Impact of Central Excise On Branded Garments & Textile Articles – Part - I. CA Madhukar N. Hiregange & CA Rajesh Kumar T R Hiregange

Coverage Today Why levy needed? Basic Principles in Central Excise: What is duty? What is excisable goods? Who is the manufacturer? What is removal? Small Scale Exemption- who and how to claim? Classification and Valuation options. Cenvat Credit impact? Brief procedural aspects. Impact on Jewellers Impact on Textiles Q/ A – 45m. Hiregange

Why Needed? Huge Parallel economy – forces procurement without bills/ taxes- cascading effect of non compliance. Reduce tax rates on products. Present limited tax payers bear the brunt of tax contribution. [ 3 crores in IT and 70 lakhs in IDT – probable- trader/ businessman/ service provider in India – Crores? ] Movement towards GST and reduced rate of tax Invite the FDI as promised Hiregange

Excise Duty Seventh Schedule ( Art COI) Entry No. 84 to List I : “Duties of excise on tobacco and other goods manufactured or produced in India, except alcoholic liquors for human consumption, opium, narcotics, but including medical and toilet preparations containing alcohol, opium or narcotics.” Entry 97 to List I: “ Any other matter not enumerated in List II or List II including any tax not mentioned in either of those lists” Deemed Manufacture – packing, branding, labelling, declaration/ alternation of price ++ Hiregange

Excise Duty Levy 1. Manufacture + 2. In India for domestic consumption+ 3. Goods (movability & marketability) + 4. Excisable (mention in the First or Second Schedule to CETA, 1985) Assessment 5. Classification, 6. exemption 7. Valuation, Collection 8. On removal of goods After set off 9. Cenvat Credit Hiregange

Liability Manufacture & Deemed Manufacturer, Person Liable/ Not liable Location of goods as on Job Worker Liable Classification & Exemption Valuation & Credit Return/ Repair Hiregange

Section 2 (d) of CE Act – it means goods specified in the First and Second Schedules to the CE Tariff Act, 1985 as being subject to a duty of excise and includes salt. Explanation – Goods include any article, material or substance which is capable of being bought and sold for a consideration and such goods shall be deemed to be marketable. (2008 amendment) Excisable goods Hiregange

CET – 1 st and 2 nd schedule Section wise [ XI] – Textiles and Textile Articles– each section has chapters – ( Ch ) Specified as taxable: Ch- 61 – Branded Apparel/ Clothing Accessories( Knit.) Ch Branded Apparel/ Clothing Accessories( Not Knit.) Ch- 63 – Branded made up textile articles Other Chapters / fabrics, sarees of silk, cotton, man made yarn not liable as on date. Excisable goods Liable? Hiregange

“ Manufacture” includes any process, - – i) incidental or ancillary to the completion of a manufactured product; [ A converted to B] Different and Distinct Name, Characteristics and Use. ( DCM Case) Manufacture – Definition – 2(f) Hiregange

– ii) which is specified in relation to any goods in the Section or Chapter notes as amounting to manufacture; or Affixing Brand on product, labelling, relabelling, repacking from bulk to retail, or process to render product marketable- manufacture. (61,62,63) Manufacture – Definition – 2(f)(ii) Hiregange

– iii) which, in relation to the goods specified in the Third Schedule, involves packing or repacking of such goods in a unit container or labelling or re- labelling of containers including the declaration or alteration of retail sale price on it or adoption of any other treatment on the goods to render the product marketable to the consumer  None of the Chapter 61,62,63 have been specified. and the word “manufacturer” shall be construed accordingly and shall include not only a person who employs hired labour in the production or manufacture of excisable goods, but also any person who engages in their production or manufacture on his own account; JW who affixes brand + price tag is manufacturer Manufacture – Definition – 2(f) Hiregange

Brand Name Owner regn. Brand Name owner to register instead of JW who is the actual manufacturer. – tag by BNO All compliances of movement, payment of duty with BNO JW only can keep record for receipt and dispatch of RM/ SFG etc. Hiregange

What is Removal? Removal means the physical act of shifting/ moving the goods- Stock Transfer Under excise- the self-removal procedure No excisable goods on which any duty is payable – shall be removed from any place where they are produced or manufactured or from warehouse without payment of duty Rate of duty and tariff valuation would be done on the date of removal. Hiregange

Finished Goods on Own Brand – Over Rs. 1000/- RSP on 60% At factory- Liable At Job workers premises- Liable At depot ( different from factory) – Not liable At showroom – Not liable Other Brand dealing – not liable Endorsement to differentiate prior to + traded Hiregange

What is Classification? Ascertaining the tariff heading/sub-heading under which the product is categorized In line with Central Excise Tariff Act -Based on HSN See the Interpretative Notes at the beginning of the Tariff Notes in the Section (XI) and Chapter ( 61-63) Rules of interpretation Hiregange

