GOLD industry is the one, which is deeply hurt in the current Budget with launch of attack from all the sides and by all types of missiles from the Finance Minister of India, the supreme commander of the three taxation forces viz. Income Tax, Customs and Central Excise.

As regards imposition of Central Excise duty, the incidence of duty is kept at the barest minimum of 1% ad valorem , that too on the Tariff value fixed at 30% of the transaction value considering the high value segment and the perennial bond that exists between the yellow metal and the customers, sentimental, psychological feeling of being in a secured mental state and as a definite option of investment multiplier. Effectively, the tax burden is 0.309% of the value of transaction. In other words, for the purchase of Gold jewellery worth Rs. one lakh, the customer is required to pay an additional amount of Rs. 309/- as Central Excise duty inclusive of Education cess .

In contrast, the VAT burden for the same amount of purchase is Rs. 1000/-. There is no protest from the industry against the existing levy of VAT, which is 324% higher than the Excise duty. In simple terms, the Industry, which has experienced the days of strict enforcement of the Gold Control Act for a period of about three decades from 1962 to 1992, does not want repetition of the experience of those days. The apprehension of the Industry is meaningless in the context of liberalized tax regime, restrictions for the officers to visit the premises of the assessees and facilitation for online transactions for every activity viz. Registration, tax payment, filing of Returns etc. Practically, in the normal course of activities, the officers of the Department will not go to the business premises of the Trade and the Trade is not expected to visit the field formations for their day-to-day transactions.

Under these circumstances, the agitation against this negligible levy by the manufacturers of unbranded jewellery, which constitutes about 90% of the Gold industry, will have to be gauged as a protest against accounting of all the transactions. Proper accounting means proper accountability to the customers with regard to right standards of the product and proper contribution to the exchequer in accordance with the statutes. The industry cannot shy away from these responsibilities anymore.

While the incidence of tax burden of the Gold industry is kept at a negligible percentage of 0.309% of the transaction value, the additional benefit of SSI exemption is also extended to the Articles of precious metal jewellery under Notification No. 8/2003 CE dated 1.3.2003 as amended. Though the aforesaid levy for the current fiscal is applicable only for a limited period of 15 days, the benefit of SSI exemption is made applicable in full without any curtailment to the extent of Rs. 500 lakhs (Rs. 150 lakhs / 30%)

Board vide Para 8.1 (iii) of letter D.O.F.No.334/ 3/2012-TRU dated 16-3-2012 clarifies the position and legislative intent as follows:

"The exemption limit for the remaining part of 2011-12 i.e. between 17th March, 2012 and 31st March, 2012 is not being curtailed for manufacturers of unbranded jewellery who would come into the tax net afresh. In other words, eligible manufacturers/ factories would be entitled to exemption for the full threshold limit of Rs.1.50 crore for this period. For manufacturers who are already availing of the SSI exemption during 2011-12 also the computation of the exemption limit would have to be made on the basis of tariff value of clearances effected during the period from 17th March, 2012 to 31st March, 2012 by virtue of Explanation (C)(ii) of notification no.8/2003-CE dated 1.3.2003".

7. Explanation (C )( ii) of Notification No. 8/2003-CE dated 1.3.2003 as referred to in the aforesaid letter of the Board reads as follows:

Explanation .- For the purposes of this notification-

(A ) ......

(B ) .......

(C) " value " means

(i) in respect of specified goods which have been notified under section 4A of the Central Excise Act, the value as determined in accordance with the provisions of that section, and

(ii) in respect of specified goods other than those referred to in sub clause (i), the value as determined in accordance with the provisions of section 4 of the Central Excise Act, or the tariff value fixed under section 3 of the said Act;

As could be seen from the above, there is a legislative support for the intention of the Board in Explanation (C )( ii) of Notification No. 8/2003-CE dated 1.3.2003 to allow the full benefit of SSI exemption even for the limited period of 15 days during the current fiscal (2011-12), that too based on the Tariff value (30% of the transaction value) fixed under Section 3 of the Central Excise Act, 1944. The illustration to the Board's letter stated above reinforces the above aspect as follows:

Illustration - If a manufacturer X clears goods of value 1.4 crore till 16th March 2012, and from 17th March to 31st March 2012 manufacturer X clears goods of transaction value 30 lacs , the total value of clearances for SSI exemption in financial year 2011-12 shall be calculated as follows:-

Value of clearances from 1-4- 2011 to 16-3-2012= Rs. 1.4 crore .

