Change in Customs Tariff in new Budget 2013

Government of India
Ministry of Finance
Department of Revenue
Tax Research Unit
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P. K. Mohanty
Joint Secretary (TRU-I)
Tel: 23092687
Fax: 23092031
Email: pk.mohanty@nic.in
D.O.F.No.334/ 3/2013-TRU
New Delhi, dated the 28th February, 2013.
Dear Chief Commissioner/ Commissioner,
The Finance Minister has introduced the Finance Bill, 2013 in Lok Sabha today, i.e., 28th February, 2013. Changes in Customs and Central Excise law and rates of duty have been proposed through the Finance Bill, 2013 (clauses 54 to 77 for Customs and clauses 78 to 92 for Central Excise). In order to prescribe effective rates of duty and to carry out changes in the Rules made under the respective Acts, the following notifications are being issued:
CUSTOMS:
Notification Nos.
Date
Tariff
No. 9 /2013-Customs to No.15 /2013-Customs
1st March, 2013
Non-Tariff
No. 25 /2013-Customs(NT)
1st March, 2013
CENTRAL EXCISE
Tariff
No. 5 /2013-CE to No. 12 /2013-CE
1st March, 2013
Non-Tariff
No. 1 /2013-CE (NT) to No. 4 /2013-CE (NT)
1st March, 2013
Unless otherwise stated, all changes in rates of duty take effect from the midnight of 28th February/1st March, 2013. A declaration has been made under the Provisional Collection of Taxes Act, 1931 in respect of clauses 76, 77(b), 91 and 92 of the Finance Bill, 2013 so that changes proposed therein also take effect from the midnight of 28th February/1st March, 2013. The remaining legislative changes would come into effect only upon the enactment of the Finance Bill, 2013. Retrospective amendments in the provisions of law or notification issued under the respective Acts shall have the force of law only upon the enactment of the Finance Bill, 2013 but with effect from the date indicated in the relevant clause or Schedule. These dates may be carefully noted.
2. Important changes in respect of Customs and Central Excise duty and legislative changes are contained in the three Annexes appended to this letter. Annex I contains Chapter wise changes relating to Customs; Annex II contains Chapter wise changes relating to Central Excise. These
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Annexes also contain a few clarifications. Annex III provides a bird’s eye view of legislative changes proposed in the Finance Bill, 2013.
2.1 The Annexes provide a summary of the changes made and should not be used in any quasi-judicial or judicial proceedings, where only the relevant legal texts need to be referred to.
3. In order to achieve a sharper focus, I have alluded only to the key highlights of the budgetary changes in this communication. The details are contained in the Finance Bill and notifications which alone have legal force. My team and I have made every possible effort to avoid the occurrence of errors or mistakes in the Budget documents. However, given the scale of changes, inadvertent errors cannot be ruled out. I shall be grateful if the provisions of the Finance Bill are studied carefully and feedback on issues that may need clarification is provided urgently.
4. It may kindly be ensured that the changes are implemented in a smooth manner without causing any inconvenience to the taxpayers and other stakeholders. All possible efforts may be made to guide the taxpayers by holding interactive sessions/ seminars for their benefit. In case of any doubt or difficulty, I would request you to kindly bring it to my notice immediately or to the notice of Shri Amitabh Kumar, Director (TRU) (Tel No.011-23092236; e-mail: amitabh.kumar@nic.in, Sh. G. G. Pai, Director (TRU) (Tel No. 011-23092753; e-mail: giridhar.pai@nic.in or Sh. Prashant Kumar Jha, Budget Officer (TRU) (Tel No. 011-23094819; e-mail: prashantk.jha@nic.in ). We can also be reached at budget-cbec@nic.in.
5. Copies of Finance Bill, 2013, Finance Minister’s Budget Speech, Explanatory Memorandum to the Bill, relevant notifications can be downloaded directly from www.indiabudget.nic.in as well as www.cbec.gov.in.
6. To conclude, my team and I would like to express my gratitude to you for the valuable suggestions, feedback and support and would look forward to your comments/ suggestions.
With warm regards,
Yours sincerely,
(P. K. Mohanty)
To
All Chief Commissioners/ Directors General
All Commissioners of Customs
All Commissioners of Central Excise
All Commissioners of Customs and Central Excise
All Commissioners of Service Tax
Director DPPR/ Logistics/Legal Affairs/ Data Management
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Annex I
CUSTOMS
Chapter 1 to 7: No change
Chapter 8
8.1 The basic customs duty (BCD) on hazel nuts is being reduced from 30% to 10%. Notification No.12/2012-Customs, dated 1st March, 2012 as amended by notification No. 12/2013-Customs, dated 1st March, 2013 refers. S. No. 23A contains the changes.
8.2 In notification No 12/2012-Customs, at S. No. 24 of the Table, sub-heading 0802 50 00 (Pistachios) is being replaced by sub-headings 0802 51 00 and 0802 52 00. This is a technical rectification.
Chapter 9 to 10: No change
Chapter 11
11.1 The BCD on de-hulled oat grain is being reduced from 30% to 15%. Notification No.12/2012-Customs, dated 1st March, 2012 as amended by notification No. 12/2013-Customs, dated 1st March, 2013 refers. S. No. 38A contains the changes.
Chapter 12 and 14: No change.
Chapter 15
15.1 Peanut butter is presently classified under sub-heading 1517 90 20 of the Customs Tariff whereas, under the Harmonised System, peanut butter is classified under sub-heading 2008 11. To align our Tariff Schedule with HSN, an amendment has been proposed in the Finance Bill, 2013 (Clause 76 read with Third Schedule) to delete the current sub-heading 1517 90 20 and entries relating thereto from the Tariff. By virtue of this amendment, hereafter, the peanut butter will fall under sub-heading 2008 11, which is the correct classification as per the HSN.
15.2 Presently, peanut butter attracts a concessional BCD of 7.5% under notification No. 12/2012-Customs (S. No 71 of the Table). In view of the amendment referred to above, sub-heading 1517 90 20 is being deleted from S. No. 71. However, the concessional duty is being continued under notification No. 12/2012-Customs at new S. No. 88A. In the connection, notification No. 12/2013-Customs refers.
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Chapter 16: No change
Chapter 17
17.1 Raw sugar, white or refined sugar (1701) has been included in the Second Schedule to the Customs Tariff Act, 1975 (Export Schedule) vide Clause 77 read with Fourth Schedule of the Finance Bill, 2013 with a tariff rate of 20%. Exemption is however provided under notification No 27/2011-Customs dated 1.3.2011, as amended by notification No 15/2013-Customs, dated the 1st March 2013. Thus, raw sugar, white or refined sugar will not attract any export duty.
Chapter 18-22: No change
Chapter 23
23.1 De-oiled rice bran oil cake is being exempted from export duty. S. No. 12 of notification No. 27/2011-Customs, dated 1st March 2011, as amended by notification No.15/2013-Customs, dated 1st March 2013 refers.
Chapter 24 and 25: No change
Chapter 26
26.1 Bauxite and ilmenite are being incorporated in the Second Schedule to the Customs Tariff Act, 1975 (Export Schedule) with a tariff rate of 30%. (Clause 77 read with the Fourth Schedule to the Finance Bill, 2013). However, the effective duty is being prescribed at 10% on bauxite (2606 0010 and 2606 0020) and unprocessed ilmenite (2614 0010) and at 5% on upgraded ilmenite (2614 00 20). In this connection, notification No. 27/2011-Customs dated the 1st March as amended by notification No.15/2013-Customs, dated 1st March 2013 refers. New S. Nos. 24A, 24B, 24C and 24D contain the changes. By virtue of the Provisional Collection of Taxes Act, 1931, the levies will come into force with immediate effect.
Chapter 27
27.1 The BCD on bituminous coal is being reduced from 5 % to 2 % and CVD from 6 % to 2 %. The BCD on steam coal is being raised from Nil to 2% and CVD from 1% to 2%. Hereafter, both steam coal and bituminous coal will attract a uniform rate of 2% BCD and 2% CVD. Notification No.12/2012-Cus, as amended by notification No. 12/2013-Customs refers. Changes are contained in S. Nos 122 A, 123 and 124 of the Table.
Chapter 28-49: No change.
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Chapter 50
50.1 The BCD on raw silk is being increased from 5% to 15%. S. No.276 of notification No.12/2012-Customs, as amended by notification No.12 /2013-Customs, dated the 1st March 2013 refers.
Chapter 51 and 52: No change
Chapter 53
53.1 Presently, coir yarn (53.08) is mentioned at S. No. 43 of notification No. 27/2011-Customs. In column (4), which is presently blank, the entry Nil is being inserted. This is a technical rectification. In this connection, notification No.15 /2013-Customs, dated the 1st March 2013 refers.
Chapter 54 - 70: No change
Chapter 71
71.1 Basic customs duty is being reduced on pre-forms of precious and semi-precious stones from 10% to 2%. Notification No.12/2012-Customs, dated 1st March, 2012 as amended by notification No.12/2013-Customs, dated 1st March, 2013 refers. S. No.312A contains the changes.
71.2. Under the Foreign Trade Policy (paragraph 4A.2.2), an exporter with annual export turnover of Rs 5 crore for each of the last three years is allowed to export cut & polished diamonds (each of 0.25 carat or more) abroad to any of the designated laboratories/agencies with re-import facility at zero duty within 3 months from the date of export. In this regard, a variance not exceeding +_1mm in height and circumference and not exceeding +_1 cent in weight is allowed between exported and re-imported cut and polished diamonds. In this connection, Explanation 1 of notification No. 9/2012-Customs, dated the 9th March, 2012 refers. This limit is being revised in respect of height and circumference from +_1 mm to +_0.01 mm. The variation in respect of weight shall remain unchanged. Notification No. 9/2012-Customs, dated the 9th March, 2012 as amended by notification No. 11/2013-Customs, dated the 1st March, 2013 may be referred to for details.
Chapter 72
72.1 Flat rolled products of iron or non-alloy steel, plated or coated with zinc (sub-headings 7210 30 10, 7210 30 90, 7210 41 00, 7210 49 00, 7212 20 10, 7212 20 90, 7212 30 10 and 7212
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30 90) are being exempted from export duty retrospectively from 1st March 2011. In this connection, clauses 75 and 77 of the Finance Bill, 2013 may be referred to for details. The changes will come into force upon enactment of the Finance Bill. In the meanwhile, export duty may not be collected on the afore-cited product. Prior to 1st March 2011, this product was exempt from export duty under notification No. 77/2008-Customs, dated 13th June 2008.
Chapter 73
73.1. Under notification No 12/2012-Customs (S No. 371), specified goods for manufacture of catalytic convertors and their parts attract a concessional BCD of 5%. Stainless Steel Wire Cloth Stripe (sub-heading 7314 14 10) and Wash Coat (sub-heading 3824 90 90) are being added to the list for availing of concessional duty of 5%.
Chapter 74-83: No change.
Chapter 84
84.1 The BCD on 20 specified machinery for use in the leather industry or footwear industry is being reduced from 7.5% to 5%. Descriptions of certain leather and footwear machinery items are being modified. S No 390 (List 29) of notification No. 12/2012-Cus, as amended by notification No. 12/2013-Customs, dated the 1st March 2013 refers.
