This write up is to update you on the recent developments on applicability of Excise on Gems and Jewellery Industry. On the basis of Circular No. 1040 /28 /2016-CX to No. 1045 /33 /2016-CX ; and Notification No.'s 26/2016-Central Excise to 29/2016-Central Excise; No.’s 33/2016-Central Excise (N.T.) to 40 /2016-Central Excise (N.T.) dated 26 July,2016 issued by Central Board of Excise and Customs, it can be concluded that :
1) Excise duty liability will be payable at the time when an article of jewellery falling under heading 7113 is sold for the first time (first sale) from the registered premises or from the centrally registered premises, or branches of such centrally registered premises, by the manufacturer or principal manufacturer at such first sale value.
To illustrate:
Suppose, on 1st April assesse sold 100 different articles in its different showrooms at different gold rates. Now the excise duty will have to be discharged on the cumulative value of all the sales taken together. It has nothing to do with the variations that can arise on account of different rates of gold in its different showrooms across India.
2) In case of articles of jewellery, which are manufactured from the precious metal provided by the retail customer, the tariff value will be equal to the sum of the value of additional material used by the assesse for making such article of jewellery, labour charges charged by the assesse and the value of precious metal provided by the retail customer.
3) The law exempts the articles of jewellery which are manufactured (i) from jewellery provided by a retail customer; or (ii) by mounting of precious stones provided by a retail customer, from so much of the excise duty leviable thereon, as is in excess of the duty of excise payable on a value which is sum of the cost of additional materials used by the assesse jeweller for making such article of jewellery and labour charges charged by the assesse jeweller from the retail customer provided following records are maintained:
- Name and address of retail customer.
- Weight and purity of material provided by customer.
- Receipt number and date.
- Value of additional material used in manufacturing and labour charges.
4) No excise liability will arise on stock that was lying in different showrooms or sent on approval basis as on 29th February.
5) The excise will be levied on stocks lying with the Job workers or in the place of manufacture (including finished articles as well as work in progress) as on 29th February.
6) The government has made relaxation in context of visits, issue of summons, search, seizure, arrest and prosecution of the principal manufacturer of articles of jewellery.
7) No excise duty will be payable on the sale of traded articles of jewellery i.e. where assessee is buying the manufactured jewellery from some other party and are just trading in such jewellery.
8) Records maintained for state VAT will suffice for central excise purposes also.
9) Repairs and alterations which do not change the identity, character and use of the goods and do not result in a new item, is not "manufacturing" and will not attract excise duty.
10) No excise audit will be carried out for jewellery manufacturer in first two years if their duty liability during the financial year is less than Rs.1 crore. Jewellers who are liable to pay duty more than Rs.1 crore but less than Rs.2 crore may be audited once in every two years and jewellers who are liable to pay duty more than Rs.3 crore may be audited every year. Such audit will be a desk audit i.e. audit done in the office of jurisdictional central excise audit commissionerate. Moreover, such audit will under no circumstances involve any physical verification of stocks in the premises.
11) The goods once sold will be duty paid goods and if they are returned subsequently, then the duty paid on such goods will not be refunded but on their subsequent sale, no excise duty will be charged if required documentation is maintained in this regard.
12) Every assesse shall maintain separate records for receipt and sale of manufactured and traded articles, indicating the particulars regarding description of the manufactured articles, on a daily basis.
13) Principal Jeweller which gets articles manufactured on its behalf, on job work basis shall obtain registration, maintain accounts, pay duty leviable on such articles and comply with all the relevant provisions of these rules, as if it is an assesse. The job worker shall not be required to get himself registered or shall not be required to maintain any record evidencing the processes undertaken for the sole purposes of undertaking job work.
14) Jewellers exporting 100% of jewellery are not required to take Excise registration provided theyfurnish a bank guarantee.
15) Commissioner can visit and search premises of jewellery manufacturer only if he has reason to believe that there is evasion of excise duty. However, search cannot be undertaken for procedure or compliance related matters.
16) After complying with certain requirements in regard to documentation, assessee jeweller can remove any inputs or semi-finished articles or finished articles for further processing, testing, repair, reconditioning, hallmarking, display in exhibitions or for any other purpose including as samples, to some other premises, without payment of duty.
Further, there may be some concerns which are not addressed in this write up. I have alluded only to the key highlights of the changes in this write up.
The author can also be reached at jainsamarth@live.com
Views expressed are strictly personal. The content of this document are solely for informational purpose. It may or may not depict the legal position sought to be conveyed by the statute. It doesn’t constitute professional advice or recommendation. Readers are cautioned to evaluate the actual legal position before acting on this write up. The Author does not accept any liabilities for any loss or damage of any kind arising out of information in this article and for any actions taken in reliance thereon.
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