Import No. : 106/2003
Export No. : 106/2003
Public Notice No. 22/2003, Dt. 28/02/2003

Finance Bill 2003.

The Financial Bill, 2003 has been introduced in the Parliament by the Hon’ble Finance Minister on 28.02.2003. Changes in excise, customs and service tax have been made through the Finance Bill {clause 97 to 152 and 158 to 161} and through notifications. Details of changes are given in Explanatory Notes. The salient features of the proposals in respect of excise and custom duties are indicated below:

(I) Central Excise

1. Rate structure

The general duty structure is proposed at 8% , 16% and 24% . Tobacco products, pan masala and petroleum products will continue to have different rates. For textiles, a separate package has been prescribed.

1.1 The special excise Duty (SED) on following items has been reduced from 16% to 8%

1) Tyres
2) Aerated soft drinks
3) Polyester Filament Yarn
4) Air Conditioners and components
5) Motor Cars

The duty incidence on all these items will be 24% (16% Cenvat + 8% SED) as against 32% earlier.

1.2 The 4% rate of excise duty without Cenvat has been abolished. Some of the items attracting this rate have been exempted from excise duty and rest have been taken to 8% rate. The 8% rate will now be with Cenvat credit. As a consequence, the following items have been exempted from excise duty.

1) Bicycle and parts
2) Toys
3) Mosaic tiles
4) Utensils and kitchen articles of metals
5) Knives, spoons and similar items of kitchenware/ tableware
6) Unbranded surgical bandages
7) Articles of wood
8) Imitation Zari
9) Adhesive tape
10) Tubular knitted gas mantle fabric for use in incandescent gas mantles
11) Umbrellas
12) Walking sticks, riding- crops and like
13) Articles of mica
14) Kerosene pressure lanterns
15) Glasses for corrective spectacle lenses, flint buttons
16) Registers, account books etc.

In addition, the following goods have also been exempted from excise duty.

1) Recorded audio CDs
2) Slag arising in the manufacture of iron and steel
3) Gold arising in the course of copper/zinc smelting

1.3 The following items, which were earlier liable to duty at 4% without Cenvat or 16% with Cenvat, would now attract 8% excise duty with Cenvat credit:

1.4 Excise duty has been reduced from 16% to 8% with full Cenvat on the following items:

1) Pressure cookers
2) Biscuits
3) Sugar confectionery (excluding white chocolate ) not containing cocoa
4) Rough ophthalmic blanks
5) Dental chairs
6) Electric vehicles
7) Scented supari
8) Bicotin Polacrilex gum

(Note : Item attracting excise duty presently at 8% without Cenvat will attract duty at 8% with Cenvat )

1.5 New impositions

Excise duty at the rate of 8% with Cenvat credit has been imposed on the following items :

1) Refined edible oils (branded and packed for retail sale) *
2) Vanaspati, bakery shortening, margarnie and other similar edible preparations
(braded and packed for retail sale) *
3) Lay flat tubing
4) Chemical reagents for specified end use
5) Wood free board made from agrowaste
6) Paper and paper board manufactured from at least 75% non-conventional raw materials (for the first clearances of 3500 MT per year) which were attracting Nil duty till now
7) Populated printed circuit boards for black and white televisions

In respect of these products, labelling or relabelling of containers of containers and repacking or adoption of any treatment to render the goods marketable will amount to manufacture.

1) Excise duty exemption on animal driven vehicle tyres has been withdrawn. Such tyres will attract duty at 24 %
2) Coating of pipes and tubes of headings 73.04 or 73.05, with cement or polyethylene or other plastic materials has been declared as amounting to manufacture,
3) The facility given to integrated steel manufacturers to pay excise duty on the factory gate price, even when their goods are sold from their depots is being withdrawn. The integrated steel manufacturers will pay excise duty on the normal transaction value at depots.
4) For starches falling under heading 11.03, labeling, re-labeling of containers and packing from bulk to retail pack or adoption of any other treatment to render the product marketable to the consumers has been declared as amounting to manufacture.
5) Excise duty on chassis of motor vehicles has been increased from 16% to 16% plus Rs. 10,000/- per chassis.

