Effective date for levy of excise duty on cigarettes at enhanced rates vide Finance Act, 2012 - CBEC Clarification
IN the Budget 2012-13, vide Finance Bill, 2012 as introduced in the Lok Sabha on 16.03.2012, the basic excise duty rate was increased on various lengths of cigarettes by imposing an ad valorem component in addition to the specific duty, through clause 141 of the Finance Bill read with the Seventh Schedule.
By a declaration under the Provisional Collection of Taxes Act, 1931 (PCT Act), the above increase in the excise duty was made effective immediately on the expiry of the day on which the Finance Bill, 2012 was introduced i.e. with effect from 17.03.2012.
Subsequently, by virtue of Government amendment to the Finance Bill, 2012 as introduced, the ad valorem component of 10% was converted to a specific rate. Consequently, the basic excise duty on cigarettes was levied at specific rates which were higher than the excise duty rates proposed in the Finance Bill as introduced. The Finance Bill, 2012 received the assent of the President on 28.05.2012. Thus, the provisions of the Finance Act, 2012 came into effect from 28.05.2012.
The issue that arises for consideration is whether the excise duty levied on cigarettes at higher specific rates by virtue of the Government amendments to the Finance Bill, 2012 would be applicable with effect from 17.03.2012, immediately on the expiry of the day on which the Finance Bill, 2012 was introduced or w.e.f. 28.05.2012, when the Finance Bill, 2012 received the assent of the President.
In the post-Budget letter issued under F.No.334/1/2012-TRU dated 01.06.2012, it was clarified that since clause 141 of the Finance Bill, 2012 read with the Seventh Schedule, by virtue of which the excise duty on cigarettes was increased, was declared under PCT Act, therefore the rates proposed in the Finance Bill came into effect from 17.03.2012. And, since the rates proposed in the Finance Bill have been revised through Government amendments, the revised rates will apply with effect from 17.03.2012.
Everybody (except the Board of course) knew that this view was patently illegal and without any basis. Anyway, wisdom dawned a little late and the Board sought the opinion of the Law Ministry and fortunately the Law Ministry was not confused by the Revenue drive of the Board and clarified that the tariff rate of duty on cigarettes levied vide amendments in the Finance Act, 2012 shall be applicable from the date of enactment of the said Finance Act i.e. 28.05.2012 and not from 17.03.2012.
Board is kind to accept this 'view' of the Law Ministry and clarifies that the tariff rate of duty on cigarettes levied vide amendments in the Finance Act, 2012 shall be applicable from the date of enactment of the said Finance Act i.e. 28.05.2012 and not from 17.03.2012.
The PCT Act is in existence for more than 80 years and is meant exclusively for customs and excise duties and is not applicable to any other department. The Provisional Collection of Taxes Act is a small Act with just 6 sections and it clearly says that a provision in a Bill introduced in Parliament to increase or impose excise and customs duties will have immediate effect. An amendment to the Finance Bill cannot be a Bill and in any case the PCT Act does not by any stretch of revenue imagination provide for a retrospective levy of excise duty.
But the Board had the audacity to clarify [F.No. 334/1/2012-TRU dated 01.06.2012] that the rate as enacted by the Finance Act on 28.5.2012 will have effect from 17.03.2012!
We told you so ! In DDT 1935 - 05 09 2012, we said, Where from the TRU gathers the powers to make this "specific rate of duty" applicable from 17th March 2012 defies logic.
We are happy that the wise Law Ministry and the wiser Board have accepted our view - after 18 months!
Please also see dated 02.05.2013.
CBEC Circular No. 981/5/2014-CX., Dated: February 11, 2014