No Duty imposed by Notification No 59/2008-CE
Notification No. dated 7.12.2008, has created quite a confusion in the minds of officers and assessees. TIOL phones were incessantly ringing with anxious queries from agitated assessees as well as concerned officers. Even some of our technical experts had doubts.
The simple notification simply prescribed an effective rate of excise duty of 4% for most of the 24 items figuring in the notification. Of course there were a couple of 8% items and a few 20%+....
Sl. No. 1 of this notification refers to inter alia Heading 1507 to 1515, which attract a 4% duty.
By Sl. No 9 of Notification No. , Dated: March 1, 2006, these goods attract nil rate of duty. When these goods already attract a nil rate of duty by a notification issued in 2006, what happens when a notification issued in 2008 prescribes an effective duty of 4%? DDT understands that in some places, the Department has already initiated action to make the units pay the 4% duty.
There is so much confusion in the trade that the Solvent Extractors' Association of India (SEA) has issued a clarification that they have checked up the factual position and has advised its members that there is no excise duty levied on domestically produced edible oils nor ad valorem duty on imported oils by these notifications and they continue to enjoy exemption.
The Notification 59/2008 has simply made an effective rate of 4% for those goods for which there is a tariff rate of 8%. A similar exercise was done at the time of Budget 2008, when the goods which attracted a tariff rate of 16% were reduced to 14% by Notification No. dated 1.3.2008. At that time the 8% rate was not touched as it was anyway less than 14%.
Now there is a 4% reduction across the Board.
Now what is the effect of Notification No. 59/2008 which prescribes a 4% duty and Notification No. 3/2006 which prescribes a nil rate?
Fortunately you don't need DDT's advice. The Board itself clarified on this situation.
While reducing the rate to 14% in this year's Budget, the JS TRU in his DO Letter 334/1/2008- TRU dated 29th February, 2008, clarified,
The general rate of excise duty (CENVAT) has been reduced from 16% to 14%. This reduction applies to all goods that hitherto attracted this general rate of 16%. In some cases, a deeper reduction has been made, the details of which are indicated in the subsequent paragraphs. These changes have been carried out by notification. The other ad valorem rates of 24%, 12% and 8% have been retained.
Since the reduction in the general rate has been carried out by notification, the possibility of the same product/item being covered by more than one notification cannot be ruled out. In such a situation, the rate beneficial to the assessee would have to be extended if he fulfils the attendant conditions of the exemption.
So it is clear that Notification No. 59/2008 does not impose any 4% duty, it actually exempts. If there is any other notification which prescribes a lesser rate of duty, the assessee is free to avail that and the Department cannot force the assessee to avail any particular notification.
The poor boys in TRU must have struggled for hours to sort out the 8% rates in the Tariff and draft this exemption Notification No. 59/2008; the field understands it as imposition of duty.
Perhaps the Board should have given a similar clarification now as they did at the Budget time, but they might not have realised that an exemption can be understood as an imposition.