excise duty on jewellery

A Walkthrough Central Excise Duty on Jewellery Sector

(Practical difficulties and solutions)

1st Edition

24 June 2016

OPTITAX'S CONSULTING LLP Raveendra Pethe

Sunil Kumar

SOLUTIONS COMBINED

Ketan Bhinde Arti Sehgal

P a g e | 2 OPTITAX'S CONSULTING + SOLUTIONS COMBINED

Content 1. Preface..................................................................................................... 4

2. Background .............................................................................................. 5

3. Brief on changes made in Union budget 2016-17 ..................................... 6

4. Conventional ways of doing business by Jewellery Sector ....................... 8

4.1 Manufacture of jewellery on job work basis................................................ 8

4.2 Movement of raw material, semi-finished jewellery and finished

jewellery.................................................................................................... 9

A. Raw material.......................................................................................... 9

B. Semi-finished jewellery.......................................................................... 9

C. Finished jewellery.................................................................................. 10

4.3 Trading of jewellery .................................................................................. 10

4.4 Sale to the Customers................................................................................ 10

A. Sale of jewellery for money................................................................... 11

B. Sale of jewellery for Exchange................................................................ 11

C. Sale of Gold as such................................................................................ 11

D. Repairs and maintenance........................................................................ 11

5. Manner of applicability of Excise procedures to the

jewellery sector ..................................................................................... 12

5.1 Manufacture of jewellery on job work basis............................................. 12

5.2 Manufacture of jewellery in own factory ................................................. 15

5.3 Deemed manufacturing ........................................................................... 15


6. Practical difficulties and possible solutions for proposed format or

modalities under Excise law………….......................................................... 17

6.1 Registration............................................................................................. 17

6.2 Person liable to pay Excise duty in case of manufacturing on job work basis........................................................................................................ 18

6.3 Procedural difficulties.............................................................................. 20

A. Movement of Raw material, Semi - finished and Finished jewellery.... 20

B. Mode of Valuation of jewellery removed from job worker's

premise.................................................................................................... 23

C. Invoicing............................................................................................... 24

D. Receipt of duty paid jewellery.............................................................. 25

E. Deemed manufacturing......................................................................... 27

F. Duty liability of Stock of jewellery lying on 29th February 2016............. 28

G. Service tax implication.......................................................................... 29

7. Clarification needed................................................................................ 31

8. About us.................................................................................................. 32

9. Contact us................................................................................................ 34

10. Appendix (legal provisions)...................................................................... 35


1. Preface Jewellery business is one of the oldest businesses in India and is still conducted in the most traditional ways. Generally business is traditionally run by families and the secret of running the business is handed over from one generation to other. They have evolved ways of doing business which now are deep rooted. The records are also kept in the traditional ways.

The Central Excise law on the other side demands most up to date record keeping in the prescribed manner. The special leave-ways in the procedures offered to the industry as well would require industry to be more responsive towards possible future checks by the Central Excise department. We believed that the understanding of the business followed by explanation about the manner in which the Central Excise law would be complied will make it simple for the industry to follow the complex law in easier way. Though, presently the industry is assured about not having surprise visits/raids/checks by the Central Excise department, regular scrutiny and audit by the departmental authorities cannot be ruled out in the near future.

A streamlined approach to compliances under the applicable regulations will not only be helpful to keep their track clean before the regulatory authorities but also will prepare the industry to face the impending GST. This will also serve in the interest of the customers of the industry. In a way it can be helpful to the industry and the customers of the industry to be prepared to the possible levy of GST on jewellery.


2. Background

"The desire of gold is not for gold. It is for the means of freedom and benefit.”

by Ralph Waldo Emerson

Gold in India for many centuries is not only the best form of investment because of its liquidity but it also has sentimental values attached to it. This is primarily because it is used for many social purposes, such as weddings, religious events and till date it remains a STATUS SYMBOL. Jewellery sector is not a standalone sector, but it is a combination of multiple sectors including manufacturing, trading, lending, etc.

In this sector, business is conducted in the most conventional ways and all the

transactions are based on trust and mutual understanding. Jewellers are the Virtual

Bankers, especially in rural and semi rural areas of India.

Relation between the Central Excise department and Jewellery Sector goes way back

to the 60’s. In 1968, the Government introduced the Gold Control Act, to regulate this

sector and physical control was introduced and control and regulations were brought

on the stock of gold held by the trade. To the relief of the trade, the era of physical

control was withdrawn in the year 1989. There was much joy and celebration, which

lasted till the end of century. In 2005, the Government tried to re-introduce Central

Excise duty (‘Excise duty’) on branded jewellery, but was again unsuccessful. Again in

2009, the Government imposed Excise duty @1% on branded jewellery but owing to

industry pressure, in 2011, the levy was done away with.

In Union Budget 2016-17, Government imposed Excise duty on jewellery with effect

from 1 March 2016 by withdrawing the exemption granted earlier. Intention of

Government to impose Excise duty on jewellery sector probably stems from the

impending introduction of GST wherein, the present indirect tax structure would be

subsumed in the GST structure. The jewellery sector cannot therefore be expected to

be out of proposed GST structure.


3. Brief on Excise duty introduced in Budget 2016

In Budget 2016, Excise duty of 1% (without tax credit on inputs and capital goods) and

12.5% (with input tax credit) is imposed on specified articles of jewellery with effect

from 1 March 2016. Manufacturers opting for 1% scheme are allowed to take credit of

input services, which can be utilized for payment of Excise duty on jewellery.

Salient features of this levy are as explained as under:

a) All articles of gold except silver jewellery (other than those studded with

diamonds, ruby, emerald or sapphire) are liable to Excise duty.

b) Articles of silver jewellery (other than those studded with diamonds, ruby, emerald

or sapphire) are exempt from this levy.

c) Jewellery manufacturer has an option to pay Excise duty at 1% (without tax credit

on inputs and capital goods) or 12.5% (with input tax credit)

d) An artisan or goldsmith who manufactures jewellery on job-work basis is not

required to register with the Excise, or pay duty or file any returns. The legal

provisions require the principal manufacturer to comply with all these provisions -

Principal manufacturer is the person sending the raw materials or the person

under whose instruction jewellery is manufactured by the job worker.

e) It is specifically clarified in the CBEC Circular No. 1021/9/2016 CX Dated 21 March

2016 (‘the Circular’) that the Excise officers will not visit the premises of jewellery

manufacturers till the recommendations of the Sub-Committee of the High level

committee, chaired by Dr. Ashok Lahiri (Chief Economic Adviser to Ministry of

Finance and Company Affairs, are finalized after discussion with trade.

f) Jewellery manufacturers are permitted to obtain Excise registration on or before 1

July 2016, duty however has to be paid on clearances made form 1 March 2016.

g) Jewellers having multiple show rooms have the option not to take separate

registration for each show room and instead obtain centralized registration at any

one show room.

h) As a special measure, for procedural ease, a jewellery manufacturer is to be

granted registration under Excise, within two working days of filing an application.

Also, the physical verification of premises by Excise officers is also done away with.

i) Small Scale Industries (SSI) exemption is also granted for the jewellery

manufacturer and such manufacturer is not required to pay any Excise duty upto


Rs. 6 crore (Rs. 50 lacs for the month of March 2016), provided the manufacturer’s

turnover is less than Rs.12 crore in preceding financial year (Rs. 6 crore in 2014-

15).

j) Records presently maintained by jeweller namely private records, or records in

terms of State VAT or Bureau of Indian Standards (as applicable in the case of

hallmarked jewellery) will be accepted for Excise compliances purposes. Also, there

is no requirement to file a stock declaration to the jurisdictional Excise authorities.

k) Excise duty is to be paid on monthly basis on the 6th of the succeeding month.

l) Jewellers are required to file simplified quarterly return.

As can be seen from the features of the levy, the Government has amply tried to make

simple and hassle free Excise procedures for jewellery sector. In spite of all the

simplified measures introduced, industry is likely to face certain difficulties while

complying with Excise law and procedures as the jewellery business operates in a

conventional way which far different than other manufacturers.

In the above background, to summarize the implications under Excise on jewellery

sector, we have primarily divided this hand book in following three sections:

Conventional way of doing business by jewellery sector: How the day-to-day

business is run by the jewellery sector?

Manner of applicability of Excise procedures to the jewellery sector

Practical difficulties and possible solutions for proposed formats or modalities

under Central Excise law


4. Conventional way of doing business by jewellery sector

Generally, jewellers are engaged in the business of purchase and sale of jewellery through various show rooms located at different locations. Jewellery is either purchased by them from other traders or they get it manufactured from job worker(s), commonly known as 'Karigars' or jewellers may also employ their own karigars to manufacture the same.

In the job-work model, the jeweller gets jewellery manufactured from the job worker.

The job workers supply such manufactured finished articles, to the centralised Head

office of the jeweller, The manufactured jewellery is then stock transferred to the

respective show rooms of the jeweller. Also, in some cases, the individual show room

may get jewellery manufactured from their local job worker(s).

In the following Paras, capture different ways in which business is conducted by

jewellers:

4.1 Manufacture of jewellery on job work basis

Gold jewellery is traditionally manufactured/worked upon by karigars. Such karigars are generally employed by job workers. The job workers and the karigars in most of the cases operate in an unorganized sector. Jewellers supply gold, silver and precious stones (‘Precious material’) to job workers for manufacture of jewellery articles. In some cases job workers also use some of their own material for manufacture of jewellery. Precious and expensive materials are supplied to such job workers based on trust and relationship. The job workers use other metal like copper or silver to make the alloy used for manufacture of gold jewellery. The job worker makes articles of jewellery based on design provided by Jewellers. In some cases however, the customers insist on their own design, in such a case they ask the job worker to manufacture jewellery as per the design provided by the customer. The job workers may also send unfinished jewellery to another job worker for further processing/finishing. Once the jewellery is manufactured, the job worker returns the finished articles to jeweller on weight and caratage basis, generally without giving any description of the jewellery. The job/making charges are paid to the job workers by the jeweller on the basis of weight and caratage of the jewellery, as agreed upon between them. Effective


control on the entire supply chain and monitoring is done in terms of weight and caratage of gold and the other precious items.

In some of the cases, the finished article may not be as per the design/specification or there may be issues such as lack of proper finishing etc. due to which the jewellery cannot be sold/ displayed. In such cases, the jeweller may return the jewellery to the job worker. Also, in case of slow moving items, jewellers may return the jewellery to the job workers for re-work or re-making, as may be required.

4.2 Movement of raw material, semi-finished jewellery and finished jewellery

A. Raw material:

Raw material i.e. Precious materials are generally procured centrally by the jeweller at

the head office from banks or traders. Sometimes gold or jewellery is given by the

customers for exchange which may be used as raw material. Precious materials,

depending on the requirement, are despatched to the job workers on simple chits. In

some cases, individual show rooms if required, purchase gold locally and send it to the

local job workers. The individual show rooms also receive gold or jewellery from their

customers for exchange. The Head office records details of such transactions carried

out by the individual show rooms at a later date.

Jeweller may also send unfinished/semi finished jewellery items such as gold ring,

silver ring, etc to another jeweller, for studding precious stones on such semi finished

articles of jewellery. The recipient jeweller thereafter dispatches the precious

materials along with precious stones to his job worker and gets the studding done on

the same.

B. Semi-finished jewellery:

Normally, the job worker carries out the entire process involved in the manufacture of

articles of jewellery and thereafter sends finished jewellery to the jeweller. In few

cases, however, the job worker sends semi-finished jewellery to another job worker

for completion of a part of the operation or for further processing. In very rare cases,

there is a possibility that the job worker may make such movement of semi-finished

jewellery without informing the principal manufacturer, for his own commercial

reasons


C. Finished jewellery:

As stated earlier, jewellers receive manufactured jewellery at their centrally located

head office from their job workers premises. The finished jewellery is then despatched

to various show rooms of the jeweller. In cases where individual show rooms directly

send precious materials to the job workers, the individual show room directly receive

such jewellery. Further, jewellers may also send jewellery for display/sale/approval/

sample/exhibition from their head office/individual show rooms. The individual show

rooms may also make inter-branch transfers as per requirement.

Further, the head office or show rooms also buy finished jewellery from various

suppliers. The suppliers can be manufacturers, principal manufacturers or traders.

