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Customs Notification, Circulars Public Notice Public Notices w.e.f 01/04/2002 PUBLIC NOTICE NO. 27/2002 Dated 28/02/2002

Import no 22/2002

Export no 22/2002

BUDGET INSTRUCTIONS NO 35/2002

PUBLIC NOTICE NO. 27/2002 Dated 28/02/2002

SUB : Finance Bill 2002.
The Finance Bill has been introduced in the Parliament by the Hon’ble Finance Minister on 28.02.2002. The bill has made various changes in the Tariff including the rates of duties, basic and additional and these changes take effect from the midnight of 28.02.2002/01.03.2002 unless and otherwise indicated. The salient features of the changes introduced by the Finance Bill, 2002 for Customs and Central Excise are as below.

(I) Excise

1. Rate structure.

1.1 The ad valorem excise duty structure has been further rationalized with more items added in the category of 16% CENVAT and number of items removed from the SED list.

1.2 The remaining deviations, from the standard CENVAT rate of 16% can now be counted on fingertips.

1.3 The excise duty on the following items has been increased from 8 % to 16%:

1.4 Special Excise Duty has been abolished on the following items. Now they will be charged to CENVAT only @ 16%

1.5 With the above changes the rate of 8% is now confined to cotton yarn. The special Excise Duty of 16% is also confined to a few items, being, Polyester Filament Yarn, Motor Cars, Multi Utility Vehicles, Soft drinks and their concentrates, Tyres for replacement, air-conditioners, pan masala, chewing tobacco and miscellaneous tobacco products.

1.6 An important change relates to textiles. While excise duty on cotton yarn continues at 8% the exemption applicable to cotton yarn cleared in hank form has been withdrawn w.e.f. 01.03.2002.

1.7 The rate of excise duty on processed fabrics, made-ups and readymade garments has been fixed at 12% which will comprise of 8% cenvat and 4% AED (in lieu of sales tax) in the case of fabrics.

1.8 Option has been given to manufacturers of grey fabrics, processors of knitted cotton fabrics and manufacturers of knitted garments to pay excise duty at the rate of 12%.

1.9 Another important change that has been made to the excise duty exemption on hand-processed fabrics. Under this exemption, hand processors (who do not undertake the process of bleaching, dyeing and printing with the aid of power or steam) were permitted to use power in respect of 12 specified processes in case of cotton fabrics and 7 specified processes in the case of man-made fabrics, the exemption has been modified and henceforth use of power will be permitted only for 3 processes, namely, scouring, hydro-extraction and calendering . If power is used for any other process on the fabrics, they will be liable to pay excise duty on par with other textile processors.

1.10 The optional compounded levy scheme for textile processors has been abolished and these processors will be required to pay duty on ad-valorem basis in respect of their production from 01.03.2002 onwards.

1.11 The extent of deemed credit is respect of processed fabrics has been suitably adjusted, having regard to the reduction in rate of the excise duty.

1.12 Excise duty on the following items has been increased from 4% to 8%. The rate of 8% applies without the facility of CENVAT credit . If the manufacturer wishes to avail of CENVAT credit facility, the option to pay the excise duty@ 16% continues:

1.13 Excise duty has been imposed on cigars and cheroots and cigarillos at the rate of 16% adv. And on the number of specified items at the rate of 4% The rate of 4% applies without the facility of CENVAT credit. Manufacturers wishing to avail of CENVAT credit facility would have to pay excise duty at the rate of 16%. The items on which excise duty at 4% has been imposed now are mentioned in notification no 10/2002- CE dated 01.03.2002.

1.14 The rate of excise duty on petrol has been modified. It is now composed of 32% ad valorem plus surcharge of Rs. 6 per litre The government has decided to dismantle the Administrative Price Mechanism. The oil companies which are required to pay excise duty would be calculating the revised assessable value for payment of excise duty.

1.15 The surcharge of Rs. 5.25 per litre will apply for motor spirit which is doped with ethanol. Notification in this regard would be issued in due course of time.

1.16 Rate of excise duty on HSD has been reduced from 20% to 16%. Here also the oil companies would be furnishing the assessable value of HSD.

1.17 The rate of cess applicable to crude petroleum oil has been increased from Rs. 900 to Rs. 1800 per MT. The Ministry of Petroleum and Natural gas will be issuing the necessary notification, which is effective from 01.03.2002.

1.18 Refineries located in North East will pay excise duty at half of each of excise duty rates applicable to petroleum products. This will also apply of Numaligarh Refinery. It may also be noted that an amendment has been made to notification No. 33/99 dated 8/7/99 to make it clear that excise duty exemption under this notification does not apply to petroleum products.