1.5 Cement

Excise duty on cement has been increased from Rs. 350/- per metric tonne to Rs., 400/- per metric tonne. Excise duty on cement cleared in bulk has been increased from Rs. 332 per metric tonne to Rs. 382 per metric tonne. Excise duty on cement clinkers and on cement made by mini cement plants has been increased from Rs. 200/- to Rs. 250/- per metric tonne.

2 Textile

2.1 Motor changes have been proposed in the duty structure applicable for textiles so as to remove a large number of exemption, withdraw deemed credit scheme and to complete Cenvat chain right from fibre/yarn to the garment stage. In brief, the following are the important changes :

(a) Yarns :

1) 8% excise duty is being retained only for cotton yarn, not containing any other textile material.

2) 16% excise duty on fibres of polyester, viscose, acrylic remain unchanged.

3) Uniform rate of 12% excise duty has been prescribed on polyester cotton, cotton viscose and all other spun yarn. Viscose cotton yarn will attract duty at 12% even if cotton predominates.

4) Excise duty on all other filament yarn (such as viscose filament yarn, nylon filament yarn) has been reduced from 16% to 12%

5) SSI exemption benefit has been withdrawn for shoddy and woolen yarn. This change will come into effect from 01.04.2003.

(b) Fabrics :

1) Excise duty on all woven cotton, manmade and woollen fabrics has been reduced from 12% to 10% :

2) Duty on knitted/crochetted fabrics of cotton has been reduced from 12% to 8%.

3) Duty on non-cotton knitted/crochetted fabrics has been reduced from 12% 10%

4) All industrial fabrics including rubberized textile fabrics presently attracting duty rates of Nil, 21% 16% and 16% plus specific rates will be charged to duty at 16%

5) Optional exemption on woven, crocheted or knitted fabrics is being withdrawn with effect from 01.04.2003.

6) Deemed credit scheme under which credit can be taken without production of duty paying documents is being withdrawn with effect from 01.04.2003 :

7) The system of compounded lavy on embroidered fabrics (at present charged at Rs. 45 per meter length of machine per shift) has been replaced by an ad valorem duty of 105. This change would come into effect from 01.04.2003 :

8) Fabrics and garments manufactured by non-profit charitable institution have been exempted from excise duty.

(c) Garments and other made up atricles :

1) Excise duty on all woven (including cotton ) garments and made ups has been reduced from 12% to 10%

2) Duty on cotton knitted/crocheted garments is being reduced to 8%, while on other knitted/crocheted garments, duty has been reduced to 10%

3) The duty on knitted and crocheted articles has been reduced from 16% 10%

4) The following exemption have been withdrawn. These changes will come into effect from 01.04.2003:


(a) Textile articles made from handloom fabrics (SSI exemption would be available).

(b) SSI exemption on ready made garments.

(c) Blanket of wool and shoddy yarn below certain price.

The above list is not exhaustive. For full drtails, the Explanatory notes, clauses of Finance Bill and the notifications may be referred to :

2.2. While changes in the rates of excise duty in respect of textiles (except where the present duty is nil) will come into effect immediately w.e.f. 01.03.2003, the withdrawls of exemptions, removal of scheme of deemed credit and removal of goods from SSI exemtion scheme will come into force w.e.f. 01.04.03. the Government have also decided that job work facility will be made available to the textile sector and a separate procedure would be devised to ensure that the large number of powerloom in the decentralised sector are not inconvenienced in any way and are exempted from maintenance of central excise records. The duty liability will be on the supplier of the raw materials to the jobworkers. The Government is very keen to see to it that there is absolutely to harassment to the manufacturers coming into excise net for the first time.

3 National Calamity Contingent Duty (NCCD)

For replenishment of the National Calmaity Contingent Fund, duty on following items has been imposed

1) % on polyester filament yarn, motor cars and two-wheelers,
2) Rs. 50 per metric tonne on domestic crude oil.

