Excise payable on cement bricks

CHATROOM

Cement and concrete products attract excise if they are moveable or marketable.

We are from the Karnataka Concrete Products Manufacturing Association. We would like to know if excise duty is levied on manufacturing of cement bricks. If it is levied then what would be the limit and per centage of excise levied on us?

Articles of cement, of concrete or of artificial stone, whether or not reinforced are covered under classification 68.10 of the central excise tariff. There are sub-classifications for building blocks and bricks at 68.10.11 and further sub-classifications for cement bricks at 68.10.11.10 and other building blocks and bricks at 68.10.11.20. The goods mentioned in the classification above are excisable if they are manufactured, moveable and marketable. The duty rate in all the above cases is 16 per centage. Education cess of 2 per centage on 16 per centage is also leviable under the Finance Act, 2004.

We are starting an export organisation as a merchant exporter. As per the current regulations, we have got the Permanent Account Number and we have decided the name of our company. For opening a current account in the name of our company, the banks insist on obtaining sales tax registration certificate though we tried to convince them that sales tax registration was not necessary for starting exports and that we intended to go for non-taxable goods for export. Kindly clarify the following:

i) Whether sales tax registration is necessary when a person is starting an export organisation and when he intends to deal with non-taxable items for export.

ii) Whether sales tax registration is a pre-requisite to open a current account when a person intends to start exports.

iii) Whether RCMC (Registration Cum Membership Certificate) of the concerned Export Promotion Council is mandatory for an exporter.

In my opinion, it is not necessary to have a sales tax registration if you intend to deal in non-taxable items, especially when you are starting the business. Sales tax registration is not a pre-requisite to open a current account when you intend to start exports. It is not mandatory to have RCMC for making exports. In case as a merchant exporter and you have to issue 'Form H' you need sales tax registration. Secondly, bankers have to follow the 'Know your Customer' guidelines issued by the Reserve Bank and so may insist on some registration with the government. Thirdly, RCMC is essential if you want to get any benefits under the FTP.

Para 4.1.3 of the Foreign Trade Policy (FTP) says that "An Advance Authorisation is issued to allow duty free import of inputs, which are physically incorporated in the export product (making normal allowance for wastage)." Does it mean that in case we obtain advance authorisation, we have to discharge export obligation by exporting only those items that actually contain the inputs imported duty free under the advance authorisation that we obtain? In other words, does it mean that the imported materials cannot be used in any manner other than use in manufacture of goods that are actually exported?

Para 4.1.3 of FTP is an enabling provision that allows issue of licenses for duty free import of inputs that are actually 'required for use' in the manufacture of the export product. In fact, the same paragraph allows duty free import of even fuel, energy, catalysts and consumables under that cannot be incorporated in the export product.

Para 4.12 of the FTP Vol 1 allows exports in discharge of export obligation even in anticipation of issue of advance authorisation, any time after the application for advance authorisation is filed and file number obtained from the regional authorities.

Note (a) to para 4.18 of the FTP Vol 1 says that no bank guarantee or legal undertaking will be required where the specific obligation has been fulfiled before making any import. It says further that in case of partial fulfilment of export obligation before making any imports, the bank guarantee or legal undertaking may be reduced proportionately.

Thus, it is clearly envisaged that you can make exports of goods manufactured by using inputs that are procured outside the duty exemption scheme and fulfil the export obligation and then use the advance authorisation to import the inputs as replenishment.

The restriction in such cases is that only those inputs that are actually required for use in the manufacture of export product can be imported under Advance Authorisation and secondly, the replenished inputs that are imported later on cannot be sold or transferred. They can be used for any purpose within the factory of the manufacturer exporter or supporting manufacturer.