Exemption to Ordnance factories - Confusion in field formations and trade
VIDE Notification No 23/2015 CE dated 30.04.2015 (w.e.f 01.06.2015) , two old Notifications in Central Excise, i.e., 62/95 and 63/95 have been amended. In Notification No 62/95 CE, the following entries of exemption were omitted:
1. | All goods [Sl.No. 1 is omitted with effect from 1st June, 2015 vide Notification No. 23/2015-CX., dated 30-04-2015] | If produced in Ordnance factories belonging to the Central Government and intended for consumption by the members of the Armed Forces of the Union or by such Ordnance factories. |
6. | Arms and Ammunition falling under Chapter 93 [Sl.No. 6 is omitted with effect from 1st June, 2015 vide Notification No. 23/2015-CX., dated 30-04-2015] | If (i) produced in Ordnance factories and supplied to the Police Forces of the States or the Union Territories; and (ii) in each case, before the clearance of the said goods an officer not below the rank of a Joint Secretary in the Ministry of Home of the concerned State or Union territory/Home Department of the concerned State or Union territory recommends grant of the exemption indicating full description and quantity of the said goods to be supplied to the said Police Forces of the States or Union Territories. |
So, after this amendment, the above goods manufactured by the ordnance factories became dutiable and the exemption is not allowed.
Similarly, in Notification No 63/95, the following entries were omitted:
2. | All goods [Sl.No. 2 is omitted with effect from 1st June, 2015 vide Notification No. 23/2015-CX., dated 30-04-2015] | If manufactured by the following units and are for supply to the Ministry of Defence for official purposes :- |
16. | (I) Pistol 9 mm and Rifle 7.62 mm SLR falling under chapter 93 (II) Parts and components of (I) above [Sl.No. 2 is omitted with effect from 1st June, 2015 vide Notification No. 23/2015-CX., dated 30-04-2015] | If, - (i) manufactured by M/s. Bharat Dynamics Limited, Hyderabad and supplied to the Armed Forces of the Union and Police Forces of the States or the Union territories; and (ii) before the clearance of the said goods, in each case, an officer not below the rank of a Deputy Secretary in the Ministry of Home Affairs recommends grant of this exemption indicating the full description and quantity of the said goods to be supplied to the said force. If produced in - (a) Bharat Dynamics Limited; or |
See /01.05.2015
However, there is one more exemption Notification which also needed an amendment, but the authorities have lost sight of the same at the time of amending the above two Notifications.
Notification No 64/95 CE dated 16.03.1995 provides exemption to parts of motor vehicles supplied to Central Government Ordnance factories for the purpose of manufacture of vehicles falling under Chapter 87 of the Schedule. Sl No 6 of the Notification reads:
6.
Parts of motor vehicles falling under chapter 45,48/68,73, 85,87 or motor vehicles in completely knocked down or semi knocked down form
If,-
(i) used in a Central Government Ordnance Factory for the manufacture of vehicles falling under Chapter 87 of the said Schedule; and
(ii) such use is elsewhere than in the factory of the production of such parts, the procedure set out in the Central Excise (Removal of Goods at Concessional Rate of Duty for Manufacture of Excisable Goods) Rules, 2001, is followed.
Obviously after the amendments made vide Notification No 23/2015 CE, the ordnance factories are required to pay duty on all goods manufactured by them. So, even if these parts are supplied duty free, there is no exemption to finished goods manufactured by the Ordnance factories.
It appears that there are some doubts as to what needs to be done in cases where parts of motor vehicles are supplied by one ordnance factory to another ordnance factory. In such cases, the supplying ordnance factory can avail the exemption under Notification No 64/95 CE.
CBEC should consider issuing a clarification as doubts are being expressed by departmental officers.
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