B.Com. V Sem (Tax) Subject- Central & Provincial Excise...

B.Com. V Sem (Tax) Subject- Central & Provincial Excise Duty

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SYLLABUS

B.Com I SEM (Tax)

Subject – Central & Provincial Excise Duty

UNIT-I Introduction of Central Excise Duty, features and importance,

types of excise duty, important definitions; goods, manufacture, manufacturer, factory, excisable goods, basic conditions, Registration, process of classification and principles.

Unit-II Methods of valuation of excisable goods, Items to be included and excluded to Transaction value. Practical problems relating to computation of assessable value and excise duty payable.

Unit-III MRP based valuation. CENVAT rebate. Exemption to small scale industries. Methods of goods removal from factory-physical control method. Self Removal method compounded and levy scheme.

Unit-IV Removal of goods for export. Production records, depositing of duty. Excise duty authorities. Appeal and revision. Penalty and prosecution.

Unit-V Introduction of MP excise duty – provisions relating to import. Export, transportation, manufacture, sales and licensing of introxicants. Calculation of duty on intoxicants.



Unit – 1 Excise Duty is an important Central and indirect tax of India, which is levied by the Central Govt. It is a major source of Tax revenue. It is imposed on manufacturing of goods in India which is paid manufacturing but it is ultimately borne by consumers of goods. It is governed by central Excise Act. 1994 and Central excise tariff Act 1985. At present it is levied upon various excisable goods under 20 sections divided in 96 chapters. During the financial year 2013-14, the government of India collected Rs. 1,80,000 crores through excise duty. The Webster’s New International Dictionary defines – “Excise Duty” as –

a. Any duty; toll or tax b. An inland duty or import, levied upon manufacture. c. A tax upon the pursuit or following of certain sports, traders or occupation; usually taking in the

case, the form of exactions for licences. Nature /Characteristics of Excise Duty –

1. Tax Imposition on Manufacture/ Product of goods in India 2. It is paid by manufacture but final burden falls upon the consumer 3. It s imposed assessable value which is based on transaction value. 4. Its payment is to be made before removal from Factory. 5. Its scope is throughout in India Uniformly 6. It is imposed only once on the finished goods except it is used as raw material for production of

another goods. 7. Maintenance of records regarding removing/shifting of manufactural stock and goods from the

factory should bas as per the rules of excise duty. 8. At present normal general excise rate is 12% and 3% education cess on it. 9. Administration of central excise is under the central customs department 10. Most important 10 goods are on which the excise duty is imposed – Cigarettes, Tyres & Tubes,

plastics, motor cars, two wheelers, petroleum. 11. Additional special excise duty is levied on pan-masala, motor spirit, kerosene, diesel etc. 12. In addition to basic duty and special duty the national calamity contingent duty is also levied on

some product. Merits of Excise Duty

1. Major source of Governments revenue 2. Psychological advantages of tax payer 3. Easier to collect tax 4. Balanced industrial growth 5. Less collection cost 6. Tax evasion difficult

7. Control over wasteful expenditure 8. Channelize industrial growth 9. Manufactures favours indirect taxes 10. Record keeping easier 11. No resistance by consumers.

Disadvantages of Excise Duty –

1. Increase the price of goods 2. The incidence is uniform 3. Reduces demand of goods 4. Increases project costs

5. Shields inefficient local Industrial 6. Modern technology becomes costly 7. Increase smuggling/tax evasion

Types of Excise Duties A clear distribution of sources has been made under the constitutions of India between centre and states. The constitutions grant’s power to central govt. to impose tax on goods manufactured in India except intoxicants. The right of imposing excises duty on liquors, opium and narcotics granted to states on this bases the excise duty may be classified in the two sections –



1. Central Excise Duty a. Basic Excise duty – 12% & education cess 3% education cess there on so, effective excise

rate was 12.36%. In the Central Budget 2015-16 the education cess on excise duty has been withdrawn and a gross rate 12.5% shall be applicable w.e.f. 01.03.2015.

b. Advolerm duty on specified rate on value of goods c. Specified duty on specified rate on unit, weight, volume, length or area of goods d. Maximum Retail price based excise duty e. Tariff value based duty.

Special duties also known as auxiliary duties are the regulatory duties, which were levied as surcharge on certain specified goods. At present all goods which were leviable to special Excise duty have been exempted. These have been merged with basic duty as per central excise Act.

2. Provincial Excise Duty – This excise duty is imposed by central govt. Indian constitution has given rights to state governments to impose and collect excise duty on intoxicants, like, liquor, bhang, ganja, opium etc. It is an important source of revenue for states except sales tax or commercial tax.

Duties under other Act –

1. Education cess on excise duty – 3% 2. National calamity contingent duty – It is varies from 10% to 45% 3. Additional Excise Duty on pan masala and tobacco products is 10% 4. Duty on medical and Toilet preparations 5. Additional duty on mineral products.

Brief History of Central Excise Duty

1. Tax on the production of salt during Mughal period

2. Indian salt Act 1882

3. Excise Duty on Cotton yarn 4. Inclusion of various goods 5. Central Excise Duty Act 1944

Main Provisions of Central Excise

1. Brief History of excise Duty 2. Levy and collection of duty 3. Excise duty based on value 4. Valuation of excisable goods

5. Central credit 6. Administration of excise duty 7. Appeal & Revision 8. Penalty & Prosecution

Basic conditions of Excise duty Indian constitutions has given powers to central govt. and state govt. to levy various taxes and duties, powers of central to impose duties of excise on tobacco and other goods manufactured or produced in India, except alcoholic liquors for human consumption, opium, narcotizes, but including medical and toilet preparations containing alcohol, opium or narcotics. Power to purpose excise an alcoholic, liquors, opium and narcotics is granted to states and it is called “State Excise”. Section – 3 of central excise act the “charging section” states that there shall be levied and collected duties an all excisable goods (excluding goods produced or manufactured in special economic zones) which are produced or manufactures in India. This definition of changing section of central excise is vital, because it clearly signifies that there are four basic conditions for levy of central excise duty.

1. The excise duty levied on goods – a. Goods must be movable b. Goods must be marketable

2. The goods must be excisable –



Section 2 (d) of central excise act defines “excisable goods as goods specified in the schedule to central excise tariff act 1985 as being subject to a duty of excise and includes salt.” a. Goods specified in CETA b. Goods excisable even if exempt from duty c. Goods not included in CETA and not excisable goods d. Nil duty paid goods e. Goods manufactured in SEZ

3. The goods must be manufactured or Produced [Sec. 2 (f )] 4. Manufacture must be in India

Section 2(f) of central excise act states that manufacture includes any process – a. Incidental or ancillary to the completion of manufactures product and b. This is specified in relation to any goods in the section or chapter notes of the schedule to

the central excise tariff Act 1985 as amounting to manufacture. Levy and liability of excise duty – The words levy means imposition of tax, once a tax or duty is imposed, it has to be qualified (assessed) and then collected. Once a duty is levied, it has to be collected. It cannot be collected unless his duty is qualified (assessed). Hence, normally levy should cover imposition assessment and collection. Following should be kept in view regarding levy of excise duty –

1. Taxable event is that on happening which the change is fixed. 2. Once duty liability is fixed person liable to pay excise duty 3. The duty liability is of the person who stores the goods in the ware house in case of ware house

goods. 4. The duty liability is of actual manufacturer and not of the raw material supplier in case of job

workers. 5. The duty liability is of manufacturer even if goods are consumed within the factory and not sold. 6. The duty can be levied on goods manufactures by state or central govt. undertaking 7. Rate of duty as applicable on date of removal relevant. 8. State of goods at the time of removal is relevant 9. Marketability of goods is essential

Important Definitions It is important to have a conceptual clarity of the various terms used in the enactment before embarking on a detailed study of the central excise act 1944. The important terms used in the act have been definitions of various other terms given under constitution and other acts. Goods Articles 366 (12) of the constitution defines goods as “Goods includes all materials, commodities and articles.” Sale of goods act defines “Goods means every kinds of movable property other than actionable claims and money and includes stock and shares, growing crops, grass and things attached to or forming park of the land which are agreed to be several before sale or under the contract of sale.” These definitions are two board based to fit into the scheme of excise duty. However; case low on this aspect has crystallized two basic requirements –

1. Goods must be movable a. It should be come into existence, as a result to manufacture. b. It should be capable of being moved to market to be bought and sold



2. Goods must be marketable a. Capable of being brought to the market b. Actual sale is not necessary c. Mere mention in tariff is not enough d. Even one purchaser enough e. Everything that is sold is not marketable f. Duty leviable on captive consumption g. Marketability to be decided on the basis of the state in which it is produced h. Actual open market is not necessary i. Burden of proof of marketability is on department.

