Rate of duty @2% or 6% on Job work goods

[S.C. WADHWA]

Dear Experts,

We are manufacturers of food items falling under excise chapters 20 and 21 and paying
duty @2% without getting cenvat credit, on MRP value after getting abatement. Now we
have got job work for items falling in chapters 20 and 21 with their brand name. According
to principal manufacturer we have to clear the goods after paying duty on MRP value
after getting abatement. All the raw material will be supplied by the principal manufacturer.
Now my query is whether we should pay excise duty @ 2% or 6% (Full rate) and in this
case an intimation is required to be given to excise deptt or not.
Regards,
WADHWA

[Rajagopalan Ranganathan]

Sir,

Notification No. 1/2011-CE dated 1.3.2011 as amended prescribes effective rate of duty of 1% subject to the condition that no cenvat credit of excise duty or additional duty of customs on inputs or service tax on input services has been taken by the manufacturer of such goods.

Notification No. 2/2011-CE date 1.3.2011 as amended prescribes effective rate of duty of 6% and in this case you can avail cenvat credit of excise duty or additional duty of customs on inputs or service tax on input services has been taken by the manufacturer of such goods.

The option is yours to avail either of these Notification which beneficial to you. You need not give any intimation to department. You may indicate the exemption notification availed by you in your monthly/quarterly return which is sufficient for the purpose.

[KASTURI SETHI]

Sir,

In this context, I would like to add that Notification No.19/12-CE dated 17.3.2012 may also be read.

[Rajagopalan Ranganathan]

Sir,

All goods falling under Chapter 20 had been omitted from Notification No. 2/2011-CE by Notification No.19/2012-CE.

[S.C. WADHWA]

Dear Experts,

Thanks a lot for prompt reply. At present rate of duty on chapters 20 and 21 is 1% if we are not availing cenvat credit. Principal manufacturers suppling us raw material at his own name and hence we are not availing any cenvat credit on their raw material. Manufacturer (principal) are getting goods at their depot address from where they will be directly sent to the parties.

Now my query is whether we should pay excise duty on Job charges bill at MRP after abatement @1% or 6%. Please confirm immediately.

Regards,

WADHWA

[Mahir S]

Sir,

If the principal manufacturer supplying raw materials has not availed cenvat credit on the inputs, then I am of the view that you can clear the finished goods from your factory premises after job work at 1 % duty payment after MRP abatement. However, department may ask to furnish proof that the principal manufacturer has not availed cenvat credit on inputs used in manufacture and supplied to you on job work basis.

If credit availed by principal manufacturer, then you shall have to clear the goods after job work at6 % duty payment after MRP abatement.

Intimation is required to be given to the department as job work clearance is made on payment of duty from your factory premises. .

[KASTURI SETHI]

Sh. Wadhwa Ji,

Rate of duty was increased to 2%. Notification is as follows:-

Effective rate of duty of 2% on specified goods when no Cenvat credit availed on inputs or inputs services - Amendment to Notification No. 1/2011-C.E.

In exercise of the powers conferred by sub-section (1) of section 5A of the Central Excise Act, 1944 (1 of 1944), the Central Government, being satisfied that it is necessary in the public interest so to do, hereby makes the following further amendments in the notification of the Government of India in the Ministry of Finance (Department of Revenue), No. 01/2011-Central Excise, dated the 1st March, 2011, published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i), vide number G.S.R. 116(E), dated the 1st March, 2011, namely :-

In the said notification, -

(a) in the opening paragraph, for “1% ad valorem:”, “2% ad valorem:” shall be substituted;

(b) in the Table, -

(i) serial number 28, 40, 88 and 89 and the entries relating thereto, shall be omitted;

(ii) against serial number 115, for the entry in column (3), the entry “Spectacle lenses” shall be substituted;

(iii) after serial number 130 and the entries relating thereto, the following shall be inserted, namely :-

(1)	(2)	(3)
“131	Any Chapter	Parts, components and accessories namely, battery chargers, PC connectivity cables, memory cards and hands-free headphones of mobile handsets. Explanation. - For the purposes of this entry, mobile handsets include cellular phones.”

 

[Notification No. 16/2012-C.E., dated 17-3-2012]

Effective rate of duty of 2% on specified goods when no Cenvat credit availed on inputs or inputs services - Amendment to Notification No. 1/2011-C.E.

In exercise of the powers conferred by sub-section (1) of section 5A of the Central Excise Act, 1944 (1 of 1944), the Central Government, being satisfied that it is necessary in the public interest so to do, hereby makes the following further amendments in the notification of the Government of India in the Ministry of Finance (Department of Revenue), No. 01/2011-Central Excise, dated the 1st March, 2011, published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i), vide number G.S.R. 116(E), dated the 1st March, 2011, namely :-

In the said notification, -

(a) in the opening paragraph, for “1% ad valorem:”, “2% ad valorem:” shall be substituted;

(b) in the Table, -

(i) serial number 28, 40, 88 and 89 and the entries relating thereto, shall be omitted;

(ii) against serial number 115, for the entry in column (3), the entry “Spectacle lenses” shall be substituted;

(iii) after serial number 130 and the entries relating thereto, the following shall be inserted, namely :-

(1)	(2)	(3)
“131	Any Chapter	Parts, components and accessories namely, battery chargers, PC connectivity cables, memory cards and hands-free headphones of mobile handsets. Explanation. - For the purposes of this entry, mobile handsets include cellular phones.”

 

[Notification No. 16/2012-C.E., dated 17-3-2012]

AI Summary

Excise duty rate choice on job-work goods depends on whether cenvat credit is availed; lower rate if no credit. Whether job-work finished goods attract the concessional excise rate or the higher rate turns on whether the principal manufacturer availed cenvat credit on inputs or input services. If the principal has not availed credit and supplies materials in its own name, the job worker may clear finished goods at the concessional rate after MRP abatement; if the principal has availed credit, the higher rate applies. The department may require proof of the principal's credit status and the notification claimed should be indicated in statutory returns.