- Excise duty of 2% without CENVAT credit or 12.5% with CENVAT credit is levied on readymade garments and textile articles over Rs. 1000 retail price that bear a brand name. - Job workers who use materials supplied by brand owners are not required to register for excise, but brand owners must register and pay duty. Brand owners can authorize job workers to pay duty instead, requiring the job worker to register. - If a brand owner gets goods made without supplying materials, manufacturers pay no duty until the brand owner labels goods with the retail price, triggering manufacture and duty.

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VALUE ADDED PROFESSIONAL SERVICES LLP
Corp Office: 404 I, 4th Floor, Devika Towers I Chander Nagar I Ghaziabad, U.P. -201011, Telephone: +91 120 4264301
Applicability of Excise duty in
respect of Readymade Garments
Excise duty of 2% (without CENVAT credit) or 12.5% (with CENVAT credit) is being
levied on readymade garments and made up articles of textiles falling under
Chapters 61, 62 and 63 (heading Nos. 6301 to 6308) of the Central Excise Tariff
except those falling under 6309 and 6310 of retail sale price (RSP) of Rs.1000 and
above when they bear or are sold under a brand name.
This optional levy would apply to such readymade garments and made up articles of
textiles regardless of the composition of the garment / article. However, in respect of
readymade garments and made up articles of textiles other than those mentioned
above, the optional levy of “Nil (without CENVAT credit) or 6% (with CENVAT credit)”
in case of garments / articles of cotton, not containing any other textile material and
“Nil (without CENVAT credit) or 12.5% (with CENVAT credit)” in case of garments /
articles of other composition, as the case may be, shall continue.
The tariff value for readymade garments and made up articles of textile is also being
increased from 30% to 60% which shall apply to all goods mentioned in the
notification No.20/2001CentralExcise (N.T.) dated 30.04.2001. It may be noted that
the new levy is similar to the levy of mandatory excise duty of 10% on readymade
garments and made up articles of textiles [goods falling under Chapters 61, 62 and
63 (heading Nos. 63.01 to 63.08)] when they bear or are sold under a brand name,
which was introduced in Budget 2011-12 except that:
a. The present levy is an optional levy, i.e. domestic manufacturers will have the
option to pay excise duty of 2% (without CENVAT) or 12.5% (with CENVAT),
b. The levy is restricted to articles which have RSP of Rs.1000 and above, and
c. The tariff value is being revised from 30% of RSP to 60% of the RSP.
In this regard, It is worth discussing the instructions issued vide Budget letter
F.No.334/3/2011TRU dated 28.02.2011, Instruction D.O. F.No.334/3/2011TRU,

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VALUE ADDED PROFESSIONAL SERVICES LLP
Corp Office: 404 I, 4th Floor, Devika Towers I Chander Nagar I Ghaziabad, U.P. -201011, Telephone: +91 120 4264301
dated 4.03.2011 and Instruction D.O. F.No. B1/3/2011TRU, dated 25.03.2011. The
said instructions shall apply mutatis mutandis to the new levy.
Salient features of these instructions are as under:
(i) The levy shall not apply to retail tailoring establishments that stitch garments in
a customized manner to the size and style specifications of individual
customers, whether out of fabric purchased by the customer from the same
establishment or fabric supplied by the customer.
(ii) The brand name owner, who gets the goods manufactured on his own account
on job work, shall pay the duty leviable on such goods as if the goods were
manufactured by him. The brand name owner (and not the job worker) shall be
required to register and comply with all the provisions of Central Excise law.
Rule 4 (1A) of the Central Excise Rules, 2001 and Para 1, clause (vi) of
notification No.36/2001C.E. (N.T.), dated 26.06.2001 refers.
(iii) However, the brand name owner will be given the option to authorise his job
worker to pay the duty leviable on the goods. If such an authorisation is given,
then the job worker would have to obtain registration. Proviso to rule 4 (1A) of
the Central Excise Rules, 2001 and proviso to Para 1, clause (vi) of notification
No.36/2001C.E. (N.T.), dated 26.06.2001 refers.
(iv) A unit which manufactures goods bearing the brand name of another person
out of inputs or raw materials which have been purchased independently and
not supplied by the brand owner, does not satisfy the definition of “job worker”
and would, therefore, have to obtain registration and discharge the duty liability.
(v) In cases where the brand name owner gets goods bearing its brand
manufactured from other manufacturers (normally small units) without providing
the raw materials or inputs, and if the RSP is not affixed or marked on such
goods when they are cleared in the course of sale from the factory of a
manufacturer to the brand owner, then no excise duty would be payable by
such a manufacturers since the RSP of such goods is not disclosed to them by
the brand owner. However, since the process of labelling or relabelling
constitutes a process of “manufacture”, duty on the tariff value (based on the
RSP) would be payable as and when the brand owner labels the goods with the
RSP of Rs.1000 or above and clears them for further sale.

