Prof Dippak/ IDT

10
CX/Sec 3-A of CEA, 1944

SPECIAL MANNER OF COLLECTION OF EXCISE DUTY

Sec. 3-A : Power of CG to CHARGE EXCISE DUTY on the basis of

CAPACITY OF PRODUCTION in respect of NOTIFIED GOODS
[inserted by FA, 2008]

CG empowered to lay down special manner for levy and collection of ED

(1) Notwithstanding anything contained in section 3,
where the CG, having regard to
⇒ the extent of evasion of duty in regard to any goods or
⇒ such other factors as may be relevant,
is of the opinion that
 it is necessary to safeguard the interest of revenue ,
it may specify , by notification in the Official Gazette,
⇒ such goods as NOTIFIED GOODS and
⇒ there SHALL be levied and collected duty of excise on such goods in accordance with
the provisions of this section.

Earlier, 2 goods were Pan Masala (containing Pan Masala

notified tobacco) (not containing tobacco)

Recently, 3 more Unmanufactured Tobacco Chewing Tobacco Jarda Scented Tobacco

goods have been (Branded) [Heading 24 [Heading 24 03 99 10] [Heading 24 03 99 30]
notified. 01]
th th
[N/N 10/2010 – 27 Feb, [N/N 17/2010 – 13 April,
[N/N 10/2010 – 27 th Feb,
2010] 2010]
2010 ]

2 Special Methods can be designed by CG

(2) Where a notification is issued under sub-section (1),
the CG may, by rules , —
(a) provide the manner for determination of the ANNUAL CAPACITY OF
PRODUCTION of the factory, in which such goods are produced, by an officer not below
the rank of AC
and such ANNUAL CAPACITY shall be deemed to be the ANNUAL PRODUCTION
of such goods by such factory ;
OR
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CX/Sec 3-A of CEA, 1944

(b) (i)  specify the FACTOR relevant to the production of such goods and the
QUANTITY that is deemed to be produced by use of a unit of such factor ; AND
(ii) provide for the determination of the ANNUAL CAPACITY OF PRODUCTION of
the factory in which such goods are produced on the basis of such factor by an officer
not below the rank of AC and
and such ANNUAL CAPACITY shall be deemed to be the ANNUAL
PRODUCTION of such goods by such factory ;

Fixation of Annual Capacity

Rules can provided for any of 2 Methods

Method:1 AC/DC will directly
fix Annual Capacity
Annual Production = Annual
Capacity
Method-2: AC/DC will fix Annual Capacity
based on the number of Factors of
Productions employed in Factory
Annual Capacity = [No. of factors of
production * Quantity which one factor
can produce (as notified)

Annual Production = Annual Capacity

Extract from Rules
[PAN MASALA PACKING MACHINES (Capacity Determination And Collection Of Duty)
RULES, 2008]

[Rule 4: FACTOR RELEVANT TO PRODUCTION]

The factor relevant to the production of notified goods shall be the number of PACKING
MACHINES in the factory of the manufacturer.

[Rule 6: Manner of Fixation of ANNUAL CAPACITY]

(1) A manufacturer of notified goods shall, atleast 7 DAYS prior to the commencement of
COMMERCIAL PRODUCTION , file a Declaration [Form-1] to AC/DC (with a copy to
SCE)

(2)  On receipt of the said declaration, AC/DC shall , after making such inquiry as may be
necessary including physical verification ,
 approve the declaration and
 determine and pass order concerning the ANNUAL CAPACITY of production of the
factory within 3 working days.

(3)  The ANNUAL CAPACITY OF PRODUCTION shall be calculated as follows

= The number of OPERATING PACKING * Quantity that is deemed to be
MACHINES in the factory (during the month produced by use of one
beginning which the capacity is being operating packing machine (as
determined) specified in Rule 5)

(4) The Number Of Operating Packing Machines during any month shall be equal to the
Number Of Packing Machines Installed in the factory during that month.

(5) The machines which the manufacturer does not intend to operate shall be
UNINSTALLED and SEALED by SCE and REMOVED FROM THE FACTORY premises
under his physical supervision.
Provided that in case it is not feasible to remove such packing machine out of the
factory premises , it shall be uninstalled and sealed in such a manner that it cannot be
operated.

