Circular, dated 21st June, 2001

Central Excise (No.20) Rules, 2001 and other Rules
As you are aware, the Central Excise Rules, 1944, are proposed to be replaced by new set of rules. In this context, Central Excise Rules, 2001 were notified on 1.3.2001 vide notification No. 9/2001-CE(NT). Since then, certain comments and suggestions have been received from the field formations as also from trade and industry. In general, the Rules have been widely welcomed, though a few suggestions have been made for necessary correction.

2. The Central Excise Rules, 2001, have now been re-notified as Central Excise (No. 2) Rules, 2001 vide notification No. 30/2001-CE(NT) dated 21.6.2001. The Central Excise Rules, 2001, notified earlier vide notification No. 9/2001-CE(NT) dated 1.3.2001 have been rescinded. The new Rules would come into force from 1st July 2001.
   
   
3. There is no basic change in the Rules now notified. Only a few amendments have been made, which are indicated below.
   
   
   1. In the case of readymade garments the parent manufacturer is required to pay the excise duty, unless the job worker is authorized to do so. Accordingly, this dispensation finds addition in Rule 4 and 5.
      
      
   2. In Rule 7 relating to provisional assessment, provision has been made for the finalisation of such assessments within six months. Though provision has been made for extension of the time limit by the Commissioner/Chief Commissioner, the intention is that the Assistant Commissioner/Deputy Commissioner should strive to finalize the assessment within a period of six months. The power to extent the time limit has been given, as there could be some exceptional cases when it may not be possible to finalize the assessment within six months.
      
      
   3. In Rule 7 relating to provisional assessment; provision has also been made for charging of interest or for allowing refund, as the case may be. It may be clarified that these will apply to cases in which provisional assessment is resorted to on or after 1.7.2001 and not to past cases of provisional assessment even if the assessments are finalized on or after 1.7.2001.
      
      
   4. It has been provided in Rule 11 that the invoice should contain information regarding registration No., description and classification of goods, date and time of removal, etc.
      
      
   5. Rule 16 relates to the manner in which goods returned for re-making, re-conditioning, etc. are to be dealt with. If the amount of duty that was paid when the goods were originally removed from the factory is known from the relevant documents, the manufacturer can take the CENVAT credit equal to the amount of duty paid and utilize this under the CENVAT credit rules. But the goods received must be eventually returned. If for any reason, the goods are not returned then the credit earned and utilized cannot be said to be admissible. In other words, action would have to be taken to recover it. The field officers may exercise scrutiny/checks on this aspect.
      
      In case the process of re-making, re-conditioning, etc. results into a new manufacture product, the manufacture is required to pay excise duty on the value determined under section 4 or section 4A, as the case may be. In other cases, the manufacturer shall pay an amount (not by way of duty) equal to the CENVAT credit taken when the goods are removed from the factory again.
      
      It is reported that in some cases it is not possible to know the amount of duty paid on the returned goods. For instance, the goods might have been removed originally long back and the original invoice is not available. In such cases, the goods can be received and returned on the basis of the permission to be accorded by the Commissioner of Central Excise. This permission may be specific or general. The Commissioner may decide any conditions and the procedure to regulate the receipt and disposal of such goods as may be considered appropriate.
      
      
   6. Rule 21 has been inserted to provide for remission of duty in specific circumstances.
      
      
   7. In Rule 22 provision has been made for furnishing of list of records to the Central Excise Officers and the audit parties.
      
      
   8. It has been provided in Rule 32 that the existing Circulars, instructions, Trade Notices, etc., to the extent they are relevant, shall continue to remain valid for the purposes of the new Rules as well. This has been done for ease of operational convenience during the transition. New Central Excise Manual, that is proposed to be brought into force from 1.9.2001, would, in any case, incorporate instructions after undertaking a review of all existing instructions.
      
      
   9. There are a few other changes of drafting nature.
   
   
4. One significant change is that the procedure for end-use exemption that was contained in Chapter X of the Central Excise Rules, 1944, has been replaced by Central Excise (Removal of Goods at Concessional Rate of Duty for Manufacture of Excisable Goods) Rules, 2001. These Rules contemplate that the procurement of goods for end-use under concessional (including fully exempted) rate of duty would be on the basis of a certificate issued by the Assistant Commissioner/Deputy Commissioner. Separate certificate would be necessary for each supplier. It may be noted that the end-user is responsible for discharging the duty liability on the entire quantity of goods originally dispatched to him and no allowance shall be made for loss/destruction in transit. The Bond to be executed for the purposes of the new Rules may be essentially in the same kind of format as was being used under Chapter X procedure. It may be incorporate as a condition in the bond that the recipient shall be liable to pay duty for any loss/destruction in transit. (See Explanation to Rule 6). Decision regarding the amount of bond, surety and security may be taken by the AC/DC.
   
   
5. Simultaneously, CENVAT Credit Rules, 2001 have been notified separately by notification No. 31/2001-CE(NT) dated 21st June, 2001. There is no significant change in these Rules, except for minor drafting changes. The penalty provisions for any infringement of CENVAT Rules have now been built into these Rules.
   
   
6. Central Excise (Appeals) Rules, 2001, have been notified vide notification No. 32/2001-CE(NT) dated 21st June, 2001. Here also there is no change contemplated.
   
   
7. Central Excise (Settlement of cases) Rules, 2001 have been notified vide notification No. 33/2001-CE(NT) dated 21st June 2001. There is no change in the scheme of the procedures relating to settlement.
   
   
8. All the above Rules are effective from 1st July, 2001. Copies of these Rules have been made available on the web site. The Chief Commissioners and the Commissioners may use their discretion for resolving difficulty, if any, that may still arise in a given case with a practical approach. It is with this objective in view that Rule 31 provides for issue of instructions on incidental or supplemental matters by the Commissioner. If, however, the Commissioner/Chief Commissioners feels that any amendment in the rules is still necessary, reference may be made to the Board for this purpose.
   
   
9. Notifications regarding other aspects like jurisdiction, exports, compounded levy will follow soon.

Sd/-
(T.R.Rustagi)
Joint Secretary to the Government of India

F.No.354/66/2001-TRU




(Note:-see Ntf. No. 34/2001-CE(NT), dt. 21/06/2001)

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