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VALUE ADDED PROFESSIONAL SERVICES LLP
Corp Office: 404 I, 4th Floor, Devika Towers I Chander Nagar I Ghaziabad, U.P. -201011, Telephone: +91 120 4264301
(vi) The value for computing the eligibility as well as the exemption limit for
purposes of SSI exemption would be the tariff value of the goods. Explanation
(C) to notification No.8/2003C.E., dated 1st March, 2003 refers.
(vii) The SSI exemption for the month of March, 2016 will be Rs.12.5 lakh, subject
to fulfilment of other conditions of the notification No.8/2003C.E., dated
01.03.2003. For this purpose, notification No.8/2003C.E., dated 1st March,
2003 is being amended suitably.
(viii) The eligibility for availing of the SSI exemption in 2015-16 for the month of
March 2016 is that the value of clearances for home consumption from one or
more manufacturer from one or more unit should not have exceeded Rs. 4
crore in the financial year 2014-15. The computation for this purpose shall be
done in accordance with the provisions of Para 3A of notification No.
8/2003C.E. For this purpose, a certificate from a Chartered Accountant based
on the books of accounts for 2014-15 shall suffice.
(ix) Excisable goods which were produced on or before 29.02.2016 but lying in
stock as on 29.02.2016 shall attract excise duty upon clearance. Manufacturers
shall keep a stock declaration of finished goods, goods-in-process and inputs
as on 29.02.2016 in their records duly certified by a Chartered Accountant so
as to enable the manufacturers to claim CENVAT credit on inputs or inputs
contained in goods lying in stock as already provided for in Rule 3(2) of the
CENVAT Credit, Rules, 2004, if he so desires. No stock declaration, will,
however, be required to be made to the jurisdictional central excise authorities.
(x) Full exemption from Central Excise duty will be available to duty paid goods
returned to the manufacturer during a financial year up to an aggregate ceiling
not exceeding 10% of the value of clearances for home consumption made in
the preceding financial year. The manufacturer would be required to observe
the following procedure for this purpose:
(a) To submit an intimation within 48 hours of the receipt of the returned goods about
the value of returned goods received in his factory / registered premises;
(b) To maintain proper accounts/record of the receipt, finishing operations, and
dispatch of returned stock indicating the monthly and cumulative value of the
returned stock received during the financial year and to produce the same as and
when required. Notification No. 31/2011C.E., dated 24th March, 2011 refers. This
facility has been provided since it is a common practice in this industry that the duty

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VALUE ADDED PROFESSIONAL SERVICES LLP
Corp Office: 404 I, 4th Floor, Devika Towers I Chander Nagar I Ghaziabad, U.P. -201011, Telephone: +91 120 4264301
paid stock cleared to the wholesale dealer/retailer on consignment basis that
remains unsold is returned to the manufacturer either at the end of the season or
from time to time. Such returned goods are cleared either as such or after
“refinishing” operations to another wholesaler or retailer for sale (often at reduced
prices). The refinishing operations could involve cleaning, ironing, refolding,
repacking or relabelling, some of which constitute “manufacture” in terms of the
relevant Chapter Notes. This facility obviates the need to pay excise duty twice on
the same goods.

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VALUE ADDED PROFESSIONAL SERVICES LLP
Corp Office: 404 I, 4th Floor, Devika Towers I Chander Nagar I Ghaziabad, U.P. -201011, Telephone: +91 120 4264301
Applicability of Registration under
Central Excise in respect of
Readymade Garments
Issue in respect of Readymade Garment brand relating to who is to obtain
registration under central excise, the job working units or the brand name owners
COMPULSORY COVERAGE UNDER CENTRAL EXCISE
Readymade garments and made up articles of textiles falling under Chapters
61, 62 and 63 (heading Nos. 6301 to 6308) of the Central Excise Tariff except
those falling under 6309 and 6310* (these articles / garments may be of cotton
or any other textile material) of
Retail sale price (RSP) of Rs.1000 and above;
and;
When they bear or are sold under a brand name
Option 1
• Pay excise duty of 2% of Tariff value
• Do not avail CENVAT credit
Option 2
• Pay excise duty of 12.5% of Tariff value
• Do not avail CENVAT credit

