MARCH 19, 2012

Need to have proof readers in TRU - Just in case you needed another reason

By a Netizen

First a bit of history:

Till recent past, Sanitary napkins and diapers were classified under Chapter Sub Heading 48184010 (Sanitary towels and tampons, napkins and napkin liners for babies andsimilar sanitary articles-Baby and clinical diapers) and/or under Chapter Sub Heading 48184090 (Sanitary towels and tampons, napkins and napkin liners for babies and similarsanitary articles-Others).

Budget 2011 brought in the jumbo list of goods to be subject to central excise duty of 1%, subject to conditions. Notification No. 1/2011-CE dated 01/03/2011 provided for concessional rate of central excise duty of 1% provided the manufacturers of said notified goods do not avail Cenvat Credit. Goods classified under Chapter Sub Heading No 48184010 and 48184090 were covered under the said Notification at Sr. No. 66 and 67 respectively. For those manufacturers opting to avail Cenvat Credit, Notification No.2/2011-CE dated 01/03/2011 provided for levy of 5%concessional rate of duty. Goods classified under Chapter Sub Heading No 48184010 and 48184090 were covered under the said Notification at Sr. No. 34 and 35 respectively.

With the introduction of Finance Act, 2011, sanitary napkins, clinical diapers and like products was separately placed under a new Chapter Heading 9619 and were removed from the ambit of Chapter Sub Headings 48184010 and 48184090.

Subsequently, Notification Nos. 1/2011-CE and 2/2011-CE were amended vide Notification No.43/2011-CE dated 30/12/2011 to give effect to the said change in classification and Sr. Nos. 66, 67 of Notification No 1/2011 and Sr. Nos.34, 35 of Notification No 2/2011 were deleted and new Sr. Nos. 131 and 77 respectively were introduced covering all goods of Chapter Sub Heading No 9619 in the said Notifications. Needless to say the rate of duty remained the change for said products, the only change being that a separate entry was given to provide for said rate of duty for said products. So whether manufacturers not availing Cenvat credit on inputs, could have cleared their goods covered under Chapter 9619 under 1% when the Eleventh Schedule of the Finance Act, 2011 introduced Chapter Sub Heading 9619 with 5% rate of duty is another big question. We understand that the Industry has continued to pay central excise duty at 1%. Here was a bit case for retrospective amendment which has not happened.

And the present:

Let's move ahead as the story does not end here. Amendment was also made to MRP based levy notification no 49/2008 to include the said classification change at a later date. But let's zip forward to Budget 2012.

Notification No. 16/2012-CE dated 17/03/2012 has amended NotificationNo. 1/2011 to increase the rate from 1% to 2% and introduced (notsubstituted) Sr. No. 131 to give benefit of concessional rate of duty toparts etc. of mobile handsets. Now what about the existing Sr. No. 131 introduced vide Notification No. 43/2011 giving the benefit of 1% central excise duty to products falling under Chapter Sub Heading 9619. Notification No.16/2012 was supposed to introduce Sr. No. 132 instead of Sr. No. 131. Since Sr No 131 as introduced vide Notification No 43/2011 has not been replaced by the new Sr No 131 ( introduced vide Notification No 16/2012), the position would be goods under Chapter Sub Heading 9619 would still be required to clear their goods @ 2% and not @ 1%. However, this is another of those mistakes that our Babus can make to mar an otherwise impressive performance.

Parting Shot: Let's look at JS TRU's letter dated 16 th March 2012. “Similarly, the rate of duty of 1% imposed on 130 items in the last Budget has been increased to 2%”. Well, may be he is correct after all !!! But what about Para 24.2 (ii) – reference to reduction of Basic Customs duty duty from 10% to 7.5% on import of machinery and instruments for surveying and prospecting of mines – now where does this change in rate come from ?