Excise Duty has been imposed on jewellery and there are many fears among the industry about its implications. The authors have analysed such fears in the light of provision of law.

1. Central Excise on Jewellery : Whether fears are real?
By CA Rajesh Kumar T R
By CA Ashish Chaudhary
Background
Excise Duty has been imposed on the article of jewellery in the Union Budget 2016-17.
There has been protest by trade fearing the nuisances of excise. There fear is not without
justifiable reasons considering the rigorous provisions of Gold Control Act, 1968 which they
were subjected to. It is perceived that if the duty is reintroduced, they would again be going
back to the old regime where inspector raj would prevail.
But these fears may not be of much relevance considering the paradigm shift as to the
manner in which present excise law functions viz a vizearlier Gold Control Act and Excise
law of couple of decades ago. We have attempted to discuss few of fears being faced by
Industry and their validity.
1. Inspector Raj: The industry has feared that imposition of excise duty would
reintroduce “Inspector Raj”. This may not be true under present excise regime
which has completely been made based on self-assessment in 1996. Unlike under
earlier regime where each removal of goods from the factory used to be under
presence of inspector. Now the assessee can remove the goods from his
factory/workshop based on proper excise invoice, charge appropriate duty, account
for duty liability, periodical self payment of duty and filing of periodical return. There is
no need of making any interaction with departmental office at any of the above
stages.
2. Dreadful experience of Gold Control Act, 1968: The Act was introduced in 1968
and contained several provisions which virtually killed the industry. Few of such
provisions being prohibition from owning gold in the form of bars and coins,
compulsory conversion of bars and coins to jewellery, goldsmith not allowed to own
more than 100 gms of gold, licensed dealer not supposed to own more than 2 kg of
gold, ban on trading with each other etc. This legislation killed the official gold market
and a large unofficial market sprung up dealing in cash only. None of these
provisions are there under present excise law. Each jeweller/manufacturer/trader/
goldsmith is allowed to do their business in normal course without subjected to any of
regulations of these natures.
3. Compulsory assessment: Being self assessment regime, the information furnished
by assessee is considered true and correct (unless contrary circumstances exist).
There is no compulsory annual assessment at department end.

2. 4. Interaction with department for furnishing information: There is no need to visit
department for taking registration, payment of duty or filing of return. All such
functions can be done online sitting at your office. There is no need of furnishing any
of such information to department.
5. Visit by department officer: Registration is granted under excise after visit by
department officer. It is felt that if the visit is permitted to inspectors, they would be
visiting the premise unnecessarily and may result in “haftavasuli”. But this fear of
industry has already been taken care of by Government by providing the specific
provisions that no department officer shall visit the factory of jeweller by making
necessary amendment in the Notification No. 35/2001- CE (NT). Instructions are
issued whereby it is stated that officer at commissioner level is accountable for any
violation in this regard.
6. Visit to job worker’s premise: There is specific provision under Central Excise
providing that job worker shall not be liable to duty of excise and the liability shall be
exclusively on the principal. When job worker is not considered assessee at all, there
cannot be any visit to his premise by department officer.
7. Increased compliance and documentation formalities: No doubt, imposition of
new of tax invariably adds to compliance burden and documentation formalities. But
the government has provided for simplified procedures in case of jewellery sector.
The documentations/records maintained by assessee for the purpose of VAT
law/internal recording purpose would be considered sufficient for excise also. Still
there could be certain areas where trade may face compliance and documentation
burden. It is expected that the High Level Committee constituted which would
certainly look into the matter and provide for more simplified process and procedure
for smooth functioning. This requires active participation by all stakeholders so that
they may bring the problems anticipated by them before the committee to take
suitable measures to simplify the procedural aspects of law.
8. Burden on small manufacturers & job workers: It is feared that small
manufacturers and job workers would be badly impacted by excise duty imposition in
terms of obtaining registration, maintaining necessary documentations and making
other compliances. But this may not be correct as job workers are exempted from
taking registration absolutely. Also small manufacturers exempted from excise levy
as exemption has been provided to manufacturer whose turnover does not exceed
Rs. 6 crore subject to previous year turnover of Rs. 12 crore.
9. Obtaining registrations at all workshops/showrooms: Another apprehensions of
the industry considering the provision of excise is that they may have to obtain
registration for each of the workshops/showrooms separately. But realising the