Effect if factory operational for part of year

Provided that
 Prof Dippak/ IDT
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CX/Sec 3-A of CEA, 1944

where a factory producing notified goods is in  the ANNUAL PRODUCTION thereof

operation during a part of the year only , shall be calculated on proportionate basis
of the annual capacity of production.

Effect if FACTOR OF PRODUCTION altered in-between of year

Provided further that
in a case where the factor relevant to the
production is altered or modified at any time
during the year,
 the Annual Production shall be RE-
DETERMINED on a proportionate basis
having regard to such alteration or
modification.

Extract from Rules [Rule 6]

In case a manufacturer wishes to make ANY SUBSEQUENT CHANGES with respect to any
of the parameters which has been declared by him AND approved by AC/DC , such as
changes relating to addition or removal of packing machines in the factory
he shall file a FRESH DECLARATION to this effect atleast 3 Working days in advance to
AC/DC , who shall
 APPROVE such fresh declaration and RE-DETERMINE THE ANNUAL CAPACITY OF
PRODUCTION following the procedure as specified above.

Computation of ED liability and Collection Procedure

(3) The duty of excise on notified goods shall be
 LEVIED , at Such Rate , as the CG may, by notification, specify,
AND
 COLLECTED in such manner as may be prescribed.

Extract from Rules

[Rule 7 : DUTY PAYABLE TO BE CALCULATED ]
The duty payable for a particular month shall be calculated
 by application of NOTIFIED RATE
 to the NUMBER OF OPERATING PACKING MACHINES in the factory during the month.

[Rule 8: ALTERATION IN NUMBER OF OPERATING PACKING MACHINES ]

In case of
-- Addition or Installation or
-- Removal or Uninstallation
of a packing machine in the factory during
the month
In case of Non-Working Of Any Installed
Packing Machine during the month, for
any reason whatsoever
 the Number Of Operating Packing
Machine For The Month shall be taken as
the maximum number of packing
machines installed on ANY DAY during
the month
 the same shall be deemed to be
operating packing machine for the month

[Rule 9: MANNER OF PAYMENT OF DUTY AND INTEREST]

The MONTHLY DUTY PAYABLE on notified goods shall be paid by the 5 th Day OF SAME
MONTH
and
An INTIMATION [in Form–2] shall be filed with the Jurisdictional SCE before the 10th Day of
the SAME MONTH .
.
Provided that
 if the manufacturer fails to pay the amount of duty by due date , he shall be liable to pay
INTEREST @ 13% p.a. on the outstanding amount, for the period starting with the first day
after due date till the date of actual payment of the outstanding amount:

[Author’s Note: ,
1) ED for month of Aug shall be paid upto 5th Aug (Advance Payment) – this is
irrespective of whether payment is made manually or e-payment.
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CX/Sec 3-A of CEA, 1944

2) Intimation of payment so made for month of Aug shall be given upto 9th Aug .
[Intimation is to be given – Excise Return need not be filed]
3) If payment is made belatedly, then interest @ 13% p.a.. shall also be paid alongwith.

Provided also that

 in case of INCREASE in the number of operating packing machines in the factory
during the month on account of addition or installation of packing machines ,
the differential duty amount, if any, shall be paid by the 5th of FOLLOWING MONTH

Author’s Example: ,
FY 2010-2011
No of Operating Packing machine in Beginning of April, 2010 = 10 Machine
Monthly Capacity of Each machine = 50,000 pouches
ED liability for Month of April paid by 5 th
of April Intimation of payment given to SCE by 9 th
April
Subsequently No of Packing ED already Differential ED ED liability for
Machine deemed paid payable for month of
to be operative [by 5 th Month of May (&
during April April April onwards)
[Applying Rule ]
8 – Max No of
Machines
installed on any
day during April]
Case-A : 1 New 11 machines For 10 Payable -- by 5 th of ED payable in
Machine Mach Next Month respect of 11
purchased on ines [by 5 th May] Machines
15 th April

Case-B : 1 10 machines For 10 Not payable ED payable in

Machine sold Mach respect of 9
on 15 th April ines Machines

[Rule 15 : CENVAT CREDIT NOT ADMISSIBLE]

Notwithstanding anything contained in these rules,
 CENVAT CREDIT of duty paid on any INPUT , CAPITAL GOODS or INPUT SERVICES
used for manufacture of the notified goods shall NOT be TAKEN under the Cenvat Credit
Rules, 2004
and the FULL AMOUNT OF DUTY PAYABLE WOULD BE paid in CASH ONLY.

