Chartered Accountant
Bookmark and Share
click here to subscribe our newsletter
 
 
Corporate News *   CBIC issues draft rules for Customs valuation *  Top Headlines: Threshold for Benami deals, green bond investors, and more *  Govt aims 1-hour clearance for goods at all ports *  Exporters Allowed To Use RoDTEP, RoSCTL Scrips To Pay Customs Duty, Transfer Them; Rules Amended *  Millions of labourers to be affected by brick producers’ strike over hike in GST, coal rates *  Inauguration of ‘kendriya GST parisar’ *  Transporter can seek Release of Conveyance alone, not Goods under GST Act: Madras HC *  GST: Quoting of DIN Mandatory for Responding to Notice, Govt Modifies Portal *  Firms can soon file claims for GST credits of ?400 cr *  CBIC issues modalities for filing transitional credit under GST. *  Mumbai: Man creates 36 fake GST firms, arrested for input tax credit fraud of Rs 23 cr *  Report to restructure Commerce Ministry under study; idea is to set up trade promotion body: Goyal *  Firms can soon file claims for GST credits of ?400 cr *  Gambling Alert! Govt May Levy Up To 28% GST; UP, Bengal Back Move *  EPFO backs raising retirement age to ease pressure on pension funds *  India Moving Up Power Scale, Set to Become Third Largest Economy By 2030 *  Airfares Get Expensive: What Changes for Flyers From Today? *  IRCTC Latest News: Passengers to Pay More For Cancelling Confirmed Rail Tickets Soon. *  IBC prevails over Customs Act, says Supreme Court. *  As GST enters sixth year, a time for evaluation and reassessment *  There’s GST on daily essentials as Centre needs money to buy MLAs: Arvind Kejriwal *  Now, GST on cancellation of confirmed train tickets, hotel bookings *  GST kitty for top States could rise 20% in FY23, says Crisil *  French customs officials seize another cargo vessel over Russia sanctions *  TradeLens builds on Asia momentum with Pakistan Customs deal *  Hike tax on tobacco, reduce affordability & increase revenue: Civil society organizations to GST council *  Bihar: ?10 crore tax evasion on tobacco products detected in raids *  Centre failed on GST, COVID; would it be anti-national? Rajan on Infosys row *  Service Tax not Chargeable on Income Tax TDS portion paid by recipient: CESTAT grants relief to TVS *  Foreign portfolio investors make net investment of Rs 7575cr in Sep so far
Subject News *  Run-up to Budget: Monetary threshold for GST offences may rise to Rs 25 cr *   GST (Tax) E-invoice Must For Businesses With Over Rs 5 Crore Annual Turnover *   Both Central GST and excise duty can be imposed on tobacco, rules Karnataka high court *   CBIC Issues Clarification On Extended Timelines For GST Compliance *   CBIC Issues Clarification On Extended Timelines For GST Compliance *  Budget 2023- 9.6 crore gas connections *  GST: Tamil Nadu Issues Instructions for Assessment and Adjudication Proceedings *  GST: CBIC Extends Last Date for filing of ITC *  GST collection in September surpasses Rs 1.4 lakh crore for straight seventh time *  Dollar smuggling case: Customs chargesheet names M Sivasankar as key conspirator. *  Hike in GST rates fuels inflation *  Assam: CBI arrests GST commissioner in Guwahati *  GST fraud worth ?824cr by 15 insurance Cos detected *  India proposes 15% customs duties on 22 items imported from UK *  Decriminalising certain offences under GST on cards *  Surge in GST collections more due to higher inflation: India Ratings *  MNRE Notifies BCD and Hike in GST Rates as ‘Change in Law’ Events But With a Condition | Mercom India *   Solar projects awarded before customs duty change allowed cost pass-through *  Rajasthan High Court Dismisses Writ Petitions Challenging Levy Of GST On Royalty *   GST revenue in September likely at Rs 1.45 lakh crore *  Govt working on decriminalising certain offences under GST, lower compounding charge *  Building an institution like GST Council takes time, trashing is easy: Sitharaman *  GST collections in Sept may touch ?1.5 lakh crore *  KTR asks Centre to withdraw GST on handlooms *  After Gameskraft, More Online Gaming Startups To Receive GST Tax Claims *  Madras HC: AAR Application Filed Under VAT Does Not Survive After GST Enactment *  Threshold for criminal offences under GST law may be raised *  Bengaluru: Gaming company faces biggest GST notice of Rs 21,000 crore *  CBIC clarifies Classification of Cranes for GST, Customs Duty *  Customs seize gold hidden in bicycle in Kerala airport  

Comments

Publish Date: 25 Mar, 2013
Print   |    |  Comment

Patta Patti manufacturers: Tempted to opt Cenvat Scheme

Patta Patti manufacturers: Tempted to opt Cenvat Scheme

 
 

An article by:-
CA. Pradeep Jain
CA. Preeti Parihar
Ankit Palgauta
 

Introduction:-
 

Compounded levy scheme was introduced in the Central Excise Law with the duty of Rs. 10000/- per machine per month in the year 1994. The scheme was simple with reasonable amount of duty, as such a no. of manufacturers of stainless steel patta-patti switched to it. Later on this duty was increased to Rs. 15000/- and then to Rs. 30000/-. Now, this duty has been increased to Rs. 40000/- vide notification no. 5/2013-CE dated 1.3.2013. The increase in duty amount in the compound levy indicates that this step of government is going to decrease the popularity of this scheme in the stainless steel industry. This piece of writing is about the implications of this amendment on the stainless steel industry.

