37727725 Certificate Course in C Excise(2)

7/24/2019 37727725 Certificate Course in C Excise(2)

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CENTRAL EXCISE

A BIRDS EYE-VIEW

------- By R.K.DEODHAR


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INTRODUCTIONWhat is tax

Lord Justice Holmes of U.S. Supreme Court has defined tax

as under Tax is the price which we pay for the civilied society!.!

Types of taxes

Taxes are "roadly classified into two cate#ories as

$irect Taxes.

%ndirect Taxes.

$irect taxes are paid and "orne "y the same person

whereas

%ndirect taxes are paid "y one person and "orne "y another

person. &xamples of $irect Tax' are %ncome Tax( )ealth Tax( *ift

Tax.

&xamples of %ndirect Tax' are &xcise( Customs( Sales Tax(

Service Tax.


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%n +,,-,+( share of %ndirect Taxes was a"out /-0 of the

total tax revenue whereas that of $irect Taxes was 1-0.

%n 1--/-,( share of %ndirect Taxes was 2/0 and the shareof $irect Taxes has increased to 310.

Share of Central &xcise duty alone was 140 and share of

Customs $uty was around 130.

Share of %ncome tax was 1-0 and that of Corporate Tax was1/0.

%n the financial year 1--4-/(first time the collection from

$irect Taxes exceeded %ndirect Tax collection.

Service tax has "een introduced from +,,2 and its share is

+-0 of the Total Tax 5evenue in the year 1--/-,.


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Constitutional Background Constitution of %ndia came into existence on 16th

January( +,3- and it is the Supreme Law in the country.

7ll the laws and rules are su"ordinate to theConstitution. %ndia is a union of states. Central*overnments has certain powers and State *overnments8Union Territories have certain powers.

7rticle 126 of the Constitution indicates the "ifurcation of

these powers and the details are listed in three lists of theSeventh Schedule of the Constitution.

List I.( Union List.)contains the matters which can "edealt with "y Central *overnment. e.#. $efence. 9orei#n

7ffairs( :an;in# etc.

List II (State List)Contains the matters which can "edealt with "y State *overnment. e.#


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&xcise $uty and Sales Tax appear in Union List as well asState List. &xcise duty levied under Union List is called

Central &xcise duty and the excise duty levied under State

List is called State &xcise duty. Similarly( Sales Tax is alsodivided into two types vi.( Central Sales Tax and State

Sales Tax.

State &xcise duty is levied only on three #oods vi.(

lcoholic Li!uor" #piu$ and %arcotics and on all other#oods manufactured in %ndia( Central &xcise $uty is levied.

Central sales tax is collected on the sale of #oods which

ta;es place in the course of %nterstate trade whereas state

sales tax is collected if the #oods are sold within the state.


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Land$ark changes in Central &xcise La''

%n %ndia( &xcise $uty was first levied on cotton yarn in

+/,2( and then #radually on other products li;e =otorSpirits >+,+4?( @erosene >+,11?( Silver >+,A-?( Su#ar and

=atches >+,A2?. =any more #oods #ot covered under the

net of &xcise duty after +,2A.

%n +,22( a consolidated 7ct was passed( vi.( Central

&xcises B Salt 7ct( +,22 which is still in force with the

chan#ed name as Central &xcise 7ct( +,22.

&arlier each commodity was covered under the Tariff

item "ut with the enactment of Central &xcise Tariff 7ct(

+,/3( the #oods are classified under various Chapter

Headin#s "ased on the classification under ar$onised

Syste$ of %o$enclature (S%).


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To avoid cascadin# effect >i.e. tax on tax? of taxation(=$D7T >=odified Dalue 7dded Tax? scheme was

introduced with effect from +.A.+,/6 which is now ;nown as

C&ED7T >Central Dalue 7dded Tax? scheme with effect from+.2.1---.

=$D7T was introduced only for certain inputs in +,/6

"ut was extended to Capital *oods also with effect from

+,,2.Today(practically all the inputs are covered underCenvat Credit scheme with maFor types of Capital *oods.

%n +,,1( &xcise licensin# >on annual "asis? was

scrapped and was replaced "y one time re#istration.

%n +,,2( system of &xcise *atepass and su"mission of


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%n the same year( $ealerGs 5e#istration was introducedcoverin# 9irst Sta#e and Second Sta#e $ealers.

%n +,,3( su"mission of Classification List wasa"andoned. Self assessment procedure was introducedw.e.f. +,,6.

%n +,,, the rates of Central &xcise $uty were reducedfrom 11 to only three( i.e( /0( +60 and 120 and since

1---( most of the #oods attract +60 duty. %n 1---( all statutory records were a"olished and a new

Section 2 and Daluation 5ules were introduced for thepurpose of valuation of #oods

Central &xcise 5ules( +,22 were scrapped w.e.f.+.2.1--+ and new set of rules was introduced.

%n 1--2( new Cenvat Credit 5ules( 1--2 wereintroduced in which the &xcise $uty as well as Service Taxwere included for the first time.


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Legal Frame!r" !# Ce$%ral E&'()e La

a? Central &xcise 7ct( +,22'This is the "asic 7ct providin#char#in# of duty( valuation( offences and penalties( powers

and duties of officers( adFudication and appeals etc.

"?Central &xcise 5ules( 1--1' These deal with the detailed

procedures of Central &xcise Law.

c?Cenvat Credit 5ules( 1--2' These cover the provisionsrelatin# to Cenvat credit on inputs and capital #oods as

well as on Service Tax..

d?Central &xcise >7ppeals? 5ules( 1--+' These rules cover

the appellate procedure.e?Central &xcise Daluation > $etermination of


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f? Central &xcise >Settlement of Cases? 5ules( 1--+'

These contain the provisions where assessee wants to

settle the dispute with the *overnment.

#? Central &xcise >5emoval of #oods at concessional rateof duty for manufacture of &xcisa"le *oods? 5ules 1--+'

These relate to the procedure for removin# the #oods

under special circumstances.

h? Central &xcise Tariff 7ct(+,/3'This 7ct classifies all the#oods into various Sections(Chapters B ChapterHeadin#s

B rates of duties.

i? C&*7T>


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Eotifications are issued prescri"in# the chan#es in the Central

&xcise 5ules B


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A*m($()%ra%(+e Se%-U, !# E&'()e De,ar%me$%

=inistry of 9inance

Central :oard of &xcise B Customs

Chief Commissioner

Commissioner

7dditional Commissioner

Joint Commissioner

$eputy Commissioner

7ssistant Commissioner

Superintendent

%nspector


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NATURE OF EXCISE DUTYConstitution #f India

&ntry nu$er *+ of List I (Union list) of Se,enthSchedule to the Constitution of %ndia reads as follows'

$uties of &xcise on to"acco and other #oods manufactured

or produced in %ndia( except alcoholic liIuors for human

consumption( opium( narcotics( "ut includin# medical and

toilet preparations containin# alcohol( opium and narcotics.!

Central &xcise ct" -++

Section A>a? of the Central &xcise 7ct( +,22 states that

there shall "e levied and collected in such manner as may

"e prescri"ed duties on all &xcisa"le #oods >excludin##oods produced or manufactured in Special &conomic one

which are produced or manufactured in %ndia and at the

rates( set forth in the 9irst Schedule to the Central &xcise

Tariff 7ct( +,/3?.!


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Ba)(' C!$*(%(!$) +K The duty is on #oods.

1K The #oods must "e excisa"le. AK The #oods must "e manufactured or produced in

%ndia.

!!*) a$/#a'%/re* I$ S.E.0 are $!%1E&em,%e*!!*)2 3/% 1e&'l/*e* g!!*).2Ta&a3le E+e$%

Taxa"le &vent is that event( which on its occurrence(

creates or attracts the lia"ility Supreme Court

*ood ear %ndia Ltd. Ds. State f Haryana >+,,-? 46 STC 4+. =anufacture or production in %ndia of an &xcisa"le

article is a taxa"le event for Central &xcise( thou#h duty

can "e levied and collected at a later sta#e for


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administrative convenience S.C. Shree Synthetics Ltd.

Ds. U% +,,, >++A? &LT 442.

5emoval from factory is not a taxa"le event.


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/erson Liale To /ay &xcise 0uty

&very person who produces or manufactures any

&xcisa"le #oods or who stores such #oods in a

warehouse( shall pay the duty. M5ule 2 >+?K.

%n case of molasses manufactured in @handsari Su#ar9actory( the duty is paya"le "y the person who procures it

5ule 2 >1?.

Eormally( the person who actually manufactures the#oods is lia"le to pay the duty. %n case of Fo" wor;( if theconditions under Eot. Eo. 1+28/6 dated 13.-A./6 aresatisfied( the Fo" wor;er is exempted form payin# the dutyas the raw material supplier underta;es the duty payment.Similarly( if the #oods are fallin# under CH. Eo 6+ or 61>i.e( 5eadymade #arments?( the raw material supplier islia"le to pay the duty 5ule 2 >A?.

$uty is paya"le even if not collected from the customer.


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Ra%e O# D/%y Thou#h the taxa"le event is NmanufactureG( duty "ecomes

paya"le on the removal of #oods from the factory and the rateof duty will "e the rate which is applica"le on the date of

removal of #oods 5ule 3.