84.2 The BCD on all textile machinery and parts thereof falling under headings 8444 to 8449 is being reduced from 7.5% to 5%. Notification No.12/2012-Customs, dated 1st March, 2012 as amended by notification No. 12/2013-Customs, dated 1st March, 2013 refers. S. No. 406A contains the changes.
Chapter 85
85.1 The BCD on Integrated Decoder Receiver, also known as Set Top Box, is being increased from 5% to 10%. S. No411 of notification No.12/2012-Customs, as amended by notification No. 12 /2013-Customs, dated the 1st March 2013 refers.
85.2 LCD and LED TV Panels of 19” and above are presently exempt from BCD under notification No 12/2012-Customs (S. No. 432). In this connection, a doubt has been raised whether this exemption is available for LCD and LED TV Modules or otherwise. It is clarified that LCD and LED TV Panels and LCD and LED TV Modules are one and the same thing for the purpose of exemption under this notification.
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85.3 Presently, all goods required for the manufacture of the goods falling under heading 8541 are exempt from BCD subject to actual user condition. Solar cells and solar modules are classified under heading 85.41. It has been brought to the notice of the Ministry that this exemption has been denied at certain places although the imported goods are required for the manufacture of solar cells and solar modules. It is clarified that the BCD exemption under S No 39 of notification No. 24/2005-Customs, dated 1st March, 2005 is available to all goods including chemicals and electronic parts required for the manufacture of solar cells whether or not assembled in modules or panels.
Chapter 86: No change
Chapter 87
87.1 The validity period of exemption granted to identified parts of hybrid and electric vehicles is being extended by two more years up to 31st March, 2015. Clauses (g) and (h) of Proviso to notification No.12/2012-Customs, as amended by notification No. 12/2013-Customs, dated the 1st March 2013 refers.
87.2 BCD is being exempted on lithium ion automotive battery for manufacture of lithium ion battery packs for supply to the manufacturers of hybrid and electric vehicles. Notification No.12/2012-Customs (S. No 438), as amended by notification No. 12/2013-Customs, dated the 1st March 2013 refers.
87.3 At present, cars and other motor vehicles, new with FOB value more than US $ 40,000 and with engine capacity more than 3000 cc for petrol-run vehicles and more than 2500 cc for diesel-run vehicles attract a BCD of 75%. In this connection, notification No 12/2012- Customs (S No 437, (2) (a) of the Table) refers. The entry is being amended to read: “...with CIF value more than US $ 40,000 or with engine capacity more than 3000 cc for petrol-run vehicles and more than 2500 cc for diesel-run vehicles or with both”. Further, the BCD on these cars/motor vehicles is being increased from 75% to 100%. Thus, hereafter, these cars/ motor vehicles with CIF value more than US $ 40,000 would attract 100% BCD regardless of engine capacity. Similarly, regardless of value, cars/motor vehicles with engine capacity more than 3000 cc for petrol-run vehicles and more than 2500 cc for diesel-run vehicles would attract BCD at 100%. S.
No 437 of notification No.12/2012-Cus, as amended by notification No. 12/2013-Cus, dated the 1st March 2013 refers.
87.4 The BCD on import of old cars is being increased from 100% to 125%. Clause 76 of the Finance Bill 2013 refers. By virtue of the Provisional Collection of Taxes Act, 1931, the levy will come into force with immediate effect.
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87.5 The BCD on new motorcycles with engine capacity of 800cc or more is being increased from 60% to 75%. Notification No.12/2012-Customs (S No 443), as amended by notification No. 12 /2013-Customs, dated the 1st March 2013 may be referred to for details.
Chapter 88
88.1 Exemption from education cess and secondary & higher education cess is being withdrawn on aeroplanes, helicopters and their parts. For this purpose, S Nos 51 and 52 and entries relating thereto are being deleted from notification No 69/2004-Customs, dated 9th July 2004. The relevant entry at S. No 1 is also being deleted. In this connection, notification No. 9/2013- Customs, dated 1st March 2013 refers.
88.2 The time period for consumption/installation of parts and testing equipment imported for maintenance, repair and overhaul (MRO) of aircraft by units engaged in such activities is being increased from 3 months to 1 year. S. No.448 of notification No.12/2012-Customs (Condition 73), as amended by notification No. 12/2013-Customs, dated the 1st March 2013 refers.
88.3 The customs duty exemption on parts and testing equipment for maintenance, repair and overhauling of aircraft is being extended to parts and testing equipment for maintenance repair & overhauling of aircraft and aircraft parts. S. No.448 of notification No.12/2012-Customs, as amended by notification No. 12/2013-Customs, dated the 1st March 2013 refers.
88.4 Private category aircrafts are being included in the list of eligible categories of aircrafts for the purpose of availing of the exemption under notification No 12/2012- Customs. S. No.448 of notification No.12/2012-Customs, as amended by notification No. 12/2013-Customs, dated the 1st March 2013 refers.
88.5 The terms “scheduled air transport service” and “scheduled air cargo service” are explained in condition No. 75 of notification No. 12/2012-Cus dated 17.3.2012. In this connection, a doubt has been raised whether exemption granted to parts and testing equipment imported for servicing, repair or maintenance of scheduled airlines includes foreign airlines or otherwise. Under S. Nos. 448 and 454 of the notification No. 12/2012-Customs read with condition Nos. 73 and 21 respectively, exemption has been provided for servicing, repair or maintenance of aircraft used for operating “scheduled air transport service” and “scheduled air cargo service”. The term “scheduled air transport service”/ “scheduled air cargo service”, as defined under condition No 75 of the afore-said notification, does not exclude foreign airlines. It is as such clarified that the aforesaid exemption available for “scheduled air transport service” and “scheduled air cargo service” includes foreign airlines that meet the definition of scheduled air transport and air cargo service.
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88.6 Under S. No. 450 of the notification No. 12/2012-Customs read with condition 75 (ii), a foreign registered aircraft, that is brought into India for the purpose of “a flight to or across India” and which is intended to be removed within the time period specified for the purpose, is exempt from customs duty. In this connection, doubts have been raised whether the term “a flight to India” means “one landing and one take off” or it entitles the aircraft to fly to different destinations within India during the stipulated period of stay in India. The matter has been examined and it is clarified that the term “a flight to India” by a foreign registered non-scheduled aircraft shall mean a flight which after completion of its itinerary (which may include multiple destinations in India) leaves India within the stipulated period of 15 days, or as extended by the competent authority in the Ministry of Civil Aviation, not exceeding 60 days from the date of entry.
Chapter 89
89.1 By virtue of excise duty exemption on ships and vessels (89.01, 89. 04, 89.05 and 89.06 90 00), there will no CVD leviable on these ships and vessels. Notification Nos. 19/2012-Customs and 20-2012-Customs, both dated 17th March 2012 and S. No 462 of notification No. 12/2012-Customs, which have become redundant due to excise duty exemption, are being rescinded.
89.2 Basic customs duty on yachts and other vessels (89.03) is being increased from 10% to 25%. Clause 76 of the finance Bill, 2013 refers. By virtue of the Provisional Collection of Taxes Act, 1931, the levy will come into force with immediate effect.
89.3 The time limit for consumption of imported goods for the purpose of repair of ocean going vessels by ship repair units is being increased from 3 months to 1 year. S. Nos.459 and 460 of notification No.12/2012-Customs (Conditions 79 and 80), as amended by notification No. 12/2013-Customs, dated the 1st March 2013 refers.
Chapter 90-98: No change.
Miscellaneous:
(i) Full exemption is being provided to trophy when imported into India by National Sports Federation recognized by the Central Government or any Sports Body registered under any law for the time being in force in connection with international tournament to be held in India. Notification No. 146/1994-Customs, dated the 13th July, 1994 as amended by notification No. 14/2013-Customs, dated the 1st March 2013 refers.
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(ii) Notification No 75/2005-Customs, dated 22nd July 2005 (India- Singapore FTA) is being amended to replace the sub-heading 2920 90 90 with the sub-heading 2920 90 99. This is a technical rectification.
(iii) Exemption from education cess and secondary & higher education cess is being withdrawn on soya bean oil, olive oil and a few other items. Accordingly, S. Nos. 5, 6, 7, 8, 13, 51& 52 and entries relating thereto are being deleted from notification No 69/2004-Customs, dated 9th July 2004. In the said notification, at various places, references have been made to exemptions contained in erstwhile notification No. 21/2002-Customs, dated 1st March, 2002. The entries showing notification No. 21/2002-Customs (S. Nos. 9, 10, 12, 55) are being replaced by the relevant S. Nos. of notification No.12/2012 –Customs. This is a technical rectification. Notification No.69/2004-Customs as amended by notification No. 9/2013 –Customs, dated 1st March, 2013 may be referred to for details.
Baggage Rules
Presently, under Rule 6 of the Baggage Rules, 1998, an Indian passenger, who has been residing abroad for over one year, is permitted to bring jewellery without payment of duty up to an aggregate value of Rs 10,000/- in case of a gentleman passenger and Rs 20,000/- in case of a lady passenger. Under Rule 8 of the Baggage Rules,1998, a person who is transferring his residence ( Transfer of Residence) to India is also allowed to bring jewellery without payment of duty up to an aggregate value of Rs 10,000/- in case of a gentleman passenger and Rs 20,000/- in case of a lady passenger. The duty free limits are being raised to Rs 50,000/- in case of a gentleman passenger and Rs 100,000/- in case of a lady passenger.
Presently, under Rule 10 of the Baggage Rules, 1998, a crew member of the vessel/aircraft is allowed to bring duty free items like chocolates, cheese, cosmetics etc. for their personal or family use up to a value of Rs 600. The duty free allowance is being increased from Rs 600 to Rs 1500.
Notification No 25/2013-Customs (NT), dated 1st March, 2013 which contains these changes may be referred to for details.
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Incentives to semiconductor wafer fab manufacturing facilities

Incentives to semiconductor wafer fab manufacturing facilities, including zero
customs duty for plant and machinery.

