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Corporate News *  Service tax penalty can’t survive when assessee acted on dept.’s own view of non-taxability: Delhi High Court. *  GST section 74 extended limitation questionable when form 26AS mismatch was already known: Karnataka High Court grants interim relief. *  CGST demand prima facie impermissible after state GST settlement under section 128A: Bombay High Court. *  Supreme Court asks GSTAT to sympathetically consider delay as taxpayers pursued remedy before wrong forum. *  Supreme Court stays Tripura High Court ruling protecting genuine buyers from ITC denial over supplier’s GST default. *  Diary entries alone can’t prove clandestine removal of goods: CESTAT quashes excise penalty on steel trader. *  Customs could investigate preferential tariff claims even before sec. 28DA: Delhi High Court. *  Customs dept. relied on fake AI generated case laws: supreme court quashes Rs. 425.28 crore penalty. *  No GST exemption in affiliation and annual registration charges for admission or conduct Of examinations: GSTAT. *  Mere invoices, cheque payments insufficient to establish genuine movement of goods: GSTAT restores Rs. 43.44 lakh ITC demand. *  Consolidated GST show cause notice covering multiple financial years is not without jurisdiction: Delhi High Court. *  Construction of independent houses on separate plots not taxable as ‘Residential Complex’ without common facilities: CESTAT. *  GST penalty exceeding statutory maximum unsustainable; Allahabad High Court quashes ? 50,000/- penalty after taxpayer filed return and paid late fee. *  GST order against standard chartered bank passed without hearing set aside by Bombay High Court. *  Retracted statements can’t be relied upon without cross-examination: CESTAT quashes gold confiscation. *  Burden to prove misclassification lies on customs department: CESTAT. *  CESTAT quashes Rs. 98 lakh excise demand on clearance of used refractory brick scrap. *  Service tax demand on irrigation works quashed: Karnataka High Court rules sale of goods component not taxable as service. *  GSTAT restores tax and penalty for transporting iron scrap without E-way bill citing intent to evade tax. *  Madras High Court stays GST recovery from directors without opportunity to show cause under section 89. *  Madras high court stays GST recovery notice against directors; finds prima facie case on applicability of section 79(1)(c). *  Procedural lapses can’t justify harsh punishment without serious customs breach: CESTAT quashes customs broker licence revocation. *  Service tax payable on land leasing and sports complex charges: CESTAT. *  Settled customs dispute can’t be reopened through Article 226 challenge to interest liability: Delhi High Court. *  Mere facilitation of customs clearance can’t establish knowledge of smuggling: Madras High Court. *  GST registration cancellation stayed: Allahabad High Court questions 99% ITC utilisation cap under rule 86B. *  Composition scheme lapses automatically on crossing Rs. 1.5 crore turnover: GSTAT. *  Gujarat High Court quashes GST cancellation orders after officer relied on non-existent AI-generated case laws. *  Importers liable for customs duty benefits availed through manipulated scrips: Delhi High Court. *  Procedural E-way bill lapse alone can’t justify penalty where genuine transaction and absence of tax evasion are established: GSTAT.
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Publish Date: 27 Feb, 2010
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Large Benefits to Small Scale Units

 

Large benefits to Small Scale Units

 

Prepared By:

CA Pradeep Jain

Sukhvinder Kaur

 

This year budget has brought many good things for the small scale manufacturers. The small scale exemption is contained in notification 8/2003-C.E. dated 01.03.2003. The units opting for such exemption were treated as small scale units. But in this year Budget 2010 has brought amendment to this also. We are discussing the amendments and benefits given to small scale manufacturers in this article and the possible outcome of the same.

 

1.                 Credit of Capital Goods: Prior to this budget, sub rule 2(a) of rule 4 of Cenvat Credit Rules, 2004 provided that 50% of the Cenvat Credit can be taken in the financial year of purchase of the capital goods and 50% of the balance credit was to be taken in the next financial year.