This increase has been made by amending the 7th Schedule of the Finance Act, 2001 through clause 126(1) and 161 (1) of the Finance Bill. As a result, in addition to the goods already covered under the NCCD levy, these items will also be liable to pay this levy. This levy will apply to imports also. This levy on the additional items will be valid for one year (upto 29.02.2004).

4. AED (Sales Tax Act, 1957)

To enable the States to levy tax on sugar, textiles and tobacco products at a rate not exceeding 4% without being denied the 1.5% of total tax revenue, suitable amendments have been made in the above Act. This will come into effect from a date to be notified later (Clause 148 of Finance Bill).

Cenvat Credit Rules, 2002 have been amended to allow credit of AED (GSI)paid for payment of Cenvat duty and special excise duty.

5. Petroleum Products

The Additional Excise Duty on motor spirit (petrol)and high speed diesel oil has been increased From Rs. 1 per litre to Rs. 1.50 per litre (Clause 159 & 160 of the Finance Bill)

Excise Duty on light diesel oil (LDO) has been increased by Rs. 1.50 per litre [Clause 147 (a) of the Finance Bill]. No Cenvat credit will be allowed in respect of the duty paid on LDO.

Excise duty concessions on ethnol doped petrol etc. have been continued for one more year, upto 29.2.2004.

6. Tea

Tea has been exempted from excise duty of Rs. 1 per kg. In its place, an additional duty of excise of Re.1 per kg, by way of surcharge, for development of tea plantation sector, has been introduced. This will apply to imports also [clause 121(1) and 149(1) of the Finance Bill].

7. Health

Drugs and life saving equipments which are exempt for CVD ( additional duty of Customs) are being exempted from excise duty.

Drug intermediates used captively in the factory of production has been been exempted from excise duty.

8. Small Scale Industries Exception Scheme

8.1 With effect from 1.4.2003, SSI exemption will be withdrawn on-

(a) Ceramic tiles. Printed ceramic tiles made from duty paid tiles outside the factory will, however, be exempt from excise duty.

(b) Stainless steel patties / pattas.

(c) Woolen yarn, shoddy yarn.

8.2 Value of exempted goods (excluding exports) will be included for calculating the limit of Rs. 3 crores for eligibility under SSI exemption with effect from 1.4.2003.

9. Medicinal & Toilet Preparations

Changes have been made in respect of duty structure applicable to medicines and toilet preparation containing alcohol under the M&TP Act, 1955. These are given below:

1. The amendment ot M&TP Act, 1955 carried out vide Finance Act, 2000 will now come into force w.e.f. 1st March, 2003.

2. Duty on toilet preparations containing alcohol or narcotic substances has been reduced form 50% to 16%.

3. Duty on medicines containing alcohol or narcotic substances has been reduced from 20% or specific rates to 16%.

4. Full exemption on Ayurvedic / Unani /Indigenous medicines, containing self-generated alcohol and not capable of being consumed as a alcoholic beverage, has been retained.

5. Toilet preparations containing alcohol or narcotic substances, will be assessed on maximum retail price (MRP) basis, with an abatement of 40% on the MRP.

10. Matches

Matches made by the non-mechanized sector have been fully exempted from excise duty. Specific duty rates on matches manufactured in the mechanized and semi-mechanized sector, have been replaced by a uniform excise duty of 8% without CENVAT credit. Bengal lights will also now attract duty at 8%. Provision is being made in the Central Excise Rules for giving credit or refund of the central excise stamps available with the assessee, but not utilized.

11. Retail Sale Price (RSP) based assessment:

11.1 The RSP based assessment has been extended to pesticides, insecticides, and chewing tobacco and preparation containing chewing tobacco. Sanitary ware and fixtures of ceramics have been excluded from the ambit of RSP based levy.

11.2 Rates of abatement on aerated water, air conditioners, biscuits, boiled sweets, sugar confectionery, scented supari and pressure cookers have been reduced by 5% consequent to the reduction of excise duty on these items.

11.3 Change in definition of RSP

1) The definition of retail sale price (RSP) as mentioned in Explanation I to Section 4A of the Central Excise Act has been modified so as to extend it also to cases where the governing law on such goods permits declaration of retail sale prices exclusive of rates.