Key Features of Budget 2013

“Kalangathu Kanda Vinaikkan Thulangkathu
Thookkang Kadinthu Seyal”
(What clearly eye discerns as right, with steadfast will
And mind unslumbering, that should man fulfil)
- Saint Tiruvalluvar
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Key Features of Budget 2013-2014
THE ECONOMY AND THE CHALLENGES
􀂉 Getting back to potential growth rate of 8 percent is the challenge facing the
country.
􀂉 Slowdown in Indian economy has to be seen in the context of slowing global
economic growth from 3.9 per cent in 2011 to 3.2 per cent in 2012.
􀂉 However, no reason for gloom or pessimism. Of the large countries of the world
only China and Indonesia growing faster than India in 2012-13. In 2013-14, only
China projected to grow faster than India.
􀂉 Between 2004 and 2008, and again in 2009-10 and 2010-11 the growth rate was
over 8 per cent and crossed 9 per cent in four of those six years.
􀂉 11th Plan period had average growth rate of 8 percent, highest during any Plan
period, entirely under the UPA Government.
􀂉 High growth rate can again be achieved through cooperation.
􀂉 ‘Higher growth leading to inclusive and sustainable development’ to be the
mool mantra.
􀂉 Government believes in inclusive development with emphasis on improving
human development indicators specially of women, the scheduled castes, the
scheduled tribes, the minorities and some backward classes. This Budget to be a
testimony to that commitment.
Fiscal Deficit, Current Account Deficit and Inflation
􀂉 The purpose of Budget to create economic space and find resources to achieve
the objective of inclusive development.
􀂉 Dr Vijay Kelkar Committee made its recommendations to Government
in September 2012. A new fiscal consolidation path with fiscal deficit at
5.3 per cent of GDP this year and 4.8 per cent of GDP in 2013-14 announced by
the Government.
􀂉 Foreign investment in an imperative in view of the high current account deficit
(CAD). FII, FDI and ECB three main source of CAD Financing. Foreign
investment that is consistant with our economic objectives to be encouraged.
􀂉 Development must be economically and ecologically sustainable and
democratically legitimate.
􀂉 Battle against inflation must be fought on all fronts. Efforts in the past few months
have brought down headline WPI inflation to about 7 per cent and core inflation
to about 4.2 percent.
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􀂉 Food inflation is worrying but all possible steps to be taken to augment the supply
side to meet the growing demand for food items.
􀂉 Government expenditure has both good and bad consequences and trick is to
find the correct level of Government expenditure.
􀂉 Faced with huge fiscal deficit, Government expenditure rationalised in 2012-13.
Some economic space retrieved. Space to be used to further Government’s socioeconomic
objectives.
THE PLAN AND BUDGETARY ALLOCATIONS
􀂉 Revised Estimates (RE) of the expenditure in 2012-13 at 96 per cent of the Budget
Estimates (BE) due to slowdown and austerity measures.
􀂉 During 2013-14, BE of total expenditure of ` 16,65,297 crore and of Plan
Expenditure at ` 5,55,322 crore.
􀂉 Plan Expenditure in 2013-14 to grow at 29.4 per cent over Revised Estimates for
the current year.
􀂉 All flagship programmes fully and adequately funded and sufficient funds
provided to each Ministry or Department consistent with their capacity to spend
funds.
􀂉 Budget for 2013-14 to have one overarching goal of creating opportunities for
our youth to acquire education and skills that will get them decent jobs or selfemployment.
SC, ST, Women and Children
􀂉 Allocations for Scheduled Caste Sub Plan and Tribal Sub Plan increased
substantially over the allocations of the current year. Funds allocated to these
Sub Plans cannot be diverted.
􀂉 ` 97,134 crore allocated for programmes relating to women and ` 77,236 crore
allocated for programmes relating to children.
􀂉 Ministry of Women and Child Development to design schemes that will address
the concerns of women belonging to the most vulnerable groups, including single
women and widows. An additional sum of ` 200 crore proposed to be provided
to the Ministry to begin work.
Minorities
􀂉 An increase of 12 per cent over the BE and 60 per cent over the RE of 2012-13 to
Ministry of Minority Affairs.
􀂉 Allocation of ` 160 crore to the corpus of Maulana Azad Education Foundation
to raise its corpus to ` 1,500 crore during 12th Plan period.
Disabled Persons
􀂉 A sum of ` 110 crore to the Department of Disablity Affairs for ADIP scheme in
2013-14 against RE 2012-13 of ` 75 crore.
􀂁
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Health and Education
􀂉 Health for all and education to all remains priority.
􀂉 ` 37,330 crore allocated to the Ministry of Health & Family Welfare.
􀂉 New National Health Mission will get an allocation of ` 21,239 crore.
􀂉 ` 4,727 crore for medical education, training and research.
􀂉 ` 150 crore provided for National Programme for the Health Care of Elderly.
􀂉 Ayurveda, Unani, Siddha and Homoeopathy are being mainstreamed. Allocation
of ` 1,069 crore to Department of AYUSH.
􀂉 ` 1,650 crore allocated for six AIIMS-like institutions.
􀂉 Allocation of ` 65,867 crore to the Ministry of Human Resource Development,
an increase of 17 perent over the RE of the current year.
􀂉 ` 27,258 crore provided for Sarva Shiksha Abhiyaan (SSA).
􀂉 An increase of 25.6 per cent over RE of the current year for investments in
Rashtriya Madhyamik Shiksha Abhiyan (RMSA).
􀂉 ` 5,284 crore allocated to Ministries/Departments in 2013-14 for scholarships to
students belonging to SC, ST, OBC, Minorities and girl children.
􀂉 Mid Day Meal Scheme (MDM) to be provided ` 13,215 crore.
􀂉 Government committed to the creation of Nalanda University as a centre of
educational excellence.
ICDS
􀂉 ` 17,700 crore allocated for ICDS in 2013-14 representing an increase of
11.7 per cent over 2012-13.
􀂉 Allocation of ` 300 crore in 2013-14 for a multi-sectoral programme aimed at
overcoming maternal and child malnutrition. Programme to be implemented in
100 districts during 2013-14 to be scaled to cover 200 districts the year after.
Drinking Water
􀂉 ` 15,260 crore allocated to Ministry of Drinking Water and Sanitation.
􀂉 ` 1,400 crore provided for setting-up of water purification plants in 2000 arsenic
- and 12000 fluoride-affected rural habitations.
Rural Development
􀂉 Allocation of ` 80,194 crore in 2013-14 for Ministry of Rural Development
marking an increase of 46% over RE 2012-13.
􀂉 Proposal to carve out PMGSY-II and allocate a portion of the funds to the new
programme that will benefit States such as Andhra Pradesh, Haryana, Karnataka,
Maharashtra, Punjab and Rajasthan.
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JNNURM
􀂉 ` 14,873 crore for JNNURM in BE 13-14 as against RE of ` 7,383 crore. Out of
this, a significant portion will be used to support the purchase of upto 10,000
buses, especially by the hill States.
AGRICULTURE
􀂉 Average annual growth rate of agriculture and allied sector was 3.6% during XI
Plan against 2.5% and 2.4% in IX and X plans respectively.
􀂉 In 2012-13, total food-grain production will be over 250 million tonnes. Minimum
support price for every agricultural produce has increased significantly under the
UPA Government.
􀂉 ` 27,049 crore allocated to Ministry of Agriculture, an increase of 22 per cent
over the RE of current year.
􀂉 Agricultural research provided ` 3,415 crore.
Agricultural Credit
􀂉 For 2013-14, target of agricultural credit kept at ` 7 lakh crore.
􀂉 Interest subvention scheme for short-term crop loans to be continued scheme
extended for crop loans borrowed from private sector scheduled commercial
banks.
Green Revolution
􀂉 Bringing green revolution to eastern India a remarkable success. ` 1,000 crore
allocated in 2013-14.
􀂉 ` 500 crore allocated to start a programme of crop diversification that would
promote technological innovation and encourage farmers to choose crop
alternatives.
􀂉 Rashtriya Krishi Vikas Yojana and National Food Security Mission provided
` 9,954 crore and ` 2,250 crore respectively.
􀂉 Allocation for integrated watershed programme increased from ` 3,050 crore in
2012-13 (BE) to ` 5,387 crore.
􀂉 Allocation made for pilots programme on Nutri-Farms for introducing new crop
varieties that are rich in micro-nutrients.
􀂉 National Institute of Biotic Stress Management for addressing plant protection
issues will be established at Raipur, Chhattisgarh.
􀂉 The Indian Institute of Agricultural Bio-technology will be established at Ranchi,
Jharkhand.
􀂉 Pilot scheme to replant and rejuvenate coconut gardens implemented in some
districts of Kerala and the Andaman & Nicobar extended to entire State of Kerala.
Farmer Producer Organizations
􀂉 Matching equity grants to registered Farmer Producer Organization (FPO) upto
a maximum of ` 10 lakhs per FPO to enable them to leverage working capital
from financial institutons.
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􀂉 Credit Guarantee Fund to be created in the Small Farmers’Agri Business
Corporation with an initial corpus of ` 100 crore.
National Livestock Mission
􀂉 National Livestock Mission to be set up.
􀂉 A provision of ` 307 crore made for the Mission.
Food Security
􀂉 Additional provision of Rs. 10,000 crore for National Food Security Act.
INVESTMENT, INFRASTRUCTURE AND INDUSTRY
􀂉 Communication with investors to be improved to remove any apprehension or
distrust, including fears about undue regulatory burden.
