SMALL SCALE EXEMPTION SCHEME

1.The contribution of Small Scale Sector in the industrial growth of the Indian economy and to the Gross Domestic Product is significant besides the potential for employment generation. The Small Scale Sector has for itself a special dispensation in the Central Excise law in order to make it competitive in the domestic and global market. Central Excise duty concessions have been extended to the units in the small-scale sector based on their turnover so as to facilitate them to graduate by availing these concessions in a graded manner.

ELIGIBLITY

2.Manufactuerers of specified commodities having clearances not exceeding Rs. 3 crores in the preceding Financial Year are eligible for this exemption.

REGISTRATION OF SMALL SCALE COMPANIES

3. Every manufacturer of excisable goods is required (under Rule 174 of Central Excise Rule 1944) to get registered with the Central Excise Department before starting production. The SSI must file for registration when their turn over crosses Rs. 1 Crore only. The application for the registration should be submitted to the jurisdictional Range Superintendent of Central Excise. The Registration Certificate will be automatically granted. If it is not granted within 30 days of the receipt of the application it is deemed to have been granted. There is no fee for registration and a factory or a unit is to be registered once only. There is no need for renewal of the registration. The registration is applicable only for the premises where the manufacture is taking place. A separate registration is required for each premise. In case a new product is to be manufactured, the registration certification should be got endorsed for the additional items.

Exemption from registration.

4. The requirement of registration has been exempted for the following persons.(Notification No. 22/98 CE(NT) dated 4.6.98 as amended)

Manufacturers who are only manufacturing goods, which are exempted from payment of duty of Central Excise.

For small scale industries who are manufacturing goods up to an aggregate value of less than Rs. 90 lacs. After crossing Rs. 90 lakhs turn over the SSI must file declaration.

In case an SSI is manufacturing goods of more than 30 lacs he must file a declaration only once. (the form is enclosed).

WHO IS COVERED BY THE SSI SCHEME

5. At present, in terms of notification nos. 8/2000-CE and 9/2000-CE, both dated 1st March, 2000, and effective from 1st April, 2000, a general small scale excise duty exemption scheme has been made operational providing slab-rated concessions from excise duty in respect of clearances of specified excisable goods. Under these notifications, all goods specified in the First Schedule to the Central Excise Tariff Act, 1985 are eligible to avail the exemptions/concessions except for those goods which are chargeable to NIL rate of duty or which are exempt from whole of the duty and certain products as given in the Annexure to these notifications. With effect from 1st April, 2000, the hitherto commodity specific exemption schemes for SSI units manufacturing cosmetics, refrigerating and air conditioning equipment, tread rubber and for articles of plastics have also been merged with the general small scale exemptions, as provided under the aforesaid notifications.

6.I. The salient features of these exemption schemes, as contained in the aforesaid notifications are as under:-

Where the SSI unit does not avail CENVAT

Notification No.8/2000-CE, dated 1st March, 2000 as amended. For first clearances effective from 1st April of a financial year up to an aggregate value of Rs. 1 Crore, duty is exempted in respect of those SSI units which do not intend to avail CENVAT up to a value of clearances of rupees one crore.

6. II. Where the SSI unit avails CENVAT

– Notification No.9/2000-CE, dated 1st March, 2000 as amended. The graded scheme of exemption in respect of those SSI units which intend to avail CENVAT is as under:-

Sr. No. Value of Clearances Rate of Duty

1
First clearances effective from 1st April of a financial year
Up to an aggregate value of Rs.1 crore 60% of the normal rate of duty

2 Subsequent Clearances at the normal rate of duty

7. A. The following clearances are excluded from computation of value of clearances

Clearances of the specified goods which are used as inputs for further manufacture of specified goods within the factory irrespective of the value of clearances.

Clearances of excisable goods affixed with the brand name or trade name of another person who is not eligible for availing the exemption under the aforesaid notification. However, the clearances of goods affixed with the brand name or trade name of another person - other than those which are in the nature of components or parts of machinery or equipment for use as original equipment in the manufacture of the said machinery, goods bearing the brand name of KVIC, NSIC or a State Small Industries Corporation or State KVIB or those goods manufactured in a factory located in a rural area are not eligible for the exemption/concession from excise duty irrespective of the value of clearances.