Excisable goods sec. 2(d) “An excisable goods means goods specified in the scheduled to the central excise tariff act 1985, as being subject to a duty of excise and includes salt.” Some points are important regarding the term excisable goods –

a. It should be specified in the tariff schedule b. Goods not included in CETA are non-excisable goods. c. Mere mention in CETA not enough d. Subject to duty e. Goods manufactures in SEZ are excluded excisable goods. f. Dutiable and non-dutiable goods.

Manufacture – Sec 2 (f) Section 2(f) defines the term manufacture to include any process –

1. Incidental or ancillary to the completion of a manufactures product, and 2. Which is specified in relation to any goods in the section or chapter notes of the schedule to the

central Excise Tariff Act, 1985, as amounting to manufacture or, 3. This is specified in relation to any goods by the central Govt., by notification in the official

Gazette, as amounting to manufacture. The above definition is inclusive in nature and includes all the intermediate processes, packaging of the final products etc. Some important points related to this term –

1. New substance having distinct to this term – 2. Transformation or conversion 3. Identity of original article should be lost 4. Assembling can be manufacture 5. Commercially known product

Processing Manufacture is the end result of one or more processes through which the commodity is made to pass. Thus manufacture involves a series of processes, whereas process in one of the activities undertaken for manufacture of a product for input material. At some point of time processing and manufacturing may merge. “Manufacturing is, in fact the cumulative effect of various processes, to which raw materials are subjected and each such step towards the finished product, would constitute processing in relation to the manufacture.” Manufacturer



Section 2 (f) defines “Manufacturers shall be understood accordingly and shall include not only a person who employs hired labour in the production or manufacture of excisable goods but also any person who engages in their production or manufacture is a person who actually manufactures or produces excisable goods one who actually brings into existence new and identifiable product. Who is not manufacturer –

1. Raw material supplier 2. Brand owner is not the manufacturer

3. Franchise agreement 4. Loan licensee

Assessable value sec. 4(1) (a) Assessable value when duty of excise is chargeable on excisable goods with reference to value will be following conditions are satisfied –

1. The goods should be sold at the time and place of removal 2. Buyer and assessee should not be related.

Transaction value Sec 4(3) (d) “Transaction value as the price actually paid or payable for the goods when sold, and include in addition to the amount charged but does not include the amount of duty & taxes.” Adjudicating Authority Sec – 2(a) “Adjudicating Authority means any authority competent to pass any order or decision under this act but does not include central Board of Excise and customs constituted under the central boards of revenue act 1963, commissioner of central Excise appeals or appellate Tribunal.” Curing sec 2 (c) “Curing includes writing, drying, fermenting and any process for rendering an un-manufactured product fit for marketing or manufacturer.” Factory Sec – 2 (e) “Factory means any premises including the precincts there of, where in or in any part of which excisable goods other than salt are manufactured or where in any part of which any manufacturing process. Connected with the production of these goods is being carried or is ordinary carried on. Sales/ Purchase sec 2 (h) “Sale and purchase with their grammatical variations and cognate expressions, means any transfer of the possession of goods by one person to another in the ordinary course of trade or business for case or deferred payment or other valuable considerations.” Central Excise officer – Sec – 2 (b) Central excise officer means the chief commissioner, commissioner, appeals commissioner, additional commissioner, joint commissioner, deputy commissioner, assistant commissioner or any other officer of central excise department or any person invested by the CBSE constituted under central board of revenue act 1963 with any of the powers of this act. Registration in central excise Registration is the process of getting the under taking listed in the records of excise department. The following points are discussed in relation to registration in central excise.

1. Persons requiring registration – According to the sec 6 of central excise act 1944 and rule 9 of the central excise rules 2002 the following person are required obtained registration. a. Manufacturer b. Persons who issue CENVAT invoice



c. Private warehouse holder d. End –use based exemption user. e. Exporters

2. Person’s exempted obtaining registration a. Persons who manufacture the excisable goods, which are chargeable to nil rate of E.Duty b. Small scale units availing slab exemption based on clearances under the notification c. The supplier of raw material who gets his goods manufacture on his account from any other

person. d. The job worker need not get registration if the principal manufacture under tax to discharge

the duty liability e. Persons manufacturing excisable goods by following the warehousing procedure under the

customs Act 1962 f. Person who carries on whole sale trade or deals in excisable goods g. A 100% export oriented under taking or units or special economic zone under custom act

1962 h. Persons who use excisable goods for any purpose other than for processing or

manufacturing of good availing goods benefit of concessional duty exemption. Procedure Making Application for Registration

1. Application in Form A – 1 2. Signature on application by authorized person 3. Submission of ground plane 4. Document to be submitted 5. Verification of application & it information 6. Discrepancy on verification 7. Time limits for issue of certificate (within a 7 days of receipt of application) 8. Recording of application and grant f certificate 9. Exhibition of certification of registration.

Other provisions relating to registrations –

1. If registered persons transfer his business to another person then transferee shall obtain a fresh registration certificate.

2. If there are any changes or amendments in the constitution of firm/company, association, shall be intimated to the jurisdictional CE officer within 30 days of change.

3. A businessman who applies for registration should file a legal understanding jointly signed by the him and the lesser undertaking to pay the duty liability with interest for manufacturing.

4. Surrender, cancellation, suspension or revocation of registration by making an application in the prescribed form. This is subject to compliance of the statutory obligations under the excise law.

5. When the registration certificate is lost the registered person should submit a written application to the range officer for issuing a duplicate registration Certificate.

6. Once registration certificate is granted, it has a permanent status unless it is suspended or revoked by the authority. It validity of registration is upto revoked the certificated.

7. (Manufacture without applying for registration is an offence.) Under the rule of 25 (1) of CE rules penalty upto duty of contravening goods or Rs. 10,000 whichever is higher can be imposed.

In addition contravening goods can be confiscated. It is also an offence under sec. 9 of CEA and imprisonment upto 7 years (Minimum 6 months) can be imposed. Excise Control Code (ECC Number)



The central excise assessee’s and registered dealers have to obtain new excise control code (ECC) number “Common Business Identifier” and will ultimately replace the existing registration number, ECC number shall be used for revenue accounting, validation of documents, inter agency coordination and for creation of database. This number has to be quoted on the TR-6 challans covering deposit of central excise duties additional duties, cess and other dues to the government. The new ECC number is alphanumeric. The first part is the 10 character PAN issued by IT Authorities to the concerned person to whom the new ECC number is to be allotted. The second part companies of a fixed 2 character alpha code, XM for manufacturers and XD for dealers. This is followed by 3 character numeric code – 001, 002, 003, etc. An application should be made in the prescribed form annexing there to a certificate copy of PAN to the jurisdictional range superintendent of central excise. The new ECC number is issued by the commissionerate and is intimated to the concerned applicant in prescribed form and a copy is also forwarded to the concerned PAO. Classification of goods in central excise Different manufacturers produce different goods and it is not possible to levy tax on all these at the same rate. Therefore different goods are categorized and excise duty is imposed on different rates. Classification of goods in central excise menas under which heading and subheading of CETA 1985, is the goods kept and which rate is applicable on it. This procedure is called HSN and coding system. Generally an assessee would like to opt for a classification that attracts lower duty. This classification forms a basis for further classifying the goods under specific chapter head and sub-head. Important provisions of CETA relating to classification of goods The central excise duty is chargeable at the rates which are determined on the basis of classification of goods –

1. Sections & chapters of CETA – There are so many varieties which are manufactures in India. CETA is divided in to 20sections and each section is further divided into 96 chapters.

2. Grouping of goods – The tariff is determined to a group all goods relating to same industry and all the goods obtained from the same raw material under one chapter in a progressive manner as far as possible. Goods are classified beginning with raw materials and ending with finished products within the same chapter.