%n case of molasses( the rate will "e the rate applica"le on

the date of receipt of molasses in the factory of the procurer.Ty,e) !# E&'()e D/%yBasic &xcise 0uty (also kno'n as Cen,at)is levied on all

manufactured #oods mentioned in 9irst Schedule to Central

&xcise Tariff 7ct( +,/3.

d 1 2alore$ 3ate of dutyis the duty which is "ased on thevalue of #oods.

Specific rates of dutyis the duty which is fixed per unit of

measurement of the #oods e.#( per num"er( per =.Ton etc.


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O%4er D/%(e)

%n addition to Central &xcise duty( followin# duties arealso levied on certain #oods

a? &xcise duty in case of clearances "y &U89T8S&'

>&Iual to Customs $uty?

"? Eational Calamity Contin#ent $uty. c? 7dditional duty on #oods of special importance.

d? 7dditional duty on textile articles.

e? $uty on medical and toilet preparation.

f? Cess' Cesses are of various types but followingtwo types are very common-

i) Education Cess 2% on Central Excise Duty. ii) econdary ! "ig#er Education Cess $% on

Central Excise Duty.


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a$/#a'%/re5 !!*) a$* E&'()a3le!!*).0efinition #f 4anufacture5

There is no definition of NmanufactureG under Central &xcise

Law.Section 1>f? of the Central &xcise 7ct( +,22 states as under

=anufacture includes any process

a? incidental or ancillary to the completion of manufactured

product and"? which is specified in relation to any #oods in Section or

Chapter Eotes of the 9irst Schedule to the Central &xcise Tariff

7ct( +,/3 as amountin# to manufacture( or

c? which in relation to the #oods specified in the Third

Schedule( involves pac;in# or repac;in# of such #oods in a

unit container( or la"elin# or rela"ellin# of containers includin#

the declaration or alteration of retail sale price on it or adoption

of any other treatment on the #oods to render the product

mar;eta"le to the consumer.


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4anufacture and /roduction

The word production is used to cover items li;e to"acco(tea( coal( ores( etc i.e( "asically which is made availa"lefrom earth or "y plantation. The word NmanufactureG is usedto denote the #oods which are "rou#ht into existence "yhuman efforts and with the help of machines etc i.e("asically in the factories.

=ost of the items which are NproducedG are either notexcisa"le at all or are exempt from duty.


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C!$'e,% !# 6a$/#a'%/re a) ,er C!/r%)Since there is no exhaustive definition of NmanufactureG

in &xcise Law( the definition has "een emer#ed out of decided

Case laws "y the courts and the tri"unals. The mostimportant Case re#ardin# NmanufactureG is Union f %ndia Ds.

$elhi

Cloth =ills Co. Ltd. 7%5 +,6ASC 4,+ O +,44>+? &.L.T +,,.

Supreme Court has ruled out in this case that6$anufacture i$plies a change ut e,ery change is not

a $anufacture. 7ro$ $anufacturing process" a ne' and

different article $ust e$erge ha,ing a distincti,e

na$e"use and character.8 This view has "een ta;en "y Hon. Supreme Court B

Hi#h Courts in many other cases and hence this has "een

accepted "y trade as well as the $epartment.


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99 Trade /arlance Test

Trade


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De'(*e* Ca)e La) !$ a$/#a'%/re +K 5ecordin# of sound on duty paid ma#netic cassette tapes.

1K =a;in#


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Deeme* a$/#a'%/re

The processes explained in ii? and iii? in Section 1 >f? are

considered as processes resultin# into N$eemed =anufacture.G%t means that applyin# the principles of court cases( the

processes are not actually Nmanufacturin# processesG "ut

those are considered as manufacturin# processes "ecause

law says so. &xamples of $eemed =anufacture'

La"ellin#( 5ela"ellin#(


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4anufacturer5

Sec 1 >f? states that

the word NmanufacturerG shall "e understood accordin#lyand shall include not only a person who employs hired

la"our in the production or manufacture of excisa"le

#oods "ut also any person who en#a#es in their

production or manufacture on his own account.! The a"ove definition covers two cate#ories'

a?


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5aw material supplier is not to "e considered as

=anufacturer unless he underta;es to pay the duty

under Eot Eo.1+28/6.

%ndependent contractor is a manufacturer even if hemanufactures the #oods in the premises of the raw

material supplier.

:rand name owner is not the manufacturer( even if he

supplies the material. Loan Licensee is not the manufacturer.

La"our Contractor( supplyin# only la"our( is not the

manufacturer.


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!!*)0efinition5There is no definition of #oods in Central &xcise

Law.

Sale f *oods 7ct( +,A- defines #oods as follows'

*oods means any ;ind mova"le property other than

actiona"le claims and money and includes stoc; and

shares( #rowin# crops(#rass and thin#s attached to andformin# part of the land which are a#reed to "e severed

"efore sale or under the contract of sale.!

:oods $ust e $o,ale5

%mmova"le


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S!me E&am,le) !# 6!!*) &lectricity( *as and Steam()aste and Scrap.

$rawin#s and $esi#ns.

%ntermediate #oods( if those are mar;eta"le. W4a% are $!% 6!!*)7 %mmova"les are not #oods.


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&xcisale :oods ne of the essential conditions is that the *oods must

"e Nexcisa"leG.

Section 1 >d? of the Central &xcise 7ct( +,22 defines

&xcisa"le #oods as *oods specified in the 9irst and the

Second schedule to the Central &xcise Tariff 7ct( +,/3 as

"ein# su"Fect to a duty of excise and includes salt!.

&xplanation to Section 1>d? has "een added which

states that &xcisa"le #oods includes any article( material

or su"stance which is capa"le of "ein# "ou#ht B sold for a

consideration B such #oods shall "e deemed to "e

mar;eta"le.

&xcisa"le "ut exempt #oods are those #oods which are

mentioned in the schedules to C&T7( +,/3 "ut exempt

"y a notification.


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Eon &xcisa"le *oods are those #oods which are notmentioned in the schedules.

*oods with NEilG rate of duty are those #oods which arementioned in the Schedules with a rate of dutymentioned as NEilG a#ainst them.


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CLASSIFICATIONIntroduction5

&xcise $uty is levied on all the &xcisa"le *oods

manufactured in %ndia and hence thousands of #oods attract the duty. 9or the purpose of proper identification

and differentiation of the #oods( it "ecomes necessary to

#roup them in some lo#ical method. This is called the

;classification< ofgoods.Background of Classification5

The need for classification was felt all over the world

and hence )orld Customs r#anisation developed a codin#

structure which is ;nown Harmonied System f

Eomenclature >HSE?. This was not followed in %ndia till +,/6.

Till that time( we were havin# our own classification which was

different for Central &xcise and for Customs. This was

creatin# lot of pro"lems in our international trade and hence in


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order to have uniformity( we also adopted HSE for the

purpose ofclassification of #oods for Central &xcise as well

as Customs purpose.

&arlier each #roup of #oods used to "e called Tariff

%tem whereas now( it is ;nown as Chapter Headin#. %n

+,/3( Central &xcise Tariff 7ct was passed which "ecame

effective from 1/.-1.+,/6.

Central &xcise Tariff ct" -*=

This 7ct is one of the smallest 7cts in our country which

contains only 2 sections. There are two schedules to this

7ct which are as follows

7irst Schedule' This contains a list of #oods on which

:asic &xcise $uty >C&ED7T? is levied. This is divided

into 1- Sections and ,6 Chapters.

Second Schedulehas "een a"olished.


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Third Schedule' This contains a list of #oods which are

covered under 43/ ased ,aluationas per Section +of

the Central &xcise 7ct( +,22.

Sections Under C&T5

9irst Schedule covers almost all the #oods. %t is divided

into 1- Sections and each Section contains various Chapters.

7 Section is a "road #roup of #oods whereas Chapters containfurther su" #roups of the #oods.ollowing is t#e list ofections along wit# t#e broad groupings


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Section %o. Section eading Chapter %o.

% ni$al products > to =

II 2egetale products ? to -+

III ni$al or ,egetale fats -=

I2 /repared food stuff" e,erages -@ to >+2 4ineral products >= to >?

2I Che$icals fertiliAers soaps etc. >* to *

2II /lastics and ruer and articles to +

2III Leather and articles +- to +

ID Wood" cork" stra' and their articles ++ to +@

D /ulp" paper" paperoard and articles +? to + DI Textile and textile products = to @

DII 7oot'ear" head gear" u$rellas etc. @+ to @?

DIII rticles of stone" plaster" cera$ic glass @* to ?

