Abatement for goods under MRP based assessment – Government Not a Friend in Deed during upward revision of duty rates?
A number of goods are assessed under Section 4A of the Central Excise Act, 1944 based on the MRP. The rate of abatement is notified under a separate notification issued by exercising the powers under Section 4A. With effect from 1 st March 2008, the central excise duty rate was reduced from 16% to 14%. Along with the tariff notifications reducing the rate of duty, simultaneously the abatement was also reduced by 2 percentage points vide Notification No dated 1.3.2008.
In the second round, with effect from 24 th December 2008, duty rate was again reduced. This time also abatement on the good notified under Section 4A was reduced by 3 percentage points vide Notification dated 24th December 2008. Again the duty rate was reduced with effect from 7 th July 2009. But this time, Notification 49/2008 CE (NT) was amended vide Notification No 18/2009 CE (NT) dated 7.7.2009 to increase the abatement for 5 items.
Finally, when the stimulus package was rolled back in this year's budget and central excise duty rate has been enhanced to 10%, no corresponding changes have been made to the abatement rates except for two items at S.Nos. 21 and 27 of the said Notification. Without going into the reasons for simultaneous amendments made to the abatement rates along with the duty rates, it should be logical to roll back the abatement rates for all goods when the duty concessions were withdrawn. But when it comes to increasing the abatement rates, it appears that the Government has selective amnesia. Again can the Government say that raising or reducing the rates of abatement is its sole prerogative?
But why the abatement should be reduced when the duty rates are reduced? Whenever the duty rates are reduced, the manufacturers normally pass on the duty benefit by reducing the MRP. There is nothing much to worry about the abatement rates. But unfortunately it appears that the law makers are under the impression that with the reduction in duty rates, if abatement is also not reduced simultaneously, the manufacturers will be benefited by keeping the “previous tax amount” in the MRP. It leads us to a very fundamental question about the basis for fixing the abatement rates and why only five commodities were considered for Notification 18/2009 CE (NT) and two commodities under Notification 9/2010-CE (NT).