2) Section 2(f) of Central Excise Act is being amended to provide that for goods presently covered under the provisions of section 4A, any process of packing, repacking, labeling or re-labeling of goods, putting them into unit containers or any subsequent declaration of RSP on goods or alteration thereof, shall amount to manufacture.

3) Provisions of section 4A of the Central Excise Act are being amended so as to-

(a) Provide that in case of affixing higher RSP subsequent to clearance of goods on payment of duty on a lower RSP, the excise duty would be leviable on the basis of such higher RSP affixed later on.

(b) Assume powers to enable the government to ascertain the RSP of goods having no RSP declared or the declared RSP being tampered with, obliterated or altered, and

(c) Assume powers to make rules for such ascertainement.

(II) Customs

12. The highlights of the changes on the customs side are :

12.1 Peak rate of custom duty

The peak rate of custom duty has been reduced from 30% to 25%. No reduction is, however, effected on agricultural and diary products.

12.2 Petroleum

Additional customs duty on motor spirit and high speed diesel oil has been increased from Rs.1.50 per litre (clause 159 and 160 of the Bill).

12.3 Baggage

Customs duty on baggage has been reduced from 60% to 50%.

12.4 Transport :

Except in CKD form, cars in all other forms, including completely built unit will attract customs duty at 60%.

13. Tea:

An additional duty of customs on tea and tea waste @ Rs. 1 per kg has been proposed for purposed of the Union (clause 121(1) of the Bill).

14. Export Promotion Measures

Customs duty on gold bars, serially numbered and weight expressed in metric units (except tola bars), and gold coins has been reduced from Rs. 2.50 to Rs. 1.00 per 10 grammes.

15. National Calamity Contigent Fund

For replenishment of the above fund, a duty of Rs. 50 per metric tonne has been imposed on imported crude oil. A duty of 1% also has been imposed on polyester filament yarn, two-wheelers and motor cars. The imposition on these items will be valid for one year (upto 29.2.2004). The good covered under the NCCD earlier under 7th Schedule of Finance Act, 2001 has been amended by the Thirteenth Schedule (read with clause 126(1) and 161 of the Bill.

16. A number of legislative changes have been made in the Central Excise Act as also the Customs Act. Finance Bill may please be referred to for details. All these changes, unless otherwise specified, will come into force from the date of enactment of Finance Bill, 2003.

17. In the explanatory notes for the last year’s budget, it was clarified that for computing the CVD, only the value of imported article as determined under section 14 of the Customs Act, 1962, including the landing charges, if any and the basic customs duty chargeable at the rates specified in the First Schedule to the Customs Tariff Act (read with any notification for the time being in force in respect of the basic customs duty)needs to be taken into account. Other duties such as anti-dumping duty, etc. should not be taken into account. A view has been expressed that section 3A of the Customs Tariff Act does not permit such interpretation. To place the matter beyond doubt, it is proposed to amend section 3 and section 3A of the Customs Tariff Act so as to make it very clear that for computation of additional duty of customs, only the c.i.f. price, landing charges and basic customs duty will be included. Similarly for determining special additional duty of customs (SAD), only the c.i.f. price, landing charges, basic customs duty and the additional duty of customs will be included. Other duties such as anti-dumping duty, safeguard duty, etc. shall not be taken into account. The amendment will have effect from 01.03.2003.

18. As you would be aware, the 8 digit customs classification was introduced through an ordinate on 01.02.2003. As a consequential change, some of the exemption notifications have been amended so as to incorporate the 8 digit headings.

19. Miscellaneous (Customs and Excise)

1) For the purpose of charging excise duty on computers, the value of preloaded software will be excluded.

2) Rope, twine and similar items are being exempted from excise duty.

3) It has been provided that a manufacturer will be required to reverse only that portion of credit which was availed of by him at the time of receipt of inputs/capital good in his factory, when such inputs or capital goods are cleared as such from the factory.

4) A new section 11 DD is being inserted enabling recovery of interest oon the amount recoverable under section 11D of the Central Excise Act.