 
Product chain in stainless steel (SS) industry:-
 

The end product of SS industry is utensils which are manufactured by following process:-
·        The initial input is the SS scrap which is converted into flats.
·        Flats are subjected to process of hot rolling and the resultant product is hot rolled patta patti.
·        Hot rolled patta patti are processed in cold rolling mills, the resultant product being cold rolled patta patti.
·        The cold rolled patta patti are converted into circles.
·        The circles are used in the manufacture of the utensils.
The compounded levy is levied on the intermediate process of cold rolling.

 
Situation prior to budget, 2011:-
 

There was no excise duty on the utensils by virtue of Notification no. 10/2006-CE dated 1.3.2006. The circles used in the manufacture of utensils was also exempted vide Notification no. 3/2005-CE dated 24-2-2005. Thus, the buyers of cold rolled patta pattis were not concerned whether the excise duty is charged on their invoice or not as in any case the excise duty was forming the part of their cost. This was the prime reason for which most of the manufacturers of the patta patti had opted for compounded levy. Besides this, the compound levy was simple involving less procedural formalities with reasonable amount of duty.

 
Situation after budget, 2011:-
 

Budget, 2011 has brought the excise duty on the utensils @ 1% under Notification no. 1/2011-CE dated 1.3.2011 on the condition that no credit is availed. Also an option was given in this budget to pay the excise duty on utensils @ 5% under Notification no. 2/2011-CE dated 1.3.2011 alongwith the facility of Cenvat credit. Since 1% duty was not a big deal, most of the manufacturers have opted for it rather than going for 5% duty with Cenvat. Thus, even after budget, 2011; though duty was imposed on utensils, the manufacturers did not require the Cenvat credit, as such, there was no impact on the manufacturers of cold rolled patta patti.

 
Situation after budget, 2012:-
 

The duty of 1% was increased to 2% on the utensils in budget, 2012. Simultaneously, the duty of 5% with Cenvat was also increased to 6% in this budget. As a result of this increase, big players of this industry where start to finish process i.e. cold rolling as well as utensils was carried out either in the same factory or within the same group companies; had already switched to Cenvat scheme. If the same cold rolling as well as utensils were manufactured in same premises then there was no problem in switching to Cenvat scheme. But if the manufacture of cold rolled as well as utensils were undertaken in separate premises or separate entities then they were following the job work procedure. However, the other manufacturers working alone were stuck to the compounded levy and those manufacturing the utensils were still paying the duty @ 2% on utensils without availing the Cenvat. However, recently announced budget of year 2013 may result into scrapping of the compounded levy scheme in SS industry.

 
Implications of Budget, 2013:-
 

Budget, 2013 has increased the duty under compounded levy scheme by Rs. 10000/-, now the effective duty under this scheme is Rs. 40000/- per machine per month. This is substantial increase after the increase in duty on utensils in previous budget. As already stated the big players have already switched to Cenvat scheme.  Obviously, the cost of utensils manufactured by these companies will be low as they are availing the Cenvat at full rate and paying the concessional duty @ 6% only. However, those manufacturer who are paying the duty on utensils @ 2% without Cenvat will find it tough to survive as the excise duty paid by the manufacturers of patta patti, whether in compounded levy (which has increased substantially) or in normal scheme, is forming the part of their cost.
Under above circumstances, there are two options available with the manufacturers of utensils:-
 
(i)                To purchase the flats as inputs and avail the Cenvat credit. Thereafter, get them processed in cold rolling mill on job work basis. Utilize the cold rolled patta patti in manufacture of circles and utensils thereafter and clear the same on payment of duty.

(ii)              To get the SS patta patti from the manufacturer who is operating under Cenvat scheme. Avail the Cenvat, manufacture and clear utensils on payment of excise duty @ 6%.
 
The second option hereabove will not be followed by the manufacturers as there is direct outflow in form of excise duty and the only option available will be the option 1 hereabove. Thus, in any case, the utensil manufacturers will prefer to procure the flats and send it to for job work, rather than purchasing the same from patta patti manufacturers. Since the increased duty on compounded levy will ultimately increase the cost of such manufacturers (additional burden of increase in compound levy duty as well as direct outflow of 2%). Thus, the only feasible option will be to purchase the flats and get the cold rolled patta patti manufacture on the job work basis.

 
While Concluding:-
 

At the time of introduction, the compounded levy scheme under SS industry was very attractive. This attraction was also due the fact that the end product “utensils” were exempted. However, this attraction faded to some extent after the announcement of budget, 2011 when the duty was imposed on the utensils. After levy of duty on utensils, it has faced the increase by 1% in the previous budget which has let many of the utensil manufacturers to shift to Cenvat scheme. Now the substantial increase in the duty under compounded levy scheme also indicates the dimming attraction of this scheme...

Comments

Post a Comment



Department News


Query

 
PRADEEP JAIN, F.C.A.

Head Office : -

Address :
"SUGYAN", H - 29, SHASTRI NAGAR, JODHPUR (RAJ.) - 342003

Phone No. :
0291 - 2439496, 0291 - 3258496

Mobile No. :
09314722236

Fax No. :0291 - 2439496


Branch Office : -

Address:
1008, 10th FLOOR, SUKH SAGAR COMPLEX,
NEAR FORTUNE LANDMARK HOTEL, USMANPURA,
ASHRAM ROAD, AHMEDABAD-380013

Phone No. :
079-32999496, 27560043

Mobile No. :
093777659496, 09377649496

E-mail :pradeep@capradeepjain.com