3. Classification of chapter under various headings and sub-headings. 4. Eight digit classification – For example – 5004.11.74 specified that it is related to 50th chapter

4m heading, 11th subheading of the chapter. 5. Division of excisable goods in 4 columns – live – heading No, subheading no., description of

goods and rate of duty. Rules for Interpretation of CETA Rules for interpretation of schedule are given in the tariff itself. These are termed as general interpretative rules. (GIR). 5 rules are made for proper classification in CETA. These rules are legally accepted in the act. It is essential to follow the serial order while going through the rules. Rule 1 – In case chapter notes clearly determine classification. Rule 2 – In case of classification of incomplete or unfinished goods.

a. In case of material or substance [Rule 2(a)] b. Classification of mixture or combinations [Rule 2(b)] c. If both are specific – later the better [Rule 2(c)]

Rule 3 – Classification of goods classifiable under two or more headings Rule 4 – Classification under a heading most similar to goods. Rule 5 – Determination of classification under sub headings



(Rules to be applied sequentially) General principles of classification

1. Trade Parlance theory 2. HSN and classification 3. Dictionary meaning 4. Technical Literature 5. Main function of machinery 6. Machinery independent even if it can be attached to another 7. End use relevant only in limited cases 8. Limited use of ISI/BIS standards 9. Exemption notification cannot determine classification 10. Condition at the time of import/clearance relevant



Unit – 2 Methods of valuation of Excisable Goods The scheme of valuation of excisable goods is governed by the provisions of sections 4 of the excise duty Act 1944 is generally termed as the “Assessable value”, based on which the rate of duty is applied (Prescribed in CETA) and actual duty liability is calculated. These are different basis for calculation of duty payable –

1. Duty as percentage based on Assessable value (Advalorem Duty) 2. Duty based on Maximum Retail Price 3. Specific duty on the basis of certain units 4. Duty as percentage of Tariff Value.

Duty Based on Assessable value It is the most applicable basis of valuation of excisable goods. It is called Advalorem Duty. A major number of excisable goods are valued on transaction value basis. Meaning of Transaction Value As per Sec. 4 (1) of the Act, the excise duty is chargeable on any excisable goods with reference to their transaction value. Section 4(3) (d) defines ‘Transaction Value’ as the price actually paid or payable for the goods, when sold, and includes in addition to the amount charged as price, any amount that the buyer is liable to pay to, or on behalf of, the assessee, by reason of, or in connection with the sale, whether payable at the time of sale or at any other time. Following are main requirements or ‘transaction value.’

1. Price actually paid or payable 2. Price is for the goods 3. It includes, in addition to the price charged, any amount the buyer is liable to pay to assessee in

respect of the sale. 4. It includes advertising, financing services, warrantee communication or any other amount

payable by buyer to the manufacturer. 5. It does not include excise duty, sales tax and other taxes. 6. The transaction value will not be applicable for the purpose of payment of duty if the buyer and

seller are related. 7. If the goods are sold to related person or if the goods are not sold, valuation will be done on the

basis of rules as may be prescribed. MRP Basis of Charging Excise Duty Section 4A of CEA empowers Central Government to specify goods on which duty will be payable based on retail sale price’. For the purposes of this section, “retail sales price’. Means the maximum price on which the excisable goods in packaged form may be sold to the ultimate consumer and includes all taxes, local or otherwise, freight, transport charges, commission payable to dealers and all charges towards advertisement, delivery, packaging, forwarding and the like and the price is the sole consideration for such sale. Specific Duty It is the duty payable on the basis of certain unit like, weight, length, volume, thickness etc. for example, duty on Cigarette is payable on the basis of length of the Cigarette, duty on sugar is based on per kg basis etc. In such cases, calculation of duty payable id comparatively easy. Presently, specific rates have been announced for –

a. Cigarettes (length basis) b. Matches (per 100 boxes/packs), c. Sugar (per quintal basis), d. Marble slabs and tiles (sugar meter basis),



e. Colour TV when MRP is not marked on the packaging or when MRP is not the sole consideration (Based on screen size in cm.)

f. Cement clinkers (per tonne basis) g. Molasses resulting from extraction of sugar (per ton basis)

In the view of the simplicity, many goods were earlier covered under ‘specific duty.’ Duty Based on Tariff Value In some cases, tariff value is fixed by Government from time to time. This is a “Notional Value” for purpose of calculating the duty payable. Once ‘tariff value’ for a commodity is fixed, duty is payable as percentage of this ‘tariff value’ and not the Assessable Value fixed u/s 4. This is fixed u/s 3(2) of Central Excise Act. Government can fix different classes or sold to different classes of buyers. When tariff value is fixed, provisions of section 4 will not be applicable. So, when tariff value is prescribed under the law, that value will form the basis for assessment. Presently, tariff values have been fixed for

a. Pan masala packed in retail packs of less than 10 gm per pack. b. Tariff value for readymade garments has been prescribed as 60% of the retail sale price of such

goods as specified on the package. Value of Goods in special cases When goods are not removed directly from the factory, shall valued in the following way-

1. Value of excisable goods determined in case of depot transfer According to Rule 7 of the Central Excise Valuation of excisable goods sold from depot, premises of consignment agent or any other place or premises, shall be as under – a. The normal transaction value prevalent at the depot, premises of consignment from the

factory to the depot, etc. b. The normal transaction value which is to be taken is the transaction value of the goods sold

in greatest aggregate quantity to the buyers not being related to the assessee and such price is the sole consideration for sale.

c. If the normal transaction value cannot be determined at the time when the goods are transferred to the depot, then, the price nearest to the time of such transfer shall be taken.

2. Valuation in case of Job work Sometimes the buyer supplies the raw material, and the manufacturing operation s are done by independent job/worker/processor and the finished goods are given to the supplier of such raw material. Accordingly, the Assessable Value = Full intrinsic cost of all raw materials = processing charges + costs and profit of the job workers.

3. Valuation on in case the excisable goods are sold at a place other than the place of removal? In case all the requirements of section 4(1)(a) are satisfied except one, that is, if the excisable goods are sold for delivery at the place other than the place of removal, then the value shall be determined as per Rule 5 of the Central Excise Accordingly, in such circumstances, the value of such excisable goods shall be deemed to be the transaction value, excluding the cost of transportation from the place of removal upto the place of delivery of such excisable goods.

4. Captive consumption of excisable goods (personal consumption) – Where the excisable goods are not sold by the assessee but are used for consumption by him or on his behalf in production or manufacture of other articles, then such captive consumed goods are to be valued at 110% of cost of production or manufacture so such goods. According to CAS – 4, the Cost or Production shall consist of material consumed, direct wages, and salaries, direct expenses, work overheads, quality control cost, research and development cost, packing cost and administrative overheads relating to production. To arrive at cost of production of goods dispatched for



captive consumption, adjustment for stock of work-in-process, finished goods, recoveries for sales of scrap, wastage, etc. shall be made.

Excise duty is payable on various basis, but most of excisable goods are levied duty on the basis of their Assessable Value such duty is called ‘Ad-Valorem Duty’ Meaning of Transaction Value Assessable Value is the ‘Value’ on which duty is payable as a percentage. Generally, by ‘Value’, we understand the price as mentioned in Bill or Invoice. The basic provision of new Section 4(1) (a) state that ‘assessable value’ when duty of excise is chargeable of excisable goods with reference to value will be ‘transaction value’ on each removal of goods, if following conditions are satisfied:

1. The goods should be sold at the time and place of removal 2. Buyer and assessee should not be related 3. Price should be the sole consideration for the sales. 4. Each removal will be treated as a separate transaction and ‘value’ for each removal will be

separately fixed. Basis of Assessable Value As per section 4, excise duty is payable on basis of ‘transaction value’. If the goods are sold at the factory gate to an unrelated buyer when price is the sole consideration. Transaction Value’ as the price actually paid or payable for the goods, when sold and includes in addition to the amount charged as price, any amount that the buyer is liable to pay to, or on behalf of, the assessee, by reason of, or in connection with the sale, whether payable at the time of sale or at any other time, including, but not limited to, any amount charged for, or to make provision for, advertising or publicity, marketing and selling organization expense, storage, outward handling servicing, warranty, commission or any other matter; but does not include the amount of duty of excise, sales tax and other taxes, if any, actually paid or actually payable on goods. Following are main requirements of ‘transportation value’.

1. Price actually paid or payable 2. Price is for the goods. 3. It includes any amount that the buyer is laible to pay to, or on behalf of assessee. 4. The payment should be ‘by reason of, or in connection with the sale.’ 5. The amount may be payable at the time of sale or at any other time. Such time may be before or

after sale. 6. Advertising or publicity, marketing and selling organization expenses, storage, outward

handling, servicing, warranty, commission or any other matter is included. 7. Amount of duty of excise, sales tax and other taxes, actually paid or actually payable on such

goods is to be excluded while calculating transaction value. The amount may be ‘payable’ any time in the future.