Clearances which are fully exempt from excise duty under any other notification (other than those giving exemption based on quantity or value of clearances).

B. The conditions for availing the aforesaid exemption/concession from excise duty are as under:-

The aggregate value of clearances of all excisable goods for home consumption by a manufacturer from one or more factories or from a factory by one or more manufacturers does not exceed rupees three hundred lacs in the preceding financial year.

The manufacturer does not avail of the credit of duty under the CENVAT scheme upto an aggregate value of clearances of rupees one hundred lacs.

C. The thresholds of excise duty concessions under the aforesaid small-scale schemes act as a ladder for enabling the small units to grow and graduate into bigger units.

D. Units availing SSI exemption are permitted to remove specified goods to a place outside the factory for getting any job work done on any specified goods without payment of duty (Notification number 83/94 and 84/94 Central Excise dated 11.4.94 as amended)

8. HOW TO AVAIL CENVAT/CAPITAL GOODS CREDIT

The Cenvat scheme is a system whereby a manufacturer can avail of credit of the duties paid by a manufacturer of his raw materials, inputs, parts and components or his capital goods to pay his own Central Excise Duty. This is intended to ensure that no manufacturer is forced to pay duty on the duty portion of his product. Briefly, in order to avail the CENVAT credit, the goods manufactured or produced have to pay duty. All inputs if used in the manufacture of the final product are eligible for Cenvat {except high-speed diesel oil and motor spirit (petrol)}. All capital goods actually used in the manufacture of the final products are also eligible. All finished goods are eligible for the benefit of Cenvat except matches. However, availment of Cenvat on capital goods will be spread over two years, half in the first year. A manufacturer availing cenvat on capital goods must not avail depreciation under the income tax act on the duty part of the cost of the capital goods.

9. An SSI who is to take the benefit of Cenvat scheme must give a letter of C.Ex. and maintain the appropriate registers. Before availing cenvat, the SSI must physically receive the goods under a duty paying document or a proper invoice issued by a registered dealer. The SSI must maintain an registers giving details of receipt and disposed of inputs & capital goods and payment of duty by credit. Registers. Once he has availed cenvat on a duty paying document the documents must be defaced so that it can not be used again. These duty paying document already defaced and the record along with his own delivery documents must be shown to the Central Excise officers on demand. There is a provision for removing raw materials, inputs or capital goods on which cenvat credit has been taken out of the factory for further processing, repairs or job work. Details of the cenvat scheme may be obtained from the local Central Excise officer. Please note that when duty is being paid vide cenvat credit, the credit accruing on goods received after the last day of the month in which duty is due to be paid, can not be utilized (CBEC’s circular 542/38/2000-Cx. Dated 25.8.2000)

10. QUARTERLY REPORT OF PRODUCTION AND CLEARANCE (RT-12)

This report is to be filed once in a quarter, before the 10th day of the close of each quarter. The Jurisdictional Commissioner of Central Excise can permit filing up to 20 days from the close of each quarter. (Rule 173 G) A statement of invoice wise duty payment is also required to be filed, as per the Proforma placed below along with the quarterly return to facilitate cenvat verification.

HOW TO PAY DUTY

11.Duty can be paid in a lump sum at the end of the month and before the 15th day of the next month. Duty is to be paid to the notified bank in the area under a TR-6 challan. (See format below) This challan should definitely contain number in seriatum for the Financial Year starting with Serial number 1 It should also have the head of accounts (in numbers), assessee’s ECC number, branch bank code, focal point code and any assessees number allotted by the Commissionerate. The SSI will be given the triplicate copy for his record and the quadruplicate copy which is to be given to the Range Suptd., with the RT-12 that the quarterly return. Duty can also be paid by debit entry in RG-23A or RG23 C for those SSIs who are availing of CENVAT credit.

12.Only after obtaining the receipted TR-6 challan from the bank should a credit entry be made in the PLA. In case of strike of the banks or closure due to unforeseen circumstances the Commissioner will issue a trade notice permitting the SSI to send the payment by cheque by registered post AD or special messenger with the TR-6 challans in quadruplicate duly filled in. These documents are to be sent to the Chief Accounts Officers of the Commissionerate with copy to the Range concerned. There must a clear declaration that the SSI has sufficient balance in their bank account.

