Duty on Jute twine? Fire ignited and Jute Industry likely to be engulfed soon
This is a classic example of how unintended actions can be disastrous to the trade and industry. Jute goods have been enjoying exemption for quite some time and twine is no exception. To eliminate the hassles of even exemptions, the Tariff rate itself is made NIL in the Central Excise Tariff. But in the maze of amendments to the Central Excise Tariff from 6 digit to 8 digit and consequential amendments to the related exemption Notifications, a small error is now snowballing into huge demands and going to be another gold mine for the consultants.
Jute twine is classified under the Chapter sub heading 5607.10 of the erstwhile Central Excise Tariff attracting NIL rate in the Tariff itself.
In 2004, Notification 30/2004CE was issued with the following changes:
Sl No | Chapter No | Description of goods |
|---|---|---|
11 | 56 ( except 5601.10, 5607.10,5608.11) | All goods |
The goods falling under the above three sub headings excluded attract a NIL rate of duty in the tariff, and thus exemption itself is not necessary.
With effect from 28.2.2006 the eight digit tariff has replaced the six digit tariff and jute twine was classifiable under Chapter sub heading 5607.1010 with NIL rate of duty. Notification 30/2004 has been further amended at serial No 11 as under vide Notification 15/2006
Sl No | Chapter No | Description of goods |
|---|---|---|
11 | "56 (except 5601 10 00, 5607 10 10,5607 10 90, 5608 11 10 and 5608 11 90)" | All goods |
So, jute twine continued to attract NIL duty under Tariff.
The tariff heading have undergone another change in 2007 and from 1.1.2007, when the sub headings 5607.1010 and 5607.1090 were omitted from the tariff. But no mention was made about jute twine etc., Since there is a residuary entry in the Chapter, jute twine stand shifted to Chapter sub heading 56079090 under “others”. Now also the exemption notification 30/2004 has been amended as under vide Notification 48/2006 to exclude jute twine from the Notification.
Sl No | Chapter No | Description of goods |
|---|---|---|
11 | "56 (except 5601 10 00, 56079090 ( jute or other textile bastfibres of heading 5303, 5608 11 10 and 5608 11 90)" | All goods |
But, unfortunately chapter sub heading 56079090 does not attract NIL rate in the Tariff and the rate of duty is 8%.
Another amendment was made vide Notification 13/2007 after which serial number 11 reads as under:
Sl No | Chapter No | Description of goods |
|---|---|---|
11 | 56 (except 5601 10 | All goods, other than of jute or other textile bastfibres of |
So, an exemption Notification, which was started to exclude jute twine from the exemption as it attracted NIL tariff rate, continued to be excluded even when the tariff rate became 8% in 2007. It implies that all other products of Chapter 56 are eligible for exemption ( 56011000 attracts NIL rate in Tariff) except jute twine!!
It cannot be construed as a conscious levy as all other jute products continue to attract NIL rate. Unfortunately the optional rate of duty with the facility of excise duty given under 29/2004 is also not applicable for jute twine as the same has been excluded even there.
The error is more glaring since no duty is levied on jute yarn and fabrics and it is highly improbable that government wanted to levy tax only on twine.
DDT has learnt that demand notices are already flying in West Bengal where majority of jute mills are located and the fire is fast spreading. Unless the Government attempts to stop it in the beginning, it is bound to be a big forest fire.