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VALUE ADDED PROFESSIONAL SERVICES LLP
Corp Office: 404 I, 4th Floor, Devika Towers I Chander Nagar I Ghaziabad, U.P. -201011, Telephone: +91 120 4264301
VOLUNTARY COVERAGE UNDER CENTRAL EXCISE
Thus the first category, i.e. ‘Branded’ Readymade garments and made up articles of
Retail Sales Price of Rs. 1000/- or more of textiles falling under Chapters 61, 62 and
63 (heading Nos. 6301 to 6308) Excise Duty has now COMPULSARILY been
Readymade garments and made up articles of textiles falling under Chapters 61,
62 and 63 (heading Nos. 6301 to 6308) of the Central Excise Tariff except those
falling under 6309 and 6310 of
Retail sale price (RSP) of less than Rs.1000;
or;
When they do not bear the brand name or are not sold under a brand name
If the Garment / Article is of Cotton and
doesn’t contain any other Textile
material
If the Garment / Article is of other
composition i.e. not pure Cotton
Option 1
• Avail benefit of
Nil rate Excise
duty
And
• Do not avail
CENVAT
credit
Option 2
• Pay Excise
duty @ 6% of
Tariff value
And
• Do not avail
CENVAT
credit
Option 1
• Avail benefit of
Nil rate Excise
duty
And
• Do not avail
CENVAT
credit
Option 2
• Pay Excise
duty @ 12.5%
of Tariff value
And
• Do not avail
CENVAT
credit

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VALUE ADDED PROFESSIONAL SERVICES LLP
Corp Office: 404 I, 4th Floor, Devika Towers I Chander Nagar I Ghaziabad, U.P. -201011, Telephone: +91 120 4264301
covered under Central Excise with effect from 1st
of March, 2016. Two options have
been given to pay Excise duty, i.e.
1. either pay 12.5% excise and take CENVAT
Or
2. pay 2% excise and don’t avail CENVAT.
In respect of ‘Unbranded’ Readymade garments and made up articles or
Readymade garments and made up articles of Retail Sales Price of ‘less than Rs.
1000/-, there is still an option available either to be covered under Central Excise or
not to be covered under Central Excise.
When Registration is to be taken by the Job Worker
Vide Notification No. 214/86 – CE dated 25th of March, 1986, “job work” means
In context with Readymade Garments and Made Ups, keeping in view the above
explanation and Rule 4 (1A) of the Central Excise Rules, 2001, the job working units
that carry job on the material supplied by the Brand Owner, shall be Job Workers.
These units will not be required to obtain Central Excise Registration if they don’t use
their own material and rather use the material supplied by the brand name owner.
Exception: It is to be noted that as per Proviso to rule 4 (1A) of the Central Excise
Rules, 2001 and proviso to Para 1, clause (vi) of notification No.36/2001C.E. (N.T.),
dated 26.06.2001, the Job Worker may be authorised by the Brand Name Owner to
Processing or working upon of raw materials or semi-finished goods supplied to
the job worker / so as to complete a part or whole of the process resulting in the
manufacture or finishing of an article or any operation which is essential for the
aforesaid process.
Who to obtain registration, Brand Name Owner or the Job Worker

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VALUE ADDED PROFESSIONAL SERVICES LLP
Corp Office: 404 I, 4th Floor, Devika Towers I Chander Nagar I Ghaziabad, U.P. -201011, Telephone: +91 120 4264301
pay the duty leviable on the goods. If that case, the job worker would have to obtain
registration.
In case, they use their own material and carry work on that material, they cease to
be the beneficiary as job workers. In this case, they will have to obtain Central
Excise Registration.
For the sake of brevity, we are not here discussing the provisions and conditions
relating to availability of SSI benefits / basic exemption limit to Job Work Units.
When Registration to be taken by the Brand Owner
In case, the brand name owner, supplies the raw material / goods to the job workers
and gets the goods manufactured on his own account on job work, the brand name
owner shall pay the duty leviable on such goods as if the goods were manufactured
by him as per the Rule 4 (1A) of the Central Excise Rules, 2001 and Para 1, clause
(vi) of notification No.36/2001C.E. (N.T.), dated 26.06.2001 refers.
Though as per Proviso to rule 4 (1A) of the Central Excise Rules, 2001 and proviso
to Para 1, clause (vi) of notification No.36/2001C.E. (N.T.), dated 26.06.2001 the
brand name owner has the option to authorise his job worker to pay the duty leviable
on the goods. If that case, the job worker would have to obtain registration
Further an explanation has been provided by the Tax Research Unit, Ministry of
Finance, Department of Revenue, Government of India in its post budget letter dated
29.02.2016 that “In cases where the brand name owner gets goods bearing its brand
manufactured from other manufacturers (normally small units) without providing the
raw materials or inputs, and if the RSP is not affixed or marked on such goods when
they are cleared in the course of sale from the factory of a manufacturer to the brand
owner, then no excise duty would be payable by such a manufacturers since the
RSP of such goods is not disclosed to them by the brand owner. However, since the
process of labelling or relabelling constitutes a process of “manufacture”, duty on the
tariff value (based on the RSP) would be payable as and when the brand owner
labels the goods with the RSP of Rs.1000 or above and clears them for further sale”

