Clarification regarding peripheral activities for Area Based Exemption notification Nos. 49 & 50/2003-CE as amended - Board Clarifies or is it a slip?
BY virtue of Notification No. 1/2008-CX dated January 18, 2008, Notifications 49/2003-CE and 50/2003-CE both dated June 10, 2003 were amended to include paragraph 4 which reads as follows:
“4. The exemption contained in this notification shall not apply to such goods which have been subjected to only one or more of the following processes , namely, preservation during storage, cleaning operations, packing or repacking of such goods in a unit container or labeling or re-labelling of containers, sorting, declaration or alteration of retail sale price and have not been subjected to any other process or processes amounting to manufacture in the States of Uttarakhand or Himachal Pradesh.” (emphasis supplied)
The effect of this insertion was clarified by Circular No. 864/2/2008-CX., dated January 18, 2008 wherein it was stated that this new paragraph has been inserted in both the notifications to exclude certain peripheral activities from the operation of these notifications. It was clarified that the benefit of the said notifications will not be available to goods which have been subjected to only one or more of the following processes such as packing or re-packing of such goods in a unit container or labelling or re-labelling of containers, declaration or alteration of retail sale price, etc. In other words, units carrying out only such processes would not be eligible for exemption benefit and would be required to pay duty as per normal procedure . (emphasis supplied)
It may be noted that processes like preservation during storage, cleaning operations which were mentioned in paragraph 4 was left out in Circular No. 864 dated 18.01.2008.
However, references were received from the field formations seeking further clarification as to whether the benefit of area based exemption notifications would be applicable if both the activities viz., manufacture of main product for e.g. hair oil in bulk and peripheral activities for e.g. repacking into bottles are carried out in the specified areas. To elaborate further, if in a situation, hair oil is manufactured in bulk in a unit situated in the specified area and such hair oil is sent to a job worker in specified areas who repacks the bulk oil in retail packs.
This issue was discussed in the Chief Commissioner's Conference held at Shillong on 30 th and 31 st October, 2009. In that Conference it was viewed that the benefit of exemption has to be allowed in cases where both the activity of manufacture and the peripheral activities mentioned in the notifications are undertaken in the specified areas i.e. Uttarakhand or Himachal Pradesh.
Agreeing with this decision of the Chief Commissioner's Conference, Board in its latest Circular clarifies that the benefit of Notifications 49/2003-CE and 50/2003-CE as amended should be available to such goods where both the activities of manufacture of the main product and the peripheral activities are undertaken in the specified areas in the States of Uttarakhand or Himachal Pradesh even if peripheral activity alone is undertaken by job workers in the specified areas.
It may be noted that the last sentence in paragraph 4 of the latest Circular as highlighted above says ‘even if peripheral activity alone is undertaken by job workers in the specified areas'. This last sentence which was included in the latest Circular is clearly contradictory to the view adopted by the Chief Commissioner's Conference as highlighted in the latest Circular as well as paragraph 4 of Notifications 49/2003-CE and 50/2003-CE as amended by Notification 1/2008-CE dated 18.01.2008 and also the earlier clarification issued by Circular 864 as emphasised by underlining the respective sentences of paragraph 4 (extracted above) and paragraph 2 of Circular No. 864 (extracted above).
Maybe the whole idea is to allow exemption to job workers who undertake only peripheral activity.
Further, in the latest Circular, Board has referred to the earlier TRU Circular dated 18.01.2008 as Circular No. 863/1/2008-CX whereas this Circular was re-numbered as Circular No. 864/2/2008-CX., vide Circular No. 866/4/2008-CX., Dated: February 28, 2008. Has the Board forgotten that Circular No. 863/2008 pertains to the issue of filing appeals, not the peripherals in Uttarakhand and Himachal Pradesh? At least they should get their numbers right!
Last but not the least, this latest Circular is numbered as 908 which is dated December 23, 2008 whereas Circulars 909 and 910 are dated 11.12.2009 and 16.12.2009 respectively. How could this happen? The Board's numbering system needs an overhaul.
Circular No. Dated: December 23, 2009