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 enhanced 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. Cement: 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 the 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:


Des cription of goods

Earlie r rate

Re vise d rate


Packaged cement manufactured in a mini-cement





(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



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



(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


Cement, not c leared in packaged for m

10%  ad valorem

12% ad valorem


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.

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




Engine capacity not exceeding 1200cc (petrol, LPG or


10% ad val

12% ad val


Engine capacity not exceeding 1500 cc (diesel)

10% ad val

12% ad val

II. Othe rs




Engine capacity not exceeding 1500 cc

22% ad val

24% ad val


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. Accordingly, 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.

Footwear: 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 domestically.

Precious metals and jewellery:

Excise duty of 1% ad valorem was applicable to precious metal jewellery manufactured 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/ coronary 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 Excise 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 Connectivity Cables, Memory cards and hands-free headphones required for the manufacture of mobile 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 Iodine 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 basis.

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 Explanatory 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 non-cognizable. [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 revised 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 any 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 classification disputes;

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 “manufacture”;

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 goods.

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 manufacturer

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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