This Tax Alert to provide an update on CBEC’s Notification No. 3/2016-CE dated 22 January 2016.
It amends Notification No.56/2002-CE & No. 57/2002-CE, both dated 14 Nov 2002. The said Notifications provide exemption to new industrial units set up / units undertaking substantial expansion in specified areas of Jammu & Kashmir (J&K) on or after 14 June 2002. The exemption is granted in the form of monthly refund of Excise duty paid by the manufacturer. The said Notifications also prescribe the manner in which exemption can be granted to specified goods manufactured and cleared from a unit located in J&K.
CBEC has now amended the said exemption Notifications to include the sunset clause and grant the Excise exemption to industrial units as follows:
1. New industrial units which have commenced their commercial production on or after the 14 June 2002, but not later than 31 March 2016
2. Industrial units existing before the 14 June 2002, but which have, undertaken substantial expansion by way of increase in installed capacity by not less than twenty-five per cent on or after the 14 June 2002, but not later than 31 March 2016
3. Units existing before 14 June 2002, but made new investments on or after the 14 June 2002, but not later than the 31 March 2016, and such new investment is directly attributable to the generation of additional regular employment of not less than twenty-five per cent over and above the base employment limit
Further, a new paragraph in the said Notifications have also been inserted to restrict the scope of the Excise exemption. Accordingly, the exemption shall not apply to such goods which have been subjected to only one or more of the following processes, viz., preservation during storage, cleaning operations, packing or repacking of such goods in a unit container or labelling or re-labelling of containers, sorting, declaration or alteration of retail sale price and have not been subjected to any other process or processes amounting to manufacture in the State of J&K.
The discontinuation of the excise benefit by inserting the sunset clause appears to be in line with the Government’s intention to prune the exemption list and eliminate tax cascading.