DI2 /earls and precious $etals ?-

D2 Base $etals and articles of ase $etals ?> to *

D2I 4achinery and $echanical appliances etc. *+ E *=D2II 2ehicles" aircraft" ,essels etc. *@ to *

DIII #ptical" photographic" $edical" clocks etc. to >

DID r$s and a$$unitions

D 4iscellaneous $anufactured articles + to @

F %ote 5 9 Chapter nu$ers -"@"-"-> and ?? are lank G


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Chaptersunder C&T5

&ach Section is su"divided into Chapters. 7s mentioned

earlier( there are ,6 Chapters out of which 3 Chapters are

;ept "lan; for future purpose. Section contains a "road#roupin# where as Chapter contains further classification

of #oods in that "road #roup. e.#. Section QD contains N

:ase =etals and 7rticles of :ase =etalsG. %t contains the

followin# Chapters


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CH7


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Chapter eading and Su9eading nu$er5

&ach Chapter is further divided into Chapter Headin#s

and Chapter Su"headin#s. Chapter Headin# denotes aparticular class of #oods within the Chapter whereas Chapter

Su"Headin# denotes further classification of #oods within

that Chapter Headin#. 7 sample of Chapter 4/ is shown

"elow for "etter understandin# '

Chapter ?*

Lead and rticles thereofHea*($g) N!. S/3-Hea*($g N!. De)'r(,%(!$ !# g!!*) U$(% Ra%e !# */%y

&$) &2) &') &()*.+$ ,nwroug#t ead

*+$$+ ++ - efined ead /g. *%

-0t#er *+$ 1$ ++ -- Containing by weig#t

antimony as t#e principleot#er element /g. *%


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Significance of 0ashes59

Sin#le $ash > ? at the "e#innin# of the description

indicates a #roup( whereas $ou"le $ashes > ? indicates a

su" #roup .Triple $ashes > ? B

9our $ashes > ? indicate su"classification of the product

immediately precedin# the triple or four dashes.


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Tariff 3ates #f 0uty E &ffecti,e 3ates of 0uty5

Column Eo. 2 in the schedule indicates the rate of duty

applica"le on the #oods. These rates are su##ested "y the

rulin# *overnment and are approved "y the "arrin#

emer#ency situations?. These rates need not "e effective rates of duty. %f the

#overnment decides to #ive partial or full exemption to the

#oods( *overnment issues notifications prescri"in# such

exemptions and then such rates "ecome the effective ratesat which the duty "ecomes paya"le "y the assesses.

R/le) #!r I$%er,re%a%(!$


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/ # r $ r,r $C.&.T.7. +,/3 contains five rules for interpretation

summary of these rules are as under

3ule -' The titles of Sections and Chapters are provided for

ease of reference only. 9or le#al purpose classification shall"e determined accordin# to the terms of headin#s and relative

Section or Chapter notes.

3ule > >a? ' %f incomplete or unfinished #oods have attained

the essential character of complete or finished #oods( then

any reference in a headin# shall apply to such incomplete or

unfinished #oods.e.#. =otor vehicle not fitted with tyres or

"attery( "icycles without saddles and tyres. Chapter headin#

will also apply to the #oods complete or finished removed

unassem"led or disassem"led.e.#. S@$ or C@$ conditions.>"? ' 7ny reference in a headin# to a material or su"stance

shall "e ta;en to include a reference to mixtures or

com"inations of that material( or su"stance with other

materials or su"stances e.#. 7rticles of #old will also includean article which is made artl of *old.

3ule >a?' The headin# which provides the most specific


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> ? # p pdescription shall "e preferred to a headin# providin# a more

#eneral headin#. D%< "a# is a NCh.Eo.A,? in

#eneral paralance "ut there is specific entry for

Suitcase8:riefcase under Chapter Headin# Eo. 21-+.+- andhence it should "e classified under this headin# only.

>"?' =ixtures( composite #oods consistin# of different

materials( components etc. ( which cannot "e classified "y

reference to >a? a"ove shall "e classified as they consisted of

material which #ives them their essential character( e.#. N


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3ule + 59*oods which cannot "e classified in accordance with

the a"ove rules shall "e classified under the headin#appropriate to the #oods to which they are most a;in >similar?.

3ule =59Su"headin#s can "e compared only at the same

level i.e. if one headin# contains 3 6 Su"headin#s( these

Su"headin#s can "e compared with each other. Similarly this

rule states that Section Eotes and Chapter Eotes also will

apply( unless the context otherwise reIuires.

*eneral &xplanatory Eotes '

The interpretation rules are also followed "y two

explanatory notes vi.+? These relates to dashes B

1? This states that N0G indicates 0 to value of the #oods.


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+.- /rinciples of Classification ' +K Trade


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2K &nd Use B Classification '

*enerally end use is not an important criteria for

classification unless classification is related to function of#oods. e.#. Laminated Safety *lass will "e classifia"le asNLaminated Safety *lassG only even if it is used a part of=otor Dehicle. However


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6K Classification of N


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d?


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VALUATION.Basis #f Calculation #f 0uty5

i? 7ssessa"le value under section 2 >7d Dalorem duty? ii? =aximum 5etail


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Section + (-)reads as under

)here under this 7ct( the duty of &xcise is char#ea"le

on any excisa"le #oods with reference to their values( then( on

each removal of the #oods( such value shall

%n a case of where the #oods are sold "y the assessee( fordelivery at the time and place of the removal( the assessee

and the "uyer of the #oods are not related and the price is the

sole consideration for the sale( "e the transaction value;

%n any other case( includin# the case where the #oods arenot sold( "e the value determined in such manner as may "e

prescri"ed.

&ssential Conditions Under Section + (-)(a)

+K *oods must "e sold

1K $elivery at the time and place of removal is important.

AK 7ssessee and "uyer should not "e related to each

other.

2K


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/lace #f 3e$o,al5

%t means a? a factory or any other place or premises

of production or manufacture of the excisa"le #oodsP "? a warehouse or any other place or premises wherein

the excisa"le #oods have "een permitted to "e deposited

without payment of duty from where such #oods are removed.!

3elated person5

The person shall "e deemed to "e NrelatedG if

a? they are interconnected underta;in#sP

"? they are relativesP

c? amon#st them( the "uyer is a relative and a

distri"utor of the assessee( or a su"distri"utor ofsuch distri"utor( or(

d? they are so associated that they have interest(

directly or indirectly( in the "usiness of each other.


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Transactional 2alue5

%t means the price actually paid or paya"le for the

#oods( when sold( and includes in addition to the amountchar#ed as price( any amount that the "uyer is lia"le to pay to(

or on "ehalf of the assessee( "y reason of or in connection

with the sale( whether paya"le at the time of the sale or at any

other time( includin#( "ut not limited to any amount char#edfor( or to ma;e provision for( advertisin# and pu"licity(

mar;etin# and sellin# or#aniation( expenses( stora#e(

outward handlin#( servicin#( warranty( commission or any

other matterP "ut does not include the amount of duty of

excise( Sales Tax and other taxes( if any( actually paid or

actually paya"le on such #oods.!


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5.2.7. Essentials of Valid Sale:

Section 2 (h) of The Central excise Act,1944,denes Sale as

Sale and Purchase ithin their !ra""atical#ariations and co!nate ex$ressions, "eans an%transfer of !oods &% one $erson to another in theordinar% course of trade or &usiness for cash ordeferred $a%"ent or other #alua&le consideration'

Sale* under Central +xcise is dierent than Sale*under Sale of -oods Act,19./' 0nder Sale of -oodsAct, 19./, the $ro$ert% i'e' onershi$ "ust &etransferred to the &u%er here as under Central+xcise,Sale* includes hire $urchase and lease also'ut the folloin! are not Sale* under Central +xcise

a) Stoc transfer i'e' transfer to de$ot3&ranch' &) o& or3 $rocessin!'

c) 5ree sa"$les' d) 6%$othecation'

)


53/180

a) /rice $ust e sole consideration 59

This means that apart from price( no other "enefitshould flow from the "uyer to the seller. %f there is anyadditional consideration other than price( then TransactionDalue will not "e the "asis for the valuation of *oods.&xamples of additional consideration

a? "uyer supplies material.

"? "uyer supplies moulds( dies( tools etc.

) /rice ctually paid or payale 59


54/180

Inclusions in Transaction 2alue 59

+K except

dura"le and returna"le containers?

1K Cost of drawin#s( desi#ns etc. AK Compulsory after sales service char#es.

2K 5oyalties char#e

&xclusions fro$ Transactional 2alue59

+K Trade $iscount

1K Cash $iscount

AK %nterests on advances if there is no nexus> relation?

"etween advance and the price

2K 7ctual Transportation Cost 3K Transport Cost on &Iualised :asis

6K %nstallation and &rection &xpenses

?G%nterest on receiva"le.


55/180

Ce$%ral E&'()e Val/a%(!$ 8De%erm($a%(!$ !# ,r('e

!# E&'()a3le !!*)9 R/le) :;;;

3ule no -' Short Title and Commencement.

3ule no >' $efinitions

3ule no 'Dalue of #oods under clause >6? of su" section>+?

of section 2 of the act should "e determined as per these

rules.

3ule no +5%f the #oods are not sold( then the value should "e

ta;en on the "asis of value of Nsuch #oodsG sold "y the

assessee at any other time nearest to the time of removal(su"Fect to reasona"le adFustment. >e.#. 9ree samples( #oods

supplied under warranty?


56/180

3ule no =' if the #oods are sold at a different place other than

the factory #ate( then the value should "e ta;en as TransactionDalue( excludin# the cost of transportation from that place of

removal up to the place of delivery. %t is clarified that the cost of

transportation means either the actual cost of transportation or

the eIualised cost of Transportation. %t is also clarified that cost

of transportation from the factory and the place of removal is

not excludi"le.

3ule no @' %f the price is not the sole consideration( the value

of the #oods shall "e determined as the a##re#ate of such

transaction value and the amount the money value of anyadditional consideration flowin# directly or indirectly from the

"uyer to the assessee.