􀂉 Need of new and innovative instruments to mobilise funds for investment in
infrastructure sector. Measures such as:
* Infrastructure Debt Funds (IDF) to be encourged,
* IIFCL to offer credit enhancement.
* Infrastructure tax-free bond of ` 50,000 crore in 2013-14,
* Build roads in North eastern states and connect them to Myanmar with
assistance from WB & ADB,
* Raising corpus of Rural Infrastructure Development Fund (RIDF) to ` 20,000
crore and
* ` 5,000 crore to NABARD to finance construction for warehousing. Window
to Panchayats to finance construction of godowns.
Road Construction
􀂉 A regulatory authority for road sector.
􀂉 3000 kms of road projects in Gujarat, Madhya Pradesh, Maharashtra, Rajasthan
and Uttar Pradesh will be awarded in the first six months of 2013-14.
Cabinet Committee on Investment
􀂉 The Cabinet Committee on Investment (CCI) has been set up. Decisions have
been taken in respect of a number of gas, power and coal projects.
New Investment
􀂉 Companies investing ` 100 crore or more in plant and machinery during the
period 1.4.2013 to 31.3.2015 will be entitled to deduct an investment allowance
of 15 per cent of the investment.
􀂉 Incentives to semiconductor wafer fab manufacturing facilities, including zero
customs duty for plant and machinery.
􀀤
6
Savings
􀂉 Need to incentivise greater savings by household sector in financial instrumnets.
Following measures proposed:
􀂙 Rajiv Gandhi Equity Savings Scheme to be liberalised.
􀂙 Additional deduction of interest upto ` 1 lakh for a person taking first
home loan upto ` 25 lakh during period 1.4.2013 to 31.3.2014
􀂙 In consultation with RBI, instruments protecting savings from inflation
to be introduced.
Industrial Corridors
􀂉 Plans for seven new cities have been finalised and work on two new smart
industrial cities at Dholera, Gujarat and Shendra Bidkin, Maharashtra will start
duing 2013-14
􀂉 Delhi Mumbai Industrial Corridor (DMIC) to be provided additional funds during
2013-14 within the share of the Government of India in the overall outlay, if
required.
􀂉 Chennai Bengaluru Industrial Corridor to be developed.
􀂉 Preparatory work has started for Bengaluru Mumbai Industrial Corridor.
Leh-Kargil Transmission Line
􀂉 Government to construct a transmission system from Srinagar to Leh at a cost of
` 1,840 crore.
Ports
􀂉 Two new major ports will be established in Sagar, West Bengal and in Andhra
Pradesh to add 100 million tonnes of capacity.
􀂉 A new outer harbour to be developed in the VOC port at Thoothukkudi,
Tamil Nadu through PPP at an estimated cost of ` 7,500 crore.
National Waterways
􀂉 A bill to declare the Lakhipur-Bhanga stretch of river Barak in Assam as the
sixth national waterway to be moved in Parliament.
􀂉 Preparatory work underway to build a grid connecting waterways, roads and ports.
Oil and Gas
􀂉 A policy to encourage exploration and production of shale gas will be announced.
􀂉 The 5 MMTPA LNG terminal in Dabhol, Maharashtra will be fully operational
in 2013-14.
Coal
􀂉 In the medium to long term need to reduce our dependence on imported coal.
One way forward is to devise a PPP policy framework with Coal India Limited
as one of the partners.
7
􀂉 Ministry of Coal to announce Government’s policies in due course.
Power
􀂉 Guidelines regarding financial restructuring of DISCOMS have been announced.
State Government urged to prepare the financial restructuring plan, quickly sign
MoU and take advantage of the scheme.
Micro, Small and Medium Enterprises
􀂉 Benefits or preferences enjoyed by MSME to continue upto three years after they
grow out of this category.
􀂉 Refinancing capacity of SIDBI raised to ` 10,000 crore.
􀂉 Another sum of ` 100 crore provided to India Microfinance Equity Fund.
􀂉 A corpus of ` 500 crore to SIDBI to set up a Credit Guarantee Fund for factoring.
􀂉 A sum of ` 2,200 crore during the 12th Plan period to set up 15 additional Tool
Rooms and Technology Development Centres with World Bank assistance.
􀂉 Ministry of Corporate Affairs to notify that funds provided to technology
incubators located within academic Institutions and approved by the Ministry of
Science and Technology or Ministry of MSME will qualify as CSR expenditure.
Textiles
􀂉 Technology Upgradation Fund Scheme (TUFS) to continue in 12th Plan with an
investment target of ` 1,51,000 crore.
􀂉 Allocation of ` 50 crore to Ministry of Textile to incentivise setting up Apparel
Parks within the SITPs to house apparel manufacturing units.
􀂉 A new scheme called the Integrated Processing Development Scheme will be
implemented in the 12th Plan to address the environmental concerns of the textile
industry.
􀂉 Working capital and term loans at a concessional interest of 6 per cent to handloom
sector.
􀂉 Scheme of Fund for Regeneration of Traditional Industries (SFURTI) extended
to 800 clusters during the 12th Plan.
Foreign Trade
􀂉 Support to measures to be taken to boost exports of goods and services.
FINANCIAL SECTOR
􀂉 A standing Council of Experts to be constituted in the Ministry of Finance to
analyse the international competitiveness of the Indian financial sector.
Banking
􀂉 Compliance of public sector banks with Basel III regulations to be ensured.
` 14,000 crore provided in BE 2013-14 for infusing capital.
8
􀂉 All branches of public sector banks to have ATM by 31.3.2014.
􀂉 Proposal to set up India’s first Women’s Bank as a public sector bank. Provision
of ` 1,000 crore as initial capital.
􀂉 ` 6,000 crore to Rural Housing Fund in 2013-14.
􀂉 National Housing Bank to set up Urban Housing Fund. ` 2,000 crore to be
provided to the fund in 2013-14.
Insurance
􀂉 A multi-pronged approach to increase the penetration of insurance, both life and
general, in the country.
􀂉 Number of proposals finalised, in consultation with IRDA such as empowering
insurance companies to open branches in Tier-II cities and below without prior
approval of IRDA, KYC of banks to be sufficient to acquire insurance policies,
banks to be permitted to act as insurance brokers, banking correspondent allowed
to sell micro-insurance products and achieving the goal of having an office of
LIC and an office of at least one public sector general insurance company in
towns with population of 10,000 or more.
􀂉 Rashtriya Swasthya Bima Yojana to be extended to other categories such as
rickshaw, auto-rickshaw and taxi drivers, sanitation workers, rag pickers and
mine workers.
􀂉 A comprehensive social security package to be evolved for unorganised sector
by facilitating convergence among different schemes.
Capital Market
􀂉 Proposal to amend the SEBI Act, to strengthen the regulator, under consideration.
􀂉 Number of proposal finalised in consultation with SEBI.
􀂙 Designatged depository participants, authorised by SEBI, may register
different classes of portfolio investors, subject to compliance with KYC
guidelines.
􀂙 SEBI will simplify the procedures and prescribe uniform registration and
other norms for entry for foreign portfolio investors.
􀂙 Rule that, where an investor has a stake of 10 per cent or less in a company,
it will be treated as FII and, where an investor has a stake of more than
10 per cent, it will be treated as FDI will be laid.
􀂙 FIIs will be permitted to participate in the exchange traded currency
derivative segment to the extent of their Indian rupee exposure in India.
􀂙 FIIs will also be permitted to use their investment in corporate bonds and
Government securities as collateral to meet their margin requirements.
􀂙 SEBI to prescribed requirement for angel investor pools by which they
can be recognised as Category I AIF venture capital funds.
􀁱
9
􀂙 Small and medium enterprises, to be permitted to list on the SME exchange
without being required to make an initial public offer (IPO).
􀂙 Stock exchanges to be allowed to introduce a dedicated debt segment on
the exchange.
ENVIRONMENT
􀂉 Support to municipalities that will implement waste-to-energy projects.
􀂉 Government to provide low interest bearing fund from the National Clean Energy
Fund (NCEF) to IREDA to on-lend to viable renewable energy projects.
􀂉 ‘Generation-based incentive’ reintroduced for wind energy projects and ` 800
crore allocated for this purpose.
OTHER PROPOSALS
Backward Regions Grant Fund
􀂉 New criteria for determining backwardness to be evolved and reflect them in
future planning and devolution of funds.
Skill Development
􀂉 Target of skilling 50 million people in the 12th Plan period, including 9 million
in 2013-14.
Defence
􀂉 Allocation for Defence increased to ` 2,03,672 crore including ` 86,741 crore
for capital expenditure.
􀂉 Constraints not to come in the way of providing any addition requirement for the
security of nation.
Science and Technology
􀂉 Despite constraints substantial enhancements given to Science and Technology,
Space and Atomic Energy.
􀂉 ` 200 crore to be set apart to fund organisations that will scale up S&T innovations
and make these products available to the people.
Institutions of Excellence
􀂉 A grant of ` 100 crore each made to 4 institution of excellence.
Sports
􀂉 National Institute of Sports Coaching to be set up at Patiala at a cost of
` 250 crore over a period of three years.
Broadcasting
􀂉 All cities having a population of more than 1,00,000 will be covered by private
FM radio services.
10
Panchayati Raj
􀂉 Augmentation in the Budget allocation of Rajiv Gandhi Panchayat Sashaktikaran
Abhiyan (RGPSA) to ` 455 crore in 2013-14. An additional ` 200 crore proposed
to be provided.
Post Offices
