TRADE NOTICE NO

TRADE NOTICE NO. 35 /2003

Dated:

27.03.2003

Subject:- New Excise Procedure on textiles and textile articles - Reg.

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As the Trade is aware, the measures like withdrawal of deemed credit, removal of specific duties, and removal of exemptions (including SSI exemptions) on textiles and textile articles would come into effect from 1.4.2003. It may also be recalled that in this regard, discussions were held with the Chief Commissioners, the Commissioners and the Trade Associations to evolve a set of simplified procedure, specially for the units coming within the excise net for the first time. Keeping in view the ground realities, the trade practices and the suggestions received, new excise procedures (by way of amendment to rules, notifications and issuance of executive instructions) have been framed, and have been notified. The salient features of these are as follows:

CHANGES IN THE CENTRAL EXCISE AND CENVAT CREDIT RULES

(a) Central Excise Rules, 2002 are being amended so as to prescribe special procedure for Textile and Textile articles. Under the special procedure, the duty liability, accountability and the responsibility for complying with the excise procedures (such as registration, return filing, maintenance of records) would rest with the person who gets yarns, fabrics or ready made garments manufactured or processed on job work. Such person would normally be the owner of the raw material who gets finished products manufactured on payment of job charges. He can take credit of the goods which are used in job work. In such a case, the job worker (such as powerlooms, hand processor and power processors) would be totally free from the duty burden as well as from the procedural requirements. Such persons who manufacture goods or get goods manufactured on job work basis, get registered and pay duty, would be treated at par with actual manufacturer.The job worker, however, at his option, can take upon himself to comply with the excise law and pay duty. He can also do so on behalf of the owner of the goods working as his agent. The registered job worker can authorise the supplier of yarn or fabrics as his agent to maintain accounts and pay duty on behalf of the job worker. In such a case, the supplier (agent) need not have registration.

(b) The rules also provide for situations when the goods move from one job worker to another during the course of completion of its manufacture. Such movement would be under simple challans which would contain certain minimum information and would be printed (including computer printed) and serially numbered. Such challans could also be in local/vernacular language and the procedure is as follows:

1. The said person i.e. supplier of yarn or fabrics may supply or cause to supply to a job worker, the following goods, namely,

(i) inputs in respect of which he may or may not have availed CENVAT credit in terms of the CENVAT Credit Rules. 2002, without reversal of the credit thereon; or

(ii) goods manufactured in the factory of the said person without payment of duty;

under a challan, consignment note or any other document.

The document shall be in duplicate, in printed (including computer printed) format, having printed running serial numbers on a financial year basis. The document, before it is issued shall be signed by the sender, of the goods or his authorized representative, as the case may be.

2. The document for the movement of goods from the said person i.e. supplier of yarn or fabrics to the job worker shall contain the following information,

(i) the name, address and registration number of the said person

(ii) the Range, Division and the Commissionerate with whom the said person is registered;

(iii) the description, quantity (in terms of kg. /m/ Sq. m) and the value of the goods being sent for the job work;

(iv) the date of dispatch of such goods; and

(v) the name and address of the job worker.

3. The document pertaining to movement of goods from a job worker to another job worker or from a job worker to the said person i.e. supplier of yarn or fabrics shall contain,

(i) the name and address of the job worker (the sender).

(ii) the description and quantity (in terms of kg. /m/ Sq. m) of the goods being sent.

(iii) the date of dispatch of such goods.

(iv) the name and address of the job worker/the said person to whom the goods are being sent ( the receiver).

4. The responsibility in respect of accountably of the goods shall lie on the said person (ie) supplier of yarn or fabrics.

5. The job worker, on receipt of the goods from the supplier or, as the case may be, from another job worker shall duly acknowledge the receipt of the goods on the said document.

6. The job worker, with or without completing the job work, may,

(i) return the goods without payment of duty to the said person; or

(ii) send the goods without payment of duty to another job worker; or

(iii) clear the goods for home consumption or for exports

subject to receipt of an invoice from the said person i.e. supplier of yarn or fabrics. The job worker shall clear the goods after filling in the time and date of removal and authenticating such details. The rate of duty on such goods shall be rate in force on date of removal of such goods from the premises of the job worker. No excisable goods shall be removed except under an invoice:

Provided that the goods may be sent under a proforma invoice in terms of proviso to sub rule (1) of rule 11 of the Central Excise Rules, 2002.