5) Section 13 of Central Excise Act has been amended to provide that power of arrest can be exercised by a Central Excise Officer, not below the rank of Inspector, only with prior approval of the Commissioner.

6) The jurisdictional DC/AC has been permitted to allow manufactures to store input, in respect of which credit of duty has been taken, outside the factory, subject to suitable safeguards.

7) Full rebate of excise duty paid on petroleum products exported as stores for consumption on board an aircraft on foreign run has been allowed.

8) Interest on advance deposit not to be included in the case of goods made to specification of the buyer unless there is specific evidence that such deposit has the effect of lowering the price.

9) Finance Act, 1989, is being amended to provide for punishment of specified persons if the carrier fails to pay the Inland Air Travel Tax collected from the passengers to the credit of the Central Government.

10) The existing provision of prior approval of show cause notice by the Chief Commissioner / Commissioner is being withdrawn and the earlier position of approval by the proper officer is restored.

11) The provisions regarding appeal to the High Court are being modified so as to provide that in respect of appeals against orders of the Tribunal passed on or after 1.7.2003, the High Court, instead of referring the issue to the Tribunal, will itself formulate the question of law and decide.

12) The name of the Customs, Excise and Gold(Control) Appellate Tribunal is being changed to Customs, Excise and Service Tax Appellate Tribunal.

13) The jurisdiction of the Advance Ruling Authority is being expanded so that it can decide on matters of Service Tax, Cenvat credit, and all notifications under the Customs Act, Central Excise Act and notifications issued under the Finance Acts. Scope of applicability is also being widened.

14) It is being provided that interest will be payable in respect of drawback claims after one month as against two months now.

15) The power of adjudication of Customs Officers is being raised. AC/DC will now have the power to adjudicate upto an amount of Rs. 2 lakhs as against Rs. 50,000/-now. For officers below the rank of AC/DC, the limit will be Rs. 10,000/- as against Rs. 2,500/- now.

16) Section 7 of the Customs Act, 1962, is being amended so as to delegate the powers of the Central Government to the Board for appointment of customs ports/airports/ICDs etc.

17) Section 15(1)(b) of the Customs Act is proposed to be amended so as to provide that the relevant date for determination of rate of duty on home clearance of warehoused goods would be the rate of presentation of the ex-bond bill of entry for home consumption.

18) Section 25 of the Customs Act, 1962, is proposed to be amended to provide that no duty will be collected if the total amount of duty leviable is Rs. 100 or less.

19) Section 27(2) of the Customs Act is being amended to enable an exporter to claim refund of duty and interest subject to the provisions of unjust enrichment.

20) Section 30 of the Customs Act is proposed to be amended to provide for delivery of import manifest before the arrival of vessel or aircraft and within 12 hours of arrival of a vehicle, and for levy of penalty not exceeding Rs. 50,000/- if there is no sufficient cause for the delay.

21) Section 61(1) of the Customs Act is being amended to provide that the period of warehousing in respect of goods (other than capital goods) intended for use in 100% EOUs will be increased from 1year to 3 years.

22) Section 61(2) of the Customs Act is being amended so as to increase the interest free period for warehoused goods from 30 days to 90 days.

23) Section 68 of the Customs Act is being amended so as to enable the owners of any warehoused goods to relinquish his title to the goods on payment, rent etc at any time before an order for clearance of these goods for home consumption has been made. On his relinquishing title, the importers will not be liable to pay duty on such goods.

24) Section 113 of the Customs Act is being amended so as to provide that this section applies to offences in relation to all exports, and not on dutiable or prohibited exports only.

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

21. 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.

22. Any difficulty in implementing the changes brought out in the Finance Bill, 2003 may be brought to the notice of Commissioner (Import) immediately.

Sd/-
(A. HUSSAIN)
COMMISSIONER OF CUSTOMS (IMPORT)

F.No. S/26-04/2003 A(G)

ATTESTED BY

Sd/-
( A.K. GOSWAM)
DY. COMMISSIONER OF CUSTOMS
APPRAISING (GENERAL)

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