Value of clearances from 17-3-2012 to 31-3-2012=Rs. 9 lacs (30% of transaction value 30 lacs )

Total value of clearances financial year 2011-12= Rs. 1.49 crore .

The Board's letter cited above with the illustration contained therein supported by Explanation (C)(ii) of Notification No. 8/2003-CE dated 1.3.2003 makes it amply clear that the full benefit of SSI exemption is admissible for the period from 17-3-2012 to 31-3-2012 based on the Tariff value fixed under Section 3 of the Act.

It has to be remembered in this context that the SSI exemption Notification consists of two distinct compartments, one is with reference to the availment of SSI benefit and another is with reference to the SSI eligibility. While there is no ambiguity or dispute with regard to the applicability of SSI benefit for the period from 17-3-2012 to 31-3-2012, the eligibility for availment of the SSI exemption for the aforesaid period is dependent on the value of clearances effected by the manufacturer during the preceding Financial year 2010-11. Para 2 .( vii) of Notification No. 8/2003-CE dated 1.3.2003 reads as follows:

" the aggregate value of clearances of all excisable goods for home consumption by a manufacturer from one or more factories, or from a factory by one or more manufacturers, does not exceed rupees four hundred lakhs in the preceding financial year".

Thus, the full SSI benefit based on the Tariff value could be extended to the manufacturer of precious metal jewellery for the period from 17-3-2012 to 31-3-2012, if only the value of clearances had not exceeded the prescribed limit of Rs. 400 lakhs during the preceding financial year viz. 2010-11.

Another question that arises in this context is whether the value of clearances for the year 2010-11 can be reckoned based on the tariff value (30% of the transaction value). It is not possible to do so as there is no legislative support for that. While considering the SSI eligibility level for 2012-13, the Government has reckoned the value of clearances of 2011-12 based on the Tariff value of the goods. The proviso appended to Para 2 (vii) of Notification No. 8/2003 CE dated 1.3.2003 as per Notification No. 15/2012 CE dated 17-3-2012, which facilitates such a method of reckoning reads as follows:

"Provided that for the purposes of availing of exemption under this notification for the financial year 2012-13, the aggregate value of clearances of articles of jewellery (other than silver jewellery) falling under Chapter heading 7113 of the First Schedule, for home consumption by a manufacturer from one or more factories, or from a factory by one or more manufacturers, for the financial year 2011-12 shall be calculated on the basis of tariff value fixed in accordance with notification no. 09/2012-Central Excise (NT), dated the 17 th March, 2012."

By virtue of the above proviso, the SSI benefit would be admissible for the year 2012-13 to those manufacturers, whose value of clearances had not exceeded the limit of Rs. 1333 lakhs during the year 2011-12. In the absence of such a method of reckoning for the Financial year 2011-12 based on the value of clearances of the Financial year 2010-11 for the purpose of considering the SSI eligibility, the SSI benefit cannot be extended for the period from 17-3-2012 to 31-3-2012 to those assessees , whose value of clearances had crossed the limit of Rs. 400 lakhs during the year 2010-11.

The inference from the expression viz. "eligible manufacturers/ factories would be entitled to exemption for the full threshold limit of Rs.1.50 crore for this period" (17-3-2012 to 31-3-2012) used in the Board's Circular dated 16-3-2012 is that the eligibility will have to be determined in accordance with the provisions of the law ie the proviso to Para 2(vii) of Notification No. 8/2003 CE dated 1.3.2003. The definition for "value" contained in the Explanation (C )( ii) of Notification No. 8/2003-CE dated 1.3.2003 cannot come to the rescue of the manufacturers in so far it relates to SSI eligibility as the fixation of tariff value for the precious metal jewellery in terms of Section 3 of the Central Excise Act, 1944 was only with effect from 17-3-2012 as per Notification No. 9/2012 CE dated 16-3-2012.

In spite of the above, the manufacturers of unbranded jewellery believe that there will not be any duty liability for them upto the transaction value of Rs. 500 lakhs during the period from 17-3-2012 to 31-3-2012 without any curtailment or restrictions. It is high time the Department educated them that their entitlement for SSI benefit for the current fiscal is in accordance with the SSI eligibility , which is based on the value of clearances of all the excisable goods (including the exempted goods) effected during the preceding Financial year.

Also See detailed Power Point Presentation on this issue

(The views are personal)