There are several units in the country undertaking weaving of grey fabrics as well as processing of these fabrics and they also process grey fabrics supplied by other parties the way the independent processors do. These units are not considered composite mills as they have no spinning along with weaving and processing and are not availing full Modvat.

Such units were treated on par with the independent processors so far. However, the notification issued under section 3A of the Central Excise Act introducing compounded levy on chamber kept out these units.

"Such units having weaving as well as processing should also be treated as independent processing units only and should be allowed to pay compounded levy on fabrics processed by these units" suggests Silk & Art Silk Mills' Association (Sasma).

Another anomaly pertains to the coverage of only certain fabrics and not all. The said notification covers only fabrics under chapter heading 52, 54 and 55 only. The knitted fabrics under heading 60 and pile fabrics under heading 58 are also processed by the independent processors and were also treated at par with those under heading 52, 54 and 55. The Sasma, therefore, suggests that even these knitted and pile fabrics should be covered under compounded levy since they are processed on the same stenter machine.

The processors have to pay compounded duty on the embroidery fabrics at the embroidering stage itself. But they will not get any abatement on the processing of these embroidered fabrics which amounts to paying excise twice. Sasma, therefore, suggested that the embroidery fabric should be free from the excise duty at the processing stage.

Another problem relates to the method of payment of this compounded excise duty. As per the notification, the independent processors are required to pay the duty on the fifth of every month for the entire month which amounts to advance payment. Since the time coincides with payment of wages and salaries, it puts burden on the processors to pay for the entire month at the beginning of the month. The penalty for non-payment is also very high according to the processors. Earlier they paid duty only on clearance of the goods. Sasma therefore suggested that the assessees should be asked to remit the duty in three instalments in a month.