Excise and SSI
http://dcmsme.gov.in/policies/central/t-ed.htm
Today, the SSI sector produces almost 8000 products.
The number of units have gone up from 19 lakhs in 1991 to over 31 lakhs
in 1999. During the 7 year period from 1991 when liberalization began
till 1998, the SSI sector created almost 42 lakhs new jobs whereas the
entire organised industry including government was able to create only
14.3 lakhs new jobs.
From time to time, various incentives in the shape of
exemptions from payment of excise duties and licensing registration
controls have been extended to small scale units producing excisable
goods. This has been the long standing and consistent policy of the
Government to encourage the small scale sector and to improve their
competitive position vis-à-vis the large manufacturing units. Government
of India has provided a major relief by granting full exemption from
the Payment of central excise duty on a specified output and thereafter
slab-wise concessions of certain specified items in 1978. A general
Small Scale Exemption Scheme in respect of specified commodities was
introduced in 1985. The same was replaced in 1986 and subsequently
amended from time to time by a number of notifications in 1993. With
effect from 1-4-1994, Gate-Pass System was replaced by manufacturer
invoice to cover clearances of goods as the duty-paying document.
In the Budget 1995-96, the limit of Rs.2 crore
turnover for a small scale unit to be eligible to exemption was revised
to Rs.3 crore. SSI units whose clearances dis not exceed Rs.30 lakhs in a
financial year were exempted from payment of excise duty. SSIs are also
not required to maintain any statutory records such as daily stock
account of production and clearances, raw material account, personal
ledger account, RG-23A account, RG-23C account, stock register of goods
sent for processing of job-work, invoice records etc. Their own records
are adequate for excise purposes. The exemption limit was raised to
Rs.50 lakhs in the budget 1998-99 and further to Rs.100 lakhs in 2000.
SSIs have been allowed to pay duty on a monthly basis w.e.f 1-4-1999.
Eligibility as an SSI Unit
The pre-requisite for the eligibility for excise
concessions was that SSI unit should be registered with the State
Directorate of Industries or DC(SSI). At-the time of obtaining the
exemptions and concessions, the SSI unit was required to produce such a
certificate of registration from the respective Directorate of
Industries or DC(SSI),
In the year 1986, SSI units not registered with the
State Directorate of Industries were also given exemptions, but on
different eligibility conditions. With effect from 1-4-1994, the
requirement of obtaining registration certificate from the Directorate
of Industries or DC(SSI) has been dispensed with as a condition for
available or excise duty concessions. This implies that there would be
no distinction between registered and unregistered units for SSI
concessions. Further, the eligibility for excise concessions for SSIs
has been based on annual turnover rather than SSI registration which is
based on the criterion of investment in plant and machinery. Only the
units previously registered with DGTD and now with SIA are not
considered eligible for SSI concessions.
There are two exemption schemes available for the SSI sector which have been amended by the Finance Act, 2000. The schemes are:
SSI Scheme (Without CENVAT)
This scheme as contained in Notification No.8/2003-CE
dated 1.3.2003 is effective from 1.4.2000. The following rate of duty
is applicable to such manufactures whose turnover does not exceed Rs. 3
crores in the previous financial year in respect of clearances of
excisable goods for home consumption (including exports to Nepal or
Bhutan) from one or more factories of the same manufacturer or from
factory by one or more manufacturers:
Rate of duty in respect of Clearances of Excisable Goods
Value of Clearance (Rs.) | Rate of duty | Remarks |
Upto 100 Lakhs | Nil | Not to avail Cenvat |
100-300 Lakhs | Normal rate of duty | Can avail Cenvat |
It may be noted that beyond clearances of Rs.100
lakhs, the manufacturer is liable to pay normal rate of duty and
accordingly he can avail CENVAT credit at this stage. Similarly, CENVAT
credit on capital goods can be availed and utilised after crossing the
limit of Rs.100 lakhs.