57/180

&xamples '

+K Dalue of materials( components( parts and similaritems related to such #oods.

1K Dalue of tools( dies( moulds( drawin#s( "lue prints(

technical maps and charts and similar items.

AK Dalue of material consumed( includin# pac;a#in#materials( in the production of such #oods.

2K Dalue of en#ineerin#( development( art wor;( desi#n

wor; and plans and s;etches underta;en elsewhere than in

the factory of production and necessary for production of

such #oods.


58/180

3ule no ?'%f the #oods are sold from $epot( premises of

consi#nment a#ent or any other place from where the #oods

are sold and where the seller and "uyer are not related( then

the value shall "e normal transaction value of such #oods soldfrom such other place at8 or a"out the same time or at the time

nearest to the time of removal.

3ule no *')here the #oods are consumed captively( then the

value shall "e cost of production8 manufacture R +-03ule no ' )here the #oods are sold to or throu#h related

person( the value shall "e normal transaction value at which

the #oods are sold "y such related person to the "uyer or if the

#oods are not sold( then the retail price of such #oods. if the

related person does not sell the #oods "ut consumes them

captively( then the value shall "e determined accordin# to 5ule

/.


59/180

3ule no -' )here the #oods are sold to or throu#h

interconnected underta;in# who is also a related person or

a holdin# company or su"sidiary company( then the valueshall "e determined in accordance with 5ule ,. in any other

case( the value shall "e determined as if they are not

related persons.

R/le


60/180

"? in a case where the #oods are not sold "y the

principal manufacturer "ut are transferred to some other

place from where the said #oods are sold( the value shall

"e the normal transaction value of such #oods sold from

such other place at or a"out the same time or at the time

nearest to the time of removal of the said #oods from the

factory of the Fo" wor;er(

c? in any other case( the provisions of these rules shallapply.

3ule no --'%f the value of the #oods can not "e

determined under any of the rules( then the value shall"e determined usin# reasona"le means consistent with

the principles and #eneral provisions of these rules and

section 2 .

2LU& BS&0 #% 4DI4U4 3&TIL /3IC&


61/180

Section 27 of the Central &xcise 7ct( +,22'

This section specifies the circumstances and the conditions

under which the value of the #oods should "e determined

"ased on the =aximum 5etail


62/180

So far ,1 items are covered under this scheme. Some of

the examples are as follows'

%T&= 7:7T&=&ET +? Chocolates A-0

1? :iscuits A30

A? %ceCream A-0

2? )hite Cement A-0

3? Tooth


63/180

Certain clarifications issued y C.B.&. E C59 +? %f the provisions of Standards of )ei#hts B =easures 7ct(

+,46 do not apply( duty is paya"le on the "asis of section 2. 1? %f the #oods are sold in wholesale( valuation should "e as

per Section 2. hence( it is possi"le that the same commoditywould "e sometimes assessed under Section 2 Bsometimes under section 27.

0ee$ed 4anufacture59 7s per Section 1>f?>iii?( pac;in# or repac;in# of the #oods

covered under Third Schedule in a unit container orla"elllin# or rela"ellin# of containers includin# thedeclaration or alteration of retail sale price on it or adoption

of any other treatment on the #oods to render the productmar;eta"le to the consumer amounts to manufacture.

Confiscation of goods 5 Section +()5


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Confiscation of goods 5 Section +()5

%f the assessee removes the #oods without declarin#the 5etail


65/180

S=ECIFIC DUTY %f the duty is paya"le on the "asis of certain

measurement unit li;e wei#ht( len#th( nos. etc.( it is called

as specific duty. %n such case value of #oods has no

relevance. &xamples'

+? Ci#arettes other than filtered ci#arettes of len#th5s.

4/ per Thousand not exceedin# 6- mm.

1? Su#ar( other than ;handsari su#ar5s. A2 per Iuintal

.TARIFF VALUE%n some cases( tariff values are fixed "y Central

*overnment. This is Eotional Dalue! for the calculation of

the duty paya"le. This is fixed under section A>1? of the

Central excise 7ct( +,22.


66/180

/3CTICL &D4/L&S #% 2LUTI#% 59

+K :. Ltd. manufactures two products vi. &ye inment B S;ininment. S;in inment is a specified product under Section

27 of The Central &xcise 7ct( +,22. The sales prices are 5s.2A8 B 5s.AA8 respectively. Sales


67/180

1K 7n assessee sells the #oods to 7:C Co. Ltd for 5s. +-(---8on +3th $ec. 1--2.The "uyer is a related person! as

defined under Section 2>A? > "? of The Central &xcise7ct(+,22. n that date( the net price > excludin# exciseduty? of related person to an unrelated "uyer was5s.+1(---8. )hat will "e the assessa"le value in each ofthe followin# cases

a? The related person sells the #oods to an unrelated

"uyer on 3th 9e". 1--2 at 5s. +1(3-- exclusive of exciseduty.

"? The related person sells the #oods to unrelated "uyeron +-th 9e".1--2 at 5s. ++(---( exclusive of excise duty.

c? The "uyer is treated as related person! as it is aninterconnected underta;in# in relation to manufacturer.However the "uyer is not a holdin# company or su"sidiarycompany of the assessee. :uyer B seller do not haveinterest in each other.

AK 7n assessee has a factory at @ol;ata 7s a sales policy he


68/180

AK 7n assessee has a factory at @ol;ata. 7s a sales policy( hehas fixed uniform price of 5s. 1---8 per piece > excludin#taxes? for sale anywhere in %ndia. 9rei#ht is not shownseparately in his %nvoice. $urin# 9inancial year 1--2-3( hemade followin# sales

a? Sale at factory #ate at @ol;ata +1-- pieces Eo

transport char#es.

"? Sale to "uyers in *uFarath 6-- pieces . 7ctual

transport char#es incurred 5s. 1/(---8.

c? Sale to "uyer in :ihar 2-- pieces 7ctual transport

char#es incurred 5s. +/(---.

d? Sale to "uyers in @erala +--- pieces 7ctual

Transport char#es 5s. 32(---8.

9ind assessa"le value.

2K $etermine the assessa"le value in each of the followin#


69/180

2K $etermine the assessa"le value in each of the followin#circumstances .

uote relevant Section8 5ule under Central &xcise Law.

a? 7 Ltd. sold the #oods to : Ltd. at a value of 5s. +-- perunit B : Ltd. sold the #oods to C Ltd. at a value of 5s. ++-8per unit. 7 ltd. B : Ltd. are related whereas : Ltd. B C Ltd.are unrelated.

" ?7 Ltd. B : Ltd. interconnected underta;in#s under

=5T< 7ct. 7 sells the #oods to : Ltd. at a value of 5s. +--per unit B to C Ltd. at 5s. ++-8 per unit( who is anindependent "uyer.

c? 7 ltd. sells the #oods to : Ltd. at 5s. +-- per unit. Thesaid #oods are captively consumed "y : Ltd. in its factory. 7Ltd. B : Ltd. are unrelated. The cost of production of #oodsto 7 Ltd. is 5s. +1- per unit.

d? 7 Ltd. sells motor spirit to : Ltd.at 5s. A+8 per Ltr. :ut=otor spirit has administered price of 5s. A-8 per Ltr. fixed"y *ovt.

REISTRATION


70/180

REISTRATIONS&CTI#% @ 3UL& 59

&very person who produces( manufactures( carries on trade(

holds private store room or warehouse or otherwise usesexcisa"le #oods( shall #et re#istered.

%#T. %# =>- (%.T.) 0T. >@.@.>-5

G pplication for 3egistration5

&very person who wants to #et re#istered shall apply in the

prescri"ed 7or$ 9-. :road Contents of the form are as under' +K Eame and address of the applicant.

1K


71/180

K F p

Headin# nos.

,K =aFor inputs used in the manufacture with Chapter

Headin# Eos.

:K Separate 5e#istration should "e o"tained for each

premises.

CK 5e#istration Certificate in the prescri"ed form 5C containin#

5e#istration Eo. shall "e #ranted within seven days of the

receipt of the application.$K )here the re#istered person transfers his "usiness to

another person( the transferee shall #et himself re#istered

afresh.

&K )here a re#istered person is a firm or a company or an7


72/180

*K 7 re#istration certificate shall "e revo;ed or suspended if

the holder is found to have committed "reach of any

provisions of 7ct or 5ules.

HK 7 5e#istration Certificate or a copy of thereof shall "eexhi"ited in a conspicuous part of the re#istered premises.

%K 5e#istration is permanent.

JK &ach re#istered person is #iven &xcise Control Code. This is

+3di#it code "ased on for dealer?. Last three di#its are numeric

codes representin# the num"erP assessee must mention &CC

Eo. in his %nvoice( T56 Challans( &5+ etc.

EXE=TION FRO REISTRATION7


73/180

Eot. Eo. A681--+ >E.T.? dated 16.-6.1--+ #rants the

exemption under the followin# circumstances'

aK %f the #oods are completely and unconditionally exempt

from the duty.

"K %f the #oods are exempt "ased on the value of annual

turnover of 5s. +3- la;hs su"Fect to certain conditions.

