SSI Notification and 3/2014-CE - a disconnect
IN a mail, we were informed of the following by a registered SSI unit.
1. They are engaged in the manufacture of Rail Joints for the Indian Railways.
2. Rails are supplied free of cost by Railways and without the cover of any duty paying documents.
3. The Notification in question is No. 3/2014-C.E., dated 3-2-2014 and it provides the following rate of duty -
Sl. No. | heading or sub-heading | Description of excisable goods | Rate | Condition No. |
|---|---|---|---|---|
(1) | (2) | (3) | (4) | (5) |
"205A | 7302 or 8530 | Railway or tramway track construction material of iron and steel. Explanation. - For the purposes of this exemption, the value of the goods shall be the value of goods excluding the value of rails. | 12% | 49"; |
Condition 49:
"49
If manufactured out of rails on which duty of excise has been paid and no credit of duty paid on such rails has been taken under rule 3 or rule 13 of the Cenvat Credit Rules, 2004.".
4. The assessee satisfies the condition mentioned against the said entry and, therefore, stake their claim for the same.
5. As mentioned, since they are a SSI unit and do not avail any CENVAT credit on inputs, they are not required to pay any CE duty for an aggregate clearance value of Rs.1.5 crores in terms of notification 8/2003-CE.
6. For computing this value of Rs.1.5 crores, the SSI unit takes into account the value as arrived in terms of the Explanation to the notification.
7. The department has objected to the same and resultantly the assessee has been asked to pay excise duty. It is the department's view that the "Explanation" would be applicable for computing the value only when the assessee 'pays' the duty of 12% Basic in terms of the amending notification 3/2014-CE and not otherwise.
8. Applying the provisions of section 4 of the CEA, 1944 read with rule 6 of the Valuation Rules, 2000, they are including the value of the rail in the value of the rail joints manufactured and cleared by the assessee. This has led to astronomical CE duty demand on the small-time assessee. Shutting down of business is the only option left.
9. In this Make in India era, there are hundreds of such small time rail joint manufacturers who would be saddled with crores of demands.
10. Unless the CBEC listens to their plea and carries out the necessary amendment in the SSI notification,doomsday is near.
There is also another issue with this. Sl No 30 of Notification No 5/2006 CE dated 01.03.2006 provided exemption from the value of Rails. This Notification was in force up to 16.3.2012.With effect from 17.03.2012, concessional rates of duty vide Notification Nos 3/2005-CE dated 24.2.2005, 3 to 6/2006-CE, all dated 1st March, 2006, 10/2006-CE dated 1.3.2006;2/2008-CE dated 1.3.2008;and 59/2008-CE dated 7.12.2008 - merged into a Single Notification No 12/2012 dated 17.03.2012. This new consolidated Notification has 344 entries and in the process of consolidation, some of the earlier entries were lost sight of. One such entry is Sl No 30 of Notification No 5/2006 CE. This has been rectified vide amending Notification No 3/2014 CE dated 03.02.2014 and the exclusion of value of rails has been restored for the above goods.
But, for the period from 17.03.2012 to 02.02.2014, there was no exemption because of a mistake by a babu and the department is demanding differential duty on value of rails during this period. Again astronomical sums from Small Scale Industries!
Perhaps, a section 11C notification would be in order.