The scheme has been extended to articles of plastic,
cosmetic and toilet preparations, tread rubber, airconditioning and
refrigeration and parts, which were earlier covered under a separate
exemption. All such clearances of the specified goods which are used for
captive consumption in production of the specified goods are subjected
to 'nill' rate of duty and the Table itself. The notification grants
exemption in respect of basic excise duty and special excise duty. The
manufacturer may opt for not availing exemption contained in the
notification and instead pay the normal rate of duty on the clearances.
But once the option is exercised, it shall continue till the remaining
part of the financial year.
SSI exemption notifications clearly use the words
'first clearances on or after 1st April in any financial year'. In
Remakrishna Engineering Works v. CCE, (1996) 83 ELT 346 (CEGAT), it has
been held that all clearance from 1st April in chronological order have
to be considered for purpose of calculation of exemption limit of Rs.100
lakhs. Thus, if some goods are cleared on payment of duty, those will
also have to be considered for calulating the limit of 100 lakhs.
Value for purpose of calculating the limit of 100 and
300 lakhs is the 'Assessable value' as per section 4 i.e., wholesale
price at factory gate, exclusive of taxes, where price is the sole
criteria. When goods are assessed on basis of MRP (Maimum Retail Price)
the 'Value' will be as determined under section 4A.
SSI Scheme (with CENVAT)
This scheme as contained in Notification No.9/2003-CE
dated 1.3.2003 is effective from 1.4.2003. The Notification provides
the concessional rate of duty in respect of clearances of specified
goods for home consumption (including exports to Nepal or Bhutan), and
also states that all clearances of the specified goods which are used
for captive consumption in production of the specified goods shall be
subjectedd to 'nil' rate of duty. Such clearances shall not be counted
for determining the aggregate value of clearance of the specified goods.
The following Table shows the Rate of Duty.
Rate of duty in respect of Clearances of Specified goods
Value of Clearance (Rs.) | Rate of duty | Remarks |
Upto 100 Lakhs | 60% of normal rate | Cenvat credit is of duty available from the beginning itself |
100-300 Lakhs | Normal rate of duty | Can avail Cenvat |
- A manufacturer who intends to avail the exemption under this notification shall exercise his option in writing for availing the exemption under this notification shall exercise his option in writing for availing the exemption under this notification before effecting the first clearances and such option shall be effective from the date of exercise of the option and shall not be withdrawn during the remaining part of the financial year.
-
While exercising the option under condition (i), the manufacturer shall inform in writing to the jurisdiction Deputy Commissioner or Assistant Commissioner of Central Excise with a copy of the Superintendent of Central Excise giving the following particulars, namely:-
- name and address of the manufacturer;
- location/locations of factory/factories;
- description of specified goods produced;
- date from which option under this notification has been exercised;
- aggregate value of clearances of specified goods (excluding the value of clearances referred to in para 3 of this notification) till the date of exercising the option.
- Where a manufacturer opts for availing the exemption under this notification in terms of condition (i) above, the clearances of specified goods already made during the financial year, prior to the exercise of such option, shall be taken into account for computing the aggregate value of clearances, as specified in the said table.
- Where a manufacturer clears the specified goods from one or more factories, the exemption in this case shall apply to the aggregate value of clearances mentioned against each of the serial numbers in the said table, and not separately for each factory.
- Where the specified goods are cleared by one or more manufacturers from a factory, the exemption shall apply to the aggregate value of clearances mentioned against each of the serial numbers in the said table and not separately for each manufacturer.
- The aggregate value of clearances of all excisable goods for home consumption by a manufacturer from one or more factories, or from a factory by one or more manufacturer, does not exceed preceding financial year Rs.300 lakhs.
- Where specified goods, being in the nature of components or parts of any machinery or equipment orappliances by following the procedure laid down in Chapter X of the Central Excise Rules, 1944, However, manufacturers, whose aggregate value of clearances for home consumption of such specified goods for use as original equipment does not exceed rupees fifty lakhs in the financial year 1999-2000, may submit a declaration regarding such use instead of following the procedure laid down in chapter X of the said rules;
- Where the goods bear a brand name of trade name of -
- the Khadi and Village Industries Commission; or
- a State Khadi and Village Industry Board; or
- the National Small Industries Corporation; or
- a State Small Industries Development Corporation; or
- a State Small Industries Corporation;
- Where the specified goods are manufactured in a factory located in a rural area.
