Excise Duty on Ready made Garments

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vinu (Querist)
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20 July 2011 Iam a accountant of a Garment Factory.We are manufacturing Ready made garments.Is excise duty leviable on this manufacture.Is there any slab ie; turnover limit for Excise duty liability.Last year we made around 4 crore turnover.What is procedure for excise duty levy?

CA Suresh Jain

CA Suresh Jain (Expert)
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24 July 2011 the following will answer your questions

Ready-made garments and made-up articles — Budget 2011-12 changes

D.O. F.No. 334/3/2011-TRU, dated 28-2-2011

Government of India

Ministry of Finance (Department of Revenue)

Central Board of Excise & Customs, New Delhi
3.4 Excise duty at the rate of 10% shall now apply to ready-made garments and made-up articles of textiles falling under Chapters 61, 62 and 63 (heading nos. 63.01 to 63.08) of the Central Excise Tariff except those falling under heading nos. 63.09 and 63.10 when they bear or are sold under a brand name. Hitherto, ready-made garments and made-up articles were exempt from Central Excise duty on the condition that no credit of duty on inputs is taken by the manufacturer in terms of Notification No. 30/2004-C.E., dated 9th July, 2004. If credit were taken, the applicable rate was 4% for goods of cotton, not containing any other textile material and 10% for others under Notification No. 29/2004-C.E. also dated 9th July, 2004. These notifications are being amended so that they apply only to those goods of Chapters 61, 62 and 63 not bearing a brand name or not sold under a brand name. For such goods, therefore, the optional duty regime would continue. In the case of ready-made garments and made-up articles bearing a brand name or sold under a brand name, no such option would be available and a duty of 10% would be payable regardless of the composition of the item/article.

3.5 Note 12 of Chapter 61 and Note 11 of Chapter 62 already prescribe that certain processes such as affixing a brand name on a product, labelling or re-labelling of containers etc. shall be processes amounting to manufacture. A similar note (Note 5) is being added to Chapter 63. As for the valuation of these goods, tariff value has already been fixed at the rate of 60% of the retail sale price in terms of Notification No. 20/2001-C.E. (N.T.), dated 30th April, 2004. This provision is being extended to goods of Chapter 63 as well. It may be noted that SSI exemption is being extended to the goods attracting this levy. This is being implemented through a suitable amendment in item (xxvi) of the Annexure to notification No. 8/2003-C.E., dated 1-3-2003. Although this should take care of small manufacturers, it may be made abundantly clear to the field formations that the levy does not apply to retail tailoring establishments that stitch garments in a customized manner to the size and style specifications of individual customers, whether out of fabric purchased by the customer from the same establishment or fabric supplied by the customer.

3.6 It is the practice in the garment and made up industry for brand owners to have goods manufactured from several job-workers. The brand owners may or may not, themselves, possess any manufacturing facility. Central Excise Rules are being amended to incorporate sub-rule (1A) in rule 4 to prescribe that in such a situation the liability to pay duty and comply with Central Excise procedure shall be on the person on whose behalf the goods are manufactured by job-workers. For this purpose, he would be required to register his private store-room or warehouse in which inputs are received for distribution to job-workers and finished goods are received from the job-workers. He would also be required to comply with all the other provisions of Central Excise law. The job-worker is exempt from payment of duty if the merchant manufacturer pays the duty. Alternatively, the merchant manufacturer may authorize the job worker to obtain registration and comply with all formalities of Central Excise including payment of duty. Cenvat Credit Rules, 2004 are being amended to enable merchant manufacturers to avail of credit of duty paid on inputs, input services and capital goods.

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