Inclusions of Transaction Value The following items will be include in transaction value for finding out Assessable value; if these items are included in transaction value or invoice price or separately charged -

1. Advertisement publicity and marketing expenses 2. Packaging charges 3. Designs and Engineering Charges 4. Compulsory after Sales Service/service in warranty period is included 5. Loading and handling charges within the factory 6. Price reduction due to advance 7. Consultancy charges 8. Dharmada



Exclusions from transaction value Central Excise Act provides that ‘transaction value’ does not include amount of duty of excise, sales tax and other taxes, if any, actually paid or actually payable on such goods. Moreover, any other payment made by buyer to assessee will be included only if it is by reason or sale in connection with sale.

1. Trade Discount 2. Deduction of taxes from AV 3. Outward Handling charges 4. Installation charges 5. Post removal charges

Computation of Assessable Value & Duty Payable Procedure for computation of Assessable value and Excise Duty payable under Central Excise Duty. Central Excise Duty is payable on Assessable Value of the goods at specific rates. The following procedure should be adopted for determination of assessable value and calculation of Excise Duty payable-

1. Computation of Assessable Value. 2. Calculation excise duty payable on Assessable value. 3. Rebate for CENVAT.

This procedure can be understood from the following table –



Rates of Excise duty during the financial year 2014-15 – Excise duty 12% + 3% Education cess = 12.36% Rates of Excise duty during the Financial Year 2015-16 (w.e.f. 01-03-15) Gross rate 12.5% (no education cess) Note- If the excise duty is included in assessable value, and then the following formula should be applied. Assessable value including Duty x Rate of Duty 100 + Rate of Duty

𝐴𝑠𝑠𝑒𝑠𝑠𝑎𝑏𝑙𝑒 𝑉𝑎𝑙𝑢𝑒 𝑖𝑛𝑐𝑙𝑢𝑑𝑖𝑛𝑔 𝐷𝑢𝑡𝑦 𝑥 𝑅𝑎𝑡𝑒 𝑜𝑓 𝐷𝑢𝑡𝑦

100 + 𝑅𝑎𝑡𝑒 𝑜𝑓 𝐷𝑢𝑡𝑦

Important points should be kept in view –

1. The following important points should be kept in view while determine Assessable value under Transaction value method

2. If different prices charged to different buyers for same goods at same time the actual price charged will be taken in each case.

3. Every packing charges will be includible either it is primary packing or secondary packing. However returnable packing will not be includible like cost of bottles supplied by the PEPSI are not includible because these are returnable.

4. Design and drawing charges are part of assessable value. Therefore includible. 5. Internal transportation and haulage within factory is also part of assessable value. 6. Advertisement expenditure and sales promotion charges incurred by the buyer on behalf of

manufacturer will be added to transaction value. 7. Goods or material supplied by the buyer to manufacturer without or lower cost is includible. 8. Concession in selling price by manufacturer due to advance given by buyer will also be added to

transaction value. 9. Transportation charges after clearing of goods from factory gate or depot are post removal

charges, therefore will not be includible. 10. If the goods sold through depot the transportation charges from factory to depot shall be part of

Assessable value, because removal place is depot. 11. Charges relating to after sales services in guarantee or warranty period are part of assessable

value, though such services given in future after removal of goods from the factory. 12. Goods manufactured but not sold or cleared from factory or depot is not liable to tax; because

liability of duty arises on the event of sale. 13. If the goods sold through depot the price will be considered which prevail on depot on the date

of removal from factory to depot even goods sold by the depot later on lower or higher price. 14. Transit insurance charges, interest charged by manufacturer for delay payment, Bank charges

for collection of bill, installation charges etc. are post removal charges, so will not includible. 15. Trade discount, cash discount and other rebate will be deducted on actual basis, but concession

in price due to payment of advance money shall not be deductible. 16. Goods destroyed or damaged or shortage will not be considered, because these are post

removal events. 17. Basic Excise Duty, Special Excise Duty and other duty will be calculated on Assessable Value. 18. Education cess @ 3% on Excise Duty payable. 19. Goods cleared as sample shall also be taxable as goods sold. 20. Goods manufactured for captive consumption will be valued at cost of production + 10%

notional profit, i.e. 110% of cost of production will be assessable value. 21. In case of job work, the job worker will be treated as manufacturer and liable to pay duty. In

such case cost of raw material supplied by principal + processing charges + transportation charges on goods supplied to job worker + profit of job worker will be assessable value. Cost of Transportation goods supplied by job worker to principal will not be part of assessable value



and price charged by the principal to its customers will be immaterial from excise duty point of view.

22. CENVAT credit will be deducted against excise duty calculated on assessable value, CENVAT credit is available @ 100% in case of inputs, input services and 50% on capital goods used in final product.

Production For captive Consumption In case of production for captive consumption, there us n actual sale to external party. In case of captive consumption, valuation should be on the basis of cost of production plus 10% notional profit will be added to actual cost from calculation of assessable value of goods manufactures for captive consumption. Cost of production shall consist of material consumed, direct wages, direct expenses, work overheads, quality control cost, research and development cost, packing cost, administrative overheads relating to production – The cost of material should be net of excise duty if cenvat credit is availed in respect of such inputs.



Unit – 3

MRP Based Valuation Retail Sale price – The retail sale price means the maximum price at which the excisable goods in package form may be sold to ultimate consumer and includes all taxes local or otherwise, freight transport charges, commission payable to dealers and all charges towards advertisement. Delivery, packing, forwarding and the like and the price is the sole consideration for sale. Special features of the MRP Based Methods

1. Applicability of provision – Provisions in respect of payment of duty on MRP are applicable only in cases where specific notification has been issued and manufacturer is statutorily required to put MRP under weights & measures Act.

2. MRP provisions are overriding provisions – When Section 4A relating to MRP is applicable; provisions of section 4 for determination of assessable value are not applicable.

3. Products covered under the scheme – So far, 99 articles have been covered this scheme. Some of them and abatement as a percentage of retail prices are given head.

4. Partly assessed on MRP based and partly on transaction value based – When goods covered u/s 4A are supplied in bulk to large buyers, valuation is required to be done on the basis of transaction value based methods. Provisions to MRP apply only where manufacturer is legally obliged to print MRP on the packages of goods. Thus, there can be instances where the same commodity would be partly assessed on the basis of MRP and partly on basis of transaction value. Some of the situations where MRP cannot be printed are bulk supplies for personal as well as industrial uses, against contract, to canteen store depots of defence, to free with another consumer item, to free as marketing strategy or market response, for export.

5. MRP inclusive of all taxes – Under Weight and Measures Act, ‘maximum Retail Price’ (MRP) has to be printed on packaged commodity for retail sale. MRP has to be inclusive of all duties and taxes, including local taxes.

6. Increase in retail price after clearance from factory – If retail price declared on the package at the time of removal is subsequently altered to increase the price.

7. MRP is not indicated or wrongly indicated- If retail price is not declared on the package at the time of removal, or retail price is declared which is not the retail price as required to be declared as per provisions of Central Excise Law of any other law, the goods are liable to confiscation.

8. When more than one retail price declared – MRP printed on package is required to be inclusive to taxes. Rate of taxes vary from State to State hence, in some cases, a manufacturer may print different prices for different States.

9. Department cannot challenge MRP printed on package – Excise officer cannot challenge or investigate into geniuseness of MRP printed on package. He can only satisfy himself that there is declaration of MRP in prescribed form. Excise Officer cannot question its correctness as that involves impracticability of finding a reasonable price throughout the country.

Values Based on Maximum Retail Price Central Government can imposed excise duty on goods based on retail sale price the provisions re as follows –

1. The goods should be covered under provisions of standards of Weights and Measure Act. 2. Central Government can permit reasonable abatement (deductions) from the retail sale price.

While allowing such abatement, central Government shall take into account excise duty, sales tax and other taxes payable on the goods.

3. If more than one retail sale price is printed on the same packing, the maximum of such retail price will be considered.



4. The retail sale price should be the maximum price at which excisable goods in packaged forms are sold to ultimate consumer. It includes all taxes, freight, transport charges, commission payable to dealers and all charges towards advertisement, delivery, packing, forwarding charges etc.

5. Central Government has to issue a notification in official Gazette specifying the commodities for which the provision is applicable and the abatements permissible.

