CENTRAL EXCISE DUTY ON JEWELLERY SECTOR

1. CENTRAL EXCISE DUTY ON JEWELLERY SECTOR Mr. G. Shivadass Principal Partner Lakshmikumaran & Sridharan

2. Agenda

3. manufacture

4. Concept of Manufacture Definition: Section 2(f) ‘manufacture’ includes any process,- • incidental or ancillary to the completion of a manufactured product; • which is specified in relation to any goods in the Section or Chapter notes of the First Schedule to the Central Excise Tariff Act, 1985 as amounting to manufacture; or • … Manufacturer 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.

5. Manufacture under central excise

6. Deemed Manufacture Deemed Manufacture Of Goods Falling Under Chapter 71: Note 13: For the purposes of headings 7113 and 7114, the processes of affixing or embossing trade name or brand name* on articles of jewellery or on articles of goldsmiths' or silversmiths' wares of precious metal or of metal clad with precious metal, shall amount to "manufacture". Note 14: In relation to products of this Chapter, the process of refining of dore bar shall amount to "manufacture". * "brand name" or "trade name" means a brand name or trade name, whether registered or not, that is to say, a name or a mark, such as 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 – As per Note 12 to Chapter 71.

7. Relevant Definitions “Principal Manufacturer” means every person (not being an export-oriented unit or a unit located in a Special Economic Zone or any person who gives his pre-owned gold or any precious metal, ornaments or jewellery for the purpose of being re-made or re-conditioned or gives precious stones for the purpose of being mounted) who gets articles, produced or manufactured on his behalf, on job-work basis and causes the sale of the articles for the first time Principal Manufacturer

8. BUDGET 2016 – payment of duty and its IMPACT ON JEWELLERY SECTOR

9. EXCISE DUTY ON JEWELLERY Central Excise Duty 12.5% (with Input Tax Credit) 1% (without Input Tax Credit)

10. EXCISE DUTY ON JEWELLERY • Condition for availing 1% Notification: • Credit of Service Tax paid on Input service can be availed and utilized for payment of duty @ 1%. • CONDITION • Condition No. 16 to Notification No. 12/2012–CE (as amended): • Concessional Rate of 1% on Articles of Jewellery falling under CH 7113 can be availed if: • The said excisable goods are manufactured from inputs or capital goods on which appropriate Excise Duty/ Customs Duty has been paid; and • No Credit of such Excise Duty or Additional Duty of Customs on inputs/ capital goods has been taken.

11. SSI EXEMPTION

12. SSI Units - Threshold limits

13. SSI Exemption

14. SSI Units - Eligibility & Exemption S S I

15. VALUATION

16. Valuation – scheme

17. PAYMENT OF DUTY

18. Payment of duty • Excise duty is to be paid on monthly basis; not on transaction basis. • Duty is payable on self assessment basis • E-payment, i.e. payment of duty by electronic mode and e-filing of returns have been made compulsory. • Due date for payment:

19. Duty is payable when the articles of jewellery are sold for the first time by manufacturer or principal manufacturer Payment of Duty SSI units to pay CE duty on quarterly basis Duty deemed to have been discharged when it is credited to the account of Central Government The date of realization of cheque relevant for payment of duty

20. Duty for the months of March, April, May and June of 2016 shall be paid by 31st of July, 2016 Payment of Duty (contd.) Duty can be paid by mode other than internet banking under written intimation to the Assistant / Deputy Commissioner Default in payment of duty by due date shall attract interest @ 15% p.a.

21. REGISTRATION

22. REGISTRATION BY WHOM • Manufacturer of articles of jewellery • Principal Manufacturer who gets articles manufactured on his behalf, on job work basis • Registration: Manufacturing unit from where goods are removed • Centralized registration: Factory / premises / office where centralized billing / accounting done + details of premises from where goods are removed WHICH PREMISES BY WHEN • 31st July, 2016

23. COMPLIANCE GUIDELINES Principal Manufacturers are obliged to: Job–workers:

24. REGISTRATION – OTHER PROVISIONS

25. REGISTRATION – OTHER PROVISIONS (Contd.) • No physical verification of premises post registration • No requirement of submitting plan of the factory premises in order to obtain registration. • Option to take separate registration for factories or premises where accounts/records showing receipt of raw materials and finished goods manufactured or received back from job workers are kept • Separate registration for multiple manufacturers operating from same premises, if registered individually under VAT Law on/before 29-02-2016

26. job work

27. Job work - Relevant Definitions “Principal Manufacturer” means every person (not being an export-oriented unit or a unit located in a Special Economic Zone or any person who gives his pre-owned gold or any precious metal, ornaments or jewellery for the purpose of being re-made or re-conditioned or gives precious stones for the purpose of being mounted) who gets articles, produced or manufactured on his behalf, on job-work basis and causes the sale of the articles for the first time Principal Manufacturer

28. JOB WORK – PROCEDURES • Principal manufacturers to obtain registration, maintain accounts, pay duty and comply with all the relevant provisions • Principal manufacturer may supply to a job worker any inputs or articles, to complete manufacturing process, under the cover of a challan, voucher or any other document, duly signed and containing following details: • Name and registration number of Principal manufacturer; • Description and quantity of inputs or articles; • Name of person carrying the input or articles along with his signature and proof identity; and • Date of supply of inputs or articles.

