Intermediate goods for manufacture of chaddars - exemption under Section 11C proposed
Section 11C is a provision in the statute that allows the lawmaking babus to correct their mistakes. While making changes in the laws, they leave certain loose ends; for example, when an exemption is given usually some periods are left out. Generally on noticing the mistake, the Board issues a retrospective exemption notification under Section 11C of the Central Excise Act. But this is usually preceded by hundreds of Show cause Notices and avoidable litigation. One such issue is before the Board.
The manufacturer of chaddars buys the cotton yarn and carries out processes like dyeing, printing, bleaching, etc on such yarn. These activities are chargeable to duty in terms of Chapter Note to Chapter 52. However, the chaddar was eligible for exemption SSI notification No. 8/2003 for clearance upto Rs. 1 crores. As there was no exemption to the said intermediate yarn, duty had become payable on such yarn. Prior to 01.03.2003, dyed printing bleached yarn of Chapter 52 were exempted provided duty has been paid on base yarn (Sl. No. 95 of Notfn. No. 6/2002). Therefore, prior to 1.3.2003, problem of payment of duty on such intermediate yarn by chaddar manufacturers did not arise. However, for the subsequent period, chaddar was eligible for Rs. 1 crore exemption under Notfn. No. 8/2003 (SSI Notification). Further, all intermediate goods manufactured and used captively within the factory were also exempted in the same notification. But these intermediate goods should also be specified in the notification and goods of chapter 52 were not covered by the said SSI notification. Therefore, duty liability on these intermediate yarns existed even though the final product namely chaddars was exempted.
Now Board is considering issue of a Section 11C Notification but before that wants Chief Commissioners to furnish tons of data like amount of duty collected, not collected, audit objections, court cases etc,. Board wants the particulars urgently as a VIP reference is pending.
The period is 01.03.2003 to 08.07.2004 and the Board is still calling for particulars. When it knows that duty could not be demanded, why can't the Section 11C Notification be issued immediately?
Sometime back we had reported about jute twine becoming dutiable because of the switch over from 6 digit tariff to the 8 digit one. The good Board was kind enough to issue an exemption notification.
In - 19.06.2007, we had reported,
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.
Maybe it will take three and a half years to issue that notification - if there is a VIP reference!
CBEC F.No. 63/01/2004-CX-1 dated August 14, 2007