FEBRUARY 24, 2016

By P M Pandya, Indirect Tax Consultant Central Excise, Customs & Service Tax Ahmedabad

THERE  are many Units who are engaged in the manufacture of Chewing Tobacco and Jarda scented tobacco, in pouches from bulk tobacco. They discharge their duty liability under Section 3A of the Central Excise Act read with the Chewing Tobacco and Unmanufactured Tobacco Packing Machines (Capacity Determination and Collection of Duty) Rules, 2010.

2. As per Notification No. 5/2015-Central Excise dated 1st March, 2015, the rates of duty per packing machine per month (Rupees in lakh) for Chewing Tobacco (other than filter khaini) for packing of pouches up to 300 pouches per minute (without lime tube) (with lime tube) and 301 pouches per minute and above has been laid down (with lime tube) (without lime tube).

3. If the manufacturer of Chewing tobacco pouch packing, having speed of pouch packing machine is up to 300 pouches and making pouch packing without lime tube of MRP up to Rs.1-00, in that case he will be required to pay Central Excise duty amounting to Rs. 24.15 Lakhs, per machine for whole month, as per the Notification No. 5/2015-Central Excise dated 1st March, 2015.

4. Whereas if the manufacturer of Jarda Scented Tobacco pouch packing, having speed of pouch packing machine is up to 300 pouches and making pouch packing of MRP up to Rs. 1-00, in that case he will be required to pay Central Excise duty amounting to Rs. 27.05 lakhs, per machine for whole month, as prescribed under Notification No.25/2015-Central Excise dated 30th April, 2015.

5. Similarly, for pouch packing of Chewing tobacco of MRP up to Rs.1-00 without lime tube and having speed of pouch packing machine is 301 pouches per minute and above, in that case he will be required to pay Central Excise duty of Rs.22.94 Lakh per machine per month, as provided under Notification No. 5/2015-Central Excise dated 1st March, 2015.

6. Whereas for pouch packing of Jarda Scented Tobacco of MRP up to Rs. 1-00 and having speed of pouch packing machine is 301 pouches per minute and above, in that case he will be required to pay Central Excise duty of Rs.82.11 Lakh per machine month, as provided under Notification No. 25/2015-Central Excise dated 30th April, 2015.

7. Thus from the below mentioned table it is evident that for the same MRP of pouch, i.e. up to Rs. 1-00 (without lime tube) (having speed of machine up to 300 pouches per minute) (having speed of machine 301 pouches per minute and above), the monthly rate per pouch packing machine for chewing tobacco is less and for packing of pouches of Jarda Scented tobacco are very high.

FOR CHEWING TOBACCO-POUCH PACKING

FOR JARDA SCENTED TOBACCO-POUCH PACKING

8. From the above mentioned facts, it is evident that while manufacturing pouches of chewing tobacco and Jarda scented tobacco of same MRP and machine having same speed, in case of pouch packing of chewing tobacco monthly rate per pouch packing is less whereas in case of pouch packing of Jarda scented tobacco monthly rate per pouch packing is very high. The rates for pouch packing in both the products i.e. chewing tobacco and Jarda scented tobacco are required to be streamline and needs to be made same and equal rate for pouch packing per machine per month.

9. It is needless to bring to notice that the principal input for pouch packing of chewing tobacco and Jarda scented tobacco is bulk chewing tobacco and bulk Jarda scented tobacco and same are cleared under Section 4 of the Central Excise Act and duty rates of both these bulk clearances i.e. bulk chewing tobacco and bulk Jarda scented tobacco are same and equal. There is no difference in rate of duty on clearances of bulk chewing tobacco or Jarda scented tobacco. Further Chewing tobacco is listed at Central Excise Chapter sub-heading "24039910" and duty rate is 60% (MRP base clearance) whereas Jarda scented tobacco is listed at Central Excise tariff sub-heading "24039930" and duty rate is 60%. Thus there is no difference in duty rates in central excise tariff also.

10. Prior to 01-03-2015, the duty rates were same and equal, for packing of pouches, in case of both the products i.e. chewing tobacco and Jarda scented tobacco. The difference in rates in both the products for packing of pouches have been brought into effect only after 30-04-2015.

11. As explained above, it is requested to bring the above issue to the notice of Hon'ble Finance Minister, so as to remove anomaly in difference of rate of pouch packing per machine per month and same may be considered in the Budget of year 2016-17.