Date:04/01/2006 URL: http://www.thehindubusinessline.com/2006/01/04/stories/2006010402330300.htm

Back Chamber seeks excise rationalisation for corrugated boxes, container units

Our Bureau

Kolkata , Jan. 3

THE Bharat Chamber of Commerce has called for rationalisation of Central Excise duty structure on `Corrugated Boxes and Containers', as the manufacturing units were now facing serious difficulties owing to different provisions of Excise Rules and Duties, and duty anomalies.

Cut in customs duty on imported kraft paper and fluting media has also been sought.

The Chamber has suggested that duty rate should be fixed at 8 per cent for corrugated board, corrugated board boxes/cartons and other containers and filaments to provide a level playing field to the small and tiny corrugated box manufacturing units.

The excise payable by the corrugated boxes industry now is broadly pegged at 16 per cent under Chapter 48 of the Rules, and only those units opting for SSI Notification No. 8/2003 are entitled to nil duty up to turnover of Rs 1 crore without of course having the benefit of Cenvat.

According to the Chamber, Kraft Paper, the main raw material, was now produced by paper mills using 75 per cent or more of unconventional raw materials, and more than 90 per cent of the production is consumed by the corrugated boxes industry.

The main problem, according to the BCC, was the different duty structures, as follows:

Mills using 75 per cent unconventional raw materials, up to the first clearance of 3500 tonnes, are allowed to clear Paper & Board and articles thereof at 8 per cent, and thereafter, 12 per cent ad valorem. B) Mills located at Uttaranchal and Himachal Pradesh, and the North-East enjoy nil duty benefit, as notified by the Government of India, and, c) It is estimated that out of the 18 lakh tonnes of paper used by the corrugated packaging industry, around 15 per cent is cleared at nil rate of duty, more than 55 per cent of paper is cleared at 8 per cent and the remaining at 12 per cent.

According to senior members of the Chamber, while the users of 90 per cent of their kraft paper production have to clear corrugated board, boxes, cartons and other containers at 16 per cent duty, the paper mills, however, can clear these products at either 8 per cent or 12 per cent, or even nil duty under the various exemptions granted.

It is clarified that many users of corrugated boxes fell outside the Cenvat chain because of the exemptions under various tariff heads, including exemptions for large segments of horticultural and food producers.

On a rough estimate, it is stated, nearly 55 per cent of the user industry was outside the Cenvat chain.

According to the BCC, in such a scenario, excise-paying corrugated box units were not able to sell their products to the exempted categories of industry and exempted SSI units are finding it difficult to supply boxes to excise paying user industry, resulting in a fragmentation of the units.

It is suggested that customs duty on kraft paper should be reduced to either nil or about 5 per cent, so that kraft paper can be imported at competitive prices, which may eventually help promotion of exports of the item from the country in a big way.