Honeymoon of manufacturers in J & K, Kutch & North-East is Over

RS Sharma Advocate

    Modification of excise exemption scheme for Jammu & Kashmir, Kutch, North-East & Sikkim is like changing the rules of the game after the game has already started. The Scheme was more lucrative than the scheme of Uttaranchal & Himachal because of the twin benefits. Though Uttaranchal & Himachal Units get outright exemption from excise duty and thus not required to pay any excise; a special mechanism was provided by the Government for J & K, Kutch , North-East & Sikkim. The Notifications for these States exempted that portion of the excise duty, which was paid by the manufacturers in cash. According to the mechanism prescribed in pre-amended Notifications ; the manufacturer was first required to pay the excise duty and thereafter, whatever was paid in cash (other than CENVAT) was refunded. It is also a part of the scheme that the buyer of any input or capital goods on which such exemption is availed; gets full CENVAT Credit including the portion of duty refunded to the manufacturer. The provisions of section 11B of Central Excise Act do not apply in case of all these Notifications.

                The following Central Excise Tariff Notifications have been issued on 27th March 2008 amending the existing scheme in Jammu & Kashmir, Kutch, North-East & Sikkim.


Exemption from Excise duty in Kutch Notification No. 39/2001 amended 


Exemption from Excise duty in North-East Notification No. 32/99 amended 


Exemption from Excise duty in North-East  Notification No. 33/99 amended 


Exemption from Excise duty in J & K Notification No. 56/2002 amended 


Exemption from Excise duty in North-East Notification No. 20/2007 amended 


Exemption from  Excise duty in J & K Notification No. 56/2003 amended 


Exemption from Excise duty in J & K Notification No. 57/2002 amended 


Exemption from Excise duty in Sikkim Notification 71/2003 amended 

All Notification are available on allindiantaxes.com/cen-t08.php

                As a fallout of the amendment in the abovesaid Notifications , in the preamble, for the words and figures, “to the amount of duty paid by the manufacturer of goods other than the amount of duty paid by utilization of CENVAT credit under the CENVAT Credit Rules, 2002”, the words “to the duty payable on value addition undertaken in the manufacture of the said goods by the said unit” has been substituted with effect from 1st April 2008.

                As a result, the refund of only duty paid on value addition will be admissible to a manufacturer in place of unlimited refund of duty paid in cash. As a general norm 36 per cent of duty has been treated as duty for value addition whereas a different percentage of value addition has been notified for Chapters 29, 30, 33. 34, 38, 39, 40, 72, 73 , 74 , 76 & 85.

                The only solace is that the manufacturer has the option not to avail the rates specified in the Notifications and apply to the Commissioner of Central Excise for fixation of a special rate representing the actual value addition in respect of any goods manufactured and cleared under these notification, if the manufacturer finds that four-fifths of the ratio of actual value addition in the production or manufacture of the said goods to the value of the said goods, is more than the rate specified in the said Table expressed as a percentage.

                Investment of Lakhs of Crores was made by Industrialists in Jammu & Kashmir, Kutch, Sikkim & North-East after working out the incentives and sops. Though the Government was concerned with a drain of revenue in doling out   Crores as refund to these Units; the Industrialists are in for a shock and have already approached the Advocates for filing Petition in High Courts for challenging the amendments as the Government seems to have backtracked from its promise and , therefore, it is  a case of Promissory Estoppel.

                Several Delhi based Industrialists deserted their wives and families and migrated to Jammu & Kashmir for setting up Units. Last night I got a call at 12.30 Hours from the jubiliant wife of such an Industrialist who told me that her husband has decided to wind up his Project in Jammu & Kashmir due to change in Policy and has decided to shift back to Delhi.  I asked the rich and lonely lady as to why she was disturbing me at odd hours? The lady told me that she wanted to cross check about the change in policy from a Consultant as she had a big doubt that her husband was making her an April Fool.

(The Writer is an Advocate & Consultant based in Delhi and is advising several MNCs PSUs & Indian Corporates on Indirect Tax Issues. He can be mailed at rssharma@gmail.com)

(Source: Allindiantaxes)



  1. k.n.mishra said,

    April 1, 2008 at 11:49 am

    Dear sir,

    please give some example for the same and how the calculation willl be done.

    thanking you.


    April 27, 2008 at 2:48 pm

    please give some example for the same and how the calculation willl be done.

    thanking you.

  3. JAYESH DALAL said,

    April 30, 2008 at 10:24 am

    please give some example for the same and how the calculation willl be done.

    thanking you.


  4. pradosh said,

    June 4, 2008 at 5:33 pm

    I am a soap manufacture in Assam. Is this percentage as per the chapeter heading will be refuned irrespective of dutry paid through CENVAT or PLA ?

    Please give me a calculation.

    Thanking you,


  5. sumit said,

    July 5, 2009 at 11:21 pm

    aabe dhakkan ki aulaado….
    read this example…

    Case I
    Excise liability – Rs. 100
    Cenvat Credit Available – Rs. 100
    PLA UTIL – RS. 0
    Refund – Rs. 0

    Case II
    Excise liability – Rs. 100
    Cenvat Credit Available – Rs. 0
    PLA UTIL – RS. 100
    Refund – Rs. 36
    Loss – Rs. 64

    Case III
    Excise liability – Rs. 100
    Cenvat Credit Available – Rs. 64
    PLA UTIL – RS. 36
    Refund – Rs. 36
    Loss – Rs. 0

    The ammended rule reads “36% of total Excise Duty Liability or PLA utilisation, whichever is less will be refunded to N.E manufacturers”


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