CBEC changed notification to stem the import of gold at 1% duty

Sheela Mamidenna

Last week, the Central Board of Excise and Customs (CBEC) issued a notification, No.34/2016-Central Excise dated 8th Sept 2016 which makes amendments to the notification No.33/2016-Central Excise, dated the 2nd September 2016.

Throwing more light on the notification, Ranjeet Mahtani, Partner, Economic Laws Practice, Mumbai gave Dollar Business his views.

A recent amendment to Central Excise Notification No. 12/2012-CE dated 17th March 2012 (vide Notification 34/2016-CE dated 8th September 2016) introduces a condition [No. 52A, as is relevant to Serial No. 192 in the original notification, ] which effectively levies central excise duty on such goods (gold articles) manufactured in India, and thus causes the exemption to be conditional – i.e. there has to be duty or tax payment on inputs, inputs services and capital goods by the manufacturer’s supplier and non-availment of CENVAT Credit by the manufacturer, only then is exemption from central excise duty on the manufactured gold article available.

News articles indicated some spurt in imports of articles of gold (such as spoons, bowls, etc.) from South Korea and Indonesia, which had sought to exploit a possible duty arbitrage. Such arbitrage was due to the concessional Customs duty applicable on imports from the said countries by applying the rates prescribed in the relevant Free Trade Agreements (“FTA”), in contrast to the Customs duty applicable on import of gold articles otherwise, i.e. without the benefit of the FTA. The importers thus stood to gain to the extent of the differential customs duty on such articles.

Consequently, in the case of imports (of these articles), as the specific condition would not be satisfied, the excise duty exemption cannot operate and CVD is applicable and payable on these imports. This implies levy of CVD of 12.5% on such imports.

The amendment, therefore, attempts to overcome the unintended beneficiation enjoyed by certain importers. It, however, remains to be seen, whether importers can continue to garner benefit of the concessional rate, on the premise that the newly-applicable condition does not impact imports of gold articles; while drawing support from the judgement of the Hon’ble Supreme Court in SRF Ltd. vs. Commissioner of Customs 2015 (318) E.L.T. 607 (S.C.)].

MMTC Ltd General Manager, T Srinivas Rao opined, “due to the disparity in the price, import of gold through government agencies from the countries fell to almost 90% and sometimes there were negligible imports. The difference in the price of gold in the market was almost 1 and a half lakh per kilo.”

Last month, about 300 kilos of such gold utensils were said to have been brought into the country. It remains to be seen whether the change in the duties will have any impact on the imports of gold.