Excise of Fertilizers

Facts of case:

Our client manufacturing Superphosphate fertilizer exciseable under tariff heading 3103 10 00, which was earlier falling under exempt category. Now from this budget all items falling under chapter heading 31 is excisable at concessional rate of 1% if without CENVAT credit facility or 5% on normal basis.

My query is:

1. As till now client is purchasing raw material against CT 2 as final product was exempt. Is there any further scope of procuring raw material on concessional rates as final product is excisable under concessional rate of 1%?

2. If client opt to take cenvat and agrees to pay 5% normal duty then at what amount 5% will be calculated as fertilizer is subsidized by GOI. Presently market price of product is Rs. 2000 PMT and subsidy given by GOI is Rs 4500 PMT then on what amount they calculate excise on Rs. 2000 or Rs. 6500?

3. What would be position of stock in hand and stock lying with distributors (Field stock stored in distributors godown ownership of company on material , Billing Pending) as of the date of change. As per my knowledge excise is applicable on production and collection point is despatches. so can my client despatch finished goods without excise which were produced before changes implemented.

Yes this budget have this kind of imp[act on business where credit is more than duty payable, as it is happening in your clients' case. but in reply to your point wise queries the following are given.

There is no provison in Central excise in procuring goods at a concessional rate of duty suitable to you.

The subsidy does not forma part of the value at which the goods are cleared. Whether MRP based or not, price, being realized from the buyers are the sole consideration on which duty is charged. Subsidy is a welfare neasure on which there is no tax.

You need to pay taxes on clearances of all goods after the new levy if you don't enjoy any SSI exemption benefit. The places where your goods are now stored are required to be registered with Excise authorities for storing non-duty paid fished goods and maintain your books and accounts accordingly. All the clearances from such registered premise need to be tax-payable.