Manufacturers or principal manufacturers as the case may be, supply duty paid or

non-duty paid jewellery.

4.3 Trading of jewellery Jewellers purchase and sell jewellery as part of their business. They buy jewellery from

manufacturers, principal manufacturers [as is covered under Rule 12AA (1) of Central

Excise Rules, 2002 (‘Excise Rules’)] or traders (‘the Suppliers’). The suppliers usually

bring various jewellery articles of various designs for jewellers to choose from.

Jewellers then buy the selected jewellery items from such suppliers. They may or may

not emboss their identification mark ('House-Mark') on such jewellery. In most of the

cases they don't keep separate record for recording such transactions.

4.4 Sale to the Customers:

Sale to the customers can be broadly categorized into following types:

A. Customers who purchase jewellery for consideration in money

B. Customers who exchange gold or old jewellery and buy new jewellery C. Customers who purchase gold in the form of bullion/bars or rings which

generally is not used as jewellery

D. Customers who give jewellery to the show room for repairs or servicing


A brief process as to how above transactions take place, is explained as under:

A. Sale of jewellery for consideration in money:

Customers coming to the show room, select the jewellery from the display in the show

room (jewellery displayed could be from traded or manufactured stock) and purchase

it on payment of cash or by cheque. In some cases, customers may request jewellery

to be made as per their own specific design and specifications. Jewellers then send

such individual specifications or designs to job workers for manufacture and

thereafter, sell such manufactured jewelleryto the customer.

B. Customers who exchange gold or old jewellery to buy new jewellery in its

place:

The customer instead of purchasing jewellery in cash may exchange the same with

gold or old jewellery (which can also be traded or manufactured). Further, the old

jewellery might have been purchased from the same jeweller or from other jewellers.

In such scenario, there is a possibility from now onwards that the old jewellery of the

Customers may also be a duty-paid jewellery.

C. Customers who purchase gold in the form of bullion/bars or rings (commonly

known in Marathi as vale):

The customers may from investment perspective or for any other reason purchase

gold in the form of bullion/bar. is the rings are drawn out of pure gold or gold alloy.

D. Customers who give jewellery to the show room for repairs or servicing:

Customers may also visit show rooms for repair or finishing their jewellery which

includes polishing, cleaning, restoration etc. For repairing of jewellery the jeweller may

charge them on account of labour and precious materials if any used for such

repairing.


5. Manner of applicability of Excise procedures to the jewellery sector 5.1 Manufacture of jewellery on job work basis

Manufacture of jewellery on job work basis can be Further, categorized as follows:

i. Manufacture from gold and other precious material supplied by jeweller; or

ii. Manufacture from gold supplied by jeweller and other materials being procured by

the job worker himself; or

iii. Manufacture from old jewellery or other Precious material belonging to the

Customer and supplied by the jeweller; or

iv. Manufacture from precious stones supplied by jeweller and Gold and other

precious material supplied by some other jeweller (‘the main jeweller’)

In all of the above transactions, jewellers act as the Principal manufacturer and the job

worker manufactures such articles of jewellery on their behalf and under their

instructions. Movement of material and maintenance of records pertaining to the

above transactions are briefly captured below.

a. On receipt of precious material, the inventory records maintained at the registered

premises are updated.

b. Jewellers supply such precious materials (for manufacture of various types of articles of jewellery) under challan to the job worker and update appropriate records namely inventory records and job worker register.

c. Where job worker sends semi-finished jewellery to another job worker for carrying out part of the manufacturing process, the same is done on a challan. Intimation for sending the semi finished jewellery and receipt of the finished/part finished jewellery may or may not be given by the job worker to the jeweller

d. Clearance of the various articles of jewellery from the job worker's place to jewellers place or in some cases directly to the Customer, will be made under the cover of an invoice provided by the jewellers.


e. In case jewellery is cleared directly from the job workers premises to the Customer, jewellers will prepare a Excise invoice specifying required particulars such as description of goods as ‘articles of jewellery’, quantity of the jewellery in terms of weight and caratage and the other prescribed particulars in terms of Rule 11 of the Excise Rules, except date and time of removal.

f. The job worker will only mention the date and time of removal on the invoice and clear the same to the Customer. Entries with respect to such movement/ sale will be made in the relevant records maintained by the jewellers.

g. Job worker is required to clear jewellery to the principal manufacturer, on invoice provided by the principal manufacturer. The principal manufacturer is required to prepare Excise invoice specifying required particulars such as description of goods as ‘articles of jewellery', quantity of the jewellery in terms of weight and caratage and the other prescribed particulars in terms of Rule 11 of the Excise Rules except date and time of removal. The job worker will fill the date and time of removal on the invoice as provided under Rule 12AA of Excise Rules and accordingly clear finished articles of jewellery to the principal manufacturer.

h. The job worker under the cover of such invoice will despatch the various types of articles of jewellery to the jewellers at centrally registered head office under Excise or under instruction directly to other show rooms which are included in the centralized registration.

i. On receipt of the jewellery at the said location jewellers will update their records such as inventory and job workers register and will also update the daily stock account maintained for recording the stock of manufactured jewellery.

j. Jewellery received from the job worker at the head office will be entered in the

stock records and then be despatched to the respective show rooms under the

cover of challans having reference of the invoice under which it was received from

job worker. The challan will also contain reference of the entry no. in the daily stock

account maintained at their head office.

k. The respective show rooms will maintain their own inventory records of finished

goods which will be updated on receipt of such jewellery sent by head office.


l. The jewellery received then will be displayed at the show room for sale and will be

sold to individual customers.

m. Further, in case when jewellery is directly sold from job workers premise to the

customer, Excise duty will be paid on the transaction value.

n. However, where the jewellery is dispatched to show room or head office then value

will be determined on the basis of first sale value mentioned in CBEC Circular No. 1021/9/2016-CX dated 21 March 2016 of respective article of jewellery.

o. Excise duty payable will be determined on such jewellery in respect of which value can be determined basis transaction value or basis first sale invoice value. The respective invoices received from the job worker will be updated accordingly and such jewellery will be removed from daily stock account and will be transferred to duty paid stock register.

p. Jewellers will raise invoice to the customer from separate series of invoice at the time of sale of jewellery from the show room or Head office. Such invoice will indicate amount of Excise duty paid or payable on such jewellery. The Principal manufacturer needs to take permission for using such more than one series of invoices from the jurisdictional Assistant/ Deputy Commissioner. Further, where sale to individual customers is made from the job worker’s premises in such case also invoice (in terms of Rule 11 of Excise Rules) will be issued in the name of the customer by the Principal manufacturer.

q. Cases where customers bring their old jewellery for repairing or finishing purpose then Excise duty will not be charged if the process carried on such jewellery does not amount to manufacture. However, such repairing/ finishing activity may attract Service tax subject to small service provider’s exemption.

r. Central Excise duty liability of a particular month needs to be deposited by the 6th

of the next month after considering CENVAT credit of input services.

s. Jewellers undertaking manufacturing as well as trading of jewellery and availing

CENVAT credit of common input services (Credit of service tax paid on services common for both manufacturing as well as trading activity like security, accounting, financing etc.) are also required follow provisions of Rule 6 of the CENVAT credit rules, i.e. to reverse credit attributable to trading activity as per method prescribed


in the said rule. Same Rule 6 will apply in case of manufacturing of articles of silver jewellery other than those studded with diamonds, ruby, emerald or sapphire

t. Jewellers opting to pay Excise duty @1% are required to file quarterly return in form ER-8, before the 10th of the month following the quarter. Jewellers opting to pay duty at 12.5% are however, required to file a monthly return in form ER-1 by the 10th of the succeeding month.

5.2 Manufacture of jewellery in own factory

In case where jewellers manufacture articles of jewellery in their own factory

commonly known as 'Workshop', such workshop can be treated as, independent of

the show rooms/head office and take stand alone registration of the said

factory/workshop. The jeweller is required to follow procedures applicable to normal

manufacturers and accordingly maintain all the statutory records prescribed including

the Daily Stock Account at such factory. Further, sale to the customers or transfer to

show room from such factory can be made under the cover of regular invoice on

payment of duty. In the case of sale to the customer transaction value will prevail for

the purpose of charging duty and in the case of transfer to show room or head office

respective provisions of Central Excise valuation (Determination of price of Excisable

goods) Rules, 2000 (‘Excise Valuation Rules’) would apply for the purpose of

determining value for discharging Excise duty.

Jewellers can also opt for centralised registration and accordingly include such factory/workshop in their centralised registration and treat such factory/workshop as job worker's premise to their show room or head office and follow provisions of Rule 12AA of the Excise Rules and other procedures as applicable to their job workers (as explained above)

5.3 Deemed Manufacturing

Activity of embossing/affixing Brand name on articles of Jewellery amounts to

manufacture in terms of Chapter note 13 to Chapter 71 of the First Schedule to Central

Excise Tariff Act, 1985 (Excise Tariff’). The jewellers may carry out activity of

embossing/affixing brand name on jewellery received/ procured from suppliers which

can be their job workers or traders or manufacturers or principal manufacturers.

Further, the jeweller may carry out such activity in their own workshop/factory or may

get the same done from the job worker. In such cases the activity of


embossing/affixing brand name on jewellery would amount to deemed manufacture

and the respective place where such activity of affixing/embossing brand name takes

place will have to be registered as place of manufacturer and the applicable

procedures explained above needs to be followed by the said jeweller.

There is however ambiguity as to duty-ability of jewellery manufactured by a job

worker on which principal manufacturer carries out activity of embossing/ affixing his

brand name. In such case further clarification is required on applicability of Excise duty

on manufacturing activity at job workers premises (manufacture of jewellery) as the

clearance from job worker’s premises is at par with clearance for captive consumption


6. Practical difficulties and possible solutions for proposed modalities under Excise law 6.1 Registration:

As per Rule 9 of Excise Rules, separate registration is required to be taken by a

manufacturer for each of the premises. In this regard, exemption has been provided in

the Notification No. 5/2016-C.E. (N.T.), dated 1 March 2016, which provides that

jewellers can take centralized registration instead of taking separate registration for

each of the premises. The relevant extract of said exemption notification is as follows:

“In exercise of the powers conferred by sub-rule (2) of rule 9 of the Central Excise Rules, 2002, the Central Board of Excise and Customs hereby exempts from the operation of said rule, every manufacturing factory or premises engaged in the manufacture or production of articles of jewellery other than articles of silver jewellery but inclusive of articles of silver jewellery studded with diamond, ruby, emerald or sapphire, falling under chapter heading 7113 of the First Schedule to the Central Excise Tariff Act, 1985 (5 of 1986) (herein after referred to as the specified goods), where the manufacturer of such goods has a centralised billing or accounting system in respect of such specified goods manufactured or produced by different factories or premises and opts for registering only the factory or premises or office, from where such centralised billing or accounting is done and where the accounts/records showing receipts of raw materials and finished excisable goods manufactured or received back from job workers are kept” (emphasis supplied)

However, presently, the ACES website (for online registration) does not provide the

option of such centralized registration and accordingly jewellers opting for Centralised

registration cannot get themselves registered. Further, such Jewellers have already

started to collect Excise duty @1% from the customers and will have to get themselves

registered once the option for taking such registration is available at ACES website.

In other scenario of separate stand alone registration for each show room/factory/ workshop there is no such problem and registration will be allotted within two working days.


6.2 Person liable to pay Excise duty in case of manufacturing on job work basis: For ease of reference, we are providing the extract of relevant provisions of Excise Rules applicable to principal manufacturer and job worker. The term principal manufacturer is explained in Rule 12AA (1) of the Excise Rules. The relevant extract of the said rule, is as follows:

“every person (not being an export-oriented unit or a unit located in special

economic zone) who gets article of [jewellery or other articles of precious metals

following under Heading 7113 or 7114 as the case may be] the First Schedule to

the Central Excise Tariff Act, 1985 (5 of 1986) (hereinafter referred to as the Tariff

Act), produced or manufactured on his behalf, on job work basis, (hereinafter

referred to as “the said person”) shall obtain registration, maintain accounts, pay

duty leviable on such goods and comply with all the relevant provisions of these

rules, as if he is an assessee” (emphasis supplied)

Further, in terms of explanation 1 to Rule 12AA (9) of Excise Rules, the term job worker

is defined as follows:

“For the purpose of this rule, “job worker” means a person engaged in

manufacture or processing on behalf and under the instructions of the said

person from any inputs or goods supplied by the said person or by any other

person authorized by the said person, so as to complete a part or whole of the

process resulting ultimately in manufacture of articles of jewellery falling under

heading 7113 of the First Schedule to the Central Excise Tariff Act, 1985, and the

term “job work” shall be construed accordingly” (emphasis supplied)

A conjoint reading of the above provisions brings out that a person will be treated as

the principal manufacturer, if the following factors are fulfilled:

articles of jewellery should be manufactured on his behalf on job work basis; and

articles of jewellery are manufactured as per his instructions;

inputs or goods required for such manufacture should be supplied by him or any

person authorised by him.