Products Covered Under the Scheme – About 100 articles have been covered under this scheme some of them and abatement as a percentage of retail rice are given in the list of CE Act. Specific Excise Duty It is the duty payable on the basis of certain unit like weight, length, volume, thickness etc. for example, duty on cigarette is payable on the basis of length of the Cigarette, duty on sugar is based on per Kg. basis etc. In such cases, calculation of duty payable is comparatively easy. In view of the simplicity many goods were earlier covered under specific duty. Presently specific rates have been announced for–

1. Cigarettes (Length basis) 2. Matches (per 100 boxes/packs) 3. Sugar (per quintal bases) 4. Marble slabs and tiles (square meter basis) 5. Colour TV when MRP is not marked on the package or when MRP is not the sole consideration

(Based on screen size in cm.) 6. Cement clinkers (per ton basis)

Meaning of CENVAT Cenvat scheme has been introduced w.e.f. 1.4.2000 instead of MODVAT regarding Central Excise Duty. Under this scheme the assessee avails credit in relation to input services and capital goods used for production of final products. Under CENVAT, a manufacturer has to pay duty as per normal procedure on the basis of Assessable Value’. However, he gets credit of duty paid on inputs. The CENVAT Scheme is a designed to reduce the cascading effect of indirect taxes on final products. This is a more liberal and extensive scheme than the erstwhile MODVAT Scheme. Main features of CENVAT Scheme The main features of CENVAT credit Rules 2004 are as under –

1. Eligible items for CENVAT credit – Inputs and capital goods are eligible items for CENVAT credit. 100% credit can be taken immediately on receipts of the inputs. 100% credit is available on input services on the payment of bill. In case of the capital goods duty credit not exceeding 50% can be taken in the first year and the balance in the subsequent years provided that the capital goods are still in possession and use.

2. Scope of Scheme – The scheme applies to all excisable goods except matches, manufactured pr produced from eligible inputs. Presently, CENVAT has been extended to all items included in CEAT, except matches.

3. Purpose of the CENVAT scheme – The purpose of the scheme is to allow the credit of the duties to excise and additional duty of customs paid on inputs used in or in relation to the manufacture of the final product.

4. Duties eligible for Cenvat – A manufacturer or producer of final products shall be allowed to take credit of the following duties – The duty of excise levied under the Act; The specified duty of excise; The Additional Duties fo Excise (Goods of Special Importance) The National Calamity Contingent duty;



The additional duty levied under section 3 of the Customs Tariff Act, equivalent to the duty of excise.

Service tax on input services Education cess on excise duty and service tax.

5. CENVAT credit will be allowed to manufacturer or service Provider – Cenvat Credit Rules state that a manufacturer or producer of final products shall be allowed to take credit of specified duties (basic, special, AED. NCCD etc. as discussed above) paid on inputs, input services or capital goods received in the factory.

6. Cenvat available only if there is Manufacture 7. Inputs must be converted into final products 8. No credit if final product exempt from duty 9. CENVAT on capital goods – upto 50% credit is available in current year and balance in

subsequent financial year or years. 10. One-to-one Co-Relation not required – CENVAT rules do not required input-output co-

relation to be establishes. One to one correlation between inputs and final products is not required.

11. CENVAT credit is indefeasible 12. Credit on basis of specified documents 13. Credit available instantly – i.e. as soon as inputs reach the factory. 14. No cash refund – In some cases, it may happen that duty paid on inputs may be more than duty

payable on final products. In such cases, though the CENVAT credit will be available to the manufacturer, he cannot use the same and the same will lapse. There is no provision for refund of the excess CENVAT credit.

15. Utilization of cenvat credit – The CENVAT credit may be utilized for payment of duty of excise on any final products or for payment of duty on inputs or capital goods themselves.

16. Burden to prove – The burden to prove that the CENVAT credit that has been taken is admissible as per the Rules framed in this behalf lies on the manufacturer.

Types of Cenvat credit 1. CENVAT Credit on Inputs 100% - under Rules 2(g)

a. All goods used to manufacture of final products b. Lubricating oils, greases, cutting oils, coolants – are classified as inputs c. Accessories of the final products cleared along with the final product d. Goods used as paint – are eligible for CENVAT credit. e. Goods used as packing material f. Goods used as fuel – entitled for CENVAT credit. g. Goods used for generation of electricity or steam used for manufacture – eligible of CENVAT

credit. Special points in relation to inputs

No time limit for utilization of inputs but should be used. Use must be within the factory Inputs used in exempted products not eligible Inputs which only facilitate manufacture not eligible CENVAT available on packaging material Cenvat available even if valuation is on MRP basis Inputs required for quality control tests are eligible All inputs necessary to make product marketable are eligible

2. CENVAT Credit on Inputs services 100% under rule 2(1) a. Input service means any service –

Used by a provider to taxable service for providing an output service; or Used by the manufacturer, whether directly or indirectly in or in relation to the

manufacture of final products and clearance of final products from the place of removal



b. Activities Relating to Business c. Credit only after payment of bill of service

3. CENVAT Credit on Capital goods used in factory 50% - a. Capital goods used in factory b. Acquisition of capital goods – by the manufacturer on lease, hire purchase or loan agreement c. Credit in two parts

50% of the duty paid in the year in which the capital goods are received in the factory The balance of the CENVAT credit may be taken in any financial year subsequent to the

financial year. d. Credit on basis of documents e. In case of capital goods imported under Project Import Scheme 100% of additional duty of

customs will be eligible for CENVAT Credit f. The CENVAT credit in respect of capital goods shall not be allowed in respect of that the

manufacture claims as depreciation under section 32 of the Income tax Act. 1961 Duties Eligible for Credit

1. Basic Excise Duty 2. National Calamity Contingent Duty (NCCD) 3. Service Tax 4. Education cess

Procedures which are required to be followed for available of cenvat credit in respect of inputs and capital goods

1. Manufacturer should be Registered 2. Duty paying Document or Invoice etc. 3. Accounting Records and Returns must be maintained by manufacturer

Documents & Accounts

1. Invoice 2. Supplementary invoice 3. Al bill of entry 4. Certificate

CENVAT Credit: Practical Problems The following procedure should be adopted while computing CENVAT credit in respect of Inputs and capital goods –

1. First we should find out the assessable value and calculate excise duty payable thereon 2. Then deduct cenvat credit at the following rates –

a. On inputs @100% (Inputs remaining as closing stock are not noticeable) b. On input services @100% on payment of bill of service c. On capital goods @ 50%

3. After allowing cenvat credit balance shall be net amount of duty payable Chart – Calculating of Duty payable and CENVAT credit Transaction value of goods removed from factory Add – Packing design expenses etc. Less – Discount

Assessable value Excise Duty Payable Assessable value x Rate

100

Less – 1. Cenvat credit for (Inputs) 100%

……………….. ……………….. (-)…………….. ………………..

………………..

(-)……………..

………………..

………………..



2. Cenvat credit for input service - 100% 3. Cenvat credit for capital goods @50%

Excise Duty Payable

Exemption to Small Scale Industries The policy of the government of India is to encourage small scale industries due many reasons. Thereon an attractive concession has been given in excise law to SSI units. The small scale sector contributes about 40% of total manufacturing [production in the country. But on the other hand only about 2% small scale units in the country pay excise duty and their contribution is only about 5 to 6% of total excise duty collection. Most of the small scale units do not contribute to Government exchequer as they are well below the exemption limit. Various concessions are given to small scale industries to encourage their growth and also on account of administrative convenience. Important points relating to Concession to SSI Units

1. SSI units eligible for SSI concession – SSI unit defined on the basis of annual turnover from Excise Duty point of view. All industries irrespective of their investment or number of employees are eligible for concession. A units is entitled for exemption only if its turnover in preceding year was not exceeding Rs. 4 crores. Units whose turnover was over Rs. 4 crores in 2013-14 are not eligible to any SSI concession in 2014-15. They have to pay full normal duty from 1st April, 2014. Though a unit whose annual turnover not exceeding Rs. 4 crore, shall be treated as small scale industry (SSI) but in case to turnover crosses Rs. 1.5 crore. Such units will liable to pay excise duty at normal rate on excess amount.

2. Gods Eligible for SSI Concession – Many of goods manufactures y SSI are eligible for the concession. SSI units are eligible for exemption under different notifications. Thus, SSI exemption is available only if the item is covered in this notification. Broadly, items generally manufactured by SSI are eligible for SSI exemption. Some items like pan masala, matches, watches, some textile products, tobacco products etc. are specifically excluded even when these can be manufactured by SSI.

3. Determination of turnover of SSI Unit – The following provisions have been made to determine the annual turnover of a SSI unit in respect of Excise Duty – The value of clearance of excisable goods during the preceding financial year does not exceed Rs. 4 crores and where the manufacturer has more than one factory or more than one manufacturers will be clubbed together to calculate the exemption limit of Rs. 4 crores.

