Paan Masala under compounded Levy
Section 3A of the Central Excise Act had been in and out of the Act and always leaving behind a trail of litigation. This year's Finance Act had seen its resurrection. This section, in simple terms gives the government the power to levy excise duty based on the capacity of production rather than on the quantum of clearances.
Now the Government has notified
(i) paan masala falling under tariff item 2106 90 20 of the First Schedule to the Central Excise Tariff Act, 1985 (5 of 1986), except the pan masala containing not more than 15% betel nut; and
(ii) paan masala containing tobacco, commonly known as gutkha, falling under tariff item 2403 99 90 of the said Tariff Act,
manufactured with the aid of packing machine and packed in pouches as notified goods, on which there shall be levied and collected duty of excise in accordance with the provisions of the section 3A.
Government has also notified the Pan Masala Packing Machines (Capacity Determination And Collection of Duty) Rules, 2008.
The Government has also issued a notification specifying the duty applicable which is as follows:-
S. No. | Retail sale price (per pouch) | Rate of duty per packing machine per month | |
|---|---|---|---|
Pan masala | Pan masala containing tobacco | ||
(1) | (2) | (3) | (4) |
1. | Up to Rs. 1.00 | 9.25 | 12.50 |
2. | From Rs. 1.01 to Rs. 1.50 | 14 | 19 |
3. | From Rs. 1.51 to Rs. 2.00 | 18 | 24 |
4. | From Rs. 2.01 to Rs. 3.00 | 26 | 36 |
5. | From Rs. 3.01 to Rs. 4.00 | 34 | 47 |
6. | From Rs. 4.01 to Rs. 5.00 | 43 | 59 |
7. | From Rs. 5.01 to Rs. 6.00 | 51 | 70 |
8. | Above Rs.6.00 | 50 + 8.36 * (P - 6), where P represents retail sale price of the pouch | 69 + 11.45 * (P - 6), where P represents retail sale price of the pouch |
Illustration. - The rate of duty per packing machine per month for a gutkha pouch having retail sale price of Rs. 8.00 (i.e. 'P') shall be
= Rs. 69 + 11.45*(8-6) lakhs
= Rs. 91.90 lakhs
TIOL illustration
It seems there is mathematician in Board who is getting all his researched formulae wrong. If your Gutkha pouch has MRP of Rs 6.00, as per the above table, you have to pay Rs. 70 lakhs a month. You can save Rs 89,000/- duty per month per machine by just increasing the MRP to Rs 6.01/ - This is how it works. Since the MRP is more than Rs 6/-, you are under Serial No 8. Now, as per the formula, your duty will be Rs 69 + 11.45 multiplied by ( 6.01-6.00). This makes the total duty as Rs 69.11 lakhs ( Rs 69 lakhs plus 0.11 lakhs )
So now, Gutkha with MRP of Rs 5.50/- attracts more duty than Gutkha with MRP of Rs 6.01/-
This duty will be inclusive of all duties like AED , NCCD, Education Cess and the SHE Cess.
The Notifications were issued late yesterday evening and are applicable from early morning of yesterday.
Notification No. , , and , all Dated: July 1, 2008