3. peculiarities of industry, the government has provided simplified mechanism of taking
centralised registration. There is no need of taking separate registration for each of
the premises.
10. Valuation for excise duty payment: The prices of jewellery are subject to frequent
fluctuations and it may pose serious challenge in valuing the jewellery for payment of
excise duty. Considering the complexities, government has provided that first sale
value may be taken as basis for payment of duty. This would relieve the
manufacturer from making valuation of each of removal separately.
11. Imposition of penalty equivalent to duty not paid(Section 11AC): There is power
to impose the penalty equivalent toduty not paid. However, the power is limited in
following cases:
 fraud or
 collusion or
 any wilful mis-statement or
 suppression of facts, or
 contravention of any of the provisions of this Act or of the rules made
thereunder with intent to evade payment of duty
If none of the above ingredients are present, penalty cannot be imposed. Hence, in
case of bonafide assessee who has been complying with the law and there is no
intentional evasion of duty, the penalty cannot be imposed.
12. Power of provisional attachment of property for 6 months (11DDA): The
attachment of property cannot be routine exercise. Where a person has not complied
with the law with an intention to evasion of tax and the department is not able to
recover the duty not paid, there may be order for provisional attachment for six
months. The order for provisional attachment can be given only with prior permission
of Commissioner recorded in writing.
13. Refining (melting and freezing) of gold to be done through government agency:
There has been apprehension that gold refining could be carried out only through
government agency. But there is no such provision in the Central Excise Law
mandating it to be done through government. This could be done through any body.
14. Confiscation of gold not recorded properly by job worker and other
processers: Thereis apprehension that the gold found at job worker premise shall be
confiscated if they fail to maintain proper records of that. But this is not correct as the
job workers are out of excise net. Further, there is clear instruction to department

4. officials not to visit the premise of the job worker. Hence, this fear in the industry is
also not correct.
15. Power to confiscate goods (Rule 25 of Central Excise Rules): Though there is
provision under Central Excise Rules to confiscate unaccounted manufactured
goods, it is generally applied only in cases of goods on which duty is payable but not
paid. Since the duty in jewellery sector is applicable only at the finished goods stage,
if stock of finished goods is sufficiently kept there should not be any fear of
confiscation. Even in cases where such un-accounting is found, it is not that the
goods will be seized immediately, instead there is a legal process wherein a notice
has to be issued, opportunity to explain both in writing and in person should be given,
the order has to be passed and subsequently if the assessee is not happy he has all
the right to go for appeal.
16. If any irregularity is found the officers may carry out forced closure of
shop/place of business: When the officers are not permitted to visit the premises,
the said question does not arise. Even in case they come with clear intelligence they
have right only to carryout investigation and collect evidences and they do not have
any power to close the operation of the assessee.
17. Imprisonment of 3 years on evasion of duty up to 50 lacsand 7 years beyond
that (section 9): Though the prosecution provisions exist in the statute, it is not
permitted to be launched in routine manner so easily. It is launched only if the duty
amount is more than one crore with the permission of Principal Chief/Chief
Commissioner as per the guidelines given Circular No. 1009/16/2015-CX., dated 23-
10-2015.
Conclusion: In the opinion of the paper-writer the apprehension is unwarranted as
numerous small manufacturers are complying with the provisions of law without facing any
the apprehensions (except in one of cases due to ignorance and lack of knowledge of the
assessee) that too without any relaxation in procedures. Further more since it is applicable
only to manufacturers either on own or through others having clearances more than 6 crores
most of the business man in the industry would be out of the clutches of Central Excise
especially trading is not covered within Central Excise. For any comments, you may write to
paper writers at rajesh@hiregange.com or ashish@hiregange.com