13 February 2015
I have a client having a turnover of approx 35 crores in previous year 2013-14. It send gold (pure form), diamonds, stones to labourers who in turn sends the finished goods back to the assessee, who sells them in retail market. Payments made to the labourers after deducting tds. Is the assessee liable to Excise Duty
PS: the finished goods have an embossing of the brand name apart from hallmarking.
03 August 2024
Based on the information you provided, let's analyze the applicability of Excise Duty on the manufacturing of jewelry under the given circumstances:
### **Applicability of Excise Duty on Jewelry**
#### **1. **Manufacturing and Brand Name**
- **Excise Duty on Jewelry:** - Under the Central Excise Act, 1944, excise duty is applicable on the manufacture of goods, including jewelry. However, the applicability can depend on whether the manufacturer is registered or not.
- **Unregistered Brand Name:** - If the jewelry is manufactured under an unregistered brand name but is sold in the retail market, it does not alter the basic requirement for excise duty. The critical factor is whether the manufacturer is a registered entity under excise laws.
#### **2. **Labor and Outsourcing**
- **Process of Outsourcing:** - The fact that the gold, diamonds, and stones are sent to laborers who return the finished goods does not exempt the manufacturer from excise duty. Even if the manufacturing process is outsourced, the manufacturer remains responsible for the excise duty on the finished goods.
#### **3. **Excise Duty Registration**
- **Turnover and Registration:** - For the financial year 2013-14, under the Central Excise rules, any manufacturer whose turnover exceeds the threshold limit was required to obtain excise registration. The threshold limit for excise duty registration was Rs. 1.5 crore, but this has been revised in subsequent years.
- Since your client's turnover is approximately Rs. 35 crores, it exceeds the threshold limit. Thus, they would need to be registered under the Central Excise Act.
#### **4. **Branding and Hallmarking**
- **Brand Name and Hallmarking:** - The fact that the jewelry has embossing of a brand name and hallmarking indicates that the jewelry is ready for retail sale. Excise duty would apply to the manufacture of such goods, irrespective of the brand name or hallmarking.
### **Summary:**
1. **Liability to Excise Duty:** - Yes, the manufacturer is liable to pay excise duty on the jewelry if their turnover exceeds the threshold limit and they are required to be registered under the Central Excise Act.
2. **Registration Requirement:** - With a turnover of approximately Rs. 35 crores, your client should be registered under Central Excise. If they are not yet registered, they need to apply for registration and comply with the excise duty regulations.
3. **Outsourcing:** - The outsourcing of manufacturing to laborers does not exempt them from excise duty. The duty is applicable to the finished goods manufactured and sold.
4. **Action Steps:** - **Verify Registration:** Ensure that your client has obtained the necessary excise registration. - **Calculate Duty:** Calculate and pay the applicable excise duty based on the turnover and the rate applicable to jewelry. - **Compliance:** Maintain proper records and comply with all filing requirements under the Central Excise Act.
**Note:** Regulations and thresholds might have changed in subsequent years, so it's important to check the latest rules and consult with a tax professional or excise consultant to ensure compliance with current laws.
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