Small Scale Exemption Scheme

7/27/2019 Small Scale Exemption Scheme

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Small Scale Exemption Scheme

1.The contribution of Small Scale Sector in the industrial growth of the Indianeconomy and to the Gross Domestic Product is significant besides the potentialfor employment generation. The Small Scale Sector has for itself a specialdispensation in the Central Excise law in order to make it competitive in thedomestic and global market. Central Excise duty concessions have beenextended to the units in the small-scale sector based on their turnover so as tofacilitate them to graduate by availing these concessions in a graded manner.

ELIGIBILITY

2.Manufactuerers of specified commodities having clearances not exceeding Rs.3 crores in the preceding Financial Year are eligible for this exemption.

REGISTRATION OF SMALL SCALE COMPANIES

3. Every manufacturer of excisable goods is required (under Rule 174 of CentralExcise Rule 1944) to get registered with the Central Excise Department beforestarting production. The SSI must file for registration when their turn over crossesRs. 1 Crore only. The application for the registration should be submitted to the

jurisdictional Range Superintendent of Central Excise. The RegistrationCertificate will be automatically granted. If it is not granted within 30 days of thereceipt of the application it is deemed to have been granted. There is no fee for registration and a factory or a unit is to be registered once only. There is no needfor renewal of the registration. The registration is applicable only for the premiseswhere the manufacture is taking place. A separate registration is required for

each premise. In case a new product is to be manufactured, the registrationcertification should be got endorsed for the additional items.

Exemption from registration.

4. The requirement of registration has been exempted for the following persons.(Notification No. 22/98 CE(NT) dated 4.6.98 as amended)

• Manufacturers who are only manufacturing goods, which are exempted

from payment of duty of Central Excise. • For small scale industries who are manufacturing goods up to an

aggregate value of less than Rs. 90 lacs. After crossing Rs. 90 lakhs turnover the SSI must file declaration.

• In case an SSI is manufacturing goods of more than 30 lacs he must file a

declaration only once. (the form is enclosed).

WHO IS COVERED BY THE SSI SCHEME5. At present, in terms of notification nos. 8/2000-CE and 9/2000-CE, both dated1st March, 2000, and effective from 1st April, 2000, a general small scale excise



duty exemption scheme has been made operational providing slab-ratedconcessions from excise duty in respect of clearances of specified excisablegoods. Under these notifications, all goods specified in the First Schedule to theCentral Excise Tariff Act, 1985 are eligible to avail the exemptions/concessionsexcept for those goods which are chargeable to NIL rate of duty or which are

exempt from whole of the duty and certain products as given in the Annexure tothese notifications. With effect from 1st April, 2000, the hitherto commodityspecific exemption schemes for SSI units manufacturing cosmetics, refrigeratingand air conditioning equipment, tread rubber and for articles of plastics have alsobeen merged with the general small scale exemptions, as provided under theaforesaid notifications.6.I. The salient features of these exemption schemes, as contained in theaforesaid notifications are as under:-

Where the SSI unit does not avail CENVAT

•

Notification No.8/2000-CE, dated 1st March, 2000 as amended. For firstclearances effective from 1st April of a financial year up to an aggregatevalue of Rs. 1 Crore, duty is exempted in respect of those SSI units whichdo not intend to avail CENVAT up to a value of clearances of rupees onecrore.

6. II.Where the SSI unit avails CENVAT – Notification No.9/2000-CE, dated 1st March, 2000 as amended. The gradedscheme of exemption in respect of those SSI units which intend to avail CENVATis as under:-Sr. No. Value of Clearances Rate of Duty

1 First clearances effective from 1st April of a financial year Up to an aggregate value of Rs.1 crore 60% of the normal rate of duty

2 Subsequent Clearances at the normal rate of duty7. A. The following clearances are excluded from computation of value of clearances

• Clearances of the specified goods which are used as inputs for further manufacture of specified goods within the factory irrespective of the valueof clearances.

• Clearances of excisable goods affixed with the brand name or trade nameof another person who is not eligible for availing the exemption under the

aforesaid notification. However, the clearances of goods affixed with thebrand name or trade name of another person - other than those which arein the nature of components or parts of machinery or equipment for use asoriginal equipment in the manufacture of the said machinery, goodsbearing the brand name of KVIC, NSIC or a State Small IndustriesCorporation or State KVIB or those goods manufactured in a factorylocated in a rural area are not eligible for the exemption/concession fromexcise duty irrespective of the value of clearances.



• Clearances which are fully exempt from excise duty under any other

notification (other than those giving exemption based on quantity or valueof clearances).

B. The conditions for availing the aforesaid exemption/concession from excise

duty are as under :-• The aggregate value of clearances of all excisable goods for home

consumption by a manufacturer from one or more factories or from afactory by one or more manufacturers does not exceed rupees threehundred lacs in the preceding financial year.

• The manufacturer does not avail of the credit of duty under the CENVAT

scheme upto an aggregate value of clearances of rupees one hundredlacs.

C. The thresholds of excise duty concessions under the aforesaid small-scaleschemes act as a ladder for enabling the small units to grow and graduate intobigger units.