In cases where the manufacturing takes place as specified in Para 5.1(i) and (ii)

(reproduced below for ease of reference)


i. Manufacture of jewellery by the job worker from Gold and other Precious material

supplied by jeweller; or

ii. Manufacture of jewellery by the job worker from Gold supplied by jeweller and

other materials being procured by the job worker himself; or

The jewellers will be considered as the principal manufacturer and therefore would be

liable to pay Excise duty.

Further, in case of 5.1(ii) where some material is used by the job worker out of his own

material, the above position does not change and the principal manufacturer is the

person liable to pay duty for the reason that jewellery is manufactured by the job

worker on his behalf and on his instruction.

In the situations described in Para 5.1(iii) and (iv) and reproduced below for ease of reference, there is ambiguity regarding who will be treated as principal manufacturer: iii. Manufacture of jewellery by the job worker from old jewellery or other Precious

material belonging to the Customer; or iv. Manufacture of jewellery by the job worker from precious stones supplied by one

jeweller and Gold and other precious material supplied by other jewellers (‘the main jeweller’)

In the above situations, basis existing legal provisions of Excise law, the following

inference can be drawn:

Where customers gives old jewellery or gold for making new jewellery, the customer can be said to be getting jewellery manufactured from jeweller and therefore can be considered as a principal manufacturer;

Further, in case of manufacture of jewellery by the job worker from precious stones

supplied by one jeweller and gold and other precious material supplied by other

jewellers (‘the main jeweller) considering the definition of job worker given under

explanation 1 to Rule 12AA(9) of Excise Rules as under (reproduced below for ease

of reference):


“For the purpose of this rule, “job worker” means a person engaged in manufacture or processing on behalf and under the instructions of the said person from any inputs or goods supplied by the said person

the jeweller under whose instructions the jewellery is manufactured becomes the Principal manufacturer in terms of provisions of Rule 12AA of Excise Rules and not the customer or the main jeweller. Further, with respect to situation covered in Para 5.1(iv) the same analogy would follow. In some of the cases the main jeweller supplies gold or precious material to another

jeweller and may want to bear the incidence of Excise duty for some commercial or

logistic reasons. In such a case procedure prescribed under Notification No.214/ 86-CE

dated 25 March 1986, as amended can be followed. A clarification in this regard would

ease doing such business.

6.3 Procedural difficulties:

A. Movement of raw material, semi finished jewellery and finished jewellery Legal provisions applicable for movement of the raw material, semi finished jewellery

and finished jewellery from the premises of the job worker are prescribed under Rule

12AA(8) and 12AA(4) of the Excise Rules. For ease of reference the same is reproduced

below.

“Rule 12AA (8) The job worker, with or without completing the job work may,- (i) return the goods without payment of duty to the said person; or

(ii) clear the goods for home consumption or for exports;

Subject to receipt of an invoice from the said person, as mentioned in sub-rule (4).

Rule 12AA (4). The job worker shall fill up the particulars of date and time of

removal of goods before the clearance of goods and after such clearance the job

worker shall intimate to the said person, the date and time of the clearance of

goods for completion of the particulars by the said person in the triplicate copy of

the invoice.”

Further, Rule 12AA (9) of the Excise Rules, states as under:


“12AA (9) The job worker shall clear the goods after filling in invoice the time and

date of removal and authentication of such details. The rate of duty on such goods

shall be the rate in force on date of removal of such goods from the premises of

the job worker and no excisable goods shall be removed except under the invoice.

Explanation 1. - For the purpose of this rule, “job worker” means a person engaged

in manufacture or processing on behalf and under the instructions of the said

person from any inputs or goods supplied by the said person or by any other

person authorized by the said person, so as to complete a part or whole of the

process resulting ultimately in manufacture of articles of jewellery falling under

heading 7113 of the First Schedule to the Central Excise Tariff Act, 1985, and the

term “job work” shall be construed accordingly”

Based on above provisions, an understanding emerges that clearance from the

premises of the job worker can be made only under the cover of an invoice.

Accordingly, job worker(s) can clear the finished jewellery:

back to jeweller; or

for home consumption; or

for export

The said provisions, therefore take care of clearances either back to the jewellers, for home consumption or for export from the premises of the job worker.

However, besides the above said clearances, the job worker may require to remove

semi finished jewellery to other job workers for completing part of the manufacturing

process. The specified provisions do not explicitly provide for such movement. In order

to avoid any constraints in the routine business, jewellers can propose to make such

clearance on challans issued by the respective job worker (except where it is sold to

the ultimate customer from the job worker’s premises).

The relevant provisions with respect to jewellery transferred from the job worker’s

premises to the registered premises do not provide any particular time when the

Excise duty is payable. The modalities prescribed in case of jewellery sector suggest

that the jeweller should maintain daily stock account (however documents maintained


by jewellery manufacturers for State VAT or Bureau of Indian Standards (in case of

hallmarked Jewellery) is sufficient compliance for maintaining daily stock account.

Accordingly, it can be inferred that the jewellery received from job workers premises is

non-duty paid stock and as such needs to be entered into the stock register

maintained by the jeweller at the registered premises. This scenario would be similar

to a manufacturer entering finished goods in his daily stock account and thereafter

paying duty when such goods are removed from his premises. In the case of jewellers

also clearance from the job workers premises to principal manufacturers will not have

any bearing on the duty element. Such Jewellery being entered in the Daily Stock

Account maintained at the show room, duty incidence would arise only when such

jewellery is cleared from the show room.

The relevant provisions however require the job worker to put date and time of

removal on the invoice at the time of removal from his premises. Basis sub-Rule (9) of

Rule 12AA of Excise Rules the rate for payment of duty would therefore be the rate

applicable at the time of removal from the job workers premises.

Therefore, it is not clear if such Excise duty is payable on each individual sale of the

articles of jewellery or otherwise. The Excise Rules also do not provide for the

modalities in case where the jewellery is transferred from one show room to other

show room where both the show rooms are part of centralized registration or where

both or more than one show room is individually registered. In such cases where

jeweller has obtained centralized registration, then the jeweller can choose not to pay

Excise duty at the time of inter-branch transfers. However, in cases where individual

registration is obtained the jewellers will have to pay Excise duty on inter-branch/show

room transfers on the value determined as per Excise Valuation Rules.

With respect to sale to individual customers, the jewellers presently can treat their

respective show room as a place of removal and charge duty at the time of individual

sale to the respective customer.


B. Mode of valuation of jewellery removed from job worker’s premises:

In respect of valuation of jewellery under Excise, we refer to Rule 4 of Excise Rules,

which states as follows:

“(1) Every person who produces or manufactures any excisable goods, or who

stores such goods in a warehouse, shall pay the duty leviable on such goods in the

manner provided in rule 8 or under any other law, and no excisable goods, on

which any duty is payable, shall be removed without payment of duty from any

place, where they are produced or manufactured, or from a warehouse, unless

otherwise provided” (emphasis supplied)

In the case of jewelers, following two particular situations emerge for clearance of

finished jewellery from job worker's premises:

when jeweller sells jewellery directly to the customer from job worker’s

premises, transaction value shall be the assessable value for the purpose of

payment of Excise duty

when jewellery is removed from job workers premises to their Head office in

such case relevance of the following provision of Rule 12AA of Excise Rules

needs to be considered

In the first case Excise duty can be discharged on the transaction value at the time of

removal from job worker’s premises.

However, in second case when the jewellery is removed to the head office or to any of

the show rooms then, jewellers would not be aware about the value of the jewellery.

In such case, as and when any of the article of jewellery is sold from the premises

registered under Excise then, the value of the respective article of jewellery removed

from the job workers premises would be determined basis such first sale invoice as

clarified/ provided in the Circular. The Circular creates ambiguity regarding whether

the show room or whether the job workers premises is the place of removal.

With respect to such first sale invoice further clarification is also required due to

following ambiguities:


First sale invoice value of any of the articles of jewellery such as gold ring, necklace

or bangle be the basis to discharge Excise duty on any of the articles of jewellery

received from the job worker’s premises:

In the Circular 1, it is clarified that first sale invoice value can be taken as the basis for

discharging Excise duty. However, in view of the following, further clarification is

required on this aspect:

The first sale invoice can be issued for any of the article of jewellery sold by jeweller.

The value charged for such jewellery is worked out basis intrinsic value of gold on

the date of sale plus making charges. The making charges depending on the artwork

(commonly known as 'karigari') vary from article to article. If the first sale invoice

value pertains to such article which involves major karigari work then, it would

require the jewellers to pay higher Excise duty on all the articles of jewellery at such

increased rate irrespective of the fact whether making charges for other articles of

jewellery is substantially higher or substantially lower as compared to making

charges involved in the first sale invoice

Customers would also not accept such values and would lead to arguments by the

customers and disruption of routine business of jewellers. Further, if the Excise duty

is payable on individual sale to the customers then, the concept of paying Excise

duty on first sale invoice value is not required

Further, it also needs to be clarified if, the jewellers are required to consider first sale

invoice value of the respective article or any article of jewellery sold from the

respective show room in the case of centralised registration.

C. Invoicing:

One of the main concerns of jewellery sector is the modality and timing of issuance of

invoice in terms of Rule 11 of Excise Rules. Two possible situations regarding removal

from job workers premises are:

i. When each of the articles of jewellery is getting sold to individual customers from

job workers premises; and


ii. When the jewellery is transferred from job workers premises to the show

room/Head office and thereafter sold to respective customers.

In first case, where jewellery is sold directly from the job workers premises to the

ultimate customer Excise invoice as specified under Rule 11 will be prepared by the

principal manufacturer and all the particulars of the said clearances except date and

time will be entered by him. Job worker will enter the date and time of clearance and

accordingly clear the finished jewellery to the ultimate customer.

In the second case also Rule 12AA of the Excise Rules requires such removal to be

made under the cover of an invoice as per Rule 11 of the Excise Rules. Principal

manufacturer will enter all details of such removal except date and time of removal.

The Job worker will enter date and time of removal and accordingly remove said

articles of jewellery to the principal manufacturer. The question remains as to what

document needs to be prepared when the principal manufacturer sells articles of

jewellery from show room/head office to the ultimate customer. Till such time

clarification is issued, clearance can be made on invoice. The Principal manufacturer

can maintain separate series of excise invoice after taking appropriate permission from

jurisdictional Assistant/ Deputy Commissioner. Principal manufacturer can however

raise commercial invoices for selling jewellery from their traded stock.

D. Receipt of duty-paid jewellery in the show rooms/registered premises

The jewellers may also receive duty paid jewellery from following two sources:

i. Their customers (the jewellery received could have been manufactured by said

jeweller or some other jeweller); and

ii. Their suppliers

where jewellery is received from the customers it could be for various reasons like repairing, exchange, outright sale etc. The customers may have documents which may indicate duty paid character of such jewellery. In such cases jewellers should be allowed to take credit of such duty paid in terms of Rule 16 of the Excise Rules. Any practical difficulties in this regard should be generally addressed and a general


permission should be given in this regard. For ease of reference the relevant extract of Rule 16 of Excise Rules, is reproduced below:

“Rule 16. Credit of duty on goods brought to the factory. – (1) Where any goods on which duty had been paid at the time of removal thereof

are brought to any factory for being re-made, refined, re-conditioned or for any

other reason, the assessee shall state the particulars of such receipt in his records

and shall be entitled to take CENVAT credit of the duty paid as if such goods are

received as inputs under the CENVAT Credit Rules, 2002 and utilise this credit

according to the said rules.