>7 simple declaration should "e filed when the turnover

reaches 5s. ,-.-- la;hs.? cK %f the #oods #ot manufactured from others.

dK %f the #oods are manufactured in the Customs :onded

)arehouse >i.e. &U( 9T( ST


74/180

+? >c? can "e levied up to

5s.1(---8 or the amount of duty of contravenin# #oods

whichever is hi#her. %n addition( the #oods can "econfiscated. %mprisonment of minimum 6 months and

maximum 4 years also can "e imposed.

STORAE > ACCOUNTIN OF OODS


75/180

STORAE > ACCOUNTIN OF OODS4&%I%: #7 ;7CT#3Je?'

9actory means any premises( includin# the precinctsthereof( wherein or in any part of which excisa"le #oods other

than salt are manufactured( or wherein or in any part of which

any manufacturin# process connected with the production of

these #oods is "ein# carried on or is ordinarily carried on.!ST#3:& #7 :##0S5

+K =anufactured #oods can "e stored in a factory without

payment of duty.

1K The duty is paya"le only when the #oods are removed

from the factory. AK There is no separate place reIuired to "e earmar;ed

>earlier called as :S5? where the #oods can "e stored.

2K There is no time limit within which the #oods should "e

removed from the factory.


76/180

DAILY STOCK ACCOUNT

a? Under 5ule +- >+?( a $aily Stoc; 7ccount should "emaintained "y every assessee.

"? There is no prescri"ed form of $aily Stoc; 7ccount.

c? $aily Stoc; 7ccount must contain the followin#

particulars

+K $escription of #oods manufactured or produced.

1K penin# "alance

AK uantity manufactured or produced.

2K uantity removed >on payment of duty or without

payment of duty.? 3K 7ssessa"le value of #oods removed

6K $uty 7mount

4K Closin# :alance.

d? $aily Stoc; 7ccount must "e maintained on a daily "asis.

Th ti t " l t d ft th d f th hift >i


77/180

The postin#s must "e completed after the end of the shift >in

case factory is runnin# only in one shift? or "efore the end of

the first shift of the next day >if the factory is runnin# in three

shifts.? e? )hen entry is reIuired to "e made'

7s soon as the #oods are completely manufactured( duly

tested and pac;ed( the entry should "e made in the $S7.

Hence( unless the #oods are in the mar;eta"le sta#e( entryneed not "e made in $S7.

STORAE FOR TRADINThere is no specific 5ule restrictin# the tradin# activity from

the factory. :ut it is advisa"le to inform the &xcise 7uthoritiesa"out the same. $epartment has clarified that tradin# of

identical #oods should not "e done from the factory without

the prior permission of the Commissioner..

STORAE OUTSIDE THE FACTORY7


78/180

STORAE OUTSIDE THE FACTORY75ule 2 >2? of The Central &xcise 5ules(1--1 states that The

Commissioner may allow any assessee to store the

#oods outside the factory without payment of duty su"Fectto certain conditions.

REISSION OF DUTY nce the #oods are manufactured( the duty lia"ility

arises. However( duty can "e waived on the #oods in thefollowin# circumstances

aK %f the #oods are destroyed or dama#ed in the factory

"y natural causes( or "y accident.

"K %f the #oods "ecome unfit for consumption for

mar;etin#(

The remission can "e #iven "y The Superintendent if

the duty is less than 5s.+-(---8( "y the 7ssistant $eputy

Commissioner.

%f the duty is less than 5s.+(--(---8( "y Joint


79/180

Commissioner 8 $eputy Commissioner if the duty is less

than 5s.3(--(---8 and "y the Commissioner if the duty is

more than 5s.3(--(---8

0I77&3&%C& I% 0S %0 /JSICL ST#CK5

%f the #oods are found short as compared to $S7 stoc;(

the duty can "e demanded and if the #oods are found in

excess( the #oods can "e confiscated. %n "oth the cases( the

penalty also can "e levied./&%LTJ 7#3 %#T 4I%TI%I%: 0S5

Under 5ule 13 >+? >"?( the penalty can "e imposed up to

the amount of duty payableon the #oods and the #oods can

"e confiscated.

CLEARANCE OF OODS


80/180

CLEARANCE OF OODS I%2#IC&5

Clearance means removal of #oods from the

factory. 5ule ++ of the Central &xcise 5ules( 1--1 ma;es itcompulsory to prepare an %nvoice when the #oods are to "e

removed from the factory. %t reads as under'

Eo excisa"le #oods shall "e removed from a

factory or a warehouse except under an invoice si#ned "y

the owner of the factory or his authoried a#ent.!

C#%T&%TS #7 T& I%2#IC&5

+K Serial Eum"er

1K 5e#istration Eum"er

AK $escription and Classification of #oods. 2K Time and $ate of 5emoval.

3K uantity and Dalue of the #oods.

6K 5ate of $uty.

4K $uty paya"le on the #oods.

T3&& C#/I&S #7 I%2#IC&5


81/180

T3&& C#/I&S #7 I%2#IC&5

7ccordin# to 5ule ++( three copies of the %nvoice

should "e prepared as follows'

ri#inal Copy "ein# mar;ed as 6#3I:I%L 7#3BUJ&3.!

$uplicate Copy "ein# mar;ed as 60U/LICT& 7#3

T3%S/#3T&3.8

Triplicate Copy "ein# mar;ed as 6T3I/LICT& 7#3

SS&SS&&.8

#%LJ #%& I%2#IC& B##K5

7t any time( only one %nvoice :oo; should "e in use(

unless specially permitted "y the 7ssistant Commissioner.

/3&UT&%TICTI#% #7 I%2#IC&5The owner or the )or;in#


82/180

are exempt from the preauthentication.

%n case of computer #enerated %nvoices( authentication can

"e done after those are printed.

I%TI4TI#% #7 T& S&3IL %U4B&35

:efore ma;in# use of the %nvoice :oo;( the Serial

Eum"ers of the same shall "e intimated to the

Superintendent.

0&L&3


83/180

S&L7 3&4#2L %0 /JSICL C#%T3#L5

7ll #oods( except Ci#arettes( can "e removed "y the

assessee himself. This is ;nown as Self 5emoval


84/180

time of printin# is permitted.

3K 7uthentication can also "e done after the %nvoice is printed

C%C&LLTI#% #7 I%2#IC&5

+K %ntimation of a cancelled %nvoice should "e sent to the

Superintendent on the same date.

1K 7lon# with the intimation( the ori#inal copy of the cancelled

%nvoice also should "e sent to The Superintendent.

AKTriplicate copy of the invoice should "e retained "y theassessee in the %nvoice :oo;.

/3&/3TI#% #7 I%2#IC& W&% :##0S 3&


85/180

0IS/TC&0 T3#U: 4#3& T% #%& 2&ICL&.

a? %n such a case the assessee has to inform to 7ssistant

Commissioner 8 $eputy Commissioner at least 2/ hoursprior to removal of #oods.

"? 7ssistant Commissioner 8 $eputy Commissioner should

verify the details.

c? 7 separate invoice should "e made in case of eachvehicle.

d? =anufacturer will pay the entire duty on the first such

%nvoice >


86/180

f?


87/180

d? 7 pre printed serially num"ered challan duly

authenticated "y the Superintendent should "e used.

e? 7 record of outward and inward movement should "e

maintained.

f? )ei#hment should "e done at the nearest

wei#h"rid#e.

#? Challan Eum"er should "e Iuoted on %nvoice.

I%2#IC& 7#3 C/TI2& C#%SU4/TI#%5 3UL& = (>)

%f the #oods are used within the factory( the date of removal

will "e the date on which the #oods are issued for such use.nly one invoice per day can "e prepared.

SU==LEENTARY INVOICE7


88/180

6ccording to ule &$) &b) of Cenvat Credit ules52++(5 a supplementary invoice s#ould be prepared for t#e

differential duty to be paid in addition to t#e original dutyamount. 0n t#e basis of suc# supplementary invoice5 t#econsignee can avail t#e Cenvat credit.

%t is also provided that in case of fraud( suppression of

facts or willful misstatement( supplementary invoice cannot

"e prepared.

C/T&3 %I%& 5/J4&%T #7 0UTJ


89/180

.- /&3I#0 7#3 /J4&%T #7 0UTJ 59 7ssessees who are not enFoyin# any exemption8

concession have to pay the duty "y 3th of the next month.

7ssessees who are enFoyin# any exemption8concession

have to pay the duty "y +3th of the next month.

.> /J4&%T #7 0UTJ T3#U: C&%2T

C3&0IT'

$uty can "e paid "y utilisin# Cenvat credit "alanceavaila"le with the assessee as on the last date of the

month.Credit on %nputs(Capital *oods as well as %nput

Services can "e utilied to#ether for this purpose.

./J4&%T #7 0UTJ T3#U: /. L.. 59


90/180

+K


91/180

$epartment alon#with the return B one copy has to "e

retained "y the assessee.

6K 9orm of


92/180

9inancial ear.

2K 7ccount Head code has to "e mentioned in *754

Challan e.#.--A/ is the code for Central &xcise

$uty(--22 is the code for Service Tax etc.

3K


93/180

if the cheIue #ets "ounced(then it will "e considered as

nonpayment of duty B penalty B interest will also "e

paya"le.