What is Brand name??? Brand name means a brand name, whether registered or not, that is to say, a name or a mark, such as a symbol, monogram, label, signature or invented words or any writing which is used in relation to a product, for the purpose of indicating, or so as to indicate, a connection in the course of trade between the product and some person using such name or mark with or without any indication of the identity of that person Hiregange

Brand Name cont…. No benefit of exemption for products which bear brand name of another person Exceptions Manufacturers of components, parts of machinery for use as original equipment in the factory Brand name of Khadi and village industries commission, etc. Goods manufactured by the unit located in the rural area Hiregange

SSI as per Excise ( Own Brand) As per Central Excise act, the assessee can claim the exemption under SSI when - The aggregate value of clearance in the preceding financial year does not exceed 400 lakhs. Duty Payable- Value of ClearanceDuty Structure 0 – 150 lakhs0% without CENVAT Facility > 150 lakhsNormal Duty with CENVAT Facility Hiregange

Exclusions for Rs.400 lakhs criteria Removal of excisable good without payment of duty- To 100% EOU, Unit in SEZ, FTP, EHTP,STP. Supply to UN or International organization. Goods of Brand name/Trade name of RMS who pays duty Trading Turnover Exempt clearances under notn 214/86, 83/94, 84/94. Exports (Excluding Nepal and Bhutan) Hiregange

Exclusions for Rs.150 lakhs criteria Good of Brand Name/Trade Name of RMS. Exempt clearances (other than exemption based on quantity or value of clearances) under any notification or on which no ED is payable for any other reason. Trading Turnover Exempt clearances - JW not. 214/86, 83/94, 84/94. Exports (Excluding Nepal and Bhutan) EOU/ SEZ Hiregange

Declaration Declaration to be filed with AC of CE – T.O exceeds 90 Lakhs Benefit of notn. at the option of manufacturer Particulars of declaration (availing the option) Name & Add of the Mfr Location of factory/ies Description of inputs used, goods manf. Date on which option exercised Aggregate value of clearance of goods Hiregange

Valuation Applicable A.For Sale Advalorem- Sec 4A - Notified under RSP- on 60% of RSP – Effective rate – 1.2% on RSP B. For other than Sale- Valuation Rules Hiregange

Relevant Valuation Rules Rule 5 – Sold other than factory – deduction for freight- MRP based x Rule 6 – Sole consideration X Rule 7 – Depot /Consignment agent- MRP Rule 8 – Captively consumed - NA Rule 9 – Related person - MRP Rule 10 – Interconnected/ holding - MRP Rule 10A – Dispatched from JW premises - MRP Hiregange

Cenvat Credit No credit if under 2% option ( Not. 1/11) Full credit if under 12.5% -CG + Inputs + Input Services- Only useful if customer is able to avail the credit. ( Uniforms) Therefore may not be feasible at all. ( Reversal of credit on input + input services under Rule 6 needed) Hiregange

Duty Drawback- Exports Raghav Industries – 2016 – TIOL- 581 – Mad Not 110/15 dt ( FM indicates deeper + wider scheme in Budget) Rate with CE – Average 8.5% maximum 200 Rate w/o CE - Average 2.5% maximum 70 Case Study – Mens shirt- FOB – 5000 ( ) – With CE 9.5% = 475 cap – 60 = 60 W/o CE 2.4% cap – Rebate CG + Inputs+ Input services – If around 3% of sale price = 150 Total = against - 60 Hiregange

Return for Repair Upto 10% of value of clearances – can be done without duty impact. If much more then: If no manufacture then only keep proper stock record. If remanufactured then liable- representations can be made for clarity on availing credit. Hiregange

Registration 30days from liability – 31 st March 2016 Option – Single premises – Show Room or Office – Centralised - Centralized Registration or Centralized Billing Apply in Physical copy to be sent, No Visit Registration in 2days Hiregange

Invoice Goods needs to be removed under the covered of the Invoice To be sent from Show Room Can be issued on customer, alternatively can be removed under Commercial Invoice Hiregange

Records to be maintained Daily Stock Account (RG – 1) Store ledger Security Register Input service credit register Job-work register and challan Returned goods register Rejected/umarketable goods Hiregange

Payment/ Returns/ Others Payment by 6 th of Next month other than March where end of March Returns – Quarterly if …( ER-3) otherwise monthly ( ER-1) Disclosure of operations, records etc. on record. Quarterly verification and reconciliation. Hiregange

Source of Info Google +  cbec.gov.in  Excus  Taxindiaonline  hiregangeacademy.com  caclubindia.com  Tmi  …. Hiregange

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