Bulk drug manufacturers oppose differential duty

Sambit Datta

Mumbai, Aug 28: INDIAN bulk drug manufacturers have expressed their dissatisfaction to the Central Board of Excise and Customs (CBEC) on its demand for the payment of differential duty on account of DPCO 1987 (which is redundant) and notification 6/94 and 7/94 dated March 1, 1994 for the period of 33 days from 6/1/1995 to 9/2/95. According to the industry sources the estimated amount that drug companies will have to cough up for excise duty during that period is over Rs 200 crore.

DPCO 95 was announced on 6/1/95 replacing the earlier DPCO 87. Due to changes in the categories, specific exemption granted to these products based on category of DPCO 87 was not amended simultaneously, resulting in the redundancy of the excise exemption notification. However, the anomaly was rectified vide a new notification 8/95 dated 9/2/95 restoring the earlier exemption.

Expecting the restoration of the exemption soon, manufacturers had continued to clear the goods without payment of excise duty. Further the manufacturers had not received the excise duty from the buyers. The matter was under dispute and taken up by the ministry of chemicals and fertilisers and was forwarded to the ministry of finance with their recommendation. After a prolonged time lag of six years, on March 13, 2001 CBEC has clarified that the exemption for the period from 6th January 1995 to 8th February 1995 cannot be acceded to since there was no general practice of non-levy of duty on the subject goods during the aforesaid period. However, the duty payable on the said goods during the period should be recovered under intimation to the Board.

Industry sources say, “ The intention of the Government is to grant exemption to these products. But the confusion is on account of not issuing the exemption notification simultaneously alongwith DPCO 95. Why should the industry suffer due to the delay in issuing notification by the concerned authority.”

Thereby, the Indian Drug Manufacturer’s Association has sent a letter to the ministry of finance , department of revenue requesting it to invoke Sec 11 C. Invoking 11 C will not result in any undue enrichment to the manufacturers as they have not recovered the excise duty from the customers.

According to a letter from Tarapur Industrial Manufacturers’ Association fowarded to the Chief Commissioner, CBEC, Mumbai, “Majority of the drug manufacturers are from small-scale category who are already facing very hard competition due to dumping of cheaper drugs from China. The recovery of these old dues may prove the last straw in case of many units to force them to close their units due to financial problems.”

It further states, “The matter relates to 1995 and it will be simply impossible for most assessees to recover the differential duty from their customers. Most of the SSI units sell their products to trading firms who do not benefit from Modvat credit. Under the circumstances, the assessees will have to bear the burden of differential duty which will be putting them in a financial mess.”