.= I%T&3&ST 7#3 %#%9/J4&%T #3 0&LJ&0/J4&%T #7 0UTJ 59

5ule />A?of The Central &xcise 5ules( 1--1 provides

that in case the duty is not paid in time ( interest will "e

levied at the prescri"ed rate > at present the rate is +A0p.a.?

5ule/>A7? of the said 5ules provides that if the delay is

more than A- days( then the assessee loses the "enefit of

monthly payment of duty as well as of utilisation of Cenvat

Credit till the date he pays the outstandin# duty includin#interest.%t means he will have to


94/180

E E ED E-.- '/&3I#0IC 3&TU3%S59

5ule +1 of The Central &xcise 5ules( 1--1 provides that

every assessee has to su"mit a monthly return called &5+ "y+-th of the next month.

S.S.% units have to file a Iuarterly return called &5A "y

1-th of the month succeedin# the Iuarter.

5eturns should "e su"mitted to The 5an#e Superintendent 5eturns should "e su"mitted in Iuintuplicate >3 copies?.

There is a prescri"ed form of &5+. The contents are

follows'

7K $etails of the manufacture( clearance B duty paya"le

+? Chapter Headin# Eo. 1? Unit of uantity

A? uantity =anufactured

2? uantity cleared

3? 7ssessa"le Dalue

6? $uty

4? Eotification availed


95/180

4? Eotification availed

/? 5ate of duty

,? $uty


96/180

+? 7rrears of duty

1? %nterest

A? =iscellaneous


97/180

RETURNS

+K 7ny record8return can "e maintained8prepared on

computer.

1K Eo specific permission is reIuired.

AK 5ecords can "e ;ept on any electronic media e.#.

floppies( hard discs( C$Gs( etc.

2K The print outs of records B documents must "e ta;enout at the end of the month B ;ept in "ound "oo;s( folders.

3K


98/180

7K There are two procedures of &xport' +? &xport without payment of duty.

1? &xport under 5e"ate >refund?.

:K The #oods have to "e cleared under an %nvoice. %n addition

to %nvoice( a prescri"ed form 7.5.&+ has to "e prepared "y

the &xporter.

CK Copies of 7.5.&+ are as follows'

+? ri#inal )hite 1? $uplicate :uff

A? Triplicate ptional?

$K $istri"ution of 75&+ 9orms'


99/180

%f the consi#nment is cleared under the supervision of

&xcise Superintendent( he will ma;e endorsement on all the

copies of 75&+. He will return the ori#inal B duplicatecopies to the exporter. Third copy will "e sent to the officer

with whom the letter of underta;in#8:ond is su"mitted.

uadruplicate copy will "e retained "y the Superintendent.

7t the time of export( ori#inal( duplicateB Iuadruplicate

>optional? copy will "e su"mitted to the Customs fficer

alon# with the #oods. These will "e examined B the export

will "e allowed. He will ma;e endorsement on all copies of

7.5.&+. The duplicate copy will "e returned to the exporter.

%n case of selfcertification( ori#inal( duplicate BIuintuplicate copies of 7.5.&+ will "e directly sent to the

customs authorities alon# with the #oods.

Triplicate B Iuadruplicate copies will "e su"mitted to theS 1 f f


100/180

Superintendent within 12 Hours after clearance of #oods.

He will endorse "oth the copies B hard cover triplicate

copy to the exporter in a sealed cover to "e su"mitted tothe customs authorities.

&K CT+ Certificate '

This is reIuired only when :ond is executed "y=erchant &xporter. He can o"tain CT+ certificate in lot of13.


101/180

The manufacturerexporter can furnish a letter of

underta;in# in 9orm UT+.H& need not execute any

"ond.UT+ is valid for a period of +1 calendar months. Themanufacturer exporter is reIuired to su"mit the proof of

export. The merchant exporter has to execute :+ :ond

eIuivalent to the duty amount B he has to furnish a :an;

*uarantee eIuivalent to 130 of the :ond amount.

*K&xport must ta;e place within six months from the dateof removal of #oods from the factory.

HK &xport under re"ate claim'

7s mentioned earlier( the #oods can "e exported first onpayment of duty B then claimin# the re"ate of duty paid. The

re"ate is not availa"le for the export made to Eepal B

:hutan. The re"ate claim can "e filed with the =aritimeCommissioner or with The 7ssistant Commissioner with


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Commissioner or with The 7ssistant Commissioner withwhom the Letter of Underta;in#8:ond is su"mitted. Theclaim has to "e filed within one year from the date of export.

7lon# with re"ate claim( all the documents li;e 75&+(%nvoice(:ill of Ladin#( Shippin# :ill etc. are to "e enclosed.5e"ate is also availa"le of the duty paid on inputs used inmanufacture of export #oods.

-.+ 59 3&TU3% #7 0UTJ /I0 :##0S T# 7CT#3J'

+K $uty paid #oods can "e "rou#ht "ac; to the factory asper the provisions of 5ule +6 of The Central &xcise 5ules(1--1.

1K The #oods can "e received for repairs( reconditionin#(rema;in#( testin# or for any other purpose.

AK 7s soon as the #oods are received( the entry should "emade in a separate re#ister recordin# the details li;e thedescription of #oods( Iuantity( from whom the #oods arereceived etc.

2K The #oods must accompany the duty payin# document

li;e %nvoice on the "asis of which the assessee can avail


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li;e %nvoice on the "asis of which the assessee can avail

Cenvat credit as if they are inputs.

3K %f the process is only repairin#( reconditionin#( testin#etc.( the Cenvat credit has to "e reversed at the time of

removin# the #oods from the factory after processin#.

6K %f the process amounts to manufacture( the assessee

has to pay the duty on the value of the #oods as per theprovisions of Section 2.

4K )hen the #oods are removed from the factory( the

suita"le entries are to "e made in the re#ister.

/K %f the a"ove procedure cannot "e followed( then a specialpermission is reIuired from the Commissioner of Central

&xcise B Customs.

-.= 59 H#B9W#3K 59

+K $ fi iti f J " ; E t E 1+28/6 dt 13 A +,/6


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+K $efinition of Jo"wor;''Eot.Eo.1+28/6 dt.13A+,/6defines Fo"wor; as processin# or wor;in# upon of rawmaterial or semifinished #oods supplied to Fo"wor;er soas to complete a part or whole of the process resultin# inthe manufacture or finishin# of an article or any operationwhich is essential for the aforesaid process.

1K Jo" wor;er will "e exempt from the payment of duty only

when the conditions under Eot.Eo.1+28/6 are followed.therwise Fo"wor;er will "e considered as a manufacturerB will "e lia"le to pay the duty.

AK Under Eot.Eo.1+28/6( followin# procedure is to followed

aK 5aw material supplier has to #ive an underta;in# to

the &xcise $epartment that he will "e responsi"le for

any duty lia"ility re#ardin# the #oods manufactured on

Fo"wor;.

"K He has to send the material on a separate Challan.


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Challan should "e in triplicate. Two copies should "e

sent alon# with the material. Jo"wor;er will have to

return the #oods after Fo"wor; is complete on the

duplicate copy of the Challan.

cK 7 separate 5e#ister should "e maintained "y "oth i.e.

the supplier of the material B the Fo"wor;er in which the entries are to "e made a"out the movement of

material.

2K The #oods must "e returned within +/- days from the

date of removal of material. 3K %n case the supplier of the material has ta;en any Cenvat

Credit on the material( there is no need of reversin# the

credit provided the #oods are returned within +/- days. %f

the #oods are not returned( then he has to reverse the credit.He is entitled to ta;e credit a#ain when the #oods are


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He is entitled to ta;e credit a#ain when the #oods arereceived in the factory.

6K %f the procedure under Eot.Eo.1+28/6 is not followed(

then the Fo" wor;er is considered as a manufacturer B hewill have to pay the duty on the assessa"le value which will"e calculated on the "asis of Transaction Dalue i.e.the priceat which the #oods are sold "y the principal manufacturer tohis customer.

4K nly "y supplyin# the material( the supplier does not"ecome a manufacturer. His lia"ility arises only when theunderta;in# is #iven "y him under Eot.Eo.1+28/6.

/K Use of own material "y the Fo"wor;er is no "ar under

Central &xcise Law. ,K =aterial can "e directly sent to Fo"wor;er from the

supplier of the manufacturer B the #oods after Fo"wor; alsocan "e directly sent to the customer from the Fo"wor;erGspremises.

C/T&3 -- C&%2T


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C/T&3 -- 5 C&%2T

--.- 5 Background of C&%2T

C&ED7T >Central Dalue 7dded Tax? has its

ori#in in D7T >Dalue 7dded Tax? which is common in other

parts of the world for a lon# time. %n %ndia( it was firstintroduced with the name of =$D7T >=odified Dalue 7dded

Tax? in +,/6. %n the modern production methodolo#y( raw

material passes throu#h various processes till it reaches

finally to the ultimate user. 7t every sta#e( a new commodityemer#es which attracts various taxes li;e Central &xcise

$uty( Sales Tax etc. This results in tax on tax which is called

Ncascadin# effectG.

ne of the "asic principles of taxation is that tax should not


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"e char#ed on tax and to avoid this cascadin# effect(

=$D7T Scheme >now ;nown as Cenvat Scheme? was

introduced. Cenvat Credit 5ules were introduced for the firsttime on -+.-A.1--- which were revised in 1--+ and 1--1.7t

present Cenvat Credit 5ules( 1--2 are in force. :roadly(

under this scheme( duty paid on inputs B capital #oods B

service tax paid on input service can "e utilied for payment

of &xcise $uty on finished products or for payment of

Service Tax on output service.