(2) If the process to which the goods are subjected before being removed does

not amount to manufacture, the manufacturer shall pay an amount equal to the

CENVAT credit taken under sub-rule (1) and in any other case the manufacturer

shall pay duty on goods received under sub-rule (1) at the rate applicable on the

date of removal and on the value determined under sub-section (2) of section 3 or

section 4 or section 4A of the Act, as the case may be.

[Explanation. - The amount paid under this sub-rule shall be allowed as CENVAT

credit as if it was a duty paid by the manufacturer who removes the goods.]

(3) If there is any difficulty in following the provisions of sub-rule (1) and sub-

rule (2), the assessee may receive the goods for being re-made, refined, re-

conditioned or for any other reason and may remove the goods subsequently

subject to such conditions as may be specified by the [Principal Commissioner or

Commissioner, as the case may be ” (emphasis supplied)

where duty paid jewellery is received from other suppliers including traders then, for

trading, there may be practical difficulties like a situation where jewellers are

simultaneously selling their own manufactured (manufactured as a principal

manufacturer) jewellery or the jewellery purchased by them from other suppliers. In

such situation it would be very difficult for the salesman on the counter to explain the

customer the nitty-gritty of relevant Central Excise provisions relating to duty paid

nature of one jewellery and non-duty paid nature of another jewellery. This for sure

will be a difficulty in running day to day business operation.

Further, the problems will get compounded when such jewellery will be brought back

by the customers as exchange or outright sale. In such cases if the credit of Excise duty


already paid is not allowed in terms of Rule 16 of Excise Rules and it would get added

to the cost. In such situation frequent exchange of such jewellery will make it suffer

Excise duty manifold, if exchange happens more than one times. In such cases the only

remedy available is to the jewellers is corresponding CENVAT credit of Excise duty

discharged by suppliers when it was originally purchased by jeweller to avoid

cascading effect.

E. Deemed manufacturing whether applicable to house mark

In this regard, we refer to chapter note 13 to chapter 71 of Excise Tariff. The relevant

extract of the said note is as follows:

“For the purposes of headings 7113 and 7114, the processes of affixing or

embossing trade name or brand name on articles of jewellery or on articles of

goldsmiths' or silversmiths' wares of precious metal or of metal clad with

precious metal, shall amount to "manufacture"

Chapter note 12 to chapter 71 defines brand name as

"brand name" or "trade name" means a brand name or trade name, whether

registered or not, that is to say, a name or a mark, such as symbol, monogram,

label, signature or invented words or any writing which is used in relation to a

product, for the purpose of indicating, or so as to indicate, a connection in the

course of trade between the product and some person using such name or

mark with or without any indication of the identity of that person.

Jewellers may carry out activity of embossing or affixing their identification mark on jewellery. After reading provisions provided in chapter note every mark embossed or affixed on jewellery amounts to manufacture and they need to pay excise duty on the same.

In this regard, CBEC had issued a Circular in 2012 under F. No. 354/38/2011-TRU,

dated 2 March 2012, clarifying duty-ability with respect to branding of jewellery. The

relevant extract of Circular is as follows:

“It is clarified that the excise duty leviable on precious metal jewellery,

manufactured or sold under a brand name, is attracted only on such jewellery on

which the trade/brand name or any such mark or symbol or even a number which


is cross referred with such trade/brand name (not being a house mark used by

jewellers for identification of jewellery at the time of exchange/resale) is

indelibly marked or embossed. If such brand name is not affixed or embossed on

the jewellery or article itself but appears on the packing such as the jewellery

box or pouch or even on the warranty card or certificate of quality, such goods

will not be treated as branded jewellery and thus will not be liable to excise

duty (emphasis supplied)

Based on the above clarification, it can be interpreted that house mark is not a brand

name and accordingly, embossing or affixing house mark on the jewellery received

from the job workers by a jeweller at his show room or at some other place does not

amount to manufacture. Further, jeweller may also carry out such embossing/affixing

of house mark on finished jewellery purchased from suppliers. In such case as well, the

process of embossing or affixing of house mark will not be treated as amounting to

manufacture. However, a suitable clarification in this regard would help jewellers in

addressing any practical issue which may come across

Where jewellers receive duty paid jewellery from other suppliers and sell such jewellery after affixing/embossing their own brand name, the jewellers should be allowed to take CENVAT credit of Excise duty paid by the suppliers in terms of Rule 16 of Excise Rules, as if such jewellery is input to them. Alternatively such procurement shall be considered as meant for captive consumption and no Excise duty shall be made applicable for such procurement F. Duty-ability of stock of jewellery lying as on 29 February 2016

In this regard, we refer to CBEC TRU letter F.No.334/8/2016 dated 29 February 2016

(Para 3.2.4), wherein it has been clarified as follows:

“Excisable goods which were produced on or before 29.02.2016 but lying in

stock as on 29.02.2016 shall attract excise duty upon clearance. Jewellery

manufacturer shall keep a stock declaration of finished goods, goods-in-process

and inputs as on 29.02.2016 in their records duly certified by a Chartered

Accountant so as to enable the manufacturers to claim CENVAT credit on inputs

or inputs contained in goods lying in stock as already provided for in Rule 3(2) of

the CENVAT Credit, Rules, 2004, if he so desires. No stock declaration, will,

however, be required to be made to the jurisdictional central excise authorities.”


The abovementioned clarification suggests that stock of finished goods lying at show

room as on 29th February 2016 is liable to Excise duty. However, a contrary view can

be taken as show room or a head office which is registered under Central Excise is not

a place of removal considering following provisions of Rule 12 AA (8) and (9) of the

Excise Rules.

“12 AA (8) The job worker, with or without completing the job work may,-

(i) return the goods without payment of duty to the said person; or


subject to receipt of an invoice from the said person,as mentioned in sub-rule( 4).

12AA (9) The job worker shall clear the goods after filling in invoice the time

and date of removal and authentication of such details. The rate of duty on such

goods shall be the rate in force on date of removal of such goods from the

premises of the job worker and no excisable goods shall be removed except

under the invoice.” (Emphasis supplied)

In terms of above mentioned provisions, the rate of Excise duty as on date of

clearance from the place of job worker is required to be considered for payment of

Excise duty. In such case the stock as on 29th February 2016 lying in the show room is

obviously cleared from the job worker’s premises prior to 29th February 2016 when

such jewellery was exempt from Excise duty. As such Excise duty is not liable to be

paid on stock of finished goods lying at the show room or Head office of the jeweler.

G. Service tax implications:

As stated in Para 5.1(q), in case the customer comes to the show room for repair or

polishing their old jewellery and process undertaken does not amount to manufacture

in such cases service tax will apply instead of Excise duty. In case such repair also

involves material component then that transaction will be covered under works

contract services, which is a declared service in terms of Section 66E(h) of the Finance

Act, 1994 as amended (‘the Finance Act’).

Accordingly, service tax needs to be discharged on appropriate value in terms of the

Service tax (Determination of Value) Rules, 2006 (‘the ST Valuation Rules’). In this regard,


we refer to definition of works contract as per Section 65B(54) of the Finance Act,

which states as follows:

“works contract” means a contract wherein transfer of property in goods involved in the execution of such contract is leviable to tax as sale of goods and such contract is for the purpose of carrying out construction, erection, commissioning, installation, completion, fitting out, repairs, maintenance renovation, alteration of any movable or immovable property or for carrying out any other similar activity or part thereof in relation to such property

Further, in terms of Section 67 of the Finance Act read with Rule 2A of the ST Valuation Rules

there are two specific options available to determine value of such declared service, which

are explained as follow:

a) In terms of provisions of Rule 2A(i) Value is determined the basis of gross amount

charged for the works contract less the value of property in goods transferred in the

execution of the said works contract;

b) Under provisions of Rule 2A(ii) which provides for determination of value as under in

case of works contracts entered into for execution of original works, value will be

considered as forty per cent of the total amount charged for the works contract;in any

other value will be considered as seventy per cent of the total amount charged for

the works contract

Based on above, jewellers in respect of the works contract service (repair involving

supply of material), need to pay service tax either on amount representing service

charges or 70 percent of invoice value. However, jeweller will get small service

providers exemption upto Rs. 10 lakhs provided turnover of services in preceding

financial year is less than Rs. 10 lakhs. The exemption would be available subject to

fulfilment of other conditions of the relevant Notification. Further, for calculating

turnover of services, value of taxable portion of works contract will only be

considered.


7. Clarification needed

In view of the above analysis, clarification is needed with respect to following aspects:

Place of removal i.e. whether job workers premises or the show room/Head office

needs to be considered as place of removal

Date of payment of duty i.e. whether duty needs to be discharged by the principal

manufacturer at the time of removal from the job workers premises or at the time

of removal from show room/Head office

Clearance of semi finished jewellery from one job worker to another for completion

of part of the manufacturing process

Availability of CENVAT credit on jewellery returned for remaking etc.

Deemed manufacture with respect to affixing/embossing of house mark

Applicability of procedures/provisions of Notification 214/86-CE dated 25 March

1986, as amended to jewellery manufacturers instead of applying

procedures/provisions of Rule 12AA of Excise Rules,, which will address some of the

problems highlighted above

Also a general permission in terms of Rule 16 of the Excise Rules, should be given to the jewellers to avail CENVAT credit of duty paid on any jewellery procured by jewellers whether from customers or the suppliers. Considering the number of practical difficulties involved when jeweller actually start functioning under Excise provisions, a special forum may be formed by the Government (other than the High Level Committee as presently constituted) to address such difficulties on monthly basis.


8. About Us

Optitax's Consulting LLP:

Optitax’s Consulting LLP primarily deals in Indirect tax advisory and compliance in the field of Customs, Central Excise, Service Tax, Sales Tax, Foreign Trade Policy, Legal Metrology and Packaged Commodities and other allied Acts and Rules

The Firm comprises a strong team of professionals having varied experience in various field of Indirect taxation. Core team comprises members having more than twenty years experience in the Customs, Central Excise and Service Tax Department so also member having five years experience with one of the Big Four Consulting firm. The team is also backed by other professional members including Chartered Accountants, Lawyers, Post Graduates in Commerce and other young and dynamic graduates

The Firm specializes in providing customised tax solutions which include tax advisory in relation to complex transactions, liquidation of accumulated CENVAT credit, assistance in collecting pending C Forms , assistance in SVB proceedings, SVB refunds

The Firm has also developed core expertise in relation implications of excise duty on the jewellery sector

The Firm virtually takes care of Indirect tax function of an organization through appropriate advisory, assistance in compliances, regular periodical audit aimed at determining appropriate compliance


8. About Us

SOLUTION COMBINED:

SOLUTION COMBINED is a firm dealing with advisory and compliance in the field of Customs, Central Excise, Service Tax, Sales Tax for the past fifteen years

The Firm is headed by highly trained professionals Shri Ketan Bhinde and Smt. Arti Sehgal having immense expertise in the Indirect Tax field

The firm has expertise in the field of Refund matters in Customs, Excise and Sales Tax. They are pioneer consultants in the field of Duty Drawback, SAD, Double Duty and Excess Duty refunds in Customs, Re-import and Re-Export, Project import and closure of import

The Firm also handles huge volume of EDD refunds for big MNCs at various ports in India

The firm also handles duty drawback for gems and jewellery Industry

The firm also gives presentation in Customs related topics like refund of SAD, ACP, Self assessment, OSPC audit, Gems and Jewellery Excise registration

The Firm also specializes in Customs and Excise related Appeal matters like drafting of Appeal, appearance before authorities. The firm also undertakes appearance before judicial authorities upto High Court level


9. Contact Us

Mr. Raveendra Pethe Mr. Sunil Kumar

Mob no. 9823010562 Mob no. 9822529390

Email id: [email protected] Email id: [email protected]

Mr. Ketan Bhinde Adv. Arti Sehgal

Mob no. 9321252004 Mob no. 9920179090

Email id: [email protected] Email id: [email protected]

Office address (Pune): C-26/11, Ketan Heights, Kothrud, Pune 411 038

Office address (Mumbai): 3 - Damji Kheraj Building, 3rd floor, RRT Road, Mulund

(West), Mumbai - 400080

For Power point presentation on Excise duty on jewellery sector or

feedback/query/doubt please contact

CA Nilesh Mahajan

Mob: 7030935858

Email: [email protected]

Disclaimer: Despite every efforts taken to avoid any error or omission, there may still be changes for such errors and omissions to

have crept in inadvertently. This book is published with understanding that neither the author/editors nor the

publishers shall be responsible for any damages or loss in whatever manner, consequent to any action taken on the

basis of contents of this book, caused to any person whether a reader or professional.

mailto:[email protected]










10. Appendix

Changes in Union Budget 2016-17

(1) Excise duty of 1% (without CENVAT credit) or 12.5% (with CENVAT credit) is levied on

articles of jewellery [excluding silver jewellery, other than studded with diamonds/other precious

stones] with a higher threshold exemption upto ` 6 crore in a year and eligibility limit of 12 crore.