􀂉 An ambitious IT driven project to modernise the postal network at a cost of
Rs. 4,909 crore. Post offices to become part of the core banking solution and
offer real time banking services.
Ghadar Memorial
􀂉 Government to fund the conversion of the Ghadar Memorial in San Francisco
into a museum and library.
Central Schemes
􀂉 Centrally Sponsored Schemes (CSS) and Additional Central Assistance (ACA)
Schemes to be restructured into 70 schemes. Central fund for the schemes to be
given to the States as part of central plan assistance.
Three promises
􀂉 Promises made to woman, youth and poor.
􀂙 We stand in solidarity with our girl children and women. And we pledge
to do everything possible to empower them and to keep them safe and
secure. A fund - “Nirbhaya Fund” - to be setup with Government
contribution of ` 1,000 crore.
􀂙 Youth to be motivated to voluntarily join skill development programmes.
National Skill Development Corporation to set the curriculum and
standards for training in different skills. ` 1000 crore set apart for this
scheme.
􀂙 To the poor of India direct benefit transfer scheme will be rolled out
throughout the country during the term of the UPA Government with the
motive “Äapka paisa aapke haath”.
Budget Estimates
􀂉 Plan expenditure is placed at ` 5,55,322 crore.
􀂉 Non Plan Expenditure is estimated at ` 11,09,975 crore.
􀂉 Fiscal deficit for the current year contained at 5.2 per cent and for the year 2013-
14 at 4.8 per cent.
􀂉 Revenue deficit for the current year at 3.9 per cent and for the year 2013-14 at 3.3
per cent.
􀂉 By 2016-17 fiscal deficit to be brought down to 3 per cent, revenue deficit to 1.5
per cent and effective revenue deficit to zero per cent.
11
PART B — TAX PROPOSALS
􀂉 Clarity in tax laws, a stable tax regime, a non-adversarial tax administration, a
fair mechanism for dispute resolution and independent judiciary for greater
assurance is underlying theme of tax proposals.
􀂉 Tax Administration Reforms Commission to be set up.
􀂉 In short term need to reclaim peak of 11.9 per cent of tax GDP ratio achieved in
2007-08.
DIRECT TAXES
􀂉 Little room to give away tax revenues or raise tax rates in a constrained economy.
􀂉 No case to revise either the slabs or the rates of Personal Income Tax. Even a
moderate increase in the threshold exemption will put hundreds of thousands of
Tax Payers outside Tax Net.
􀂉 However, relief for Tax Payers in the first bracket of `2 lakhs to ` 5 lakhs. A tax
credit of ` 2000 to every person with total income upto `5 lakhs.
􀂉 Surcharge of 10 percent on persons (other than companies) whose taxable income
exceed ` 1 crore to augment revenues.
􀂉 Increase surcharge from 5 to 10 percent on domestic companies whose taxable
income exceed ` 10 crore.
􀂉 In case of foreign companies who pay a higher rate of corporate tax, surcharge to
increase from 2 to 5 percent, if the taxabale income exceeds ` 10 crore.
􀂉 In all other cases such as dividend distribution tax or tax on distributed income,
current surcharge increased from 5 to 10 percent.
􀂉 Additional surcharges to be in force for only one year.
􀂉 Education cess to continue at 3 percent.
􀂉 Permissible premium rate increased from 10 percent to 15 percent of the sum
assured by relaxing eligibility conditions of life insurance policies for persons
suffering from disability and certain ailments.
􀂉 Contributions made to schemes of Central and State Governments similar to
Central Government Health Scheme, eligible for section 80D of the Income tax
Act.
􀂉 Donations made to National Children Fund eligible for 100 percent deduction.
12
􀂉 Investment allowance at the rate of 15 percent to manufacturing companies that
invest more than ` 100 crore in plant and machinery during the period 1.4.2013
to 31.3.2015.
􀂉 ‘Eligible date’ for projects in the power sector to avail benefit under Section 80-
IA extended from 31.3.2013 to 31.3.2014.
􀂉 Concessional rate of tax of 15 percent on dividend received by an Indian company
from its foreign subsidiary proposed to continue for one more year.
􀂉 Securitisation Trust to be exempted from Income Tax. Tax to be levied at specified
rates only at the time of distribution of income for companies, individual or HUF
etc. No further tax on income received by investors from the Trust.
􀂉 Investor Protection Fund of depositories exempt from Income-tax in some cases.
􀂉 Parity in taxation between IDF-Mutual Fund and IDF-NBFC.
􀂉 A Category I AIF set up as Venture capital fund allowed pass through status
under Income-tax Act.
􀂉 TDS at the rate of 1 percent on the value of the transfer of immovable properties
where consideration exceeds ` 50 lakhs. Agricultural land to be exempted.
􀂉 A final withholding tax at the rate of 20 percent on profits distributed by unlisted
companies to shareholders through buyback of shares.
􀂉 Proposal to increase the rate of tax on payments by way of royalty and fees for
technical services to non-residents from 10 percent to 25 percent.
􀂉 Reductions made in rates of Securities Transaction Tax in respect of certain
transaction.
􀂉 Proposal to introduce Commodity Transaction Tax (CTT) in a limited way.
Agricultural commodities will be exempted.
􀂉 Modified provisions of GAAR will come into effect from 1.4.2016.
􀂉 Rules on Safe Harbour will be issued after examing the reports of the Rangachary
Committee appointed to look into tax matters relating to Development Centres
& IT Sector and Safe Harbour rules for a number of sectors.
􀂉 Fifth large tax payer unit to open at Kolkata shortly.
􀂉 A number of administrative measures such as extension of refund banker system
to refund more than ` 50,000, technology based processing, extension of
e-payment through more banks and expansion in the scope of annual information
returns by Income-tax Department.
13
Indirect Taxes
􀂉 No change in the normal rates of 12 percent for excise duty and service tax.
􀂉 No change in the peak rate of basic customs duty of 10 perent for non-agricultural
products.
Customs
􀂉 Period of concession available for specified part of electric and hybrid vehicles
extended upto 31 March 2015.
􀂉 Duty on specified machinery for manufacture of leather and leather goods
including footwear reduced from 7.5 to 5 percent.
􀂉 Duty on pre-forms precious and semi-precious stones reduced from 10 to 2 perent.
􀂉 Export duty on de-oiled rice bran oil cake withdrawn.
􀂉 Duty of 10 percent on export of unprocessed ilmenite and 5 percent on export on
ungraded ilmenite.
􀂉 Concessions to air craft maintenaince, repair and overhaul (MRO) industry.
􀂉 Duty on Set Top Boxes increased from 5 to10 percent.
􀂉 Duty on raw silk increased from 5 to 15 percent.
􀂉 Duties on Steam Coal and Bituminous Coal equalised and 2 percent custom duty
and 2 percent CVD levied on both kinds coal.
􀂉 Duty on imported luxury goods such as high end motor vehicles, motor cycles,
yachts and similar vessels increased.
􀂉 Duty free gold limit increased to ` 50,000 in case of male passenger and `1,00,000
in case of a female passenger subject to conditions.
Excise duty
􀂉 Relief to readymade garment industry. In case of cotton, zero excise duty at fibre
stage also. In case of spun yarn made of man made fibre, duty of 12 percent at the
fibre stage.
􀂉 Handmade carpets and textile floor coverings of coir and jute totally exempted
from excise duty.
􀂉 To provide relief to ship building industry, ships and vessels exempted from
excise duty. No CVD on imported ships and vessels.
􀂉 Specific excise duty on cigarettes increased by about 18 percent. Similar increase
on cigars, cheroots and cigarillos.
14
􀂉 Excise duty on SUVs increased from 27 to 30 percent. Not applicable for SUVs
registered as taxies.
􀂉 Excise duty on marble increased from `30 per square meter to ` 60 per square
meter.
􀂉 Proposals to levy 4 percent excise duty on silver manufactured from smelting
zinc or lead.
􀂉 Duty on mobile phones priced at more than `2000 raised to 6 percent.
􀂉 MRP based assessment in respect of branded medicaments of Ayurveda, Unani,
Siddha, Homeopathy and bio-chemic systems of medicine to reduce valuation
disputes.
Service Tax
􀂉 Maintain stability in tax regime.
􀂉 Vocational courses offered by institutes affiliated to the State Council of Vocational
Training and testing activities in relation to agricultural produce also included in
the negative list for service tax.
􀂉 Exemption of Service Tax on copyright on cinematography limited to films
exhibited in cinema halls.
􀂉 Proposals to levy Service Tax on all air conditioned restaurant.
􀂉 For homes and flats with a carpet area of 2,000 sq.ft. or more or of a value of `1 crore
or more, which are high-end constructions, where the component of services is
greater, rate of abatement reduced from from 75 to 70 percent.
􀂉 Out of nearly 17 lakh registered assesses under Service Tax only 7 lakhs file
returns regularly. Need to motivate them to file returns and pay tax dues. A
onetime scheme called ‘Voluntary Compliance Encouragement Scheme’
proposed to be introduced. Defaulter may avail of the scheme on condition that
he files truthful declaration of Service Tax dues since 1st October 2007.
􀂉 Tax proposals on Direct Taxes side estimated to yield to `13,300 crore and on
the Indirect Tax side `4,700 crore.
Good and Services Tax
􀂉 A sum of ` 9,000 crore towards the first instalment of the balance of CST
compensation provided in the budget.
􀂉 Work on draft GST Constitutional amendment bill and GST law expected to be
taken forward.
  Source : http://indiabudget.nic.in/ub2013-14/bh/bh1.pdf

