provide that the processes of matching,

batching and

charging of Lithium ion batteries or the making of battery packs shall amount to


viii. align the entries relating to copper scrap, brass scrap, nickel scrap,

aluminium scrap, lead

scrap and zinc scrap with the revised ISRI classification.

Through clause 142 of the Finance Bill, a Note is being inserted in Chapter 54

to provide

that notwithstanding anything contained in Note 1, man-made fibre such as

polyester staple fibre

and polyester filament yarn manufactured from plastic and plastic waste

including waste

polyethylene terephthalate bottles shall be classified as textile material under

Chapter 54 or

Chapter 55, as the case may be. This amendment is being carried out with

retrospective effect

from 29.06.2010. Duty in respect of clearances already made is to be recovered

from the

manufacturers of these goods within one month of the date of enactment of the

Finance Bill,

2012 failing which interest at the rate of 24% is payable. Simultaneously, the

manufacturers are

being permitted to take into account credit of duty paid on inputs, input

services and capital


Amendments in Central Excise Rules, 2002

Rule 22 (3) is being amended to empower the officers of audit, cost accountants

and  chartered accountants appointed under section 14A or 14AA to prescribe

the time limit within

which the units being audited will produce the documents.

 Amendments in Cenvat Credit Rules, 2004

Rule 3(5) and 3(5A) are being amended to prescribe that in case the capital

goods on which Cenvat credit has been taken are cleared after being used then

the amount payable shall be

either the amount calculated on the basis of Cenvat credit taken at the time of

receipt reduced by  a prescribed percentage or the duty on transaction

value whichever is higher.

Rule 10A is being inserted to permit transfer of unutilized credit of SAD lying

in  balance at the end of each quarter to another factory of the


Rule 14 is being amended to substitute the word “or” with “and” so that

interest is not payable on credit wrongly taken unless the same is utilized.

Similar changes are being carried out

in Rule 16 of the Chewing Tobacco and Unmanufactured Tobacco Packing Machines

(Capacity Determination and Collection of Duty) Rules, 2010. However, penalty

provisions for such cases

have not been amended.

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Editor's Column

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