Thus, a jewellery manufacturer will be eligible for exemption from excise duty on first clearances upto

` 6 crore during a financial year, if his aggregate domestic clearances during preceding financial year

were less than ` 12 crore. In other words, jewellery manufacturer having aggregate value of clearances

in a financial year exceeding ` 12 crore, will not be eligible for this threshold exemption in the

subsequent financial year. Necessary amendments have been made in Notification No. 8/2003-Central

Excise, dated 1-3-2003 in this regard.

(2) The SSI exemption for the month of March, 2016 for jewellery manufacturers will be ` 50 lakh,

subject to the condition that value of clearances for home consumption from one or more manufacturer

from one or more factory or premises of production or manufacture during the financial year 2014-15

should not be more than ` 12 crore. Computation for this purpose shall be done in accordance with the

provisions of Para 3A of Notification No. 8/2003-C.E. For this purpose, a certificate from a Chartered

Accountant, based on the books of accounts for 2014-15, shall suffice.

(3) Similarly, for determining the eligibility for availing of the SSI exemption from 2016-17

onwards, a certificate from a Chartered Accountant, based on the books of accounts for 2015-16, shall

suffice.

(4) Excisable goods which were produced on or before 29-2-2016 but lying in stock as on 29-2-2016

shall attract excise duty upon clearance. Jewellery manufacturer shall keep a stock declaration of

finished goods, goods-in-process and inputs as on 29-2-2016 in their records duly certified by a

Chartered Accountant so as to enable the manufacturers to claim CENVAT credit on inputs or inputs

contained in goods lying in stock as already provided for in Rule 3(2) of the CENVAT Credit, Rules,

2004, if he so desires. No stock declaration, will, however, be required to be made to the jurisdictional

central excise authorities.

(5) Further, the following simplified procedure and guidelines have been issued for strict

compliance :

(i) Registration once applied for shall be granted within two working days, along with simplified

registration procedure as prescribed under Notification No. 35/2001-C.E.

(ii) Further, the requirement of post registration physical verification of the premises has been also

done away with in this case. Necessary amendments have been made to Notification No. 35/2001-C.E.

for this purpose.

(iii) Moreover, documents being maintained by the jewellery manufacturers for State VAT or

Bureau of Indian Standards (in the case of hallmarked jewellery) shall suffice for Excise purposes

also.


(iv) The private records of the jewellery manufacturers, giving details of daily stock for his own

purposes, shall be accepted for the purposes of Rule 10 of the Central Excise Rules, 2002.

(v) A notification, providing for an optional centralized central excise registration for jewellery

manufacturers with centralized billing or accounting system is being issued under Rule 9(2) of the

Central Excise Rules, 2002.

(vi) Also, jewellery manufacturers will be eligible for a simplified return applicable for optional

excise duty of 1%/2% without CENVAT credit under Notification No. 1/2011-C.E., under Rule 12 of

the Central Excise Rules, 2002.

(vii) Rule 12AA of the Central Excise Rules, 2002 provides that in case of goods falling under

chapter heading 7113, every person (not being an EOU or SEZ unit) who gets jewellery made from

any other person, and supplies the raw materials such as gold/silver/gem-stones to the job-worker for

such manufacture, the duty liability would be on such person who gets articles of jewellery made from

the job worker. In such cases, the principal manufacturer (and not job worker) will be required to get

Central Excise registered, pay duty and follow other compliance requirements. This will ensure that

small artisans/goldsmiths are not required to take any excise registration.

(viii) The levy is based on self-assessment and therefore, no physical visits shall be made to

registered units in the normal course.


Jewellery — Levy of Central Excise duty — Constitution of sub-committee of the High Level Committee to simplify Tax Laws — Relaxations in implementation of the proposed duty

Circular No. 1021/9/2016-CX., dated 21-3-2016

F. No. 354/25/2016-TRU

Government of India

Ministry of Finance (Department of Revenue)

Central Board of Excise & Customs, New Delhi

Subject : Imposition of Central Excise duty on jewellery - Constitution of sub-committee of the High Level Committee - Regarding.

In the Budget 2016-17, Central Excise duty at the rate of 1% (without input tax credit) and 12.5% (with input tax credit) has been imposed on all articles of jewellery (except for silver jewellery, other than those studded with diamond, ruby, emerald or sapphire).

2. In this regard, it has been decided to constitute a Sub-Committee of the High Level Committee to Interact with Trade & Industry on Tax Laws, chaired by Dr. Ashok Lahiri, which will consist of :

a. three representatives of the trade [to be decided by the Government];

b. one legal expert [to be decided by the Government];

c. officer concerned from the Ministry of Commerce & Industry [MoC & I] to be nominated by the MoC & I; and

d. high level officials from the central excise department to be nominated by the Central Board of Excise and Customs.

The composition of the Sub-Committee will be circulated once the names of its members are finalized.

3 All associations will be given an opportunity to submit representation before the sub-committee in writing and the all India associations to state their case in person.

4. Terms of reference of the Sub-Committee will include the issues related to compliance procedure for the excise duty, including records to be maintained, forms to be filled including Form 12AA, operating procedures and any other issued that may be relevant. The Sub-Committee will submit its report within 60 days of its constitution.

5. Till the recommendations of the Sub-Committee are finalized, the following shall be adhered to :


(a) All payments of central excise duty will be based on first sale invoice value;

(b) The central excise authorities will not challenge the valuation given in the invoice provided the caratage/purity and weight of the gold/silver with precious stones; and carats of diamond/precious stones are mentioned on the invoice;

(c) The central excise officers will not visit the manufacturing units/ shops/place of business/residence of the jewelers;

(d) No arrest or criminal prosecution of any jeweler will be done;

(e) No search or seizure of stocks by any central excise official will be effected;

(f) Exporters will be allowed to export on self-declaration and submission of LUT to customs without the need to get LUT ratified by central excise. Prevailing system will continue.

6. The registration of the establishment with the central excise department can be taken within 60 days from 1st March, 2016. However, the liability for payment of central excise duty will be with effect from 1st March, 2016, and as a special case for the month of March, 2016, the assessee jewelers will be permitted to make payment of excise duty along with the payment of excise duty for the month of April, 2016.

7. Any further communications with the regard to the aforesaid Sub-Committee may be addressed to the Office of the High Level Committee (HLC), Suite No. 215, The Janpath Hotel, Janpath Road, Opp. BSNL Building, New Delhi-110001.

8. Wide publicity may be given to this circular. Difficulty, if any, in implementing the circular should be brought to the notice of the Board. Hindi version would follow.


CENTRAL EXCISE RULES, 2002

[Notification No. 4/2002-C.E. (N.T.), dated 1-3-2002 as amended]

In exercise of the powers conferred by section 37 of the Central Excise Act, 1944 (1 of 1944) and in supersession of the Central Excise (No. 2) Rules, 2001, except as respects things done or omitted to be done before such supersession, the Central Government hereby makes the following rules, namely :-

RULE 4. Duty payable on removal. — (1) Every person who produces or manufactures any excisable goods, or who stores such goods in a warehouse, shall pay the duty leviable on such goods in the manner provided in rule 8 or under any other law, and no excisable goods, on which any duty is payable, shall be removed without payment of duty from any place, where they are produced or manufactured, or from a warehouse, unless otherwise provided :

[(1A) Notwithstanding anything contained in sub-rule (1), every person who gets the goods, falling under Chapter 61 or 62 or 63 of the First Schedule to the Tariff Act, produced or manufactured on his account on job work, shall pay the duty leviable on such goods, at such time and in such manner as is provided under these rules, as if such goods have been manufactured by such person :

Provided that where any person had, instead of paying duty, authorized job worker to pay the duty leviable on goods manufactured in his behalf under the provisions of sub-rule (1A) as it stood prior to the publication of this notification, he shall be allowed to obtain registration and comply with the provisions of these rules within a period of thirty days from the date of publication of this notification in the Official Gazette.].

(2) Notwithstanding anything contained in sub-rule (1), where molasses are produced in a khandsari sugar factory, the person who procures such molasses, whether directly from such factory or otherwise, for use in the manufacture of any commodity, whether or not excisable, shall pay the duty leviable on such molasses, in the same manner as if such molasses have been produced by the procurer.

[(3) * * * ]

(4) Notwithstanding anything contained in sub-rule (1), [Principal Commissioner or Commissioner, as the case may be] may, in exceptional circumstances having regard to the nature of the goods and shortage of storage space at the premises of the manufacturer where the goods are made, permit a manufacturer to store his goods in any other place outside such premises, without payment of duty subject to such conditions as he may specify.

RULE 11. Goods to be removed on invoice. — (1) No excisable goods shall be removed from a factory or a warehouse except under an invoice signed by the owner of the factory or his authorized agent and in the case of cigarettes, each such invoice shall also be countersigned by the Inspector of Central Excise or the Superintendent of Central Excise before the cigarettes are removed from the factory :


[Provided that a manufacturer of yarns or fabrics falling under Chapter 50, 51, 52, 53, 54, 55, 58 or 60 or readymade garments falling under Chapter 61 or 62 of First Schedule to the Tariff Act may remove the said goods under a proforma invoice signed by him or his authorised agent. The provisions of sub-rules (2) to (5) shall apply to the proforma invoice except that the said invoice shall not contain the details of the duty payable. The manufacturer shall, within five working days from the issuance of the proforma invoice prepare the invoice in terms of this rule after making adjustments in respect of the goods rejected and returned by the buyer. The proforma invoice and the invoice issued in terms of this sub-rule shall have cross reference to each other by way of their serial numbers :]

[Provided further that the said period of five working days, as referred to in the first proviso, may be extended upto a period not exceeding twenty-one days, inclusive of the said period of five working days, by the [Principal Commissioner of Central Excise or Commissioner of Central Excise, as the case may be], on receipt of a request from the said manufacturer.]

[(2) The invoice shall be serially numbered and [shall contain the registration number, address of the concerned Central Excise Division,] name of the consignee, description, classification, time and date of removal, mode of transport and vehicle registration number, rate of duty, quantity and value, of goods and the duty payable thereon :]

[Provided that in case of a proprietary concern or a business owned by Hindu Undivided Family, the name of the proprietor or Hindu Undivided Family, as the case may be, shall also be mentioned in the invoice :]

[Provided further that if goods are directly sent to a job worker on the direction of a manufacturer or the provider of output service, the invoice shall also contain the details of the manufacturer or the provider of output service, as the case may be, as buyer and contain the details of job worker as the consignee :

Provided also that if the goods are directly sent to any person on the direction of the registered dealer, the invoice shall also contain the details of the registered dealer as the buyer and the person as the consignee, and that person shall take CENVAT credit on the basis of the registered dealer’s invoice :

Provided also that if the goods imported under the cover of a bill of entry are sent directly to buyer’s premises, the invoice issued by the importer shall mention that goods are sent directly from the place or port of import to the buyer’s premises;]

(3) The invoice shall be prepared in triplicate in the following manner, namely :-

(i) the original copy being marked as ORIGINAL FOR BUYER;

(ii) the duplicate copy being marked as DUPLICATE FOR TRANSPORTER;

(iii) the triplicate copy being marked as TRIPLICATE FOR ASSESSEE.


(4) Only one copy of invoice book shall be in use at a time, unless otherwise allowed by the Assistant Commissioner of Central Excise, or the Deputy Commissioner of Central Excise, as the case may be, in the special facts and circumstances of each case.

[(5) * * * * * * ]

(6) Before making use of the invoice book, the serial numbers of the same shall be intimated to the Superintendent of Central Excise having jurisdiction.