Big relief for service tax payers.

Voluntary compliance from 1/10/2007. No interest and  penalty.

Mobile phone valued costing more than Rs. 2000 will attract 6% custom duty on import

Mobile phone valued costing more than Rs. 2000 will attract 6% custom duty on import

There is no change in custom duty(at 1%) for mobile phone valued upto Rs 2000.

There is no change in custom duty(at 1%) for mobile phone valued upto Rs 2000. 

Duty free baggage allowance for jewelry import increased to Rs. 50,000 for men and 1,00,000 for women traveler

Duty free baggage  allowance for jewelry import  increased  to Rs. 50,000 for men and 1,00,000 for women traveler .



Explanatory Memorandum to notification No. 25/2013-Customs (N.T.) dated 01-03-2013.
Notification No. 25/2013-Customs (N.T.), dated 01-03-2013 seeks to further amend notification No. 30/98-Customs (N.T.), dated 2nd June, 1998, so as to raise the value limit of Jewellery allowed duty free to an Indian passengers who has been residing abroad for more than one year.

No change in normal rate of excise duty

No change in normal rate of excise duty

No change in service tax rate of duty

No change in service tax rate of duty

No change in Custom peak rate of duty

No change in Custom peak rate of duty

Live budget 2013 from Parliament

Live budget  2013 from Parliament

Pl watch Live budget (Budget directly from Govt  website)

mould for rubber is classifiable under sub -heading 84807100

CUSTOMS CLASSIFICATION OF BLADDER MOULD FOR RUBBER TYRE

 Goods are tire mold and is the one imparting the final shape to the tire. This is being used in the tire curing press. Mold parts are fixed in the press in the relative positions along with bladder assembly. Press is closed after placing the green tire, in its location. Once the press is fully closed, high pressure steam is given inside the bladder assembly. This steam pressure, compresses the green tire against the surface of the mold. Once curing cycle is completed, press opens and facilitates tire to come out.

Whole process is achieved by the compressive force exerted by steam and thus process is termed as compression molding. Hence, mold is categorized as compression mold.

Before proceedings for classification of  compression mold under import tariff , it would be relevant to refer to the relevant law for  classification of goods  under  “THE  GENERAL  RULES  FOR THE  INTERPRETATION (GIR) OF IMPORT TARIFF”, and ,”CLASSIFICATION  OF GOODS (Chapter 4 , Customs Manual 2012).”

 I. THE  GENERAL  RULES  FOR THE  INTERPRETATION  OF IMPORT TARIFF-

“ Classification of goods in this Schedule shall be governed by the following principles:

1. The titles of Sections, Chapters and sub-chapters are provided for  ease of reference only; for legal  purposes,  classification shall  be determined according to the terms of  the headings  and any relative Section or Chapter Notes and, provided such headings or  Notes  do not otherwise require, according to  the  following provisions:…………………………………

………………………………………………………………………………………………………………………

6. For legal purposes, the classification of goods in  the  sub-headings of a heading shall be determined according to the  terms of  those  sub headings  and any related  sub headings  Notes and, mutatis  mutandis, to the above rules, on the understanding  that only  sub  headings  at the same level are  comparable.  For  the purposes of this rule the relative Section and Chapter Notes also apply, unless the context otherwise requires.”

Classification of Goods ( Chapter 4 of  Customs  Manual  2012)

    Relevant portion of this Chapter is reproduced for easy reference is as:

“2. Methodology of classification:

2.1 In the Tariff Schedule, commodities/products are arranged in a fixed pattern with the duty rates specified against each of them. The pattern of arrangement of goods in the Tariff is in increasing degree of manufacture of commodities/products in the sequence of natural products, raw materials; semi-finished goods and fully finished goods / article/ machinery, etc. The Indian Customs Tariff has 21 Sections and 98 Chapters. A Section is a group consisting of a number of Chapters which codify a particular class of goods.

The Section notes explain the scope of chapters / headings, etc. The Chapters consist of chapter notes, brief description of commodities arranged at four digit, six digit and eight digit levels. Every four-digit code is called a ‘heading’ and every six digit code is called a ‘subheading’ and 8-digit code is called a ‘Tariff Item’.

2.2 The Harmonized System (HS) provides commodity/product codes and description up to 4-digit (Heading) and 6-digit (Sub-heading) levels only and member countries of WCO are allowed to extend the codes up to any level subject to the condition that nothing changes at the 4-digit or 6-digit levels. India has developed 8-digit level classification to indicate specific statistical codes for indigenous products and also to monitor the trade volumes…………

2.5 The process of arriving at a particular heading/subheading code, either at four digit, six digit or eight digit level for a commodity in the Tariff Schedule is called ‘classification’.

The titles of Sections, Chapters and Sub-chapters are provided for ease of reference only. For legal purposes the texts of the Section Notes, Chapter Notes, Subheading Notes, Supplementary Notes, Headings, Subheadings, and the General Rules for Interpretation of Import Tariff (GIR) should be relied upon to determine the classification of an item.

2.6 The GIR is a set of 6 rules for classification of goods in the Tariff Schedule. These rules have to be applied sequentially. Rule 1 gives precedence to the Section notes/Chapter notes while classifying a product. Rule 2(a) applies to goods imported in incomplete / finished condition and assembled / unassembled condition. Rule 2(b) is applicable to ‘mixtures’ and ‘composite goods’. Goods which cannot be classified by application of Rule 2(b), will be classified by application of Rule 3 i.e. by application of ‘most specific description’ as per Rule 3 (a) or by ascertaining the ‘essential character’ of the article as per Rule 3 (b) or by taking into consideration the heading that occurs last in the numerical order as per Rule 3 (c). Rule 4 states that goods which cannot be classified by application of the preceding rules may be classified under the heading appropriate to the goods to which they are most akin. Rule 5 applies to packing materials / articles in which the goods are carried. Rule 6 is applied to arrive at the appropriate subheading within a heading and for that purpose the provisions of Rules 1 to 5 apply mutatis mutandis on the understanding that subheadings at the same level are comparable.

For the purpose of Rule 6 the relative Section and Chapter Notes also apply unless the context otherwise requires.”

II.THE GENERAL EXPLANATORY NOTES TO IMPORT TARIFF

1. Where in column (2) of this Schedule, the description  of  an article or group of articles under a heading is preceded by  “-”, the said article or group of articles shall be taken to be a sub-classification of the article or group of articles covered by the said  heading. Where, however, the description of an  article  or group of articles is preceded by “- -”, the said article or group of  articles  shall be taken to be a  sub-classification  of  the immediately  preceding  description of the article  or  group  of articles which has “-”. where the description of an article or group of articles is proceded by "---" or "----", the said article or group of articles shall be taken to be a sub classification of the immediately preceding description of the article or group of articles which has "-" or "--".

2. The  abbreviation  “%”  in any column  of  this  Schedule  in relation to the rate of duty indicates that duty on the goods  to which  the  entry relates shall be charged on the  basis of  the value  of the goods as defined in section 14 of the Customs  Act, 1962 (52 of 1962), the duty being equal to such percentage of the value as is indicated in that column.

3. In any entry, if no rate of duty is shown in column (5), the rate shown under column (4) shall be applicable.

ADDITIONAL NOTES

In this Schedule,—

(1) (a) “heading”, in respect of goods, means a description in list of tariff provisions accompanied by a four-digit number and includes all sub-headings of tariff items the first

four-digits of which correspond to that number;

(b) “sub-heading”, in respect of goods, means a description in the list of tariff

provisions accompanied by a six-digit number and includes all tariff items the first six-digits

of which correspond to that number;

(c) “tariff item” means a description of goods in the list of tariff provisions

accompanying eight-digit number and the rate of customs duty;

(2) the list of tariff provisions is divided into Sections, Chapters and Sub-Chapters;

(3) in column (3), the standard unit of quantity is specified for each tariff item to facilitate

the collection, comparison and analysis of trade statistics.

The relevant  Section, Chapter ,heading, sub-heading ,tariff items and HS explanatory notes for  determining classification of  compression mold for rubber tyre under Custosm Tariff  and  which are as under   :-    

                                                                                                                                                                                                                                

Note 2 to Chapter  84 of  Section VI

“2. Subject to the operation of Note 3 to Section XVI, and subject to Note 9 to this Chapter,a machine or appliance which answers to a description in one or more of the headings 8401 to

8424, or heading 8486 and at the same time to a description in one or other of the headings 8425 to 8480  is to be classified under the appropriate heading of the heading 8401 to 8424 or under the heading 8486, as the case may be, and not under the headings 8425 to 8480.”

  HSN explanatory Notes has given following heading and sub-headings classification of molds (as per page  XVI-8480-1, HSN ,edition,2007,is  reproduced below:

Mould  is defined in HSN (at page XVI-8480-1, HSN ,edition,2007) as under:-

 HSN Explanatory Notes to   Group (G) of heading 8480  as per page XVI-8480-1, HSN ,edition,2007 is  reproduced below :

It is observed that ,“Bladder” mould for vulcanizing tyre, uses compression force for the rubber to conform to the mold cavity. Hence, Bladder moulds for rubber are compression type .

Entries   at Chapter 84 of Customs Tariff ( 2012-2013)  with Basic Customs Duty(BCD):

Tariff Item	Description of goods	Unit                         Rate of duty            _________________                   Standard               Preferential Area
(1)	(2)	(3)	(4)	(5)
8480             MOULDING BOXES FOR METAL                        FOUNDRY; MOULD BASES;                        MOULDING PATTERNS; MOULDS                        FOR METAL (OTHER THAN                        INGOT MOULDS),  METAL CARBIDES,                        GLASS,  MINERAL MATERIALS,                        RUBBER OR PLASTICS                       -      Moulds for rubber or plastics : 8480 71 00   --       Injection or compression types                 kg.            7.5%                          - 8480 79 00   --        Other                                                              kg.             7.5%                         -

 Thus , it is seen above , that the at tariff Heading 8480, `Moulds for rubber or plastics ` is preceded by “ –“. And ‘Injection or compression types ` and ` Other’ are preceded “- - “.Thus as per THE GENERAL EXPLANATORY NOTES TO IMPORT TARIFF, the Moulds for rubber or plastics has two  sub-classes  of  ‘Injection or compression types ` and ` Other’. Under ‘Injection or compression types ` , and `other ` there is only  one tariff item 84807100 and 84807900 ,respectively. Hence, classification of mould for rubber is decided based on molding process used,e.g.injection,compression ,or,other.