29. JOB WORK – flow Goods sent back to Principal after processing & principal pays duty and clears domestically / exports from own premises Final responsibility for accounting of goods and payment of tax on principal in all cases

30. JOB WORK – PROCEDURES • Articles are lost, destroyed, found short • If any articles are lost, destroyed, found short at any time before the sale for the first time of the articles, the principal manufacturer shall be liable to pay duty thereon as if such articles were sold for home consumption for the first time from the registered premises or centrally registered premises or branches of such centrally registered premises,

31. REMOVAL FOR TESTING, HALLMARKING ETC. • Removal of : Inputs or semi-finished articles or finished articles • Purpose of removal: For further processing, testing, repair, re-conditioning, hallmarking, display in exhibitions or for any other purpose including as samples • Removal to: Some other premises, without payment of duty • Condition: Such removal does not involve sale • Manner of removal: Under a challan, issue voucher or any other document prepared by him for this purpose • Contents of challan: • name and registration number of the manufacturer or principal manufacturer; • description and quantity of articles; • name of the person carrying the articles along with his signature and proof of identity; and • date of removal.

32. RECEIPT OF DUTY PAID ARTICLES • Nature of articles: Articles on which duty had been paid at the time of their sale for the first time by the assessee • Place of original removal: Registered premises or the centrally registered premises or branches of such centrally registered premises, are brought back as such • Manner of receipt: Record particulars of receipt in records as if they are traded articles • Manner of accounting: Account in the trading stock account • Condition: No refund of excise duty should be claimed

33. exemptions

34. 1% NOTIFICATION • 1% duty applicable to: • articles of jewellery; • Parts of articles of jewellery; • Condition: If the said excisable goods are manufactured from inputs or capital goods on which appropriate duty of excise leviable under the First Schedule to the Excise Tariff Act or additional duty of customs under section 3 of the Customs Tariff Act, 1975 has been paid and no credit of such excise duty or additional duty of customs on inputs or capital goods has been taken by the manufacturer of such goods (and not the buyer of such goods) under rule 3 or rule 13 of the CENVAT Credit Rules, 2004. • Explanation.- For the purposes of this condition, appropriate duty or appropriate additional duty includes nil duty or concessional duty, whether or not read with any relevant exemption notification for the time being in force

35. 1% NOTIFICATION (CONTD.) • Meaning of article of jewellery for 1% Notification: • An article of jewellery or part of article of jewellery or both, produced or manufactured from an alloy (including a sintered mixture and an inter-metallic compound) containing precious metal may be treated as an article of jewellery or part of article of jewellery or both of a precious metal, if any one precious metal constitutes as much as 2% by weight of the article of jewellery or part of article of jewellery or both (excluding the weight of the precious or semi-precious stones, mounted or set), in accordance to the following: • (i) an article of jewellery or part of article of jewellery or both, containing 2% or more, by weight, of platinum is to be treated as an article of jewellery or part of article of jewellery or both, of platinum • (ii) an article of jewellery or part of article of jewellery or both, containing 2% or more, by weight, of gold but not platinum, or less than 2% by weight, of platinum, is to be treated as an article of jewellery or part of article of jewellery or both, of gold • (iii) other articles of jewellery or parts of articles of jewellery or both, containing 2% or more, by weight, of silver are to be treated as articles of jewellery or parts of articles of jewellery or both, of silver.

36. NEW EXEMPTION • Partial exemption to jewellery manufactured from jewellery provided by retail customer • Exemption applicable to articles of jewellery manufactured: • from jewellery provided by a retail customer; or • by mounting of precious stones provided by a retail customer,

37. NEW EXEMPTION (CONTD.) • Duty payable on value, which is sum of :

38. NEW EXEMPTION (CONTD.) • Conditions for availing exemption : maintain a proper record containing the following details,

39. EXEMPTION WITHDRAWN : HANDICRAFTS • Notification No. 17/2011-CE • Exemption restricted to Handicrafts, other than the handicrafts falling under heading 7113

40. ARTICLES OF JEWELLERY (COLLECTION OF DUTY) RULES, 2016

41. Rules for collection of duty

42. Rules for collection of duty Date when the articles are sold for the first time Relevant Date Duty is payable on self assessment Assessment of Duty For goods sold during a month, duty is payable by 5th or 6th of the following month Manner of Payment For the month of March, by 31st March For the period March to June, 2016, by 31st July, 2016

43. Maintenance of accounts • Every assessee to maintain separate records for: • Records to be maintained on daily basis • Records to show particulars of description of manufactured articles • “traded articles” means articles, on which appropriate duty (including nil duty) has already been paid at the time of their sale for the first time.

44. Manufacturing records The records are to be preserved for 5 years after F.Y to which such records pertain

45. Trading records The records are to be preserved for 5 years after F.Y to which such records pertain

46. Records - General

47. INVOICE • First Sale Invoice to show value of manufactured and traded articles separately for computation of duty • Invoice to be prepared in Duplicate (Original for Buyer / Duplicate for Assessee) • First sale invoice: Excisable articles sold for the first time from : • Registered premises or; • Centrally registered premises or; • Branches of such centrally registered premises • to be cleared under an Invoice

48. Contents of INVOICE Description & Classification of articles Date of removal by sale Contents of First Sale Invoice

49. Optional scheme

50. Optional scheme