(7) The provisions of this rule shall apply mutatis mutandis to goods supplied by [an importer who issues an invoice on which CENVAT credit can be taken, or] a first stage dealer or a second stage dealer :

[Provided that in case of the first stage dealer receiving imported goods under an invoice bearing an indication that the credit of additional duty of customs levied on the said goods under sub-section (5) of section 3 of the Customs Tariff Act, 1975 (51 of 1975) shall not be admissible, the said dealer shall on the resale of the said imported goods, indicate on the invoice issued by him that no credit of the additional duty levied under sub-section (5) of section 3 of the Customs Tariff Act, 1975 shall be admissible :

Provided further that in case of the second stage dealer receiving imported goods under an invoice bearing an indication that the credit of additional duty of customs levied on the said goods under sub-section (5) of section 3 of the Customs Tariff Act, 1975 (51 of 1975) shall not be admissible, the said dealer shall on the resale of such imported goods, indicate on the invoice issued by him that no credit of the additional duty levied under sub-section (5) of section 3 of the Customs Tariff Act, 1975 shall be admissible.]

Explanation. - For the purposes of this rule, “first stage dealer” and “second stage dealer” shall have the meanings assigned to them in [CENVAT Credit Rules, 2004].

[(8) An invoice issued under this rule by a manufacturer may be authenticated by means of a digital signature :

Provided that where the duplicate copy of the invoice meant for transporter is digitally signed, a hard copy of the duplicate copy of the invoice meant for transporter [ * * * ] shall be used for transport of goods.

(9) The Board may, by notification, specify the conditions, safeguards and procedure to be followed by an assessee using digitally signed invoice.

Explanation. - [For the purposes of rule 10 and this rule.], the expressions, “authenticate”, “digital signature” and “electronic form” shall have the respective meanings as assigned to them in the Information Technology Act, 2000 (21 of 2000).]


[RULE 12AA. Job work in article of jewellery or other articles of precious metals. - (1) Notwithstanding any thing contained in these rules, every person (not being an export-oriented unit or a unit located in special economic zone) who gets article of [jewellery or other articles of precious metals following under Heading 7113 or 7114 as the case may be] the First Schedule to the Central Excise Tariff Act, 1985 (5 of 1986) (hereinafter referred to as the Tariff Act), produced or manufactured on his behalf, on job work basis, (hereinafter referred to as “the said person”) shall obtain registration, maintain accounts, pay duty leviable on such goods and comply with all the relevant provisions of these rules, as if he is an assessee :

[ * * * * * * * ]

(2) If the said person desires clearance of excisable goods for home consumption or for exports from the premises of the job worker, he shall pay duty on such excisable goods and prepare an invoice, in the manner referred to in rules 8 and 11 respectively except for mentioning the date and time of removal of goods on such invoice.

(3) The original and the duplicate copy of the invoice so prepared shall be sent by him to the job worker from whose premises the excisable goods after completion of job work are intended to be cleared, before the goods are cleared from the premises of the job worker.

(4) The job worker shall fill up the particulars of date and time of removal of goods before the clearance of goods and after such clearance the job worker shall intimate to the said person, the date and time of the clearance of goods for completion of the particulars by the said person in the triplicate copy of the invoice.

(5) The said person may supply or cause to supply to a job worker, the following goods, namely :-

(a) inputs in respect of which he may or may not have availed CENVAT credit in terms of the CENVAT Credit Rules, 2004, without reversal of the credit thereon; or

(b) goods manufactured in the factory of the said person without payment of duty;

under a challan, consignment note or any other document (herein referred to as ‘document”) with such information as specified in sub-rule (2) of rule 11 of the Central Excise Rules, 2002, duly signed by him or his authorised agent.

(6) The responsibility in respect of accountability of the goods, referred to in sub-rule (5) shall lie on the said person.

(7) Notwithstanding any thing contained in these rules, the job worker shall not be required to get himself registered or shall not be required to maintain any record evidencing the processes undertaken for the sole purposes of undertaking job work under these rules unless he has exercised his option in terms of the proviso to sub-rule (1).

(8) The job worker, with or without completing the job work may,-

(i) return the goods without payment of duty to the said person; or



subject to receipt of an invoice from the said person, as mentioned in sub-rule (4).

(9) The job worker shall clear the goods after filling in invoice the time and date of removal and authentication of such details. The rate of duty on such goods shall be the rate in force on date of removal of such goods from the premises of the job worker and no excisable goods shall be removed except under the invoice.

Explanation 1. - For the purpose of this rule, “job worker” means a person engaged in manufacture or processing on behalf and under the instructions of the said person from any inputs or goods supplied by the said person or by any other person authorized by the said person, so as to complete a part or whole of the process resulting ultimately in manufacture of articles of jewellery falling under heading 7113 of the First Schedule to the Central Excise Tariff Act, 1985, and the term “job work” shall be construed accordingly.

[Explanation 2. - * * * * * * * ]

Explanation 3. - For the purposes of this notification, ‘brand name or trade name’ means a brand name or trade name, whether registered or not, that is to say, a name or a mark, such as a symbol, monogram, label, signature or invented words or any writing which is used in relation to a product, for the purpose of indicating, or so as to indicate, a connection in the course of trade between the product and some person using such name or mark with or without any indication of the identity of that person.

Explanation 4. - For the removal of doubts, it is hereby clarified that if any goods or part thereof is lost, destroyed, found short at any time before the clearance of articles of jewellery falling under heading 7113 of the First Schedule to the Tariff Act or waste, by-products or like goods arising during the course of manufacture of such goods, the said person shall be liable to pay duty thereon as if such goods were cleared for home consumption.]

RULE 16. Credit of duty on goods brought to the factory. — (1) Where any goods on which duty had been paid at the time of removal thereof are brought to any factory for being re-made, refined, re-conditioned or for any other reason, the assessee shall state the particulars of such receipt in his records and shall be entitled to take CENVAT credit of the duty paid as if such goods are received as inputs under the CENVAT Credit Rules, 2002 and utilise this credit according to the said rules.

(2) If the process to which the goods are subjected before being removed does not amount to manufacture, the manufacturer shall pay an amount equal to the CENVAT credit taken under sub-rule (1) and in any other case the manufacturer shall pay duty on goods received under sub-rule (1) at the rate applicable on the date of removal and on the value determined under sub-section (2) of section 3 or section 4 or section 4A of the Act, as the case may be.

[Explanation. - The amount paid under this sub-rule shall be allowed as CENVAT credit as if it was a duty paid by the manufacturer who removes the goods.]


(3) If there is any difficulty in following the provisions of sub-rule (1) and sub-rule (2), the assessee may receive the goods for being re-made, refined, re-conditioned or for any other reason and may remove the goods subsequently subject to such conditions as may be specified by the [Principal Commissioner or Commissioner, as the case may be].


CENVAT CREDIT RULES, 2004

[Notification No. 23/2004-C.E. (N.T.), dated 10-9-2004 as amended]

In exercise of the powers conferred by section 37 of the Central Excise Act, 1944 (1 of 1944) and section 94 of the Finance Act, 1994 (32 of 1994) and in supersession of the CENVAT Credit Rules, 2002 and the Service Tax Credit Rules, 2002, except as respects things done or omitted to be done before such supersession, the Central Government hereby makes the following rules, namely :-

RULE 6. [Obligation of a manufacturer or producer of final products and a [provider of output service]]. — [(1) The CENVAT credit shall not be allowed on such quantity of input as is used in or in relation to the manufacture of exempted goods or for provision of exempted services or input service as is used in or in relation to the manufacture of exempted goods and their clearance upto the place of removal or for provision of exempted services and the credit not allowed shall be calculated and paid by the manufacturer or the provider of output service, in terms of the provisions of sub-rule (2) or sub-rule (3), as the case may be :

Provided that the CENVAT credit on inputs shall not be denied to job worker referred to in rule 12AA of the Central Excise Rules, 2002, on the ground that the said inputs are used in the manufacture of goods cleared without payment of duty under the provisions of that rule.

Explanation 1. - For the purposes of this rule, exempted goods or final products as defined in clauses (d) and (h) of rule 2 shall include non-excisable goods cleared for a consideration from the factory.

Explanation 2. - Value of non-excisable goods for the purposes of this rule, shall be the invoice value and where such invoice value is not available, such value shall be determined by using reasonable means consistent with the principles of valuation contained in the Excise Act and the rules made thereunder.

Explanation 3. - For the purposes of this rule, exempted services as defined in clause (e) of rule 2 shall include an activity, which is not a ‘service’ as defined in section 65B(44) of the Finance Act, 1994.

Explanation 4. - Value of such an activity as specified above in Explanation 3, shall be the invoice/agreement/contract value and where such value is not available, such value shall be determined by using reasonable means consistent with the principles of valuation contained in the Finance Act, 1994 and the rules made thereunder.]

[(2) A manufacturer who exclusively manufactures exempted goods for their clearance upto the place of removal or a service provider who exclusively provides exempted services shall pay the whole amount of credit of input and input services and shall, in effect, not be eligible for credit of any inputs and input services.]


[(3) (a) A manufacturer who manufactures two classes of goods, namely :- (i) non-exempted goods removed; (ii) exempted goods removed; Or (b) a provider of output service who provides two classes of services, namely :- (i) non-exempted services; (ii) exempted services, shall follow any one of the following options applicable to him, namely :- [(i) pay an amount equal to six per cent. of value of the exempted goods and

seven per cent. of value of the exempted services subject to a maximum of the sum total of opening balance of the credit of input and input services available at the beginning of the period to which the payment relates and the credit of input and input services taken during that period; or]

(ii) pay an amount as determined under sub-rule (3A) :

Provided that if any duty of excise is paid on the exempted goods, the same shall be reduced from the amount payable under clause (i) :

Provided further that if any part of the value of a taxable service has been exempted on the condition that no CENVAT credit of inputs and input services, used for providing such taxable service, shall be taken then the amount specified in clause (i) shall be seven per cent. of the value so exempted :

Provided also that in case of transportation of goods or passengers by rail, the amount required to be paid under clause (i) shall be an amount equal to two per cent. of value of the exempted services.

Explanation 1. - If the manufacturer of goods or the provider of output service, avails any of the option under this sub-rule, he shall exercise such option for all exempted goods manufactured by him or, as the case may be, all exempted services provided by him, and such option shall not be withdrawn during the remaining part of the financial year.

Explanation 2. - No CENVAT credit shall be taken on the duty or tax paid on any goods and services that are not inputs or input services.

Explanation 3. - For the purposes of this sub-rule and sub-rule (3A),-

(a) “non-exempted goods removed” means the final products excluding exempted goods manufactured and cleared upto the place of removal;

(b) “exempted goods removed” means the exempted goods manufactured and cleared upto the place of removal;

(c) “non-exempted services” means the output services excluding exempted services.]


[(3A) For determination of amount required to be paid under clause (ii) of sub-rule (3), the manufacturer of goods or the provider of output service shall follow the following procedure and conditions, namely :-

(a) the manufacturer of goods or the provider of output service shall intimate in writing to the Superintendent of Central Excise giving the following particulars, namely :-

(i) name, address and registration number of the manufacturer of goods or provider of output service;

(ii) date from which the option under this clause is exercised or proposed to be exercised;

(iii) description of inputs and input services used exclusively in or in relation to the manufacture of exempted goods removed or for provision of exempted services and description of such exempted goods removed and such exempted services provided;

(iv) description of inputs and input services used exclusively in or in relation to the manufacture of non-exempted goods removed or for the provision of non-exempted services and description of such non-exempted goods removed and non-exempted services provided;

(v) CENVAT credit of inputs and input services lying in balance as on the date of exercising the option under this condition;

(b) the manufacturer of final products or the provider of output service shall determine the credit required to be paid, out of this total credit of inputs and input services taken during the month, denoted as T, in the following sequential steps and provisionally pay every month, the amounts determined under sub-clauses (i) and (iv), namely :-

(i) the amount of CENVAT credit attributable to inputs and input services used exclusively in or in relation to the manufacture of exempted goods removed or for provision of exempted services shall be called ineligible credit, denoted as A, and shall be paid;

(ii) the amount of CENVAT credit attributable to inputs and input services used exclusively in or in relation to the manufacture of non-exempted goods removed or for the provision of non-exempted services shall be called eligible credit, denoted as B, and shall not be required to be paid;

(iii) credit left after attribution of credit under sub-clauses (i) and (ii) shall be called common credit, denoted as C and calculated as,-

C = T - (A + B);

Explanation. - Where the entire credit has been attributed under sub-clauses (i) and (ii), namely ineligible credit or eligible credit, there shall be left no common credit for further attribution.