D. Units availing SSI exemption are permitted to remove specified goods to aplace outside the factory for getting any job work done on any specified goodswithout payment of duty (Notification number 83/94 and 84/94 Central Excisedated 11.4.94 as amended) 8. HOW TO AVAIL CENVAT/CAPITAL GOODS CREDITThe Cenvat scheme is a system whereby a manufacturer can avail of credit of the duties paid by a manufacturer of his raw materials, inputs, parts and

components or his capital goods to pay his own Central Excise Duty. This isintended to ensure that no manufacturer is forced to pay duty on the duty portionof his product. Briefly, in order to avail the CENVAT credit, the goodsmanufactured or produced have to pay duty. All inputs if used in the manufactureof the final product are eligible for Cenvat {except high-speed diesel oil and motor spirit (petrol)}. All capital goods actually used in the manufacture of the finalproducts are also eligible. All finished goods are eligible for the benefit of Cenvatexcept matches. However, availment of Cenvat on capital goods will be spreadover two years, half in the first year. A manufacturer availing cenvat on capitalgoods must not avail depreciation under the income tax act on the duty part of the cost of the capital goods.

9. An SSI who is to take the benefit of Cenvat scheme must give a letter of C.Ex.and maintain the appropriate registers. Before availing cenvat, the SSI mustphysically receive the goods under a duty paying document or a proper invoiceissued by a registered dealer. The SSI must maintain an registers giving detailsof receipt and disposed of inputs & capital goods and payment of duty by credit.Registers. Once he has availed cenvat on a duty paying document thedocuments must be defaced so that it can not be used again. These duty payingdocument already defaced and the record along with his own delivery documents



must be shown to the Central Excise officers on demand. There is a provision for removing raw materials, inputs or capital goods on which cenvat credit has beentaken out of the factory for further processing, repairs or job work. Details of thecenvat scheme may be obtained from the local Central Excise officer. Pleasenote that when duty is being paid vide cenvat credit, the credit accruing on goods

received after the last day of the month in which duty is due to be paid, can notbe utilized (CBEC’s circular 542/38/2000-Cx. Dated 25.8.2000)10. QUARTERLY REPORT OF PRODUCTION AND CLEARANCE (RT-12)This report is to be filed once in a quarter, before the 10 th day of the close of eachquarter. The Jurisdictional Commissioner of Central Excise can permit filing up to20 days from the close of each quarter. (Rule 173 G) A statement of invoice wiseduty payment is also required to be filed, as per the Proforma placed below alongwith the quarterly return to facilitate cenvat verification.HOW TO PAY DUTY11.Duty can be paid in a lump sum at the end of the month and before the 15 th day of the next month. Duty is to be paid to the notified bank in the area under a

TR-6 challan. (See format below) This challan should definitely contain number inseriatum for the Financial Year starting with Serial number 1 It should also havethe head of accounts (in numbers), assessee’s ECC number, branch bank code,focal point code and any assessees number allotted by the Commissionerate.The SSI will be given the triplicate copy for his record and the quadruplicate copywhich is to be given to the Range Suptd., with the RT-12 that the quarterly return.Duty can also be paid by debit entry in RG-23A or RG23 C for those SSIs whoare availing of CENVAT credit.

12.Only after obtaining the receipted TR-6 challan from the bank should a creditentry be made in the PLA. In case of strike of the banks or closure due to

unforeseen circumstances the Commissioner will issue a trade notice permittingthe SSI to send the payment by cheque by registered post AD or specialmessenger with the TR-6 challans in quadruplicate duly filled in. Thesedocuments are to be sent to the Chief Accounts Officers of the Commissioneratewith copy to the Range concerned. There must a clear declaration that the SSIhas sufficient balance in their bank account.13. In case payment is not made by the specified date interest is levible. Theinterest at present is 24% per annum on the outstanding amount, for the periodstarting with the first day after the due date until the date of actual payment of theoutstanding amount. The accounting code for entry in the TR-6 challan is asfollows:

Basic excise duties 00380003

Special excise duties 00380172

Additional excise duties in lieu of sales tax 00380335



Additional excise duties on textiles 00380368

Cess on tea 00380393

Cess on cotton 00380399

Cess on Bidi 00380415

Cess on Sugar 00380426

Cess on Paper 00380436

Cess on Copra 00380395

Cess on automobiles 00380442

Other receipts 00380453

COMPUTERISATION OF RECORDS14. The Central Excise department has no objection to accepting computeriseddocuments issued by the manufacturers instead of the prescribed forms or records. The new rule 226A permits the above. Records can be kept on anyelectronic media and the electronic records must be kept even if a hard copy is

kept. The print out (hard copy) of records and documents must be taken out atthe end of each month and kept in bound folders separately for each type of record, return, document etc. Persons maintaining their accounts on computer must ensure that proper back up record is maintained and preserved for a periodof 5 years counted from the first day of the Financial Year following the financialyear to which a record etc. pertain. In case the department requires the recordsthey must produce the same before Central Excise, Audit parties of thedepartment or C &AG officers. FORMAT OF INVOICE UNDER CENTRAL EXCISE15. In case the SSI is making payment of duty only at the end of the month, aseparate indication of "duty payable" must be made on the invoice or other

clearance document to enable the buyer to avail cenvat. In most cases of sale tonon-related persons, no declaration of value needs to be made separately.However, a declaration of marketing pattern is required under Rule 173 C of Central Excise Rules, 1944. Any changes in the marketing pattern must beinformed to the department. Manufacturers are required to declare the valueunder Section 4 of the Central Excise Act in their documents by which the goodsare sold or taken out of his factory. The information that is essential to beincluded in the invoice/clearance documents is as in annexure