Provided that ……………………………………………………………………………………………………

 where a factory producing notified goods did not produce the notified goods for a continuous
period of 15 days or more,
the duty calculated on a proportionate basis shall be ABATED i.r.o. such period
if the manufacturer of such goods fulfils such conditions as may be prescribed.

Extract from Rules

In case a factory did not produce the notified goods during any continuous period of 15
days or more ,
 The ED calculated on a proportionate basis shall be abated in respect of such period
 provided --- the manufacturer of such goods files an intimation to this effect with
AC/DC, at least 3 working days, prior to the commencement of said period, who
on receipt of such intimation shall direct for sealing of all the packing
machines available in the factory for the said period in the manner that these
cannot be operated during the said period:
--- during such period , no manufacturing activity, whatsoever, in respect of notified
goods shall be undertaken and no removal of goods shall be effected by the
manufacturer.

[When the manufacturer intends to restart his production of notified goods ,

 he shall inform to AC/DC, of the date from which he would restart production, whereupon
the seal fixed on packing machines would be opened]
 Prof Dippak/ IDT
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CX/Sec 3-A of CEA, 1944
 Prof Dippak/ IDT
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CX/Sec 3-A of CEA, 1944

[Just a reading]
Export of Pan Masala

Method:1 Rule 18 Method-2: Rule 19

[Export under Rebate Claim] [Export under Bond / LuT]

Rule 14-A: Export without payment of duty

Notwithstanding anything contained in these rules or in the CER, 2002 –
(i) No PAN MASALA shall be exported without payment of duty; and
(ii) No MATERIAL shall be removed without payment of duty from a factory/ warehouse for use in
manufacture of PAN MASALA which are exported out of India.

Rule 14: Rebate of Duty

Except in accordance with such terms and conditions as the CG may by notification specify in
this behalf,
 no rebate of excise duty shall be granted under Rule 18 of CER, 2002, in respect of notified
goods exported out of India.

Pan Masala And Gutkha — Rebate On Exports To Any Country Except Nepal And Bhutan
In exercise of the powers conferred by Rule 18 of CER, 2002 read with Rule 14 of
the Pan Masala Packing Machines (Capacity Determination And Collection of Duty)
Rules, 2008, the CG hereby grants rebate of duty to the following extent:
= ‘ MONTHLY, AVERAGE RATE OF REBATE PER POUCH ’
subject to a maximum amount of
REBATE PER POUCH calculated as
per formula given below

Monthly average rate of rebate per puch Rebate per pouch

=D /Q Duty payable per
Where, machine per month [as
D = Total duty paid for a month for the notified]
packing machines used for manufacture Total number of pouches
of Pan Masala or Gutkha which has been deemed to be produced
exported per machine (as per Rule
5 of the said rules)
Q = Total quantity of pouches

This rebate shall be subject to the following conditions, limitations and

procedures, namely :-
(i) the duty has been paid on the excisable goods u/s 3A of the Central
Excise Act, 1944;
(ii) no rebate of duty paid on the materials used in such excisable goods
shall be claimed;
(iii) the excisable goods shall be exported within 6 months from the
date on which they were cleared for export from the factory of manufacture or
warehouse or within such extended period as CCE may allow;
(v) the claim for rebate of duty shall be lodged with AC/DC, together with the
proof of due exportation, within the time limit specified in Sec 11-B of CEA,
1944;
(vi) the procedure as laid down in the notification No. 19/2004 shall be
followed mutatis mutandis;
(vii) the exporter shall also indicate the number of pouches of excisable goods
exported in the invoice, ARE 1 and any other document used for export.
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CX/Sec 3-A of CEA, 1944
 Prof Dippak/ IDT
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CX/Sec 3-A of CEA, 1944

Scheme inapplicable to 100% EoU

(4) The provisions of this section shall not apply to goods produced or manufactured, by a 100% EoU
and brought to any other place in India .

Sec 3-A inapplicable while computing CVD on imported Pan

Masala
Explanation .
For the removal of doubts, it is hereby clarified that
⇒ for the purposes of Sec 3 of the  the duty of excise leviable on the notified goods shall be
Customs Tariff Act, 1975, deemed to be the duty of excise leviable on such goods
under the First Schedule and the Second Schedule to the
CETA, 1985.
.