(iv) the amount of common credit attributable towards exempted goods removed or for provision of exempted services shall be called ineligible common credit, denoted as D and calculated as follows and shall be paid, -


D = (E/F) x C; where E is the sum total of – (a) value of exempted services provided; and (b) value of exempted goods removed, during the preceding financial year; where F is the sum total of - (a) value of non-exempted services provided, (b) value of exempted services provided, (c) value of non-exempted goods removed, and (d) value of exempted goods removed, during the preceding financial year : Provided that where no final products were manufactured or no output service was provided in the preceding financial year, the CENVAT credit attributable to ineligible common credit shall be deemed to be fifty per cent. of the common credit; (v) remainder of the common credit shall be called eligible common credit and denoted

as G, where,-

G = C - D; Explanation.- For the removal of doubts, it is hereby declared that out of the total credit T, which is sum total of A, B, D, and G, the manufacturer or the provider of the output service shall be able to attribute provisionally and retain credit of B and G, namely, eligible credit and eligible common credit and shall provisionally pay the amount of credit of A and D, namely, ineligible credit and ineligible common credit. (vi) where manufacturer or the provider of the output service fails to pay the amount

determined under sub-clause (i) or sub-clause (iv), he shall be liable to pay the interest from the due date of payment till the date of payment of such amount, at the rate of fifteen per cent. per annum;

(c) the manufacturer or the provider of output service shall determine the amount of CENVAT credit attributable to exempted goods removed and provision of exempted services for the whole of financial year, out of the total credit denoted as T (Annual) taken during the whole of financial year in the following manner, namely :-

(i) the CENVAT credit attributable to inputs and input services used exclusively in or in relation to the manufacture of exempted goods removed or for provision of exempted services on the basis of inputs and input services actually so used during the financial year, shall be called Annual ineligible credit and denoted as A(Annual);

(ii) the CENVAT credit attributable to inputs and input services used exclusively in or in relation to the manufacture of non-exempted goods removed or for the provision of non-exempted services on the basis of inputs and input services actually so used shall be called Annual eligible credit and denoted as B(Annual);

(iii) common credit left for further attribution shall be denoted as C(Annual) and calculated as, -

C(Annual) = T(Annual) – [A(Annual) + B(Annual)];

(iv) common credit attributable towards exempted goods removed or for provision of exempted services shall be called Annual ineligible common credit, denoted by


D(Annual) and shall be calculated as, -

D(Annual) = (H/I) x C(Annual);

where H is sum total of-

(a) value of exempted services provided; and

(b) value of exempted goods removed;

during the financial year;

where I is sum total of -

(a) value of non-exempted services provided,

(b) value of exempted services provided,

(c) value of non-exempted goods removed; and

(d) value of exempted goods removed;

during the financial year;

(d) the manufacturer or the provider of output service shall pay on or before the 30th June of the succeeding financial year, an amount equal to difference between the total of the amount of Annual ineligible credit and Annual ineligible common credit and the aggregate amount of ineligible credit and ineligible common credit for the period of whole year, namely, [{A(Annual) + D(Annual)} – {(A+D) aggregated for the whole year)}], where the former of the two amounts is greater than the later;

(e) where the amount under clause (d) is not paid by the 30th June of the succeeding financial year, the manufacturer of goods or the provider of output service, shall, in addition to the amount of credit so paid under clause (d), be liable to pay on such amount an interest at the rate of fifteen per cent. per annum, from the 30th June of the succeeding financial year till the date of payment of such amount;

(f) the manufacturer or the provider of output service, shall at the end of the financial year, take credit of amount equal to difference between the total of the amount of the aggregate of ineligible credit and ineligible common credit paid during the whole year and the total of the amount of annual ineligible credit and annual ineligible common credit, namely, [{(A+D) aggregated for the whole year)} – {A(Annual) + D(Annual)}], where the former of the two amounts is greater than the later;

(g) the manufacturer of the goods or the provider of output service shall intimate to the jurisdictional Superintendent of Central Excise, within a period of fifteen days from the date of payment or adjustment, as per the provisions of clauses (d), (e) and (f) , the following particulars, namely :-

(i) details of credit attributed towards eligible credit, ineligible credit, eligible common credit and ineligible common credit, month-wise, for the whole financial year, determined as per the provisions of clause (b);

(ii) CENVAT credit annually attributed to eligible credit, ineligible credit, eligible common credit and ineligible common credit for the whole of financial year,


determined as per the provisions of clause (c);

(iii) amount determined and paid as per the provisions of clause (d), if any, with the date of payment of the amount;

(iv) interest payable and paid, if any, determined as per the provisions of clause (e); and

(v) credit determined and taken as per the provisions of clause (f), if any, with the date of taking the credit.]

[(3AA) Where a manufacturer or a provider of output service has failed to exercise the option under sub-rule (3) and follow the procedure provided under sub-rule (3A), the Central Excise Officer competent to adjudicate a case based on amount of CENVAT credit involved, may allow such manufacturer or provider of output service to follow the procedure and pay the amount referred to in clause (ii) of sub-rule (3), calculated for each of the months, mutatis-mutandis in terms of clause (c) of sub-rule (3A), with interest calculated at the rate of fifteen per cent. per annum from the due date for payment of amount for each of the month, till the date of payment thereof.

(3AB) Assessee who has opted to pay an amount under clause (ii) or clause (iii) of sub-rule (3) in the financial year 2015-16, shall pay the amount along with interest or take credit for the said financial year in terms of clauses (c), (d), (e), (f), (g), (h) or (i) of sub-rule (3A), as they prevail on the day of publication of this notification and for this purpose these provisions shall be deemed to be in existence till the 30th June, 2016.]

[(3B) A banking company and a financial institution including a non-banking financial company, engaged in providing services by way of extending deposits, loans or advances, in addition to options given in sub-rules (1), (2) and (3), shall have the option to pay for every month an amount equal to fifty per cent. of the CENVAT credit availed on inputs and input services in that month.]

[(3C) * * * * ]

(3D) Payment of an amount under sub-rule (3) shall be deemed to be CENVAT credit not taken for the purpose of an exemption notification wherein any exemption is granted on the condition that no CENVAT credit of inputs and input services shall be taken.

[Explanation I. - “Value” for the purpose of sub-rules (3) and (3A), —

(a) shall have the same meaning as assigned to it under section 67 of the Finance Act, read with rules made thereunder or, as the case may be, the value determined under section 3, 4 or 4A of the Excise Act, read with rules made thereunder;

(b) in the case of a taxable service, when the option available under sub-rules (7), (7A), (7B) or (7C) of rule 6 of the Service Tax Rules, 1994, has been availed, shall be the value on which the rate of service tax under section 66B of the Finance Act, read with an exemption notification, if any, relating to such rate, when applied for calculation of service tax results in the same amount of tax as calculated under the option availed;


(c) in case of trading, shall be the difference between the sale price and the cost of goods sold (determined as per the generally accepted accounting principles without including the expenses incurred towards their purchase) or ten per cent. of the cost of goods sold, whichever is more;

(d) in case of trading of securities, shall be the difference between the sale price and the purchase price of the securities traded or one per cent. of the purchase price of the securities traded, whichever is more;

(e) shall not include the value of services by way of extending deposits, loans or advances in so far as the consideration is represented by way of interest or discount.]

Explanation II. - The amount mentioned in sub-rules (3), (3A) [and (3B)], unless specified otherwise, shall be paid by the manufacturer of goods or the provider of output service by debiting the CENVAT credit or otherwise on or before the 5th day of the following month except for the month of March, when such payment shall be made on or before the 31st day of the month of March.

Explanation III. - If the manufacturer of goods or the provider of output service fails to pay the amount payable under sub-rules (3), (3A) [and (3B)], it shall be recovered, in the manner as provided in rule 14, for recovery of CENVAT credit wrongly taken.

Explanation IV. - In case of a manufacturer who avails the exemption under a notification based on the value of clearances in a financial year and a service provider who is an individual or proprietary firm or partnership firm, the expressions, “following month” and “month of March” occurring in sub-rules (3) and (3A) shall be read respectively as “following quarter” and “quarter ending with the month of March”.]

[(4) No CENVAT credit shall be allowed on capital goods used exclusively in the manufacture of exempted goods or in providing exempted services for a period of two years from the date of commencement of the commercial production or provision of services, as the case may be, other than the final products or output services which are exempt from the whole of the duty of excise leviable thereon under any notification where exemption is granted based upon the value or quantity of clearances made or services provided in a financial year :

Provided that where capital goods are received after the date of commencement of commercial production or provision of services, as the case may be, the period of two years shall be computed from the date of installation of such capital goods.]

[(5) * * * ]

(6) The provisions of sub-rules (1), (2), (3) and (4) shall not be applicable in case the excisable goods removed without payment of duty are either -

[(i) cleared to a unit in a special economic zone or to a developer of a special economic zone for their authorised operations; or]

(ii) cleared to a hundred per cent. export-oriented undertaking; or


(iii) cleared to a unit in an Electronic Hardware Technology Park or Software Technology Park; or

(iv) supplied to the United Nations or an international organization for their official use or supplied to projects funded by them, on which exemption of duty is available under notification of the Government of India in the Ministry of Finance (Department of Revenue) No. 108/95-Central Excise, dated the 28th August, 1995, number G.S.R. 602(E), dated the 28th August, 1995; or

[(iva) supplied for the use of foreign diplomatic missions or consular missions or career consular offices or diplomatic agents in terms of the provisions of Notification No. [12/2012-Central Excise, dated the 17th March, 2012, number G.S.R. 163(E), dated the 17th March, 2012]; or]

(v) cleared for export under bond in terms of the provisions of the Central Excise Rules, 2002; or

(vi) gold or silver falling within Chapter 71 of the said First Schedule, arising in the course of manufacture of copper or [zinc by smelting; or]

[(vii) all goods which are exempt from the duties of customs leviable under the First Schedule to the Customs Tariff Act, 1975 (51 of 1975) and the additional duty leviable under sub-section (1) of section 3 of the said Customs Tariff Act when imported into India and are supplied, —

(a) against International Competitive Bidding; or

(b) to a power project from which power supply has been tied up through tariff based competitive bidding; or

(c) to a power project awarded to a developer through tariff based competitive bidding,

in terms of Notification No. [12/2012-Central Excise, dated the 17th March, 2012];

[(viii) supplies made for setting up of solar power generation projects or facilities.]

[(ix) Ethanol produced from molasses generated from cane crushed in the sugar season 2015-16 i.e. 1st October, 2015 onwards, for supply to the public sector oil marketing companies, namely, Indian Oil Corporation Ltd., Hindustan Petroleum Corporation Ltd. or Bharat Petroleum Corporation Ltd., for the purposes of blending with petrol, in terms of the provisions of S. No. 40A of the Table in Notification No. 12/2012-Central Excise, dated the 17th March, 2012, number G.S.R. 163(E), dated that 17th March, 2012.]


ANNEXURE-1

[Annexure-I

Original

Duplicate

Form A-1

APPLICATION FOR CENTRAL EXCISE REGISTRATION

(see rule 9 of Central Excise Rules, 2002)

New Registration

Amendments to information pertaining to existing Registrant

Registration Number in case of existing Registrant

Part I : Identification of business requiring Registration (Manufacturing, Warehousing,

hundred percent Export Oriented Undertaking, Unit in Export Processing Zone,

[Importer], First Stage Dealer, Second Stage Dealer)

1. Name of the Registrant (Please see instruction No. 5).

2. Details of Permanent Account Number (PAN) (Please see instruction No. 6)

(i) Whether PAN has been issued by the Income Tax Department Yes No

(ii) If yes, the PAN


(iii) Name of the Registrant (as appearing in PAN)

(iv) If PAN is not available, whether applied for PAN Yes No

3. Category (tick only one box)

Manufacturer Warehouse

Export Oriented Undertaking Unit within Export Processing Zone

Manufacturer’s Depot Dealer

[Importer]

4. Constitution of business (tick only one box) (Please see instruction No. 7)

Proprietorship Partnership Registered Company

Unregistered Company Trust Society Others

5. Address of business premises

(i) Name of Premises/Building

(ii) Flat/Door/Block No.

