Hotels beware - you may be called upon to pay excise duty- M.O Circular
MUMBAI-I Central Excise Commissionerate has issued a Modus Operandi Circular regarding evasion by cake shops.
Intelligence received reveals that Hotels, Restaurants, Clubs, Standalone Retails Outlets of food items (cake shop) are engaged in the manufacture & sale of excisable goods viz. Other food preparations falling under Chapter Nos. 16,19 (except 1905) & 20 and Cakes, Pastries, Cookies, Biscuits falling under Chapter-heading No.1905 of CETA 1985 with an aggregate turnover of these goods exceeding well over Rs.4 Crores. Although, the 'Other food preparations' are chargeable to Nil duty at Sr. No. 12 & 13 of the Table under Notfn. No. 12/2012 dt.1.3.2012, nevertheless they remain "excisable goods" as defined in Section 2(d) of Central Excise Act, 1944. Since the combined turnover of the dutiable goods like 'Cakes, Pastries, Cookies, Biscuits falling under Heading No.1905 and 'Other Food Preparations' being exempt but excisable goods, falling under Chapter Nos. 16, 19 & 20 of CETA, 1985, exceeds Rs. 4 Crores, such manufacturers (hotels, restaurants, clubs, retail outlets) become ineligible to the benefits of the threshold exemption limit for other excisable goods manufactured, in this case for cakes, pastries, cookies, biscuits falling under Heading No. 1905.
Accordingly, 11 cases were detected against such manufacturers unearthing an evasion of Central Excise Duty of Rs.4 Crores. There also had been a recovery of total Rs.2.80 Crores.
As such Hotels, Restaurants Retail outlets, Clubs, Cakes shops who manufacture the cakes, pastries, cookies, biscuits falling under Chapter-Heading No.1905 alongwith 'Other Food Preparations' of Chapter Nos. 16, 19 & 20 are liable to pay Central Excise duty on products of Chapter Heading 1905 in the succeeding financial year, right from the first clearance, in terms of Para 2 (vii) read with Para 3 A of the Notfn. No.8/2003 as amended dt.1.3.2003, in case their aggregate turnover of all excisable goods including exempt goods has crossed Rs. 4 Crores in previous financial year and the benefit of SSI Notification No.8/2003 dated 01.03.2003 as amended will not be available to them.
The above modus operandi of wrong availment of benefit of SSI Notification 8/2003 dated 01.03.2003 as amended and resultant non payment of Central Excise duty on cakes pastries cookies Biscuits falling under Chapter 1905 is brought to the notice of the field formations across the country for taking necessary action in similar cases.
The Commissioner wants Action taken and results achieved in this regard to be communicated to his office.
Hotels, Restaurants and even cake shops - beware - you may have a friendly visit from the excise office soon.