CLASSIFICATION DECLARATION16. All assessees must give a classification declaration to the Range Supt.before commencing production. The format etc., will be obtained from the localcentral excise office. VISITS BY OFFICERS

17. No SSI factory should be visited by Central Excise Inspectors except with thespecific permission of the Assistant Commissioner and for a specific purpose.The officers who visit are required, on their visit to enter the relevant particularsin the visitor’s book being maintained by the SSI.WHO TO APPROACH IN CASE OF PROBLEMS FACED18.In case of any problems faced, the SSI is advised to approach either the

jurisdictional Range Supdt., or the Asstt. Commissioner of the Division or theCommissioner of Central Excise.Annexure as above

FORMTo,

The Assistant Commissioner,Central Excise----------------I/We…………………………….declare that to the best of my/ our knowledge andbelief the information furnished in the Schedule below is true and complete.I/We undertake to apply for a Central Excise registration certificate in the proper form as soon as the value of the goods, mentioned in the said Schedule, clearedfor home consumption in a financial year, reaches the full exemption limit.I/We undertake to apply for a Central Registration in the proper form as soon asthe goods mentioned in the Schedule become chargeable to duty.I/We undertake to maintain such records and follow such procedure as may be

prescribed by the Commissioner in relation to the exempted goods.I/We also undertake to intimate any change in the information furnished in thesaid Schedule.

THE SCHEDULE

1. Name(s) and address(es) of the proprietors/all partners/Directors of thecompany owning the factory.

2. Name and address of the factory 3. Name and addresses of other factories/manufacturers(producing such

goods) in whom the manufacturer claiming the exemption has proprietaryinterest.

4. Full description of the goods (heading-wise) manufactured by the factory. 5. Value/quantity of the goods cleared during the preceding financial year. 6. Value/quantity of the goods estimated to be cleared in the current financial

year. 7. Heading No. or sub-heading No. of the Schedule to the Central Excise

Tariff Act, 1985(5 of 1986) under which the goods are classifiable. 8. (a) Reference to the heading/sub-heading of the said Schedule or the

notification issued under rule 8 of the Central Excise Rules, 1944 or



Section 5A of the Central Excise Act, 1944 or Section 5A of the CentralExcise Act, 1944( 1 of 1944), as the case maybe (under which the goodsare exempted from the whole of the duty of excise leviable thereon).(b) Ground of exemption under the said heading/sub-heading or the saidnotification

9.Process of manufacture.

(Signature of Applicant )Note. – Portion of the Form/Schedule that is not relevant to a particular manufacturer

May be deleted.

See paragraph…………STATEMENT SHOWING MONTHWISE DUTY PAYMENT FOR THE QUARTER

ENDING……….

Serial No. Invoice No. and date Name of theconsignee

ECC No. of consignee

(1) (2) (3) (4)

Assessable value Duty paid Detail of Duty Debited i.e. entry no. & date inPLA. RG 23A Pt. II or RG 23C Pt. II

(5) (6) (7)i. Full postal address of Range and Division :ii. Name, Address and Code Number/Registration Number of

Factory/Warehouse :iii. Name and Address of consignee :iv. Description and Specification of goods :v. Number and Description of Packages :vi. Total quantity of goods(net) :vii. Total price of goods

vii. Details of deductions/additions made to arrive at

Value under section 4 of the Act

viii. Assessable Value/Tariff Value per untix. Total assesssable alue/tariff valuex. Tariff heading Number/Exemption Notification No.xi. Total duty paid(Both in words and figures)xii. Serial Number of debit entry in PLA/RG-23



xiii. Date and time of issue of invoicexiv. Date and time of removal of goodsxv. Mode of transport and motor vehicle Registration number xvi. Appropriate certificate as below

"Certified that that particulars given above are true and correct and the amountindicated represents the price actually charged and that there is no flow of

additional consideration directly or indirectly from the buyer"OR

"Certified that the particulars given above are true and correct and the amountindicated is provisional as additional consideration will be received from thebuyer on account of…….".NOTE:

i. Value indicated against S.No. (ix) and (x) shall correspond to theassessable value determined in invoice or as indicated in the declaration

filed or tariff value as the case may be.ii. The rate of duty and the amount of duty given against S.No. (xii) and (xiii)should be indicated separately for each type of duties, such as basic duty,additional duty, cess etc.

Documents

Small Scale Exemption Scheme