Booklet- Central Excise Law & Procedures for Jewelry Industry

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RIKEN SHAH & CO

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May 27, 2016, 3:42:55 AM5/27/16

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Dear Professional Colleges,

The ED on jewelry appears to be here to stay. A committee to resolve issues
raised has also been constituted.Once report is out we need to revert in final. Seeking your inputs on issues not covered/ any alternative view.

*Proposed Preface for Central Excise Law & Procedures*

In 2005, Central Excise Duty @ 2% was imposed on branded Jewellery. The
collections of excise duty from this sector were reported to be merely
Rs.16 crore till 2008 which as per the statistics was said to be less than
one-tenth of the cost of collection of excise duty for this section. Hence,
the excise duty was withdrawn in 2009.

In Budget 2011, the duty was re-introduced @ 1% on branded precious metal
Jewellery. From 17.03.2012, the levy of duty was further extended to all
Jewellery whether branded or unbranded. However, to simplify its operation
and minimize its impact on small artisans and goldsmiths, it was proposed
to:

a) charge the excise duty on tariff value equal to 30% of the
transaction value;

b) to extend SSI exemption up to annual turnover not exceeding
Rs.1.5 crore for units having a turnover below Rs.4 crore in the preceding
year;

c) to compute turnover on the basis of tariff value; and

d) to place the onus of registration and payment on the person who
gets Jewellery manufactured on job-work.

At the same time it was also proposed to fully exempt branded silver
Jewellery from excise duty. These changes, led to lot of agitation across
the country for withdrawing the duty and as a result Central Excise duty
was exempted.

Union Budget 2016-17, as announced on 29th February 2016, has proposed to
withdraw the exemption provided earlier w.e.f. 1st March 2016 which means
the Central Excise duty @ 1% is imposed on all the Jewellery articles
except silver Jewellery not studded with studded with diamonds, ruby,
emerald or sapphire.

This has led to widespread protests and strikes taking place on account of
the facts that procedures are cumbersome and it may not be possible to be
judiciously followed by this largely un-organised sector. Another reason
for opposition might be the fact that this industry may have a huge
parallel part which works in cash. The Government has not given in to the
opposition till date as they intend to bring this industry to the
mainstream and reduce the transactions in black money. The protests from
the industry was called off with the assurance given by the Government with
lot of procedural relaxation and addressing all the concerns in compliance
aspects and setting up of the high powered committee.

In order to help the industry to understand the dynamics of the Central
Excise as is relevant to them and also giving guidelines as to procedural
compliances as well the Indirect Taxes Committee of ICAI had brought out
the publication *“Central Excise law and procedure for jewellery
industry”* which
has now updated.

We express our sincere gratitude and thanks to CA. Ashish Chaudhary for
providing the basic draft of the material. We would also like to thank CA.
Rajesh Kumar T R, CA Sudhir V.S., CA. Roopa Nayak and Mr. Nagendra Hegde,
for providing their assistance to this endeavor. We would especially like
to acknowledge the valuable inputs from Mr. BSV Murthy, retired CESTAT
member. The publication covers the basic understanding of Central Excise
Law and its introduction to Jewellery sector post Budget 2016-17, issues
referred with supporting provisions, formats and explanations etc.

*We may have missed a few concerns. To this effect*

*we seek feedback solicited for enhancing this publication*