Chandigarh, January 20
In a move that will help the industry in Punjab and Haryana, the Centre has withdrawn excise concessions from Himachal Pradesh and Uttarakhand-based units which are not into manufacturing, but are availing tax concessions on the basis of their location in these hill states.

The ministry of finance issued a notification on January 18, to exclude the benefit of area- based exemption in central excise duty in the above mentioned hill states, for industrial units which undertake only peripheral activities. The benefit of excise duty exemption has also been disallowed for peripheral industrial activity in Assam, Tripura, Meghalaya, Mizoram, Manipur, Nagaland, Arunachal Pradesh and Sikkim.

In the past decade, Punjab and Haryana, which are land-locked between these two tax- exempt states, have suffered because all new industrial investment in the region was made only in these two hill states. A number of industrial units from Punjab and Haryana, too, shifted to Himachal Pradesh and Uttarakhand for availing tax exemptions. The flight of industry from Punjab had led to loud protests from Punjab and a demand for similar tax benefits to its four border districts of Amritsar, Tarn Taran, Gurdaspur, Ferozepore.

Industry sources peg that the total excise exemptions granted to industry in the Baddi-Barotiwala belt in Himachal alone is to the tune of Rs 1600 crore. With a substantial number of units in these hill states being involved only in packing, re-packing or labelling of goods — and not in actual manufacturing, the government would gain substantially in earning excise revenue.

These excise duty exemptions are intended to encourage industrial development by creation of basic infrastructural facilities and to generate employment opportunities for the local people of these states. The government has now decided that benefits of duty exemption should not be admissible to goods for which only peripheral activities like preservation during storage, cleaning operations, packing, re-packing, labeling or re-labeling, sorting, alteration of retail sale price etc. take place. The industrial units located in these tax- exempt states, which are carrying out only such processes would not be eligible for exemption benefit and would be required to pay duty as per normal procedure.

It has also been decided to prescribe a quarterly return for assesses availing exemptions, in order to create a database about the actual impact of exemptions on the industrial activities in these regions.