CHAPTER 12

Special Procedure for Specified Goods

PART IV

DUTY ON READYMADE GARMENTS
1. Introduction

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

1.2 Notifications No.16/2001-CE(NT), 18/2001-CE(NT), 19/2001-CE(NT), 20/2001-CE(NT), No.21/2001-CE(NT), and No.21/2001-CE, 22/2001-CE, & No.23/2001-CE, 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 specialprocedure 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 Garmentsvide Notification No.20/2001-CE(NT), dated 30.4.2001. The tariff valueshall be 60% of the Maximum Retail Sale Price of the Garments.

2. Salient features of special scheme

2.1 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 Garmentsmanufactured on job-work, the excise duty shall be paid by the person who gets thegoods manufactured on his account from the job-worker.

2.2 The merchant manufacturer is required to get his private store room orwarehouse where the inputs required for the Readymade garments are storedbefore distribution to the job-worker and the finished goods are received registeredwith the Central Excise department. The duty will be paid when the goods areremoved from the store room or warehouse.

2.3 The merchant manufacturer has the option of authorizing the job-worker topay the duty, in which case the latter would comply with all the provisions of theCentral Excise law.

2.4 Benefit of CENVAT credit facility is available on the manufacture ofReadymade Garments.

2.5 Where the manufacturer is exporting a substantial part of the production andhis domestic clearances do not exceed Rs. 1 Crores he is eligible for a simplifiedexport procedure as contained in this Manual in Section 7.

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

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