PROVISIONS TAKE EFFECT FROM 18TH JANUARY, 2008 TO ENSURE GENUINE INDUSTRIAL ACTIVITY IN THE REGION

The Central Government has amended provisions vide Notifications No.1/2008-Central Excise (C.E.), No.3/2008-C.E.[N.T.]and 4/2008-C.E.[N.T.] all dated 18.1.2008 to exclude the benefit of area based exemption in the State of Himachal Pradesh and Uttarakhand to those units which undertake only peripheral activities.

Notification Nos.49/2003-C.E. and 50/2003-C.E., both dated 10.06.2003, provide full exemption from excise duty to the units located in specified areas of Uttarakhand and Himachal Pradesh.

These exemptions are intended to encourage industrial development by creation of basic infrastructural facilities and to generate employment opportunities for the local people of these states. In order to ensure genuine industrial activities in these regions, it has been decided that benefits of duty exemption should not be admissible to goods in respect of which only peripheral activities like preservation during storage, cleaning operations, packing, re-packing, labeling or re-labeling, sorting, alteration of retail sale price etc. take place. This will ensure that the intended purpose of promoting substantial industrial/manufacturing activities through grant of fiscal incentives is fully met. Even in respect of special category states in the North-east (States of Assam, Tripura, Meghalaya, Mizoram, Manipur, Nagaland, Arunachal Pradesh and Sikkim), the benefit of excise duty exemption has been disallowed to units carrying out only such peripheral activities.

Accordingly Notification Nos. 49/2003-CE and 50/2003-CE have been amended vide notification No. 1/2008-CE dated the 18th January, 2008 so as to exclude certain peripheral activities from the operation of these notifications. The benefit of the said notifications will not, therefore, be available to goods which have been subjected to only one or more of the following processes such as packing or re-packing of such goods in a unit container or labeling or re-labeling of containers, declaration or alteration of retail sale price, etc. In other words, units carrying out only such processes would not be eligible for exemption benefit and would be required to pay duty as per normal procedure.

It has also been decided to prescribed a simple quarterly return for assesses availing exemptions under the said notifications in order to create a database about the actual impact of exemptions on the industrial activities in these regions. Accordingly, rule 12 of Central Excise Rules, 2002 has been amended vide notification No.3/2008-CE[N.T.] dated the 18th January, 2008 to prescribe for a Quarterly Return [notified as Form-A vide notification No.4/2008-CE[N.T.] dated the 18th January, 2008] to be filed by the assesses with the jurisdictional Central Excise Commissionerate by the 20th of the subsequent month of the quarter to which the return relates. However, for the quarter ending 31st day of December, 2007, the units have been allowed to file the return by the 20th February, 2008. The assesses may send the said return electronically or by post. Necessary arrangements have been made in the concerned Commissionerates to receive the quarterly returns.

The above provisions come into effect immediately from the date of publication of the notification No.1/2008-CE i.e. the 18th January, 2008 and are applicable to all the existing units availing the benefits of these notifications as also to new industrial units that may be set up in future.

Exclusion of peripheral activities from excise duty exemptions restricts benefits to units performing genuine manufacturing and requires quarterly reporting. Amendments exclude excise duty exemption for units in Himachal Pradesh and Uttarakhand that undertake only peripheral processes-such as packing, re packing, labeling, alteration of retail sale price, cleaning, sorting or preservation-so such units must pay duty under normal procedure; a quarterly return (Form A) must be filed by assessees availing the notifications with the jurisdictional Central Excise Commissionerate.