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
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:
Another important change in respect of Portland cement is that the item is
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
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:
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
Sale Price (RSP) printed on the pack less abatement of 50%
The excise duty on Cigars, Cheroots and Cigarillos is also
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
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
(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
Central Excise Act.
iii. The benefit of SSI exemption would be available to manufacturers of
jewellery and the aggregate value of clearances (both for the purpose of
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
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%
Full exemption from excise duty has been provided in the following cases:
Specified raw materials viz. stainless steel tube and wire, cobalt chromium
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
the processes of frame-filling or dipping of splints with the aid of machines
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
capillary tube for manufacture of syringe, needle, catheters, and cannulae on
Important Legislative Amendments:
Barring legislative amendments involving an increase in the rate of duty for
suitable declaration has been made under the Provisional Collection of Taxes
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
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/
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
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
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
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
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
on articles of goldsmiths. or silversmiths. wares of precious metal or of metal
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,
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
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
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
from 29.06.2010. Duty in respect of clearances already made is to be recovered
manufacturers of these goods within one month of the date of enactment of the
2012 failing which interest at the rate of 24% is payable. Simultaneously, the
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.