Why no excise exemption for relief to Tsunami victims?
Will the Government exempt the goods supplied for Tsunami victims, from payment of excise duty?
DDT has been receiving queries from various quarters, as to whether the Government of India has issued any notification exempting various goods, including medicines supplied to the Tsunami affected area. DDT hopes that the Government will soon come out with such exemption notifications, as it was done during the Gujarat Earth Quake.
A little history here, though a very recent one. The devastating Gujarat Earthquake happened on the 26th of January 2001. On 27th of January, the Government issued Notification No. 2/2001 exempting all goods donated or purchased out of cash donations, for the relief and rehabilitation of the people affected by the earthquake in the State of Gujarat from the whole of the duty of excise leviable thereon.
Even though 26th January was a holiday, the first thing that the Revenue Administration in North Block did on the next day was to issue an exemption notification for the relief of the victims. Our Board can really work fast in an emergency.
But what happened now? We are already into five days of the tsunami tragedy and there is no sign of an excise exemption anywhere in sight? Is the Board waiting for a representation from somebody?
The exemption will be given in due course. But will it not be ‘sooner the better’?
And this unfortunately raises another important question. If these goods meant for relief are exempted, should they pay 10% of the price as per Rule 6 of the Cenvat Credit Rules 2004? If so, where is the exemption? If the goods are supplied free where is the question of paying 10% of the price when there is no price at all? But this is not how Central Excise works even in a tragedy!
The last time around, when the Government was double quick to grant the exemption, it took its sweet time to administer the bitter pill. In F. No. 332/1/2001-TRU, dated 16-2-2001, the Board clarified that in relation to relief material for the quake victims,
the manufacturer can either maintain separate record or reverse amount equivalent to 8% in the first case i.e. the sale to relief agency who purchase the goods out of cash donations. However, in the second case since there is no sale, the manufacturer cannot avail the option of reversing amount equivalent to 8% of the sale price, and the only option left with him for availing the benefit of the notification is to maintain separate records of inputs, and to not take credit in respect of inputs which have been used in or in relation to the manufacture of the exempt goods.
Will any goods move from any factory under such impossible conditions?
DDT suggests that when an exemption notification is issued for the goods supplied to the Tsunami victims, it should be specifically mentioned that the fetters of Rule 6 of the Cenvat Credit Rules will not bind this exemption.
If the Government does not come up with that kind of notification, the benevolent hearts, despatching the goods to the victims can boldly go for the suggestion made in DDT-15 – you need not pay 10%, you need not maintain separate accounts and you can take cenvat credit - citing the decision of the Bangalore bench of the Tribunal in the case of A.P. Mills Vs CCE - reported in 2004-TIOL-1056-CESTAT-BANG.
Let donations not be hampered by bad laws.