The goods are compression type mold and used for rubber tyre making. Mold parts are fixed in the press in the relative positions along with bladder assembly.  Press is closed after placing the green tire, in its location. Once the press is fully closed, high pressure steam is given inside the bladder assembly. This steam pressure, compresses the green tire against the surface of the mold. Once curing cycle is completed, press opens and facilitates tire to come out.

                                                                          The whole process is achieved by the compressive force exerted by steam and thus process is termed as compression molding. Hence, mold is categorized as compression mold.

To build hollow parts of a tyre ,it is often necessary to build an inflatable bladder which temporarily occupies the void within the tyre. Thus, Bladder molding is a form of compression molding in that pressure forces the rubber to conform to the mold cavity.

The goods are specifically covered sub-heading 848071 as “Bladder moulds” for vulcanizing tyres as per HSN Explanatory Notes to   Group (G)(1) of heading 8480  , page XVI-8480-1, HSN ,edition,2007 . Also, it falls under single tariff entry 84807100 of sub-heading 848071.

 Compression mold for rubber tyre is not excluded from heading 8480 by virtue of Note 2 to Chapter 84 of Section VI and also as per exclusion of  heading 8480  given into  HSN Explanatory Notes

  Under the authority of GIR 1, imported goods are provided for specific tariff item  84807100. Therefore, on application of General Rules for the Interpretation (GIR) of the First Schedule to Customs Tariff, GIR-1 read with Note  2  to Chapter 84  ,  “mould for rubber ” falls  under Chapter heading 8480 . Also,  by application of ‘most specific description’ ,compression mold for rubber tyre ,are falling under sub-heading 848071.Hence, as per GIR-6 read with   HSN Explanatory Note to tariff heading 8480, ‘mould for rubber’ is classifiable under sub -heading 84807100.

Therefore, on application of GIR of the First Schedule to Customs Tariff GIR-1 read with Chapter Note 2 (g) to Section XVII and Note 7(b) to Chapter 90 , Wheel sensor falls Chapter heading 9032

      Wheel sensor is a measuring device and function is to control wheel speed, in emergency  braking operation and stabilize vehicle against skidding, overturning and slipping ,along with control module and  valve .It is also called “ ABS Sensor”and  is a part of an  Anti-lock braking systems (ABS).

ABS begins with sensors deciding if the wheels are losing traction. Once this decision is made, the Electronic controller unit (like a computer) engages a valve system in the vehicle that controls available brake fluids in the lines. Since brakes work based on pressure generated by fluid compressed in the brake lines, a pump engages in the braking system to rapidly apply the brakes.

Thus, ABS is an automatic regulator, which measure rotational speed of wheel and control traction force of wheel, within the meaning of Note 7(b) to Chapter 90, and is classifiable under Customs heading 9032;

ABS  as a functional unit ,measure and  control   the  wheel speed ,is  classifiable as per Explanatory Note to heading 9032  and Note 3  read with Note 7 of Chapter 90 under  heading 9032.

The wheel sensor, which measures the speed of wheel, is an individual component intended to contribute to a clearly defined function of controlling wheel speed in emergency braking operation. It is a measuring device, as per meaning of Note 7(b) to Chapter 90 for the device described in (A) along with Explanatory Note, part II, to Chapter heading 9032. Thus, Wheel sensor is falling under heading 9032, as per HSN Explanatory Note to heading 9032.

·          Note 3 of Chapter 90 has to be read with Note 2 of Chapter 90 and if so read then it becomes clear that Wheel sensor, being parts and accessories ,use solely or principally  with an  ABS (a regulating or controlling apparatus ),  have  to be classified under CTH 90328990;

As per Section Note 2(g) of Section XVII, that if an article falls in Chapter 90, regardless of whether or not it may otherwise fall within Chapter 87, that Chapter (No. 87) stands excluded. Goods of chapter 87 are not put under test of note 2(a) of Chapter 90;

·         Heading 8708 of Customs Tariff, provides for parts and accessories of the motor vehicles of headings 8701 to 8705. To qualify for classification within this heading, an article must meet certain criteria set forth in HSN General Explanatory Notes to Section XVII and the HSN Explanatory Notes to Heading 8708;

·         But, wheel sensor is classifiable under Chapter 90 and article of Chapter 90 is excluded by Note 2(g) to Section XVII. Therefore, condition (a) of HSN General Explanatory Notes to Section XVII has not been satisfied. Thus, based on above General Explanatory Notes, wheel   sensor is not parts and accessories of the motor vehicles of headings 8701 to 8705 and same is not classifiable under heading 8708 of Customs Tariff;

·         But, as stated above, Wheel sensor being article of Chapter 90 ,is excluded by  Note 2(g) to  Section XVII. Therefore, condition (ii) of HSN Explanatory Notes to heading 8708   has not been satisfied. Therefore, also ,based on above Explanatory Notes, wheel   sensor is not parts and accessories of the motor vehicles of headings 8701 to 8705 and same is not classifiable under heading 8708 of  Customs Tariff.

·         Hence, even if   wheel sensor is used in motor vehicle (Chapter 87), it is still classifiable under Chapter 90 ,by  virtue of above discussed Note 2 (g) of  Section XVII .

·         It may be seen that imported wheel sensor are not included in the cited list of Parts and accessories of this heading (8708).  Thus by virtue of this HSN Explanatory Notes to heading 8708 ,also, Wheel sensor are not falling under Heading 8708;

·         In the present case, ratio of Honourable Supreme Court order delivered in case of Commissioner Of Customs, ... vs M/S. N.I. Systems India P.Ltd,  Dated 15 July, 2010  will also apply. Honourable Supreme Court, vide above cited case law,   has defined what is sensor and also held that sensor are  classifiable under heading 9032 .

·         Board Circular No. 42/ 2010-Customs, dated 29th November, 2010 which is issued for Implementation of above cited Supreme Court case is also applicable to this case.

·         As per Board circular, CBEC 37B Order No. 45/3/96-CX., dated 6-8-96, sensor are classified under heading 9032.

·         Even as  per   Board Circular No. 839/16/2006-CX., dated 16-11-2006 , wheel  sensor  even though are used in motor vehicle but excluded from heading  8708  and  still remained classified under  Chapter  90 by virtue of   Note  2(g) of Section XVII.

·         But goods classification rules are based on General Rules for the Interpretation (GIR) and are sequential in nature. Therefore, before resorting to Note 3 to Section XVII, application of Note 2  to  Section XVII for  classification of wheel  sensor is to be ruled out;

Therefore, on application of GIR of the First Schedule to Customs Tariff GIR-1 read with Chapter Note 2 (g) to Section XVII and Note 7(b) to Chapter 90 , Wheel sensor falls  Chapter heading 9032 . Also, as per GIR-6 read with   HSN Explanatory Note to tariff heading 9032 ‘Wheel sensor’ is correctly classifiable under tariff heading 90328990.

        

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‘ Chiller’ is correctly classifiable under Customs tariff heading 8418

What is chiller

A chiller is a machine that removes heat from a liquid via a vapor-compression or absorption refrigeration cycle. This liquid can then be circulated through a heat exchanger to cool air or equipment as required.

 Water chillers can be water-cooled, air-cooled, or evaporatively cooled. Used in air conditioning and inindustry. But chiller is not air conditioned system per se but is a part of air conditioned system.

YORK, YCIVR134a, as per product catalogue, are air cooled chillers and are designed for water or glycol cooling.The chiller consists of 2 or 3 screw compressors in anCorresponding number of separate refrigerant circuits, a single shell and tube DX evaporator, an air-cooled condenser, flash tanks, drain/feed valves, oil separators, and compressor mufflers. Oil separators utilize no moving parts and are rated for a 31.0 barg (450 psig) design working pressure. Oil cooling is accomplished by routing oil from the oil separator through several rows of tubes in the air cooled condenser.An integral liquid cooled, transistorized, PWM, Variable Speed Drive (VSD) is controlled by the chiller microprocessor control panel to start/stop, select compressors to run, and select compressor speed.The chiller is designed to operate in ambient temperatures of -18°C to 52°C (0°F to 125°).

Air Cooled Water Chillers – How They Work

Air cooled water chillers are vapour compression refrigeration systems. The main components of a vapour compression refrigeration system are the compressor, condenser, expansion valve & evaporator.

Vapour compression refrigeration systems have a refrigeration cycle. The cycle starts with a cool low pressure mixture of liquid &vapour refrigerant entering the chiller evaporator. Once inside the chiller evaporator it absorbs the heat from the relatively warm water or fluid that the fluid chiller is cooling. This transfer of heat boils the liquid refrigerant in the chillers evaporator and the super-heated vapour is pulled into the chillers compressor.

The chillers compressor compresses the refrigerant to a high temperature & pressure, high enough to allow the chillers condenser to give up its heat to the cooler ambient air. Within the chillers condenser, heat is transferred from the hot refrigerant to the relatively cool ambient air this reduction in the chillers refrigerant causes it to de-superheat and condense into a liquid, then further sub-cool before leaving the chiller condenser.

The high pressure liquid refrigerant then enters the chiller expansion valve causing a large pressure drop across the chillers refrigerant circuit. The pressure reduction causes a small portion of the refrigerant to boil off, or flash, this would be seen in the chillers site glass. The site glass indicates if the chiller is short of gas, if the chiller is short of refrigerant gas the flashing inside the chillers site glass will increase. The boiled off refrigerant helps cool the remaining refrigerant to the desired temperature before the mixture enters the chiller evaporator to start the cycle again.

(Source:http://www.allseasonshire.eu/chillers/chillers-how-they-work.php)

9.Under General Rule of Interpretation (GRI) 1, Customs Tariff Act 1975, goods are to be classified according to the terms of the headings and any relative section or chapter notes, and provided the headings or notes do not require otherwise, according to GRIs 2 through 6.

Section XVI, Note 2, governs the classification of goods that are identifiable as parts of machines or apparatus of Chapter 84 or Chapter 85. Parts which are goods included in any of the headings of Chapters 84 and 85 are in all cases to be classified in their respective headings as per Note 2(a).

