Excise and SSI
Today, the SSI sector produces almost 8000 products. The number of units have gone up from 19 lakhs in 1991 to over 31 lakhs in 1999. During the 7 year period from 1991 when liberalization began till 1998, the SSI sector created almost 42 lakhs new jobs whereas the entire organised industry including government was able to create only 14.3 lakhs new jobs.
From time to time, various incentives in the shape of exemptions from payment of excise duties and licensing registration controls have been extended to small scale units producing excisable goods. This has been the long standing and consistent policy of the Government to encourage the small scale sector and to improve their competitive position vis-à-vis the large manufacturing units. Government of India has provided a major relief by granting full exemption from the Payment of central excise duty on a specified output and thereafter slab-wise concessions of certain specified items in 1978. A general Small Scale Exemption Scheme in respect of specified commodities was introduced in 1985. The same was replaced in 1986 and subsequently amended from time to time by a number of notifications in 1993. With effect from 1-4-1994, Gate-Pass System was replaced by manufacturer invoice to cover clearances of goods as the duty-paying document.
In the Budget 1995-96, the limit of Rs.2 crore turnover for a small scale unit to be eligible to exemption was revised to Rs.3 crore. SSI units whose clearances dis not exceed Rs.30 lakhs in a financial year were exempted from payment of excise duty. SSIs are also not required to maintain any statutory records such as daily stock account of production and clearances, raw material account, personal ledger account, RG-23A account, RG-23C account, stock register of goods sent for processing of job-work, invoice records etc. Their own records are adequate for excise purposes. The exemption limit was raised to Rs.50 lakhs in the budget 1998-99 and further to Rs.100 lakhs in 2000. SSIs have been allowed to pay duty on a monthly basis w.e.f 1-4-1999.
Eligibility as an SSI Unit
The pre-requisite for the eligibility for excise concessions was that SSI unit should be registered with the State Directorate of Industries or DC(SSI). At-the time of obtaining the exemptions and concessions, the SSI unit was required to produce such a certificate of registration from the respective Directorate of Industries or DC(SSI),
In the year 1986, SSI units not registered with the State Directorate of Industries were also given exemptions, but on different eligibility conditions. With effect from 1-4-1994, the requirement of obtaining registration certificate from the Directorate of Industries or DC(SSI) has been dispensed with as a condition for available or excise duty concessions. This implies that there would be no distinction between registered and unregistered units for SSI concessions. Further, the eligibility for excise concessions for SSIs has been based on annual turnover rather than SSI registration which is based on the criterion of investment in plant and machinery. Only the units previously registered with DGTD and now with SIA are not considered eligible for SSI concessions.
There are two exemption schemes available for the SSI sector which have been amended by the Finance Act, 2000. The schemes are:
SSI Scheme (Without CENVAT)
This scheme as contained in Notification No.8/2003-CE dated 1.3.2003 is effective from 1.4.2000. The following rate of duty is applicable to such manufactures whose turnover does not exceed Rs. 3 crores in the previous financial year in respect of clearances of excisable goods for home consumption (including exports to Nepal or Bhutan) from one or more factories of the same manufacturer or from factory by one or more manufacturers:
Rate of duty in respect of Clearances of Excisable Goods
It may be noted that beyond clearances of Rs.100 lakhs, the manufacturer is liable to pay normal rate of duty and accordingly he can avail CENVAT credit at this stage. Similarly, CENVAT credit on capital goods can be availed and utilised after crossing the limit of Rs.100 lakhs.
The scheme has been extended to articles of plastic, cosmetic and toilet preparations, tread rubber, airconditioning and refrigeration and parts, which were earlier covered under a separate exemption. All such clearances of the specified goods which are used for captive consumption in production of the specified goods are subjected to 'nill' rate of duty and the Table itself. The notification grants exemption in respect of basic excise duty and special excise duty. The manufacturer may opt for not availing exemption contained in the notification and instead pay the normal rate of duty on the clearances. But once the option is exercised, it shall continue till the remaining part of the financial year.
SSI exemption notifications clearly use the words 'first clearances on or after 1st April in any financial year'. In Remakrishna Engineering Works v. CCE, (1996) 83 ELT 346 (CEGAT), it has been held that all clearance from 1st April in chronological order have to be considered for purpose of calculation of exemption limit of Rs.100 lakhs. Thus, if some goods are cleared on payment of duty, those will also have to be considered for calulating the limit of 100 lakhs.
Value for purpose of calculating the limit of 100 and 300 lakhs is the 'Assessable value' as per section 4 i.e., wholesale price at factory gate, exclusive of taxes, where price is the sole criteria. When goods are assessed on basis of MRP (Maimum Retail Price) the 'Value' will be as determined under section 4A.
SSI Scheme (with CENVAT)
This scheme as contained in Notification No.9/2003-CE dated 1.3.2003 is effective from 1.4.2003. The Notification provides the concessional rate of duty in respect of clearances of specified goods for home consumption (including exports to Nepal or Bhutan), and also states that all clearances of the specified goods which are used for captive consumption in production of the specified goods shall be subjectedd to 'nil' rate of duty. Such clearances shall not be counted for determining the aggregate value of clearance of the specified goods. The following Table shows the Rate of Duty.
Rate of duty in respect of Clearances of Specified goods
The exemption shall apply only subject to the following conditions:
The exemption contained shall not apply to the specified goods bearing a brand name of trade name, whether registered or not, of another person, except in the following cases, namely:-
Goods exempted from whole of the Duty of Excise/The Additional Duty of Excise
SSI units having turnover less than Rs.60 lakhs per annum need not have a separate storeroom for storing the finished products.
SSI units are required to pay duty on monthly basis instead of paying at the time of every clearance. Duty liability is to be discharged by 15th of the following month. The duty can be paid either through PLA or RG23 register.
SSI exemption is available in respect of goods exported to Nepal & Bhutan. The SSI exemption is available for home consumption, i.e. for consumption within India. However, explanation to SSI exemption notifications make it clear that clearances for home consumption shall also include clearances for export to Bhutan & Nepal. Thus, exports to Nepal & Bhutan will qualify for SSI exemption.
As per the CBE&C circular No.406/39/98-CX dated 7.7.1998, since the exemption SSI units do not have to file any declaration, they will not be given any code number and it need not be mentioned in the invoice or challan. In Lokhandwala Construction Industries v. CCE, 1997 (92) ELT 703(CEGAT) & K.S. Mills v. CCE, 1998 (98) ELT 619 (CEGAT), it has been held that the declaration to be given by SSI is only for purpose of exemption from registration. The duty exemption to SSI is available whether or not such declaration is given. Thus, SSI exemption is available even if such declaration is not submitted.
Normally, excise officers are not expected to visit SSI units paying less than Rs.10 lakhs duty annually. According to Mumbai II Commissionerate Trade Notice No.15/93 dated 31-3-1993, excise inspectors as well as preventive and internal audit parties can visit SSI units only with specific permission of Assistant Commissioner for specific purpose. Officers are required to enter relevant particulars in the visitors' book maintained as assessee.
Courtesy: Dr. V. BALACHANDRAN, ACS, Faculty of Corporate Secretaryship, Alagappa University, Karaikudi.