Duty on Jute twine? Fire ignited and Jute Industry likely to be engulfed soon
Fire extinguished – exemption notified – DDT salutes a responsive government
TIOL-DDT 621 25.05.2007, mentioned about an inadvertent omission which made jute twine dutiable all of a sudden. Extracts from the DDT
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.
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.
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”.
But, unfortunately chapter sub heading 56079090 does not attract NIL rate in the Tariff and the rate of duty is 8%.
It cannot be construed as a conscious levy as all other jute products continue to attract NIL rate.
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.
We are very happy to report that the Government has very graciously understood the problem and has stopped the big forest fire. Now they have issued a notification whereby Twine of jute or other textile bastfibres of heading 5303, is exempted from the whole of the duty.
This brings a lot of cheer to the harassed jute manufacturers of Kolkotta and other places. Reports have reached us that after seeing our flash yesterday, dancing assessees have gone to Central Excise offices and distributed sweets.
The CBEC deserves all praise for correcting this inadvertent lapse, but there is another problem.
It is now exempted; but what about the last five and a half months when there was no exemption? The Government has to give a Section 11C notification and they will ultimately give it. May be after hundreds of Show Cause Notices are issued and many consultants have made enough money! Why can’t they do it now and save this country some paper and a lot of time of the department and the rest of us. Already a Central Excise officer called us up and informed us that this exemption only proves that duty had to be paid till now and he is going to issue Show Cause Notice immediately even alleging suppression and intent to evade duty!
We will be happy to report as soon as possible that the exemption is with retrospective effect from 1.1.2007.
NOTIFICATION NO. , Dated: June 15, 2007