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VALUE ADDED PROFESSIONAL SERVICES LLP
Corp Office: 404 I, 4th Floor, Devika Towers I Chander Nagar I Ghaziabad, U.P. -201011, Telephone: +91 120 4264301
It is to be noted that Tailoring Establishments are not covered
Keeping in view, the tiny scale of operations of retail tailoring establishments, the
same have been kept out of preview of compulsory coverage under Central Excise.
These tailoring units stitch garments in a customized manner,(as per the demand of
the customer), to the size and style specifications of individual customers. These
units shall be exempt even in cases, the fabric out of which readymade garment
made, is purchased by the customer from the same establishment or fabric is
supplied by the customer.
Calculation of Excise Duty is to be made on Tariff Value
Central Excise Duty on Readymade garments and made up articles Duty is to be
paid at the specified rate of 2% or 6% or 12.5% as the case may be on the “Tariff
Value”.
“Tariff Value” shall be 60% of the “Retail Sales Price”.
“Retail Sales Price” finds its definition in Explanation 1 to Section 4A (pertaining to
Valuation of excisable goods with reference to retail sale price) of Central Excise Act,
1944 defines it to mean “the maximum price at which the excisable goods in
packaged form may be sold to the ultimate consumer and includes all taxes, local or
otherwise, freight, transport charges, commission payable to dealers, and all charges
towards advertisement, delivery, packing, forwarding and the like and the price is the
sole consideration for such sale:”
Examples on Calculation of Central Excise Duty
Calculation of Excise Duty on Readymade Garments / Made Ups Branded and
RSP equal to or more than Rs. 1000/- that are compulsorily covered

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VALUE ADDED PROFESSIONAL SERVICES LLP
Corp Office: 404 I, 4th Floor, Devika Towers I Chander Nagar I Ghaziabad, U.P. -201011, Telephone: +91 120 4264301
Option 1, Without CENVAT
Details Amount (Rs.)
Retail Sales Price (RSP) 1200.00
Tariff Value 60% of RSP 720.00
2% Excise Duty on Tariff Value 14.40
CENVAT Credit available 0.00
Excise Duty Payable 14.40
Any Item Cotton or Not, Branded & Retail Sale Price => Rs. 1000 without CENVAT
Option 2, With CENVAT
Details Amount (Rs.)
Retail Sales Price (RSP) 1200.00
Tariff Value 60% of RSP 720.00
12.5% Excise Duty on Tariff Value 90.00
CENVAT Credit available (Presumed) 30.00
Excise Duty Payable 60.00
Any Item Cotton or Not, Branded & Retail Sale Price => Rs. 1000 with CENVAT
Calculation of Excise Duty on Readymade Garments / Made Ups whether of
cotton or not Non Branded and RSP less than Rs. 1000/- that are not
compulsorily covered
Option 1, Without CENVAT
Details Amount (Rs.)
Retail Sales Price (RSP) 1200.00
Tariff Value 60% of RSP 720.00
As no CENVAT is availed, rate of duty will be Nil 00.00
CENVAT Credit available 0.00
Excise Duty Payable 00.00

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VALUE ADDED PROFESSIONAL SERVICES LLP
Corp Office: 404 I, 4th Floor, Devika Towers I Chander Nagar I Ghaziabad, U.P. -201011, Telephone: +91 120 4264301
Any Item Cotton or Not, Branded & Retail Sale Price < Rs. 1000 without CENVAT
Option 2, With CENVAT – Pure Cotton items
Details Amount (Rs.)
Retail Sales Price (RSP) 1200.00
Tariff Value 60% of RSP 720.00
6% Excise Duty on Tariff Value 44.00
CENVAT Credit available (Presumed) 30.00
Excise Duty Payable 14.00
Pure Cotton, Un-Branded & Retail Sale Price < Rs. 1000 with CENVAT
Option 2, With CENVAT – Other than Pure Cotton items
Details Amount (Rs.)
Retail Sales Price (RSP) 1200.00
Tariff Value 60% of RSP 720.00
12.5% Excise Duty on Tariff Value 90.00
CENVAT Credit available (Presumed) 30.00
Excise Duty Payable 60.00
Other than Pure Cotton, Un-Branded & Retail Sale Price < Rs. 1000 with CENVAT