4. Excluded turnover for calculating exemption limit – The following are not counted in the turnover of Rs. 1.5 crores or three crores for the purpose of claiming SSI exemption – a. Export Turnover – The limit of Rs. 1.5crore or 4 crores is of clearance for home

consumption, i.e. within India. Export turnover should not be considered for the purpose of calculating the turnover of 1.5 crore or 4 crores. Exports to Nepal and Bhuttan cannot be excluded, i.e. export turnover to Nepal and Bhuttan will have to be considered while calculating limit of Rs. 1.5 crore. It will be treated as clearance for home consumption, even if actually it is export. Export to Nepal and Bhuttan will have to be included whether payment of received in Indian Rupees or in free Foreign currency.

b. Turnover of Non-Excisable Goods – Some goods are non-excisable, i.e. these are not included in Tariff at all. In such case, its turnover cannot be considered for purposes of exemption limit of Rs. 4 crores.

c. Specified goods which are used as inputs d. Goods Manufactures with others brand name e. Clearances of goods exempted under other notification f. Goods cleared after job work g. Clearance of strips of plastics h. Intermediate Products



5. Goods Manufactures in rural areas with others brand name are eligible for SSI concession – Concession will be allowed if the goods bear the brand name or trade name of – a. The Khadi and Village Industries Commission, or b. A state Khadi and village industry Broad c. The National small Industries corporation d. A state small industries Development Corporation e. A state small Industries Corporation f. Where the goods are manufactures in a factory located in a rural areas.

6. Registration of small scale industries – Though every manufacturer of excisable goods is required to get registered with the Central Excise Department before starting production but in case of a SSI must file for registration when their turnover over crosses Rs. 1.5 crore only. However after crossing Rs. 90 lakhs turnover the SSI must file declaration. The application for the registration should be submitted to the jurisdictional Range Superintendent of Central Excise. The Registration Certificate will be automatically granted. If it is not granted within 30 days of the receipt of the application, it is deemed to have been granted.

7. Other concession to SSI – Besides excise duty other concession to SSI units are as follows – a. Procedural concessions – Following are procedural concessions.

Quarterly Return – the SSI unit availing SSI concession need not submit monthly ER-1 return. They have to submit a quarterly ER-3 return, by 20th of following month.

Payment by 15th of following month – SSI units have to pay duty by 15th of following month, while large units have to pay duty by 5th of following month. Both have to pay duty in March by end of the month.

b. Export Procedures for SSI – The SSI units not covered under excise provisions have to follow simplified export procedures. They do not have to prepare ARE-1 form etc. The procedure has been discussed in a previous chapter.

c. Sending material for Job work by exempt SSI unit- SSI unit can send his raw materials or semi-finished material to another unit for job work. Such another unit can carry out job work and return to SSI unit without payment of duty. The SSI unit can do further processing on these inputs and clear his final product without duty if his total turnover is below 2 150 lakhs.

d. Audit of SSI unit once in two to five years – Audit of SSI units should be done only as per following frequency - (a) Units paying duty of Rs. one crore or above (PLA) in financial year should be audited every year. (b) Audit of units paying duty of Rs. 10 lakhs (PLA) and above but less than Rs. one crore (PLA) in financial year, should be normally audited once in two years. (c) Not more than 20% of units paying duty less than Rs. 10 lakhs in a financial year shall be audited every year.

OPTION FOR SSI EXCISE CONCESSIONS Following are options for slabs in SSI excise exemption.

Option-A. Full exemption upto Rs. 1.5 crore – Under this scheme an SSI unit can avail full exemption of excise duty on first clearances upto Rs. 150 lakhs i.e. it has to pay nil duty on turnover equal to Rs. 1.5 crore and shall be required to pay normal duty on any turnover exceeding Rs. 1.5 crore. Under this scheme, the manufacturer shall not avail CENVAT credit on inputs used in the manufacture of goods upto a turnover of Rs. 1.5 crore. The manufacturer can, however, avail CENVAT credit on inputs used in manufacture of goods after the turnover exceeds Rs. 1.5 crore. The manufacturer shall utilise CENVAT credit on capital goods only after the turnover exceeds Rs.1.5 crore.

Option- B. to pay full duty to SSI without availing concession – An SSI unit is allowed to pay full duty even if it is entitled to pay concessional duty. He can avail and utilise Cenvat on inputs as well as capital goods. Option once exercised cannot be changed during the year. It is not permissible to pay full duty on part clearance and concessional duty on part of the clearance.



The option must be informed in Milting to Assistant Commissioner with copy to Superintendent.

This option is useful to SSI units which supply goods to other units which can avail Cenvat of duty paid by SS1. If such option is not available to SSI, the duty paid on inputs used by SSI units is not available for Cenvat credit.

Liability to Assessment and payment of duty Every person who produces or manufactures any excisable goods or who stores such goods in a warehouse shall pay the duty levied on such goods. No excisable goods, on which any duty is payable, shall be removed without payment of duty from any place, where they are produced or manufactures, or from a warehouse, unless otherwise provided.

Before each removal, whether outside the factory of manufactures or production or for captive consumption, duty has to be assessed on the excisable goods. The main ingredients of assessment are –

Removal methods and collection of Duty Goods have to be cleared from factory only on payment of duty under an invoice. Duty has to be paid by way of TR-6 challan in the branches of selected public sector banks. The receipted TR-6 form is the evidence of having deposited the duty.

The three types of controls on central Excise assessee for imposition and collection of duty are –

1. Physical control method – It is an old and strict form of control where assessment is done by excise officials and thereafter goods are removed under their supervision and under the cover of invoice countersigned by them. This is applicable in case of manufactures tobacco i.e. cigarettes. In this system, the Central Excise Officers are posted at the factory or warehouse of the assessee to enable strict physical control and supervision over manufacturing, storing and clearance of excisable goods. Assessment is done by the Inspector prior to the removal of the goods. The assessee has to make an application for removal in form AR – 1 to the Inspector at least 12 hours before the removal of the goods. The Inspector then assesses the amount of duty on AR-1. The goods are cleared on approval by the Inspector on production of the receipts copy of the TR 6 challan.

2. Self –assessment Method – The assessee is himself required to determine the duty liability at the time of removal of excisable goods and discharge the same. In other words, the assessee should determined correct classification and value (where duty is advalorem) on the quantities being removed by him and indicate the same in the invoice. The assessee has to submit a monthly return in form ER-1 to the Range Officer having jurisdiction over his factory within ten days of the succeeding month. He is also required to submit CENVAT return for the month, within ten days of the succeeding month. A manufacturer availing exemption notification for mall scale industries are permitted to file their ER-3 return on quarterly basis by the 20the of the month following the end of the quarter.

3. Compounded levy Scheme (Rule 151) – The compounded Levy Scheme is meant for small-scale decentralized sector and at present covers stainless steel pattis/pattas and aluminum circles. Duty for a specified period is fixed on the basis of the number and type of machines. The rate of excise duty for the sector covered under the compounded levy scheme has been fixed as follows –

In case of Stainless Steel Pattis/Pattas – Rs. 15,000 per machines per month. In case of aluminum circles subject to the process of cold rolling.

a. Where the length of roller is 30” or less Rs. 7,500 per cold rolling machine per month.

b. Where the length of roller is more than 30” Rs. 10,000 per cold rolling machine per month.



Payment of duty under Compounded Levy Scheme absolves the manufacturer from observing day-today excise formalities regarding maintenance of accounts and removal of goods. Submission of Various Return for Assessment According to Rile 12(1) of the Central Excise Rules, 2002, every assessee, shall submit to the Superintendent of central Excise a monthly return of production, removal of goods and other relevant particulars in prescribed forms. Such forms are as under – E.R.-1 form within ten days after the close of the month to which it relates.

1. IER -1 Return by General Assessee 2. E.R. – 2 Return – 100% EOU assessee 3. E.R. – 3 Return by SSI assessee 4. E.R. – 4 Return for Annual Financial information

Financial Information Statement/Form – It is an annual return to be in duplicate in respect of annual financial information of the assessee.



Unit – 4

CLEARANCE OF EXPORT GOODS EXPORT PROCEDURES FOR EXCISE There are basically two procedures for dispatching the goods out of India –

a. In the first procedure, duties are paid and subsequently rebate (refund) is claimed after exportation of such goods. Alternatively, rebate is granted of duty paid on inputs used in the exported final product.

b. Another procedure is to export goods under bond without payment of excise duty. On actual exportation of goods and on presentation of necessary proofs regarding exports, the bond is released. Regular Exporters can have a running bond for this purpose.

Export can be under bond without payment of duty or after payment of duty and then claiming rebate. Some procedures are common. These are discussed first.

1. Documents for export ARE-1- The goods have to be cleared from factory under Invoice. In addition to the Invoice a prescribed form ARE-1 has to be filled in by Exporter.