1.19 SSI exemption on granite has been withdrawn. Granite would be charged to CENVAT at the rate of 16% w.e.f. 1.3.2002 and no benefit of SSI exemption is available.

1.20 The scheme of SSI scheme has been extended to air guns, air rifles, air pistols which are not in the nature of arms and are exempt from the provisions of Arms Act. However, for the month of March the extent of exemption shall be available on clearance up to Rs.10 lakhs.

1.21 The scheme of MRP based assessment has been extended to the following items:

1.22 There are a few more changes in the nature of exemptions. These are explained in the Explanatory Memorandum enclosed with the public notice.

1.23 The Central Excise Rules and the CENVAT Rules have been re-issued with minor modifications. All notifications issued under the earlier rules would continue to be valid, unless specifically modified or rescinded.

1.24 The Government has taken enabling powers to notify an activity/process as manufacture” by notification. This provision will come into force after the Finance Bill receives the assent of the President.

1.25 Another important change is that the Government will now be permitted to explain or clarify the scope of an exemption by issue of an explanation by a notification, which will be effective from the date of the first exemption notification itself. This power will also be available to the Government after the Finance Bill receives the assent of the President.

(II) Customs

2.1 The peak rate of customs duty has been reduced from 35% to 30%.

2.2 The basic customs duty on non-ferrous metals, copper, zinc and lead has been reduced from 35% to 25%. However, the duty on aluminium and tin has been reduced to 15%.

2.3 Another important change is that the tariff rate on items falling under Chapter 72 with the exception of pig iron and ferro-alloys has been increased to 40%. The tariff rate will be the effective rate for seconds and defectives of products falling under Chapter 72. For other products, the effective rate will be 30% or less as prescribed in Notification No. 21/2002.

2.4 The rate of basic customs duty on kerosene imported for supply under the PDS scheme has been increased from 5% to 10%. Basic customs duty on other kerosene has been reduced from 35% to 20%. There is no change in the basic customs duty applicable to other petroleum products.

2.5 Effective rate of customs duty on tea and coffee has been increased to 100%.

2.6 Basic customs duty on poppy seeds, pepper, cloves and cardamom has been increased to 70%.

2.7 Similarly, the basic customs duty on natural rubber falling under heading No. 4001.10 has been increased to 70%.

2.8 The basic customs duty on pulses has been increased from 5% to 10%. They will, however, continue to be exempt from Special Additional Duty.

2.9 An important change is with regard non-edible oils. While the effective rate of basic customs duty will be 30%, the fatty acid criterion has been introduced for the applicability of this rate. Henceforth, the 30% rate will apply only to such oils in which the free fatty acid in 20% or more. The importers are required to declare this aspect to satisfy that the oil contains 20% or more free fatty acid.

2.10 Basic customs duty has been imposed on certain items for the first time. Similarly, SAD has been imposed on other items. The details of these changes are indicated in the notifications and the Explanatory Memorandum.

2.11 An important change is that IAAT has been exempted for flights from and to any of the North Eastern States.

2.12 Yet another significant feature on the customs changes is that the limit under the Transfer of Residence concession has been increased from 1.50 lakhs to Rs. 5.lakhs. The limit under “mini” t r has been increased from Rs. . 30,000 to Rs. 75,000. A number of items have also been added which can now be imported at the rate of 30% which is the rate of these items imported under Transfer of Residence

2.13 The rates of duty applicable to wines and hard liquors has been modified. The basic customs duty on hard liquors has been reduced from 210% to 182% Basic customs duty on wines continues to be 100%. The rate of CVD has also been modified. There are only two slabs now, one for items upto 25$ per case and other for items above US $ 25 per case. The CVD rate has been fixed at 75% for the first slab and 50% for the second slab. SAD will continue to apply.

2.14 AS in the case of excise, Government will now be permitted to issue explanation to an exemption notification to clarify the scope of the notification. This power will also be available to the Government after the Finance Bill receives the assent of the President.

2.15 Other important legislative changes made through the finance Bill that will come into effect with the assent of the President are as follows.

3. Explanatory Memorandum, Explanatory Notes and the Notifications issued by the Central government with regard to Customs and Central Excise duties are enclosed.

4. While every attempt has been made to ensure that there are no mistakes, Importers and Exporters, Custom House agents, and the general public are advised, on their own interest to refer to the texts of the Finance Bill and notifications published in the Gazette of India for full implications and changes.

5. Any difficulty in implementing the changes brought out in the Finance Bill, 2002 may be brought to the notice of Commissioner (Import) immediately.

M.C. THAKUR
COMMISSIONER OF CUSTOMS (IMPORT)
NEW CUSTOM HOUSE, MUMBAI

Encl. : As above

Issued from F. No. s/26 41/2002 A(G).

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