A fire at one end, a fool at the other, and a bit of tobacco in between
1. Take a look at the comparative chart of the Rate of duty on cigarettes under the First Schedule from 01.01.2012:
Tariff Heading
|
Description length mm
|
BED as on 01.01.2012 Rs. Per thousand sticks
|
BED proposed by Finance Bill, 2012 [16.03.2012] Rs. Per thousand sticks
|
BED as per Finance Act, 2012 [28.05.2012] Rs. Per thousand sticks
|
Non filter
|
|
|
|
|
|
|
|
|
|
2402 2010
|
Not exceeding 60 mm
|
509
|
---
|
---
|
|
Not exceeding 65 mm#
|
---
|
509
|
509
|
|
|
|
|
|
2402 2020
|
Exceeding 60mm but not exceeding 70 mm
|
1218
|
---
|
---
|
|
Exceeding 65 mm but not exceeding 70 mm#
|
---
|
10% + 1218
|
1463
|
Filter
|
|
|
|
|
2402 2030
|
Not exceeding 60 mm
|
509
|
---
|
---
|
|
Not exceeding 65 mm
|
---
|
509
|
509
|
|
|
|
|
|
2402 2040
|
Exceeding 60 mm but not exceeding 70 mm
|
809
|
---
|
---
|
|
Exceeding 65 mm but not exceeding 70 mm
|
---
|
10% + 809
|
1034
|
|
|
|
|
|
2402 2050
|
Exceeding 70 mm but not exceeding 75 mm
|
1218
|
10% + 1218
|
1463
|
|
|
|
|
|
2402 2060
|
Exceeding 75 mm but not exceeding 85 mm
|
1624
|
10% + 1624
|
1974
|
|
|
|
|
|
2402 2090
|
Others
|
1948
|
10% + 1948
|
2373
|
#- new category introduced by Finance Bill, 2012
2. A careful reading of the above Tabulation will reveal that the Central government has done the unthinkable.
2.1 The Central Excise duty on Cigarettes under the First Schedule as proposed by the Finance Bill, 2012 and which was brought into force with immediate effect by way of a declaration under the Provisional Collection of Taxes Act, 1931 has been drastically altered [except for the cigarettes filter/non-filter of length less than 65 mm] inasmuch as by the Finance Act, 2012 [w.e.f 28.05.2012] it has been re-converted from ad valorem plus specific to purely SPECIFIC rate of duty as was existing prior to 16.03.2012.
2.2 It would be interesting to note that consequent upon introduction of the Finance Bill, 2012 read with the PCT Act, 1931, cigarettes were notified under section 4A of the Central Excise Act. Accordingly, the value for the purpose of charging the ad valorem component of duty was to be done on the Retail Sale Price (RSP) printed on the pack less abatement of 50% [Notification Nos. 7/2012-CE(NT) dated 17th March, 2012 refers]. The Third Schedule of the Central Excise Act was also amended to include cigarettes through clause 140 of the Finance Bill, 2012 . However, consequent upon enactment of the Finance Bill, 2012, nothing changed much on this front viz. The Third Schedule carried the same change as proposed by clause 140 of the Finance Bill, 2012 inasmuch as it reads -
"In the Third Schedule to the Central Excise Act, after S.No. 26 and the entries relating thereto, the following S. No. and entries shall be inserted, namely:-
S.No.
|
Heading, sub-heading or tariff item
|
Description of goods
|
(1)
|
(2)
|
(3)
|
"26A
|
2402 20 10 to 2402 20 90
|
All goods".
|
2.3 Similarly, the notification 7/2012-CE(NT) dated 17.03.2012 also continues to extend MRP assessment to Cigarettes [Tariff Item 2402] and grants an abatement of 50%.
2.4 Existence of these amendments would suggest that Cigarettes are supposed to be assessed on ad valorem component of duty too.
2.5 But then, as mentioned, what the Finance Bill, 2012 proposed has been overturned by the Finance Act, 2012 i.e Cigarettes are to be assessed w.e.f 28.05.2012 at Specific rates of duty ONLY.
3. One cannot understand what is happening in reality.
3.1 The shocking part of this story is the following directive given by the TRU in its letter F.No. 334/1/2012-TRU dated 01.06.2012; Paragraph I (1.4) under the head ' Excise duty applicable to cigarettes '.
"As part of proposals for Budget 2012-13, an ad valorem component of 10% chargeable on 50% of Retail Sale Price was added to other slabs beyond 65mm. The ad valorem component of 10% has now been converted to a specific rate and consequently, basic excise duty rates on cigarettes continue to be fully at specific rate albeit at revised rates as under:
...This clause was declared under Provisional Collection of Taxes Act, 1931 and hence the rates proposed in the Finance Bill came into effect from 17th March, 2012. Consequently, the revised rates as per section 141 read with Seventh Schedule of the Finance Act, 2012 are applicable with effect from 17th March, 2012 ."
4. Wherefrom the TRU gathers the powers to make this "specific rate of duty" applicable from 17 th March 2012 defies logic .
5. Probably, the Anti-evasion authorities will be sharpening their knives before all goes up in SMOKE!
Will TRU clarify?”
|