Lakshmi Kumaran & Sridharan AttorneysAn ISO 9001 / 27001 certified law firm

Budget 2012 - Excise duty enhanced across the board

16th March, 2012

Budget 2012 has enhanced the standard rate of Central Excise duty commonly known as ‘Cenvat’ to 12% from the present rate of 10% for non-petroleum goods. The merit rate of 5% duty has also been enhanced to 6%.  The rate of duty on goods which were brought under the central excise levy last year, with the imposition of 1% duty, has also been enhanced to 2% except for some exceptions.

The change in the rate of duty this year has been incorporated in the first Schedule of the Central Excise Tariff Act, 1985 itself. Clause 141 read with the Seventh Schedule to the Finance Bill, 2012 has been made effective from 17-3-2012 to bring about such changes. Notification No. 18/2012-C.E. has also been issued to bring the changes into effect till the enactment of the Finance Bill.

In another major development, cement and cigarettes have been brought under the MRP based valuation. Central Excise duty has been imposed on unbranded precious metal jewellery. SSI exemption is also being extended to jewellers. In case of readymade garments, while the rate of duty has been increased to 12% for branded goods, the rate of abatement to calculate the tariff value has also been increased.  Further, exemption to clearance of returned goods would now be available even when goods are returned to any premise and not necessarily to the same factory.

Rule 14 of the Cenvat Credit Rules, 2004 has been amended to provide for non-payment of interest in case Cenvat credit is wrongly taken but is not utilized. Penalty provisions under Rule 15 for the same mistake/error, however, have not been changed.
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