 

Now in the Budget it has been provided that the eligible small scale manufacturers can take 100% credit of these capital goods in the year they have been purchased. As per Notification no 8/2003, the small scale exemption is available to the units whose aggregate value of clearances in the preceding financial year is less than Rs. 4 crores. The unit has to opt for the same. But this new definition of eligible SSI units is introduced. The explanation clarifies that the eligible units are those who are eligible to take the benefit of exemption and whose turnover is less than Rs. 400 Lakhs in preceding financial year. This is to be computed as per clause 3A of notification no. 8/2003 which reads as follows:-

 

3A.  For the purposes of determining the aggregate value of clearances of all excisable goods for home consumption, mentioned in clause (vii) of paragraph 2 of this notification, the following clearances shall not be taken into account, namely:-

 

 (a)    clearances of excisable goods without payment of duty-

 

(i)    to a unit in a free trade zone; or

 

(ii)   to a unit in a special economic zone; or

 

(iii)  to a hundred percent. export-oriented undertaking; or

 

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

 

(v)  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 erstwhile Ministry of Finance (Department of Revenue) No.108/95- Central Excise, dated the 28th August, 1995, vide number GSR. 602 (E), dated the 28th August, 1995.

 

(b)     clearances bearing the brand name or trade name of another person, which are ineligible for the grant of this exemption in terms of paragraph 4.

 

(c)      clearances of the specified goods which are used as inputs for further manufacture of any specified goods within the factory of production of the specified goods;

 

(e)      clearances, which are exempt from the whole of the excise duty leviable thereon under notifications No. 214/86-Central Excise, dated the 25th March, 1986 (G.S.R.547(E), dated the 25th March, 1986), or No. 83/94-Central Excise, dated the 11th April, 1994 (G.S.R. 375(E), dated the 11th April, 1994), or No. 84/94-Central Excise, dated the 11th April, 1994 (G.S.R. 376 (E), dated the 11th April, 1994).]

 

This clause says that the aggregate value of clearances of all excisable goods is to be taken. This does not say whether the goods should be covered under this notification. Thus, it implies that it is available to units who are producing the goods which are ineligible to take SSI exemption. This also applicable to the units who are eligible to avail the SSI exemption but has forgone the same. This is normally done by the units who have industrial customers. Thus such units will also be eligible to take the credit. This is a welcome step.

 

2.       Payment of Excise Duty: In the Budget 2010, it has been provided that the small scale manufacturers (i.e. the units having the annual turnover of less than Rs. 4 crore in the preceding financial year) will have to pay excise duty on a quarterly basis. They are not required to pay duty monthly as was prescribed earlier. The payment of duty at quarterly basis is to be made from 1.04.2010 onwards.

 

3.       Filing of Returns: It had been prescribed in Budget 2010 that the small scale manufacturers are required to file returns at quarterly basis. This facility was already available to SSI units availing exemption under Notification No. 8/2003 cited supra. But now all the eligible small scale manufacturers, whether availing SSI exemption under Notification No. 8/2003-CE or not, are to file quarterly returns. Earlier they have to file within 20 days of close of quarter. But he has to file return within 10 days of close of quarter.

 

4.       SSI exemption on Brand Name: In the Notification No. 8/2003-CE it has been provided that the exemption under this notification will not be available to those units which are affixing the brand name or trade name of another person on their finished goods. However, the dispute arose after judgement of Apex Court in case of Kohinoor Elastic [2005 (188) ELT 3 (SC)]. It was said by the board that the duty will be payable on printed packing materials if the brand name of buyer is printed. Many associations have represented the matter and suitable amendment was done in notification 8/2003 by notification no. 8/2006-CE dated 01.03.2006. This was further amended from time to time to add more products. Thereafter field formations pursued for the earlier period demand and matter was taken up with the Board and retrospective amendment was also issued under Section 11C of Central Excise Act. In the above list of packing materials, two more packing material namely packing bottles and plastic containers are added. Thus, if the units manufacturing plastic containers and plastic bottles who are affixing the brand name or trade name of another person on the same, are eligible to avail exemption under Notification 8/03-CE. But the exemption is available from Feb 27. The department will again gear up to issue demand for the past period. Again representations will be sent and 11C notification will be issued by the Board for these commodities also. History repeats itself.

 

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PRADEEP JAIN, F.C.A.

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