Chapter - 12

PART IV

DUTY ON READYMADE GARMENTS
1. Introduction

1.1 Central Excise levy has been introduced on Readymade Garments falling under Chapter 62 of the First Schedule of the Central Excise Tariff Act, 1985 in the Budget, 2001. However, certain items such as clothing accessories have been exempt from the duty. Further, the benefit of the small scale sector duty exemption is available on such goods.

1.2 Notifications No.16/2001-Central Excise (NT), 18/2001-Central Excise (NT) to No.21/2001-Central Excise (NT),and No. 21/2001-Central Excise to No.23/2001-Central Excise, all dated 30.4.2001 are relevant.

1.3 In consideration of the fact that by and large the Readymade Garments, particularly those bearing a brand name, are manufactured on job-work a special procedure has been evolved for collection of duty on the said goods.

2. Rate of duty

2.1 The rate of duty on Readymade garments is at the rate of 16% ad valorem. However, for purpose of computation a tariff value has been fixed for the Garments vide Notification No. 20/2001- Central Excise (NT), dated 30.4.2001. The tariff value shall be 60% of the Maximum Retail Sale Price of the Garments.

3. Salient features of special scheme

3.1 In terms of sub-rule (3) of rule 4 of the Central Excise (No.2) Rules, 2001 (hereinafter referred to as the said Rules), in case of Readymade Garments manufactured on job-work, the excise duty shall be paid by the person who gets the goods manufactured on his account from the job-worker.

3.2 The merchant manufacturer is required to get his private store room or warehouse where the inputs required for the Readymade garments are stored before distribution to the job-worker and the finished goods are received registered with the Central Excise department. The duty will be paid when the goods are removed from the store room or warehouse.

3.3 The merchant manufacturer has the option of authorizing the job-worker to pay the duty, in which case the latter would comply with all the provisions of the Central Excise law.

3.4 Benefit of CENVAT credit facility is available on the manufacture of Readymade Garments.

3.5 Where the manufacturer is exporting a substantial part of the production and his domestic clearances do not exceed Rs. 1 Crores he is eligible for a simplified export procedure as contained in this Manual in Section 7.

3.6 Detailed instructions regarding the valuation of processed fabric and other procedure have been issued from F.No.B.4/5/2001-TRU dated 30.4.2001, which will apply, mutatis mutandis, under the said Rules.

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