13. In case payment is not made by the specified date interest is levible. The interest at present is 24% per annum on the outstanding amount, for the period starting with the first day after the due date until the date of actual payment of the outstanding amount. The accounting code for entry in the TR-6 challan is as follows:

Basic excise duties	00380003
Special excise duties	00380172
Additional excise duties in lieu of sales tax	00380335
Additional excise duties on textiles	00380368
Cess on tea	00380393
Cess on cotton	00380399
Cess on Bidi	00380415
Cess on Sugar	00380426
Cess on Paper	00380436
Cess on Copra	00380395
Cess on automobiles	00380442
Other receipts	00380453

COMPUTERISATION OF RECORDS

14. The Central Excise department has no objection to accepting computerised documents issued by the manufacturers instead of the prescribed forms or records. The new rule 226A permits the above. Records can be kept on any electronic media and the electronic records must be kept even if a hard copy is kept. The print out (hard copy) of records and documents must be taken out at the end of each month and kept in bound folders separately for each type of record, return, document etc. Persons maintaining their accounts on computer must ensure that proper back up record is maintained and preserved for a period of 5 years counted from the first day of the Financial Year following the financial year to which a record etc. pertain. In case the department requires the records they must produce the same before Central Excise, Audit parties of the department or C &AG officers.

FORMAT OF INVOICE UNDER CENTRAL EXCISE

15. In case the SSI is making payment of duty only at the end of the month, a separate indication of "duty payable" must be made on the invoice or other clearance document to enable the buyer to avail cenvat. In most cases of sale to non-related persons, no declaration of value needs to be made separately. However, a declaration of marketing pattern is required under Rule 173 C of Central Excise Rules, 1944. Any changes in the marketing pattern must be informed to the department. Manufacturers are required to declare the value under Section 4 of the Central Excise Act in their documents by which the goods are sold or taken out of his factory. The information that is essential to be included in the invoice/clearance documents is as in annexure

CLASSIFICATION DECLARATION

16. All assessees must give a classification declaration to the Range Supt. before commencing production. The format etc., will be obtained from the local central excise office.

VISITS BY OFFICERS

17. No SSI factory should be visited by Central Excise Inspectors except with the specific permission of the Assistant Commissioner and for a specific purpose. The officers who visit are required, on their visit to enter the relevant particulars in the visitor’s book being maintained by the SSI.

WHO TO APPROACH IN CASE OF PROBLEMS FACED

18.In case of any problems faced, the SSI is advised to approach either the jurisdictional Range Supdt., or the Asstt. Commissioner of the Division or the Commissioner of Central Excise.

Annexure as above

FORM
To,

The Assistant Commissioner,
Central Excise
----------------

I/We…………………………….declare that to the best of my/ our knowledge and belief the information furnished in the Schedule below is true and complete.

I/We undertake to apply for a Central Excise registration certificate in the proper form as soon as the value of the goods, mentioned in the said Schedule, cleared for home consumption in a financial year, reaches the full exemption limit.

I/We undertake to apply for a Central Registration in the proper form as soon as the goods mentioned in the Schedule become chargeable to duty.

I/We undertake to maintain such records and follow such procedure as may be prescribed by the Commissioner in relation to the exempted goods.

I/We also undertake to intimate any change in the information furnished in the said Schedule.

THE SCHEDULE

(Signature of Applicant )

Note. – Portion of the Form/Schedule that is not relevant to a particular manufacturer
May be deleted.

See paragraph…………

STATEMENT SHOWING MONTHWISE DUTY PAYMENT FOR THE QUARTER ENDING……….

Serial No.	Invoice No. and date	Name of the consignee	ECC No. of consignee
(1)	(2)	(3)	(4)

Assessable value	Duty paid	Detail of Duty Debited i.e. entry no. & date in PLA. RG 23A Pt. II or RG 23C Pt. II
(5)	(6)	(7)

viii) Details of deductions/additions made to arrive at Value under section 4 of the Act

"Certified that that particulars given above are true and correct and the amount indicated represents the price actually charged and that there is no flow of additional consideration directly or indirectly from the buyer

OR

Certified that the particulars given above are true and correct and the amount indicated is provisional as additional consideration will be received from the buyer on account of……..

NOTE:

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