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--.>5 3ule %o. -5 Short Title" &xtent nd

Co$$ence$ent59 7K These 5ules are called as Cenvat Credit 5ules(1--2.

:K These are applica"le to the whole of %ndia "ut

nothin# contained in these 5ules relatin# to

availment B utiliation of credit of Service

Tax apply to the State of Jammu B @ashmir.

CK These 5ules came into force with effect from +-th day of Sept. 1--2.

--.5 3ule %o. >5 0efinitions59a) Capital :oods $eans


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a) Capital :oods $eans9

7K The followin# #oods namely

+K 7ll #oods fallin# under Chapter /1( /2(/3( ,-( Headin# Eo. 6/-3(#rindin# wheels B

the li;e B parts thereof fallin# under

C.H.Eo.6/-2.

1K i? B >ii? a"ove.

2K =oulds and $ies( Fi#s B fixtures.

3K 5efractories and refractory material. 6K Tu"es and pipes and fittin#s thereof B

4K Stora#e tan;.

used


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i? in the factory of the manufacturer of the final

products( "ut does not include any eIuipment or appliance

used in an office or

ii? for providin# output service.

:K =otor vehicles re#istered in the name of the provider of

output service for providin# specified taxa"le services.

) 7inal /roducts 59

9inal products means excisa"le #oodsmanufactured or produced from inputs or usin#

input services.

c) 7irst Stage 0ealer9

9irst Sta#e $ealer means a dealer who purchases the


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9irst Sta#e $ealer means a dealer who purchases the

#oods directly from the manufacturer or from the depot of

the manufacturer or from the consi#nment a#ent of the

manufacturer under cover of an %nvoice or from an importer

or from the consi#nment a#ent of the importer under cover

of an %nvoice.

d) Second Stage 0ealer 9

Second Stora#e $ealer means a dealer who purchases

the #oods from the 9irst Stora#e $ealer.

e) Inputs 9

i? N%nputsG means all #oods except li#ht diesel oil Hi#h


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i? %nputs means all #oods( except li#ht diesel oil( Hi#hSpeed $iesel il B motor spirit >petrol?( used in or in relationto the manufacture of the final products whether directly or

indirectly B whether contained in the final product or not andincludes lu"ricatin# oils( #reases( cuttin# oils( coolants(accessories of the final product cleared alon# with the finalproduct( #oods used as paints( pac;in# material or as fuelsor for #eneration of electricity or steam used formanufacture of final products or for any other purpose(within the factory of production.

%i? 7ll #oods except L$( HS$( =otor spirit B motorvehicles used for providin# any output service.

&xplanation'%nputs include #oods used in the manufacture of capital

#oods which are further used in the factory of production.

f) Input Ser,ice 59


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%t means any service a? used "y a provider of taxa"le service

for providin# an output service.

"? used "y the manufacturer( whether

directly or indirectly( in or in relation to

the manufacture of final products B clearance of final products upto the place

of removal(

and includes services used in relation to

settin# up( moderniation( renovation or repairs of a factory( premises of the

provider of the output services or an

office relatin# to such factory or premises(

ad ertisement or sales promotion mar;et research


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advertisement or sales promotion( mar;et research(

stora#e upto the place of removal( procurement of inputs(

activities relatin# to "usiness( such as accountin#( auditin#(financin#( recruitment B Iuality control( coachin# Btrainin#(

computer networ;in#( credit ratin#( share re#istry( and

security( inward transportation of inputs or capital #oods B

outward transportation upto the place of removal.g) Input Ser,ice 0istriutor 59

%t means an office of the manufacturer or producer of thefinal products or provider of output service( which receives

invoices issued under 5ule 2 7 of Service Tax 5ules( +,,2towards purchases of input services B issues invoice

"ill or as the case may "e a challan for the purposes of

distri"utin# the credit of service tax paid on the said


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distri"utin# the credit of service tax paid on the said

services to such manufacturer or producer or provider of(

as the case may "e.

h) #utput Ser,ice 59

%t means any taxa"le service provided "y the provider of

taxa"le service to a customer( client( su"scri"er( policy

holder or any other person( as the case may "e.

I) Ho 'ork 59

%t means processin# or wor;in# upon of raw material or

semifinished #oods supplied to the Fo" wor;er( so as to

complete a part or whole of the process resultin# in the

manufacture or finishin# of an article or any operation which

is essential for aforesaid process.

--.+5 3ule %o. 5 C&%2T C3&0IT59

7 f t f th fi l d t i id h ll


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7 manufacturer of the final products or service provider shall

"e allowed to ta;e credit of

a? :asic &xcise $uty as specified in 9irst Schedule. "? 7dditional $uty of Customs >C.D.$.?

c? 7dditional $uty of &xcise levia"le under 7dditional

$uties of &xcise >*oods f Special %mportance ?7ct(

+,34 B 7dditional $uties of &xcise> Textile B Textile

7rticles? 7ct(+,4/.

d?7dditional duty of Customs levia"le under su"section

>3? of Section A of Customs Tariff 7cte? Eational Calamity Contin#ent $uty.

f? Service Tax.

#? &ducation Cess on &xcisa"le *oods B Taxa"le


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#? &ducation Cess on &xcisa"le *oods B Taxa"leServices

h? Secondary B Hi#her &ducation Cess on &xcise $utyB Service Tax

paid on i? any input or capital #oods received in thefactory of the manufacturer of the final products orpremises of the provider of output Services(

ii? any input service received "y themanufacturer of final products or "y the provider ofoutput services

1? Cenvat credit shall "e availa"le to the manufacturer

of the final products or to the service provider( on theinputs lyin# in stoc; or in process or contained in thefinished #oods stoc; on the date on which the finalproducts "ecome excisa"le or output services"ecome taxa"le.

A? Cenvat credit can "e utilied for payment of

a? Central &xcise $uty on any final product(


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a? Central &xcise $uty on any final product(

"? Service tax on any output service(

c? 7ny amount eIual to Cenvat Credit ta;en on %nputsor Capital *oods themselves if such inputs are

removed as such or after "ein# partially processed

or such Capital *oods are removed as such.

d? 7ny amount paya"le under 5ule +6>1? of Central

&xcise 5ules( 1--1.

2? Cenvat Credit shall "e utilied only to the extent such

credit is availa"le on the last day of the month8Iuarter

for payment of duty or tax in relation to that

month8Iuarter.

3?)hen the inputs or Capital *oods( on which CenvatCredit has "een ta;en are removed as such from the


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Credit has "een ta;en( are removed as such from thefactory( the manufacturer shall pay an amount eIual tothe credit availed on such inputs or capital #oods andsuch removal shall "e made under cover of an %nvoice.Such payment shall not "e reIuired to "e made whereany inputs are removed outside the premises of theservice provider for providin# output service. Suchpayment shall also not to "e made in case of Capital*oods are removed from the premises of the serviceprovider.

6? %f the Capital *oods on which Cenvat Credit has "eenta;en( are removed after "ein# used( the manufacturer or

the service provider shall pay an amount eIual to theCenvat Credit ta;en on the said Capital *oods reduced"y 1.30 of each Iuarter of a year or part thereof from thedate of ta;in# Cenvat Credit.

4? %f the Capital *oods are cleared as waste B scrap( the

manufacturer shall pay an amount eIual to the duty


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manufacturer shall pay an amount eIual to the duty

levia"le on transaction value.

/? The amount paid as mentioned a"ove shall "e eli#i"le

for ta;in# Cenvat credit as if the person payin# such

amount has paid the duty.

,? %f the value of any input or capital #oods "efore "ein#

put to use on which Cenvat Credit has "een ta;en is

written off or where any provision to write off fully has "een made in the "oo;s of account( then the

manufacturer shall pay an amount eIuivalent to

Cenvat Credit ta;en in respect of said inputs or capital

#oods. :ut if said inputs or capital #oods are su"seIuently used in the manufacture of final products(

the manufacturer shall "e entitled to ta;e the credit paid

earlier.

+-? )here on any #oods ( the payment of duty is ordered

to "e remitted under 5ule 1+ of Central &xcise 5ules(


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to "e remitted under 5ule 1+ of Central &xcise 5ules(

1--1( the Cenvat Credit ta;en on the inputs used in

the manufacture of such #oods should "e reversed.++? Cenvat Credit on the %nputs or Capital *oods

manufactured in +--0 &U( HT< B ST< can "e

ta;en as per the formula prescri"ed in the 5ules.

+1? Cenvat Credit in respect of 7dditional $uties of &xcise B Eational Calamity Contin#ent $uty can "e

utilied only towards payment of 7dditional $uty of

&xcise or Eational Calamity Contin#ent $uty.

+A? Credit of &ducation Cess B Secondary B Hi#her &ducation Cess can "e utilied only for the payment

of &ducation Cess B Secondary B Hi#her &ducation

Cess respectively.