- Specified goods produced without the aid of power. All capital goods, intermediate goods and inputs if captively consumed within the factory of their production or used in the manufacture of specified final products in the manufacturer or specified goods.
- Specified goods if manufactured on job work basis/cleared for job work/manufactured as a job work and used in the manufacture of final products.
- Genuine specified products of village industry/certain specified goods manufactured in the rural areas by Co-operatives/K.V.I.C., etc.
- Goods meant for repairing, reconditioning and reengineering.
-
Goods sent abroad as exhibits for exhibition in International Trade Fairs or for demonstration or carrying out tests or trials. - Certain goods if cleared for display in any fair or exhibition in India.
- Goods produced in a technical, educational and research institute during the course of technical training or an academic or vocational nature or carrying out experiments or research.
- Goods supplied to specified research institutions.
- Goods produced in Government Factories, Mines, Mints, prisons Defence Production etc.
- Goods manufactured by specified units/Institutions for use by Governmnet Departments or Defence purposes.
- Goods supplied for Defence or other specified purposes.
- Specified goods manufactured in a State Government factory and intended for use in any of its department.
- Duty in excess of 10% is exempted on goods for supply to Gas Authority of India Limited, Oil and Natural Gas Corporation Ltd., or the Oil India Limited.
- Certain specified goods connected with solar and natural energy.
- Improved Chulhas (including smokeless Chulhas) capable of burning wood, agro-waste, cow-dung, briquettes and coal.
- Good required for Nuclear Fuel Complex.
- Duty in excess of 5% ad valorem on pollution control equipment.
- Goods manufactured by institution for handicapped persons.
- Good produced or manufactured in a Free Trade Zone.
- Specified goods used by units in Export Processing Zones/Free Trade Zones.
- Goods brought to any gem and jewellery manufacturing units set up in Santa Cruz Electronics Export Processing Zone (SEEPZ).
- Goods produced in 100% Export Oriented undertakings but not sold within India.
The exemption contained shall not apply to the
specified goods bearing a brand name of trade name, whether registered
or not, of another person, except in the following cases, namely:-
Goods exempted from whole of the Duty of Excise/The Additional Duty of Excise
Concessions
SSI units having turnover less than Rs.60 lakhs per annum need not have a separate storeroom for storing the finished products.
SSI units are required to pay duty on monthly basis
instead of paying at the time of every clearance. Duty liability is to
be discharged by 15th of the following month. The duty can be paid
either through PLA or RG23 register.
SSI exemption is available in respect of goods
exported to Nepal & Bhutan. The SSI exemption is available for home
consumption, i.e. for consumption within India. However, explanation to
SSI exemption notifications make it clear that clearances for home
consumption shall also include clearances for export to Bhutan &
Nepal. Thus, exports to Nepal & Bhutan will qualify for SSI
exemption.
As per the CBE&C circular No.406/39/98-CX dated
7.7.1998, since the exemption SSI units do not have to file any
declaration, they will not be given any code number and it need not be
mentioned in the invoice or challan. In Lokhandwala Construction
Industries v. CCE, 1997 (92) ELT 703(CEGAT) & K.S. Mills v. CCE,
1998 (98) ELT 619 (CEGAT), it has been held that the declaration to be
given by SSI is only for purpose of exemption from registration. The
duty exemption to SSI is available whether or not such declaration is
given. Thus, SSI exemption is available even if such declaration is not
submitted.
Normally, excise officers are not expected to visit
SSI units paying less than Rs.10 lakhs duty annually. According to
Mumbai II Commissionerate Trade Notice No.15/93 dated 31-3-1993, excise
inspectors as well as preventive and internal audit parties can visit
SSI units only with specific permission of Assistant Commissioner for
specific purpose. Officers are required to enter relevant particulars in
the visitors' book maintained as assessee.
Update:-01-10-09