Supreme Court order spells Rs 10 billion relief for jute industry

The Supreme Court has spared the jute industry of a Rs 10 billion central excise demand raised on jute bags supplied to government agencies between 2011 and 2013.

In a recent judgment, the apex court said the demand was non-factual and unconnected by nature. A two-judge bench of R F Nariman and Navin Sinha ruled that the demand raised by the excise department was far from the facts.

The department had imposed the demand on the industry for jute bags supplied between March 1, 2011, and February 2013. The demand notice was upheld by the Customs, Excise and Service Tax Appellate Tribunal in 2015.

“We welcome the apex court verdict. The jute industry would have been happier had the order come earlier,” said an industry source.

Jute bags were originally exempted from excise duty since 2004. However, the UPA-2 government had re-imposed an ad valorem levy of 10 per cent in March 2011. Based on the excise department notification of March 1, the Kolkata-IV office of the superintendent of central excise ruled on March 7 that jute bags supplied through Food Corporation of India and other state agencies for use in the Public Distribution System were 'branded’ and therefore came under the ambit of chapter 63 of the Excise Act.

Subsequently, many jute mills were slapped with demand notices that ranged between Rs 15 and Rs 300 million. There are around 60 mills in Bengal. Although aware that the government would soon withdraw the ad valorem levy, the officers under Kolkata-IV kept arm-twisting jute millers with threats of notices. From the record, notices were sent out in lots of 10 mills each.

The Union textiles ministry and the jute commissioner’s office vehemently opposed the move and sought urgent withdrawal of the notices, pointing out that the six items printed on top of jute bags were in line with the specifications marked by the government and were not to be treated as branded bags in the context of levies of duties. The commissioner's office noted that by printing items on the bags, the mills were not getting any extra mileage in promoting their products. Printing on jute bags started under government orders since July 2002.