Budget 2013: AIIFA for amendment of 4a of the Central Excise Act

NEW DELHI: All India Induction Furnaces Association (AIIFA) in its pre-budget memorandum has asked the government to amend section 4a of the Central Excise Act. In its memorandum, AIIFA has said that many association members have furnaces and rolling mills as separate entities with common directors / partners. Giving the reason for the same, AIIFA has said that this is because either the units are old or because of space and power constraints.

Furnace units sell the final product 'ingot' to the rolling mills at market price. However, the units are being asked to pay duty on 110% of the cost of production as per section 4a thus causing lot of problems and unnecessary litigation. AIIFA has maintained that the whole exercise is revenue neutral as both the units are registered under central excise and avail CENVAT.

AIIFA has also mentioned that while calculating cost of production, the cost of raw materials (scrap) is also taken. On calculating assessable value as per section 4 a as 110 % of the cost of production, assessable value becomes much higher than the market value. Nowhere in the world has any country's steel industry has had 10% rate of return. Even if the assessable value is taken as 110% of the cost of conversion (value addition) instead of production, the problem will reduce.

AIIFA has requested the government to exclude the definition of related person for the excisable inter- connected undertaking i.e. where both selling and buying units are registered with the excise department and are availing the facility of CENVAT credit.