The copies of ARE- I form should have following colour – (i) Original: White (ii) Duplicate: Buff (iii) Triplicate: Pink (iv) Quadruplicate - Green 2. Invoice for Export- Invoice for export can be from same series from which goods for home

consumption are cleared of a separate series of invoice can be maintained for export 3. Mention the Assessable value – The Assessable Value should be mentioned on ARE-1 and the

invoice. 'Transaction Value' is Assessable Value 4. Handling of ARE-1 Forms- if export consignment is cleared under supervision of Excise

Superintendent or Inspector, the excise officer will make endorsement on all copies of ARE-1. He will return original and duplicate copies to the exporter-assessee. At the time of export, original, duplicate and quintuplicate (optional) will be submitted to customs officer, along with the good.

5. Sealing of goods for export- Goods can be cleared from factory duly sealed. Goods can be cleared for export without sealing also. Self sealing and self certification is also permissible. a. Clearance with seal of Central Excise b. Clearance with self-sealing

6. Procedure at the Time of Export- The exporter or his agent will submit the following to the Customs Officer at the time of export- (a) Original, duplicate and sixtuplicate copy of ARE-1 (b) Shipping bill /bill of export, (c) Samples sealed by Central Excise Officer, if any. If the consignment was sealed by the Central Excise Officer before dispatch, the Customs Officer will examine that the seal is intact and the marks and numbers tally. Samples will be dealt with as per instructions of the Commissioner.

7. Procedure after Shipping- After the goods have been shipped, the Customs Officer would make necessary endorsement on the original, duplicate and sixtuplicate copies of ARE-1 at appropriate places. He will put his stamp with his name and designation below the signature. The original and sixtuplicate copy should be handed over to the exporter.

8. Export By Post- If the export is through post, duplicate copy of ARE-1 will be sent with sufficient postage stamps to cover postal charges, at the time of booking the consignment. The duplicate copy will be endorsed and sent by customs officer at the post office, after the post parcel is exported.

EXPORT TO NEPAL OR BHUTAN For export to Nepal, a different procedure has to be followed considering that the rebate is granted to the His Majesty's Government of Nepal based on Indo-Nepal Treaty. Currently, the procedure is specified only for exports through specified Land Customs Stations. There is no rebate procedure for Bhutan.



Exports to Nepal / Bhutan without payment of duty - Export to Nepal/Bhuttan are allowed under bond without payment of duty if (a) payment is to be received in convertible foreign exchange or (b) Export of specified capital goods exported to Nepal against global tender issued by Government of Nepal or export against some specified projects. EXPORT WAREHOUSING Rule 20 of the Central Excise Rules, 2002 permits removal of excisable goods from a factory to a warehouse or from one warehouse to another warehouse. The relevant provisions are as follows- The facility of export warehousing is available to the following exporters and places: Exporters- The exporters, who have been accorded status of Super Star Trading House or Star Trading House, the foreign departmental stores of repute and the automobiles manufacturers, who have signed Memorandum of Understanding with Directorate General of Foreign Trade in the Ministry of Commerce and Industry. Places- The warehouses may be established and registered in Ahmedabad, Bangalore, Kolkata, Chennai, Delhi, Hyderabad, Jaipur, Kanpur, Ludhiana, District of Pune and Mumbai. Responsibility for payment of duty For the Period for which goods may remain in a warehouse Procedure of Export Warehousing

1. Registration- The exporter shall get his premises registered with the central excise authorities from where the said goods are to be exported.

2. Execution of Bond- Every registered exporter shall execute a general bon B-3 for the purpose of export of goods from the warehouse before the jurisdictional Assistant/ Deputy Commissioner of Central Excise

3. Removal of goods to warehouse- the Central Excise officer incharge of the warehouse shall issue certificate of removal in triplicate in prescribed form CT-2.

4. The operations of packing, repacking, labeling or re-labeling, in relation to excisable goods, received and stored in the warehouse will be governed by the ,procedure specified.

5. Goods supplied by an SSI Unit exempted from Registration – will also prepare ARE-3 against CT-2 in the same manner, as mentioned above, except that he will use his own invoice

6. Clearance of goods for export outside India- For the export of goods from the warehouse, the procedure relating to preparation of application, for export (ARE.1), examination and sealing, acceptance of proof of export etc.

EXCISE PROCEDURES FOR EXPORTS The goods have to be cleared from factory under Invoice. In addition to the Invoice, a prescribed form ARE- I has to be filled in by Exporter. Invoice for export can be from same series from which goods for home consumption are cleared or a separate series of invoice can be maintained for export Are-I Form— Exporter has to prepare ARE- I f form. The copies of ARE-I form should have following colour-

1. Original: White. 2. Duplicate: Buff 3. Triplicate: Pink 4. Quadruplicate— Green. Assessee can optionally have quintuplicate form which can be used for

claiming other export incentives. Provisions relating to sealing of goods for export



Goods can be cleared from factory duly sealed. Goods can be cleared for export without sealing also. Self sealing and self certification is also permissible. Though there is provision for self-sealing and self-certification, it may be advisable to get the consignment sealed in the factory by Excise Officer, as generally, it 'costs' less, compared to cost at customs port.

1. Clearance with seal of central excise 2. Clearance with self-sealing

Distribution of Documents The exporter shall distribute the copies of ARE-1 as follows-

1. Original and Duplicate copy- Send to the place of export along with the goods. 2. Triplicate and Quadruplicate copy- Send to Superintendent or Inspector of Central Excise

having jurisdiction over the factory or warehouse within 24 hours of removal of the goods. 3. Quintuplicate copy- Send to the place of export along with the goods.

EXPORT UNDER CLAIM OF REBATE The rebate of excise duty paid on exported goods is granted under rule 18. The rebate is available on all exports except exports to Nepal and Bhutan. In case of Nepal, the rebate is granted to Government of Nepal. In case of export to Nepal, Invoice in prescribed form has to be prepared and prescribed procedure has to be followed –

1. Clearance without Bond, but under form ARE-1 2. Rebate Claim- After export, following documents are required to be submitted - (a) Application

on letterhead claiming rebate, giving all details (b) Original ARE-1 certifying that goods have been exported (c) Invoice issued under rule 11 as proof of payment of excise duty. In addition, following documents are usually asked (i) Self attested copy of shipping Bill (ii) Self attested copy of Bill of Landing. The rebate claim can be filed with Maritime Commissioner. Rebate Claim must be filed within one year from date of export. Authorities are expected to point out deficiencies in application within 15 days. Rebate claim below 500 is not acceptable. No form has been prescribed for submitting application for rebate. Application on letter head is sufficient.

3. Duty can be paid by cash or cenvat credit- It is not necessary that rebate can be obtained only if duty is paid by cash. Duty on final products can be paid either through cash or PLA or Cenvat credit.

4. Duties Eligible for Rebate- Following duties are eligible for rebate-(a) Basic Duty paid under Central Excise Act (b) Special excise duty (c) ADE (GSI and (d) ADE (TTA)

5. Rebate of duty on inputs used in manufacture of export goods- except in case of export to Nepal and Bhutan

6. Merchant exporters can also obtain 7. Inputs free of Central Excise duty – A manufacturer of export g s can gel his inputs without

payment of Central Excise Duty. Input-output ratio should be informed to Assistant/ Deputy Commissioner.