(8) The provisions of this rule, mutatis mutandis, be applicable to the during the course of manufacture of the goods mentioned in sub-rule (1).

(c) It is also provided that the owner of the goods can, if he so desires, clear the finished products directly from the premises of the job worker on payment of duty.

(d) The owner of the goods can take credit of duty paid on inputs, which are used by the job worker. In certain cases, an actual manufacturer (e.g. a yarn manufacturer) may also send some goods to a job worker for further manufacture and receive back the goods after job work, and if such manufacturer has a credit balance in respect of inputs used in other goods (including goods manufactured on job work basis), the same can be utilized for payment of duty on clearances of the goods received after job work.

(e) In case a person wants to pass on the credit on goods sold by him without any manufacture, he is required to undertake registration as registered dealer.

(f) In certain cases where some of the intermediate processes may be either exempt (for example, being carried out without aid of power or steam) or are not excisable (such as sizing of yarn), in order to ensure that the credit chain remains unbroken, it is proposed to permit endorsement of the duty paying document issued in favour of a person undertaking such exempted/non-excisable activity in favour of either the buyer of the goods or to another person who is undertaking a subsequent excisable activity. Such person simply has to endorse the duty paying document to the next person to whom they sell the goods. It would not be necessary for the person endorsing to be registered with the department. However, the person undertaking such exempted/non-excisable activity, can, at his option, get himself registered as a registered dealer. This would enable him to issue dealers’ invoice in favour of the person undertaking a subsequent excisable activity.

(g) Normally, the assessees not covered under SSI exemption are required to file monthly return as well as they are required to pay duty on a monthly basis. As a measure of facilitation, it is proposed that in the case of yarn preparatories (i.e. twisting, warping, doubling of yarns), unprocessed fabrics and readymade garments (made by units availing of SSI exemption scheme), the manufacturers would be required to file only quarterly returns in a simplified format. The duty, however, would be paid on monthly basis.

(h) Processors who undertake job work and also do processing on their own and obtain dye and chemicals under invoice issued in his name, can take credit of duty paid on such dyes and chemicals to pay duty on his dutiable clearances, even though some of these inputs were used for making goods cleared without payment of duty under the job work scheme.

(i) Credit of duty paid on capital goods can be taken only by the manufacturer in whose premises the capital goods are installed.

(j) As the manufacturer and traders are expected to have stock of inputs as on 31.03.2003, for which they may not be in a position to produce documents evidencing payment of duty, provisions are being made to give a one time credit for the inputs and/or inputs contained in the finished products lying in stock as on 31.03.2003. This facility would be available to all such persons, who would be required to pay duty or pass on the credit i.e. manufacturers, persons getting the goods manufactured on job work and registered dealers. All such persons would declare the stock of inputs (including those contained in process or are in stock of finished product) giving description, quantity (in unit length or weight, as the case may be) and value. If duty paying documents are available, credit will be allowed on the basis of these documents. Where no such documents are available, credit will be allowed on a deemed basis. In respect of yarn lying in stock, the credit amount will be notified separately. In respect of fabrics lying in stock, credit will be allowed at the rates prescribed under notification No.54/2001-CE, or as the case may be under notification No.6/2002-CE (NT). As the duty payment for April, 2003 will have to be made only by 5^th May 2003, credit would be admissible in respect of the stock lying on 31.3.2003, even if the rates are not notified on or before 1.4.2003. The assessee would work out the credit amounts and take credit accordingly. In the case of processed fabrics, only the stock lying with a manufacturer would be entilted for such credit. For unprocessed fabrics and yarns, the credit would be available both for manufacturers/job workers, and also for traders who get registered.

Where the inputs and the finished products are covered under notification Nos. 54/2001- Central Excise (NT) dated the 29^th June, 2001, or 6/2002- Central Excise (NT) dated the 1^st March 2002, subject to such conditions as prescribed under the said notifications, the credit shall be equal to the product of:

(A) the applicable percentage credits in terms of the said notifications;

(B) the value of such finished product declared by the assessee; and

The entire amount of credit as eligible shall be calculated by the assessee himself who can take credit accordingly. ".

