DRAFT Circular for Comments
Exemption from Central Excise Duty to parts falling under any Chapter, when used within the factory of production for manufacture of goods of heading 8701
1. Some doubts have been expressed as to whether parts falling under Chapters other than 87, when used within the factory of production for manufacture of goods of heading 8701 are eligible for the exemption under
Notification No. 6/2002-CE dated 1.3.2002 (Sr. No. 296) and
Notification No. 6/2006-CE dated 1.3.2006 (Sr. No. 92).
2. For the purposes of classification, goods excluded by Note 2(e) of Section XVII cannot be classified as parts under Chapter 87. For example, Internal Combustion (IC) Engines are liable to be classified under 8407 or 8408. If IC engines are used as a part for manufacturing tractors falling under 8701, then there was a possibility of classifying such engines under heading 8708, which reads “Parts and accessories of the motor vehicles of heading 8701 to 8705”. However, the effect of Note 2(e) of Section XVII is to ensure that such IC engines used in manufacturing tractors do not get classified as “parts / parts & accessories” under heading 87.08. Instead, such IC engines would remain classified under 8407 or 8408.
3. Notification No. 6/2002-CE dated 1.3.2002 (Sr. No. 296) and the Notification No. 6/2006-CE dated 1.3.2006 (Sr. No. 92) exempt parts, falling under any chapter, used within the factory of production for manufacture of goods of heading 8701. In view of this specific provision, goods falling under any Chapter, so long as they are parts of goods of heading 8701, will be covered by the said notifications subject to fulfilment of other conditions prescribed in the said notifications. For example, IC Engines, when used within the factory of production for manufacture of tractors falling under heading 8701, will be classifiable under Chapter 84, and will be covered by the said notifications subject to fulfilment of other conditions.
4. Trade and Field formations may be informed accordingly.
5. Receipt of this Circular may please be acknowledged.
(Dilip Goyal)
Under Secretary to the Govt. of India
F. No. ……………….
DRAFT Circular for Comments
Clarification on Road tractors for semi-trailers
1. Representations have been received in the Board that certain field formations are proposing to charge excise duty on agricultural tractors on the ground that besides agricultural work, these tractors are used for haulage of farm products, fertilizers, etc. thereby qualifying as “road tractors for semi-trailers”. “Road tractors for semi-trailers” attract Central Excise duty at the rate of 16%, if the engine capacity is more than 1800 cc.
2. Tractors falling under Chapter heading 8701 were exempted from excise duty in Budget 2004-05 with the intention to give exemption to agricultural tractors, in order to encourage farm sector. A tractor meant primarily for agriculture purposes can also be incidentally used to take goods to nearby markets. But that is an incidental use, and such tractors are not primarily designed to haul trailers. Therefore, incidental use of hauling trailers will not put such tractors in dutiable category. Therefore primary use of tractor should be the deciding factor.
3. Trade and Field formations may be informed accordingly.
4. Receipt of this Circular may please be acknowledged.
(Dilip Goyal)
Under Secretary to the Govt. of India
F. No. …………………………
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