(iii) Road/Street/Lane


(iv) Village/Area/Locality

(v) Block/Taluk/Sub-Division/Town

(vi) Post office

(vii) City/District

(viii) State/Union Territory

(ix) PIN

(x) Telephone Nos.: (Please see instruction No. 8)

(xi) Fax No. (Please see instruction No. 8)

(xii) E-mail Address

6. Define boundaries of the premises to be Registered (Please see instruction No. 9)

(i) North

(ii) East

(iii) West


(iv) South

7. Details of property holding rights of the Registrant with respect to the premises sought to be

Registered (tick only one box)

Ownership Lease/Rent

If owned whether mortgaged/ hypothecated : Yes No

8. Estimated investment in land, plant and machinery (Rupees in Lakh) :

9. Address of Head Office if different from that given at S.No. 5 above

(i) Name of Premises/Building

(ii) Flat/Door/Block No.

(iii) Road/Street/Lane

(iv) Village/Area/Locality

(v) Block/Taluk/Sub-Division/Town

(vi) Post office

(vii) City/District


(viii) State/Union Territory

(ix) PIN

(x) Telephone Nos.: (Please see instruction No.8)

(xi) Fax No. (Please see instruction No. 8)

(xii) E-mail Address.

10. Name, designation and address of the person signing this Application Form and of the authorised

person(s) : (Please see instruction No.10)

(i) Name

(ii) Designation

(iii) Name of Residential Premises/Building

(iv) Flat/Door/Block No.

(v) Road/Street/Lane

(vi) Village/Area/Locality


(vii) Block/Taluka/Sub-Division/ Town

(viii) Post office

(ix) City/District

(x) State/Union Territory

(xi) PIN

(xii) Telephone Nos.: (Please see instruction No. 8)

(a) Office

(b) Residence

(xiii) Fax No. (Please see instruction No. 8)

(xiv) E-mail Address

11. Details of Bank Accounts used for business transactions by the Registrant (Please see

instruction No. 11)

(a) Number of Bank Accounts

(b) Account 1

(i) Name of the Bank


(ii) Name of the Branch

(iii) Account No.

(c) Account 2

(i) Name of the Bank

(ii) Name of the Branch

(iii) Account No.

Part II : Business Transaction Number obtained from other Government

Agencies/Departments

12. Details of Business Transaction Numbers obtained from other Government Agencies/Departments (Please see instructions No. 12 and 13)

(i) Customs Registration No. (BIN No.) Yes No

If yes, give details

(ii) Directorate General Foreign Trade’s Import Yes No

Export Code No.



(iii) Sales Tax Registration Nos.

(a) State Sales Tax No. Yes No


(b) Central Sales Tax No. Yes No


(iv) Registrar of Company’s CIN No. Yes No


Part III : Proprietor/Partners/Chief Executive Officer/Chairman/Managing

Director/Trustee etc.

13. Mode of business (Please see instruction No. 14)

(i) Name

(ii) Designation

(iii) Name of Residential Premises/Building

(iv) Flat/Door/Block No.


(v) Road/Street/Lane

(vi) Village/Area/Locality

(vii) Block/Taluk/Sub-Division/Town

(viii) Post office

(ix) City/District

(x) State/Union Territory

(xi) PIN

(xii) Telephone Nos. : (Please see instruction No. 8)

(a) Office

(b) Residence

(xiii) Fax No. (Please see instruction No. 8)

(xiv) E-mail Address


(xv) PAN (issued by the Income Tax Department)

Part IV : Major Excisable goods to be manufactured, warehoused or traded/ Major inputs

14. Major excisable goods manufactured, warehoused or traded (description and CETSH) (Please

see instruction No. 15)

(i)____________________ (ii) ____________________ (iii) __________________

15. Major excisable goods used in the manufacture of final product (description and CETSH)

(Please see instruction No. 15)

(i)____________________ (ii) ____________________ (iii) __________________

DECLARATION

I, ________________________________________________ hereby declare that the information

given in this Application Form is true, correct and complete in every respect and that I am authorised

to sign on behalf of the Registrant.

(Please tick appropriate box)

(a) For new Registration/Amendment to Registration Certificate

I would like to receive the Registration Certificate -

by mail at the address specified at S.

No. ______ of Part-I

by

Hand

(b) For amendments to information pertaining

to existing Registrant

The above mentioned amendments are with effect from

(Signature of the applicant/authorised person with stamp)

(Please see instruction No. 16)

Date :

Place :


ACKNOWLEGEMENT

(To be given in the event Registration Certificate is not issued at the time of receipt of Application for

Registration)

I hereby acknowledge the receipt of your Application Form

(a) For new Registration/amendments to existing Registration Certificate

As desired, the New Registration Certificate will be sent by mail/ handed over

to you in person on

(b) For amendments to information pertaining to existing Registrant

Signature of the Officer of Central Excise

(with Name & Official Seal)

Date :

Instructions for filling up the Application Form for Registration

(1) This Application Form should be used for applying for Registration as also for informing any corrections/ changes in the information, subsequent to Registration. Any change in the information subsequent to Registration, except those under Part IV, must be brought to the notice of the Central Excise Department. Such changes should be indicated by ticking the relevant box at the top of the Form, providing the Registration Number and filling up only such information that has undergone change leaving the boxes for information not to be amended blank.

(2) The Application Form has to be filled in Duplicate, and submitted to the Deputy Commissioner of Central Excise or Assistant Commissioner of Central Excise, having jurisdiction over the place of business.

(3) Export Oriented Units and Units in Export Processing Zones in the Port Towns/cities which are in the jurisdiction of Commissioners of Customs would submit the Application Form to the concerned Deputy Commissioner of Customs or Assistant Commissioner of Customs.

(4) After entering the relevant details, extra boxes in a field may be left blank. Also one box may be left empty after completion of each entry. For example more than one telephone number may be given as under :

0 1 1 3 0 9 2 8 2 9 0 1 1 3 0 9 2 8 3 0 [(5) The name should be the name and style in which the Registrant is likely to carry out business from the premises seeking to be registered. Please do not mention any prefixes such as M/s., Mr., Shri, etc. In case of a proprietary concern or a business owned by Hindu Undivided Family, the name of the proprietor or Hindu Undivided Family, as the case may be, shall be indicated at serial number 13 (see instruction no. 14).]

(6) An attested copy of PAN allotted by the Income Tax Department should be enclosed; in case PAN has not been allotted attested copy of the acknowledged application for PAN should be enclosed.


(7) A registered company means, a company registered with the Registrar of Companies under the Companies Act, 1956 (1 of 1956) and having a CIN number. Unregistered means a company that is not so registered.

(8) Telephone and fax numbers to be given with NSD code, without leaving a gap.

(9) The description of the boundaries of the premises to be registered, should correspond to the one given in the Land Records.

(10) If there are more than one authorized persons, information is to be provided in respect of all in a separate sheet in the same box format.

(11) In case the Registrant has more than one Bank Account, for transacting his business, only two accounts with the maximum transactions must be mentioned.

(12) The details relevant to the Registrant only are to be filled. The details of businesses carried out from other premises need not be filled.

(13) If the status of the company is shown as Registered Company in Part I 4, then the information in Part II 12 (iv) is mandatory.

[(14) In the case of proprietary concern or business owned by a Hindu Undivided Family, the name of the proprietor or Hindu Undivided Family, as the case may be, shall be mentioned. In the case of a partnership firm, details of all partners are to be provided; in case of Registered/unregistered company, the details of its Chief Executive Officer/Chairman and Managing Director/Managing Director/Chairman/key Directors, as per relevance, are to be provided; in the case of Society, the details of its President, key Executive Members, are to be provided; in case of any other type of business, the details of key personnel engaged in management of the business are to be provided. If more names are to be provided the information shall be provided in respect of all in a separate sheet in the same manner.]

(15) The details of the three major excisable goods/inputs likely to be manufactured/used/traded should be mentioned.

(16) The instructions in respect of the person signing the Application for registration are as under :

(a) The Application may be signed by the Registrant himself or by his authorised agent having general power of attorney.

(b) The person signing the Application must be a holder of Permanent Account Number (PAN) allotted by the Income Tax Department.

(c) In case of unregistered partnerships, all the partners should sign the application.

(d) In case of registered Partnership the Managing Partner or other partners so authorised in the Partnership Deed may sign the application.]

_______


ER-8 Return for manufacturers paying 1% duty and not manufacturing any other product

In exercise of the powers conferred by sixth proviso to sub-rule (1) of rule 12 of the Central Excise Rules, 2002 the Central Board of Excise and Customs hereby specifies the form for quarterly return, namely :-

FORM E.R.-8

Original/Duplicate

[See rule 12 of the Central Excise Rules, 2002]

[To be submitted by the assessee falling under sixth proviso to rule 12(1) of the Central Excise Rules, 2002]

Return of excisable goods cleared @ 1% duty for the quarter

From :

MMMYYYY To : MMMYYYY

1. Registration number

2. Name of the Assessee

3. Details of the manufacture, clearance and duty payable. -

S.

No.

CETSH No. Descrip-tion of goods

Unit of

quantity

Serial number of Notification

No. 1/2011

Opening

balance

Quantity manufactured

Quantity cleared

(1) (2) (3) (4) (5) (6) (7) (8)

Closing balance

Assessable Value (Rs.)

Excise duty payable @ 1%

Education cess & Secondary Education Cess (2%+1%)

Total Duty payable

(9) (10) (11) (12) (13)

4. Details of duty paid on excisable goods :


Duty code Amount (Rs.)

Challan No.

Date Bank code

Branch Code

(1) (2) (3) (4) (5) (6)

CENVAT

Edu. Cess & Sec. & Higher Education cess

Total duty paid

5. Details of other payments made :

Payments Amount (Rs.)

Challan No.

Date Bank Code

Branch code

Remarks

(1) (2) (3) (4) (5) (6) (7)

Other payments (Specify)

6. Self- assessment memorandum :

(a) I hereby declare that the information given in this Return is true, correct and complete in every respect and that I am authorised to sign on behalf of the assessee.

(b) During the quarter, total Rs._____________was deposited vide GAR-7 Challans (copies enclosed).

(c) During the quarter, invoices bearing S. No. _______________ to S.No. _________ were issued.

Date :

Place :

(A) Name and signature of Assessee or Authorised Signatory

Acknowledgement

Return of excisable goods cleared @ 1% duty for the quarter

From :

MMMYYYY To : MMMYYYY

D D M M Y Y Y Y

Date of receipt

Name and Signature of the Range Officer with


Official Seal

Instructions

1. Indicate the 15-digit PAN based registration number and the name as appearing in the Registration Certificate.

2. In case more than one item is manufactured, additional row may be inserted in each table, wherever necessary.

3. In case the goods are cleared for export under Bond, the details of clearance may be mentioned separately.

4. 8-digit CETSH Number may be indicated under the column CETSH.

5. Wherever quantity codes appear, indicate relevant abbreviations as given below.

Quantities Abbreviations Quantities Abbreviations

Centimetre(s) cm Metre(s) M

Cubic centimetre(s) cm3 Square metre(s) M2

Cubic metre(s) M3 Millimetre(s) Mm

Gram(s) g Metric tonne Mt

Kilogram kg Number of pairs Pa

Kilolitre kl Quintal Q

Litre(s) l Tonne(s) t

Thousand in number

Tu Number u

6. In the column (8) of Table at serial number 3, the assessable value means,

(a) where goods attract ad valorem rate of duty, the value under section 4 of Central Excise Act, 1944 (1 of 1944);

(b) where goods are covered under section 4A of the Act, the assessable value as worked out under MRP after allowing deductions as provided under section 4A of the Act;

(c) in case of goods for which the tariff value is fixed, such tariff value;

(d) incase of exports under Bond, the ARE-1/ARE-2/invoice value.

7. Details of any other payments like arrears, interest etc. may be mentioned in serial number 5.

[Notification No. 15/2011-C.E. (N.T.), dated 30-6-2011]