(k) In case a person gets goods manufactured on job work and clears the same for sale, the excise duty would be payable on the transaction value at which such goods are sold. However, in case the job worker, i.e. a weaver or processor prefers to clear goods on payment of duty (even if he is actually undertaking job work and is not actually selling the goods back to the trader) the duty would be worked out on the value calculated on the basis of the price of inputs i.e. yarn or grey fabric price plus the actual job charges.

(l) It has been brought to notice that sometimes sale of yarns, fabrics or readymade garments take place on approval basis. In such cases, the goods are sent to the buyer under a challan or proforma invoice and the sale is finalised after the approval of the buyer, The buyer may reject part or whole of the goods or negotiate the price depending upon the quality. In order to accommodate such practice within the framework of the excise law, it is proposed to permit removal of such goods under a proforma invoice. Such challan/ proforma invoice would also be printed and serially numbered and have all particulars except the details of the duty payable. Within five working days from the issuance of the proforma invoice, the manufacturer would prepare the final invoice after making adjustments in respect of the goods rejected and returned by the buyer. The proforma invoice and the invoice would have cross reference to each other by way of mention of their serial numbers.

(m) The special procedure for textiles and textile articles is not applicable to Export Oriented Units (EOUs) and Units located in Special Economic Zones (SEZs).

With respect to registration, the assessee need not visit the Central Excise Office for this purpose. Instead they may file their applications with their respective Trade Associations who in turn, can submit the same to the Commissioner for instant registration. A special cell for this purpose has been opened in the Commissionerate. Normally no verification of premises by the officers would be conducted. Assessees not having Income Tax PAN would also be granted registration.

The application for registration for the new registrants would be in the same format prescribed under the existing rules. However, the information regarding PAN (if they do not have such number), details of boundaries, property holding rights, estimated investments, bank account number, business transaction numbers obtained from other government agencies, details about owner, partners etc. at the initial stages, if it is difficult for the assessee to provide these at the initial stages, will not be insisted upon.

Similarly, for filing of returns, the assessees can take the assistance of the Trade Associations till they become familiar with the format.

The purpose of the new rules is to allow the textile sector to carry on the work as they have been doing all along, and not to disturb the trade practices. It would be sufficient if the manufacturers or the deemed manufacturers keep account of production & clearance, pay duty accordingly and take credit only on the strength of duty paying documents.

In case of any doubts or difficulties experienced in following the above instructions the Trade, in Chennai III Jurisdiction, may contact any of the officers whose names and addresses are given below:-

S. No	Name & Designation (S. / Shri. / Smt.)	Address	Contact Nos.
1.	K.S. NAIR, Commissioner	121, Mahatma Gandhi Road, Nungambakkam, Chennai - 34.	044 -2833 1177 044 -2833 1199 044 -2833 1188 (fax)
2.	V.V. HARIHARAN, Addl. Commissioner (Prev.)	- do -	044 -2833 1153
3.	P.V.R. REDDY, Addl. Commissioner (Tech.)	- do -	044 -2833 1156
4.	D. SARAVANAKUMAR, Deputy Commissioner (Tambaram Division)	130 B, Mudichur Road, West Tambaram, Chennai - 45.	044 -22226804 044 - 2226 0859 (fax)
5.	G. SRINIVASAN, Asst. Commissioner (Vellore Division)	Central Revenue Buildings, Barracks Maidan, Vellore	95416 - 2221587 95416 - 2224062 (fax)
6.	K. VENKATESWARULU, Asst. Commissioner (Ranipet Division)	SIPCOT, Ranipet -632 403	954172 - 244547 (phone/fax)
7.	M. GNANASUNDARAM, Asst. Commissioner (Hosur I Division)	Thally Road, Hosur - 635 109.	04344 - 222408 04344 - 242475 (fax)

The contents of this Trade Notice may be brought to the notice of all concerned for information and necessary action.

(Issued from File C.No.IV/16/2/03 Cx.Pol)

(Authority Letter F.No.B3/1/2003 - TRU dated 25.3.03)

Sd/-

(K.S. NAIR)

To COMMISSIONER

As per Mailing List (Both Department & Trade)