 Note4 to Section XVIare for classification of machines based on function which they perform: “Where a machine (including a combination of machines) consists of individual components (whether separate or interconnected by piping, by transmission devices, by electric cablesor by other devices) intended to contribute together to a clearly defined function covered by one of the headings in Chapter 84 or Chapter 85, then the whole falls to be classified in the heading appropriate to that function”.

 The chiller is mainly consisting of compressor (used to increase the pressure & temperature of the refrigerant vapour),evaporators (where cool liquid refrigerant absorbs heat from the chilled water circuit), expansive valve(used to maintain the pressure difference between the high pressure & low pressure sides of the chiller system)and condensers (where the refrigerant vapour is converted to liquid as it rejects heat).

This continuous usesof refrigeration cycle by chillerfor compression, evaporation and condensation of refrigerant is used to chill water. It does not perform any function other than chilling /refrigerating water.Thus Chiller is a refrigeration unit. Hence, as per note 4 to section XVI, chiller as functional unit has to be classified as refrigeration system of tariff heading 8418.

 Explanatory Notes to the H.S.N., as per page XVI-8415-1, 2007 edition, which say that Heading 8415 applies only to machines - (1) equipped with motor-driven fan or blower, (2) designed to change both the temperature (a heating or cooling element or both) and the humidity ( a humidifying or drying element or both) of air; and (3) for which the elements mentioned in (1) and (2) are presented together.

In the present case, the chiller does not comprise any motor driven fan or has any facility for changing the humidity which cannot be controlled/regulated by it. Hence, Chiller does not satisfy all three conditions to be called a machine falling under heading 8415. Thus Chiller is not an air-conditioning machine as per HSN explanatory notes to heading 8415.

 That  while an imported chiller ,is not an incomplete or unfinished air conditioning machine of heading 8415.But it is still a part of  air-conditioning system under that heading.

.Explanatory Notes to Section XVI, for classification of parts, as per page XVI-2, 2007 edition, is as under:-

Note 2(a) to Section XVI –
“2. Subject to Note 1 to this Section, Note 1 to Chapter 84 and to Note 1 to Chapter 85, parts of machines (not being parts of the articles of heading 8484, 8544, 8545, 8546 or 8547) are to be classified according to the following rules :

(a) parts which are goods included in any of the headings of Chapter 84 or 85 (other than headings 8409, 8431, 8448, 8466, 8473, 8487, 8503, 8522, 8529, 8538 and 8548) are in all cases to be classified in their respective headings”;

Exclusion to the heading (8415 ),as per page XVI-8415-3, 2007 edition, : “……(b) Non-reversible heat pump of heading 84.18 and chillers for air-conditioning machining (heading 84.18)”.

 The Explanatory notes to heading 8415 provides exclusion from this heading for Chillers for air-conditioning machines and same are classified into heading84.18

  Explanatory Notes toheading 8418, as per page XVI-8418-3, 2007 edition, states that:”…Apparatus of the foregoing kinds are classified in this heading if in the following forms:

1) Units comprising a compressor (with or without motor) and condenser mounted on a common base, whether or not complete with evaporator, or self-contained absorbing units ( These units are commonly fitted into domestic type refrigerator or other refrigerating cabinets.)Certain compression type machines, known as “liquid -cooling units”, combine on a common base ( with or without condensers) ,compressors and a heat exchanger containing an evaporator and tubing carrying the liquid to be cooled. These latter machines include those known as chillers, which are used in air-conditioning systems”.

Therefore, as per above explanatory notes, chillers are goodsand specifically covered under tariff heading 8418.

 That the language of the notes to heading 8415 reads for parts, as per page XVI-8415-3, 2007 edition, “If presented as separate elements, the components of air conditioning machines are classified in accordance with the provisions of Note (2) (a) to Section XVI (headings 84.14, 84.18, 84.19, 84.21, 84.79, etc.) whether or not they are designed for building into a self-contained unit.”

 But, because the chiller is also a goods included in heading 8418, it must be classified in that heading under the authority of Section XVI, Note 2(a).

      Thus, separately presented chillers for air-conditioning machines are classified under heading 8418 in accordance with note 2(a) to Section XVI and the language of the notes to heading 8415.

 We rely on following case laws where chiller is classified under tariff heading 8418:

i)Commissioner Of Customs Kochivs M/S Lakeshore Hospital & Research ... on 21 March, 2001,

ii)Indian Hotels Limited vs Commissioner Of Customs on 25 April, 2001

Customs, Excise and Gold Tribunal - Tamil Nadu( 2001 (134) ELT 451 Tri Chennai)

iii)COMMISSIONER OF CENTRAL EXCISE, DELHI V. CARRIER AIRCON LTD [2006] RD-SC 374 (5 July 2006)

Honourablethe Supreme Court ,held in case of Commissioner of Central Excise, Delhi v. Carrier Aircon ltd [2006] rd-sc 374 (5 july 2006) thattariff heading 84.15 covers air-conditioning machines which control and maintain temperature and humidity in closed places, the main function of air-conditioning system is to control temperature, which is not done by a chiller. The chillers in question shall fall under specific heading 84.18 of the Tariff Act. This view is supported by the explanatory notes of H.S.N. below heading 84.15.

Also,Chillers in the domestic and international trade parlance are known as refrigerating equipment. The trade identifies chillers as refrigerating machinery on the basis of its function of chilling water using refrigerating circuit. Even by testing it from the commercial parlance test as well the chillers would not be classifiable under Chapter Heading 84.15.

.Honourable Tribunal – Bangalore ,have upheld the classification of similar ''York refrigeration chiller, under 8418, after considering the HSN notes, Board's instruction Nos. 242/76/96/CX dated 3.9.96 and have ruled 0ut the classification under 8415 of the Customs Tariff, in case of Commissioner Of Customs Kochi vs M/S Lakeshore Hospital & Research ... on 21 March, 2001 . The Tribunal  statedthat:

“ After considering the material we find:

(a) there is no doubt about the item under import being 'liquid chillers' and that very low temperature could be achieved. Therefore the items to our mind are functionally designed to produce chilled water (liquid) by using a refrigeration circuit in it's construction and such chilled liquid, in turn was applied in an Industrial process, which could be a Central Air Conditioning System/Plant of a huge size or would be an end use as recorded by the learned Dy Commissioner, as follows:

".... The end uses known to the appellants for the said machine are for processing cooling, brine machine cooling, process cooling for injection Moulding Machine, CNC Machine cooling, Brine chilling, Chilling of chemical plant and cooling of rubber and allied products."

We also find, that the Commissioner (Appeals) has also come to a finding that:

"The liquid Chiller here is a machine on a common basis with water cooled condenser, compressor and a heat exchanger containing an evaporator and a tubing carrying the liquid to be cooled and the combined function of the machine is to cool the liquid water passing through the tube to the desired temperature which in turn can be used for other application including air-conditioning with the help of another independent machine viz. AHU. There is no dispute that the liquid chiller is used by the importer in this case for chilling the water to 8(SIC)C for the purpose of using various AHU installed in many locations of the multi-storey hospital. The brocure/manual and manufacturers clarifications makes it clear that these apparatus can be used for very low temperature brine applications also."

(b) We find that after considering all the case law on the subject, the Tribunal in the case of Carrier Aircon Ltd., Vs CCE, Delhi-III (2001(128)/EIT/485) have upheld the classification of similar 'liquid chillers' under 8418, after considering the HSN notes, Board's instruction Nos. 242/76/96/CX dated 3.9.96 and have ruled cut the classification under 8415 of the Central Excise Tariff.

(c) We find that the Central Excise Tariff and the Customs Tariff, is para-materia as far as headings 8415 and 8418 are concerned. Therefore, relying on this decision of the Tribunal in Carrier Aircon (2001 (128) EIT 485), we have no reasons to uphold the revenues appeal to classify the subject goods under import under 8415”.

 That Chiller is a refrigeration unit .It is a part of air-condition system but in nature of goods. Hence, as per note 4 to section XVI, chiller as functional unit is to be classified as refrigeration system of tariff heading 8418.That explanatory notes to Chapter 8415 covering air conditioning machines, states that the heading is restrictive.

Heading 8415.00 of the Tariff provides that air-conditioning machines must comprise a motor-driven fan and elements for changing temperature and humidity. It includes those machines in which the humidity cannot be separately regulated. Nevertheless, while a chiller, imported without fans, is not an incomplete or unfinished air conditioning machine of heading 8415, it is still a part under that heading. But, because the chiller is also a good included in heading 8418, it must be classified in that heading under the authority of Section XVI, Note 2(a).

Thus, separately presented chillers for air-conditioning machines are classified under heading 8418 in accordance with note 2(a) to Section XVI and the language of the notes to heading 8415.

The Explanatory notes to heading 8415 provides exclusion from this heading for Chillers for air-conditioning machines and same are classified into heading 84.18.Therefore, as per  explanatory notes to heading 8418, chillers are specifically covered under tariff heading 8418.

     The Chiller does not satisfy all three conditions to be called a machine falling under heading 8415. Thus Chiller is not an air-conditioning machine as per HSN explanatory notes to heading 8415..

Honourable Supreme Court held in case of Commissioner of Central Excise, Delhi v. Carrier Aircon ltd [2006] rd-sc 374 (5 july 2006) that the chillers in question shall fall under specific heading 84.18 of the Tariff Act. This view is supported by the explanatory notes of H.S.N. below heading 84.15. Similarly various Tribunals also classified chiller under heading 8418 of Customs Tariff.

                              Also, Chillers in the domestic and international trade parlance are known as refrigerating equipment and not as air-conditioning machine.

  Under the authority of GIR 1, chiller is provided for specific heading 8418 .It is classifiable in subheading 84181010.

Therefore, on application of General Rules for the Interpretation (GIR) of the First Schedule to Customs Tariff GIR-1 read with Chapter Note 2 (b) and Note 4  to Section XVI  , Chiller  falls  under Chapter heading 8418 . Also, as per GIR-6 read with   HSN Explanatory Note to tariff heading 8415 & 8418 ‘ Chiller’ is correctly classifiable under tariff heading 84181010.