3ule %o.+ 59Conditions 7or llo'ing Cen,at

Credit59


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Credit5 +K Cenvat Credit in respect of %nputs may "e ta;en

immediately on receipt of the inputs in the factory. 1K Cenvat Credit in respect of Capital *oods may "e ta;en

to the extent of 3-0 in the financial year in which the

Capital *oods are received.:ut credit of 7dditional $uty

levied under su"section>3? of Section A of Customs Tariff 7ct in respect of Capital *oods can "e ta;en in full

immediately after the receipt of Capital *oods in the

factory.

AK The "alance amount of credit may "e ta;en in any financial year provided the capital #oods are in the

possession and use of the manufacturer.

This condition is not applica"le to components( spares(

accessories( refractories and refractory materials( tools B


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( y (

dies.

2K )hole amount of Cenvat Credit on Capital *oods isavaila"le if the Capital *oods are removed in the same

financial year in which they are received in the factory.

3K Cenvat Credit in respect of Capital *oods shall "e

allowed even if the Capital *oods are acIuired on lease(hire purchase or loan a#reement from a financin#

company. 6K Cenvat Credit in respect of Capital *oods shall not "e

allowed to the extent of amount claimed as depreciationunder Section A1 of the %ncome Tax 7ct( +,6+.

4K %nputs or Capital *oods can "e sent outside to a Fo"wor;er for processin#( testin#( repairin#( reconditionin# or


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p # # p # #for any other purpose. Such inputs or Capital *oods must"e returned within +/- days from the date of removal from

the factory. %f they are not received "ac; within +/- days(manufacturer has to de"it the amount eIuivalent to theCenvat Credit on such inputs or Capital *oods. He canavail the credit when the inputs or the capital #oods arereceived in the factory.

/K Ji#s( 9ixtures( =oulds and $ies can "e sent out for ta;in#out production of #oods from a Fo"wor;er.

,K9inal products can "e cleared directly from the premisesof the Fo"wor;er provided a prior permission is ta;en fromThe Commissioner of Central &xcise B Customs.Suchpermission shall "e valid for a period of one year.

+-K Cenvat credit in respect of input service shall "e allowed

on after the day on which payment is made of the value ofthe input service B he service tax as indicated in %nvoice("ill or challan.

--.@59 3ule = 5 3&7U%0 #7 C&%2T C3&0IT5

+K Cenvat credit availed on inputs used in the manufacture of


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+K Cenvat credit availed on inputs used in the manufacture of

#oods which are cleared for export under :ond or a letter

of underta;in# can "e utilied towards payment of duty onthe #oods cleared for the home consumption or towards

payment of service tax on output service.

1K Cenvat credit availed on inputs used in the intermediate

products cleared for exports also can "e utilied towards

payment of duty on the #oods cleared for the home

consumption or towards payment of Service Tax on output

service.

AK %n case such adFustment is not possi"le( the manufacturer

can claim refund of such Cenvat credit.

2K Eo such refund is permissi"le in case the manufacturer

avails duty draw"ac; "enefit or claims re"ate of duty or

service tax.

--.? 59 3ule @5 C#44#% I%/UTSI%/UT

S&32IC&S59


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S&32IC&S59 +K Cenvat credit shall not "e allowed on such inputs which

are used in the manufacture of exempted #oods or forprovision of exempted output services( except in thefollowin# circumstances.

1K )here the manufacturer avails Cenvat Credit on inputsor input services which are used in the manufacture of

dutia"le as well as exempted final #oods or exemptedoutput services( then the receipt( consumption and inventoryof inputs or input services meant for use in the in themanufacture of dutia"le final products8taxa"le outputservices and the exempted #oods8output services and shallta;e Cenvat credit only on the Iuantity of inputs 8inputservices which are intended for use in the manufacture ofdutia"le #oods or taxa"le output services.

AK The manufacturer( optin# not to maintain separate

account shall follow either of the followin# options


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account shall follow either of the followin# options

a? the manufacturer shall pay an amount eIual to 30

of the total value of exempted #oods B the provider ofoutput service shall pay an amount eIual to 60 of

value of the exempted service or

"? the manufacturer of #oods or provider of service

shall pay an amount eIuivalent to the Cenvat Creditattri"uta"le to inputs B input services used in( or in

relation to ( the manufacture of exempted #oods or for

provision of exempted services su"Fect to the

conditions B procedure specified in Su" 5ule A>7? of

this 5ule.

2K Eo Cenvat Credit shall "e allowed on the Capital *oodswhich are exclusively used in the manufacture of


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exempted #oods or for providin# exempted service( otherthan those #oods which are exempted "ased on the value

or Iuantity of the clearances made in a financial year. 3K The a"ove provisions are not applica"le to the

exempted #oods if they are a?Cleared to a unit in +--0 &..U( S&( ST


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0IST3IBUT#3 59

The %nput Service $istri"utor may distri"ute the CenvatCredit su"Fect to the followin# conditions

a? the credit distri"uted a#ainst a document does not

exceed the amount of service tax paid thereon(

"? credit of service tax attri"uta"le to service used in a

unit exclusively en#a#ed in manufacture of exempted #oods or providin# exempted service

shall not "e distri"uted.

--. 59 3ule ? 590IST3IBUTI#% #7 C3&0IT #% I%/UTS

BJ T& #77IC& #3 %J #T&3 /3&4IS&S #7

#UT/UT S&32IC& /3#2I0&3 597 service provider shall "e allowed to ta;e credit on

inputs B capital #oods received ( on the "asis of an invoiceor a "ill or a challan issued "y an office or premises of thesaid provider.

--.-593ule *59 ST#3:& #7 I%/UTS #UTSI0&T& 7CT#3J5


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T& 7CT#3J5

The $eputy Commissioner87ssistant Commissioner may( in

exceptional circumstances( allow the manufacturer to storethe inputs on which Cenvat Credit has "een ta;en( outside

the factory premises if there is shorta#e of space.


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+K Cenvat Credit can "e ta;en on the "asis of any of the

followin# documents

a? 7n %nvoice issued "y i? 7 manufacturer from his factory or from his depotor from the place of his consi#nment a#ent.

ii? 7n importer from his depot or his consi#nment

a#ent. iii? 7 first sta#e dealer or a second sta#e dealer.

"? 7 supplementary invoice issued "y a manufacturer

or importer( in case additional duty has to "e paid

except in cases where the duty is paya"le on account of fraud( collusion or misstatement or

suppression of facts or contraventions of any

provisions of 7cts or 5ules.

c? 7 "ill of entry.

d? 7 certificate issued "y an appraiser of customs in


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? y pp

respect of #oods imported throu#h a 9orei#n


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all the particulars reIuired to "e contained if such

documents contains details of payments of duty(

description of the #oods( assessa"le value and address

of the factory or warehouse.


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and capital #oods containin# the information re#ardin#

the value( duty paid( the person from whom the inputs or

Capital *oods have "een procured and the "urden of

proof re#ardin# the admissi"ility of Cenvat Credit shall lie

upon the manufacturer ta;in# such credit.

3K The manufacturer or service provider shall maintain

proper records containin# the a"ovementionedinformation in case of input services also on which credit

has "een availed.

6K The manufacturer shall su"mit within ten days from the

close of each month to the Superintendent a monthlyreturn in the prescri"ed form. SS% unit shall file a Iuarterly

return within 1- days from the close of the Iuarter.

4K 9irst Sta#e 8Second Sta#e $ealer shall su"mit a return inthe specified form within +3 days from the end of theI arter


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Iuarter.

/? Service provider shall su"mit a return in the specified

form within 13 days from the end of the half year.

,? %nput Service $istri"utor shall su"mit a half yearlystatement #ivin# the details of credit received Bdistri"uted durin# the half year within 13 days from the

end of half year.--.-> 59 3ule 59 I%7#34TI#% 3&LTI%: T#

/3I%CI/L I%/UTS

7 manufacturer shall furnish to the Superintendent(

annually "y A-th 7pril of each financial year( a declarationin the prescri"ed form(in respect of each of the excisa"le#oods manufactured ( the information a"out Iuantity ofprincipal inputs reIuired for use in the manufacture of unit

Iuantity of each final product.

He shall also su"mit the information within +- days of each

month( a"out the receipt B consumption of each principal


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input. 7t present( the manufacturers who are payin# the

duty more than 5s.+ Crore p.a. from


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are also transferred alon# with the factory to the new siteor ownership.

AK Similarly( the credit of Service Tax also shall "etransferred in the a"ovementioned circumstances.

--.-+ 593UL& --5 T3%SITI#%L /3#2ISI#%59 7 manufacturer who opts for SS% exemption and who has

"een ta;in# Cenvat Credit on inputs "efore such option isexercised( shall pay an amount eIuivalent to the CenvatCredit allowed to him in respect of inputs lyin# in stoc; orin process or contained in final products lyin# in stoc; onthe date when such option is exercised and if any "alance

is left shall lapse. Similar provisions apply to the service provider.

--.-= 59 3ule -> 59 S/&CIL 0IS/&%STI#% I% 3&S/&CT

#7 I%/UTS 4%U7CU3&0 I% 7CT#3I&S L#CT&0

I% S/&CIL 3&S #7 %#3T &ST 3&:I#%S KUTC

7/24/2019 37727725 Certificate Course in C Excise(2

37727725 Certificate Course in C Excise(2)

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Transcript of 37727725 Certificate Course in C Excise(2)