Reduction in duty rates across the board - shouldn't abatement rates and rule 6 amount payment follow suit?
We have been receiving calls from anxious assessees as to whether the abatement rates for MRP based assessment, had been reduced consequent to 4% reduction in excise duties across the board. They wondered why there is no simultaneous amendment in the notification 14/2008 CE (N.T) dated 01.03.2008 prescribing various rates of abatement for commodities subjected to MRP based valuation. Since the duties have been reduced by four percentage points, shouldn't these abatement rates be also reduced?
We were surprised that the assessees were so concerned instead of enjoying the benefit; then a soft drinks giant informed us that what he really wanted to know is whether such a notification had been issued and we had not carried it. He also told us, "the trade is happy; don't remind the government about this."
AG's Audit will certainly object - stimulus notwithstanding.
Similarly, as mentioned in our analysis of the mini-budget, the 10% amount required to be paid under rule 6 of the CENVAT Credit Rules, 2004 needs a fresh look.
This 10% payment made its appearance when the CCR, 2002 gave way to CCR, 2004 on 10.09.2004. Earlier, it was 8% since the day such a rule came into being on 01.09.1996 in the form of rule 57CC, 57AD of CER, 1944, rule 6 of CCR, 2001. Incidentally, when it was made 10% on 10.09.2004, the 2% Education Cess was already in vogue since 09.07.2004. Although the Secondary & Higher Education Cess of 1% came to be imposed since 01.03.2007, the percentage of 10% amount still continued.
The Union Budget, 2008 also failed to address this 10% factor suggesting that it is an "amount fixed" and would remain constant, come what may.
Now, that the CENVAT duties have been reduced by four percentage points across the board, except, of course in respect of petroleum products, this 10% amount to paid on the value of the exempted goods certainly needs a correction.