Excise and dgft query
Querist :
Anonymous
(Querist) 30 August 2011
This query is : Open
QUERY FOR OPINION
FACTS
1. The company is a SSI unit in Rajasthan, manufacturing marble slabs (which is excisable at INR 30 per square meter) and availing exemption under SSI on grounds of turnover being below INR 1.50 crores (the “Company”) .The Company is not registered under central excise as it is exempt. The Company has a Bombay office which trades in marble slabs and has a high turnover, but it is purely trading.
2. For year 2008-2009, the total turnover of the Company’s manufacturing unit was INR 1.34 crores.
3. In year 2009-2010, the Company was allotted license to import marble blocks which the Company imported. But, instead of getting the raw material to the Company’s manufacturing unit, the Company got it processed on job-work basis in Silvassa from other manufacturers and the job-worker duly paid excise on such goods removed. The Company was entitled to receive CENVAT credit but did not claim any credits as it was not registered. We are counting this as a trading activity of the Company’s Rajasthan unit and not manufacturing activity and are not counting this turnover (approximately INR 5 crores) for basic exemption limit of INR 1.5 crore.
4. For the year 2009-2010, the situation for the Company was:
Manufacturing turnover at factory : INR 40 lacs
Trading turnover at Silvassa : INR 8.25 crores
(We are counting the job-work turnover as trading turnover because the blocks have not gone to the factory of the Company at all and we have processed the goods outside in other factories and sold them also from outside, i.e. Silvassa.)
5. Similarly, for the year 2010-11, the situation for the Company turns out to be:
Manufacturing turnover at factory: INR 40 lacs
Trading turnover at Silvassa : INR 9.60 crores
QUERY
1. Will the trading turnover be counted as manufacturing turnover for the purpose of calculating excise exemption limit of INR 1.5 crores and also for the registration limit of INR 4 crores, or given the facts above we can still continue to enjoy exemption under SSI registration because the manufacturing turnover is below INR 1.5 crores?
2. Director General of Foreign Trade (hereinafter referred to as the “DGFT”) related query: We are allotted license on actual user condition to import marble blocks and sell them after processing. We are of the view that as per DHFT law under actual user condition, it is not compulsory for the importer to process goods in its own factory only, but the importer can also get it processed on job-work basis from other manufacturers and then sell the finished goods. By doing so yhe importer complies with actual user condition . Is our view correct and legally tenable? Such sale i.e sale done on jobwork basis outside the unit has been counted by us as manufacturing turnover for the purpose of license allocation in DGFT only , but for excise purposes as per provisions of excise it has been taken as trading turnover because of the facts mentioned above. Although the Company is exempt, it has paid excise on all the goods processed at Silvassa because we do not consider it as part of manufacturing activity and so the jobworker paid excise then we sold the goods and count it as a trading activity. Is this legally coorrect?
Also, in this regard please note that the concerned government department has verbally conveyed to us that since the marble blocks were imported by us, then processed in the job-workers’ factory and then sold, they will not come under the purview of trading activity as the form of raw material has changed from blocks to slabs. Is this a legally tenable objection? Our view is that even if the form has changed, it does not amount to manufacturing activity of the unit, as the activity is taking place totally outside the Company’s factory. Is this view correct and legally tenable?