Excise Concessions for Promotion of Exports Government has accepted in principles that export of goods from India should be relieved of domestic levies (both customs and central excise) so that Indian goods can be made internationally competitive. This policy is sought to be implemented through the following measures-

1. Rebate of Duty on Goods Exported 2. Export of Excisable Goods under Bond 3. Rebate of Duty on Excisable Materials used in the Manufacture of Goods that are Exported 4. Setting up of Units in Special Economic Zones and 100% Export Oriented Units 5. Drawback of Customs and Central Excise Duties in respect of -1 Inputs, both Indigenous and

Imported



Duties Eligible for Rebate- Following duties are eligible for rebate -(a) Basic Duty paid under Central Excise Act (b) Special excise duty (c) AED (GSI) (d) AED (T&TW) (e) NCCD (f) Education Cess - Explanation I to Notification No. 19/2004-CE(NT).) GENERAL BOND (BI BOND) AND BOND FOR PROVISIONAL RELEASE OF SEIZED GOODS (B4 BOND) B1 Bond is a bond is for due dispatch of excisable goods removed for export without payment of duty. The bond can be with surety or security. An exporter manufacturer can execute simple Letter of undertaking in form UT- I without executing any Bond. B4 Bond is for provisional release of seized goods. It can be only security bond. Bond should be for whole value of seized goods. Amount of security will be as determined by adjudicating authority taking into consideration of gravity of offence (normally 25%). However, as per earlier instructions, adjudicating officer had discretion to accept lower amount as security /surety. The adjudicating authority will ask the owner or person in-charge of the goods to which the goods are provisionally released, to produce the goods at the time adjudication order, if he is of the view that, the goods are liable to confiscation. In case the person is not able to produce the goods at appointed time, the bond may be enforced for recovery. PROCEDURE FOR REMOVAL UNDER BOND WITHOUT PAYMENT OF DUTY The basic procedures for removal of goods without payment of duty under rule 19 are –

a. Execute a bond with central excise authorities or issue letter of undertaking, b. Clear goods from factory under bond without payment of duty, c. Export the goods and obtain certificate of export on ARE-1 from customs authorities, d. Submit proof of export. The procedures are prescribed is discussed below —

Export under Bond

1. Submission of Letter of Undertaking prescribed Form UT – 1 2. Separation of Invoice and ARE-I Form 3. Clear goods with sealing or without sealing 4. 4. Running Bond Account 5. Inspection at port (if clearance from factory was without sealing).) 6. Submission of Shipping Bill 7. Get endorsement of export from customs authorities on ARE-1 form after goods are exported 8. Submit ARE- 1 form after endorsement by customs authorities to excise authorities as proof of

export along with statement in prescribed form 9. Submission of documents for duty drawback

FORMS RELATING TO REMOVAL OF GOODS FOR EXPORT An application for removal of excisable finished goods for export whether without payment of duty or on payment of duty with a claim for rebate is made in Form A.R.E.1. The said Form A.R.E.-1 is presented to the jurisdictional Superintendent/ Inspector of Central Excise.

1. Information to be given in Form A.R.E.-1 The assessee is required to give the following information in Form A.R.E.-1 (1) a. Particulars of Manufacturer of goods and his Central Excise Registration No.; b. No. and date of invoice under which duty was paid or the No. and date of bond/ undertaking

executed under Rule 19; c. Gross/ Net weight of the packages; d. Marks and numbers on the packages; e. Quantity of goods; f. Description of goods; g. Value of goods h. Rate and amount of duty;



i. Number and Description of packages; j. Amount of rebate claimed.

2. Form A.R.E.-1 also contains – a. A certification by the Superintendent/ Inspector of Central Excise in respect of clearance of

goods for export under bond under Rule 19 of the Central Excise Rules, 2002. b. A certification by the Customs officer that the consignment was shipped under his

supervision. c. A certification by the Post Master in case of export by post. d. A certification by the Assistant/ Deputy! Maritime Commissioner in respect of sanction of

rebate claim. Besides the assessee is also required to certify in Form ARE -1 that the goods In question have been manufactured availing or without availing the facility of - procurement of inputs without payment of duty; or on payment of duty with a claim for rebate; or Cenvat Credit.

3. Number of copies and their colours— Form A.R.E.1 is prepared in quintuplicate and its copies shall have the following colouring scheme- (i) Original: White (ii) Duplicate: Buff (iii) Triplicate: Pink (iv) Quadruplicate Green (v) Quintuplicate Blue.

4. Distribution of documents (ARE-1): In case the export takes place from the factory or warehouse, the distribution of ARE-1 shall be as follows. a. The Original and the Duplicate copy shall be returned to the exporter immediately after b. Triplicate copy shall be sent to the bond sanctioning authority c. Quadruplicate copy shall be retained by the Superintendent or inspector d. Quintuplicate copy shall be returned to the exporter immediately after endorsements

Where goods are not exported directly from the factory of manufacture or warehouse, the distribution of ARE-1 will be same as above except that the triplicate copy of application shall be sent to the Superintendent having jurisdiction over the factory of manufacture or warehouse who shall, after verification, forward the triplicate copy in the manner specified above. FORM A.R.E.-2 An application in Form A.R.E.-2 is used for removal of goods for export under claim for rebate of duty paid on inputs used in the manufacture of such goods as well as-

Removal of excisable finished goods under claim for rebate, or Removal of finished goods for export under bond without payment of duty.

The said Form ARE-2 is presented to jurisdictional Superintendent / inspector of Central Excise. Information to be given in Form A.R.E.-2 - The assessee is required to give following information in Form A.R.E.-2 in respect of the finished goods to be exported-

1. Description of packages; 2. Gross / Net weight of the packages; 3. Marks and numbers on the packages; 4. Quantity of goods; 5. Description of finished goods; 6. Value of goods; 7. Number and date of bond/ undertaking executed under Rule 19; 8. Number and date of invoice under which duty was paid; 9. Rate and amount of duty; 10. Amount of rebate claimed under Rule 18.

Production Records: RG – 1 & RG – 23 RECORDS In the course of any business, records are essential requirement. These records are also necessary for determination of tax liability of the assessee.



‘Records' means all the records prepared or maintained by the assessee for accounting of transactions in regard to receipt, purchase, manufacture, storage, sales or delivery of the goods including inputs and capital goods. All accounts, agreements, invoice, price list, return, statements or any other source document, whether in writing or any other form, shall be treated as records. Source documents refer to those documents, which form the basis of transactions and include sale invoice, purchase invoice, journal voucher, delivery challan and debit or credit note. Features of Private Records The main features of the acceptance of private records are as below –

1. Private record must be maintained 2. No format for record keeping 3. Maintenance of Daily Stock Account 4. Submission of records –to the Range Officer 5. To make available on demand

Electronic maintenance of records and preparation of returns and documents Any person may electronically maintain or generate all or any of the records, returns, invoices and other documents prescribed under the rules made under Central Excise Act, 1944 using a computer in electronically readable format. No specific permission is required for this purpose from the Central Excise Department. The records can be kept on any electronic media such as hard disk of computers, floppies, CDs or tapes and preserved. The printouts of records and documents must be taken at the end of each month and kept in bound folders separately for each type of record, return, documents etc. Rules and Procedure for Maintenance of Electronic Records

1. No need for Permission or intimation 2. Any electronic media can be used 3. Readable format 4. Printout 5. Proper back up 6. Produce on demand 7. Account of the audit trail and inter-linkages

DAILY STOCK ACCOUNT Every assessee shall maintain proper records, on a daily basis, in a legible manner indicating the particulars regarding description of the goods produced or manufactured, opening balance, quantity produced or manufactured, inventory of goods, quantity removed, assessable value, the amount of duty payable and particulars regarding amount of duty actually paid.

1. Contents of Daily Stock Account –should contain the following particulars- Description of the goods produced or manufactured; Opening balance, Quantity produced or manufactured, Inventory of goods, Quantity removed, Assessable value, Amount of duty payable, Particulars regarding amount of duty actually paid.

2. Authentication by the assessee 3. Preservation of the daily stock account –for a period of 5 years immediately after the financial

year to which it pertains



4. All goods manufactured must be entered – All goods manufactured must be entered in DSA (Daily Stock Account). Non-entry is an offense. Penalty can be imposed and contravening goods can be confiscated.

5. Daily basis entry 6. When entry is required in DSA

RG. 23 A Part II Accounting Treatment of Inputs Received When input is purchased, purchased price (net of Excise duty) should be debited to purchase Account and excise on inputs should be debited to Cenvat Credit Receivable (Inputs) account. Total Invoice amount (i.e. net purchase price plus excise) will be credited to Suppliers Account as the suppliers has paid Excise duty and his Invoice is inclusive of excise paid by him on the material supplied. When duty is debited in Input Cenvat Credit Account towards payment of duty on final product. Excise duty Paid on Final Products’ account should be debited and ‘Cenvat Credit Receivable (Input) account’ should be credited. This entry could be made on monthly basis as duty is payable once at the end of the month. Balance in ‘Cenvat Credit Receivables (Input) account’ in general Ledger and credit in ‘Input Cenvat Credit Account’ as per excise records (earlier ‘RG 23 A part II’) should tally, or reconciled. If there is debit balance at the end of the year in Cenvat account, it means that credit is not fully utilized and should be shown under current Assets under Loans and Advances. Closing stock of inputs should be valued Net of Excise Duty. However, since cenvat on stock which has not been used is also utilized for payment of duty, purchases are understated to that extent. If balance in credit of Cenvat cannot be utilized for any reason, the same must be written off. Invoice System An invoice is the document, under cover of which, the excisable goods are to be cleared by the manufacturer. This is also the document, which indicates the assessment of the goods to duty. No excisable goods can be cleared except under an invoice.

1. Contents of invoice 2. Removal only on invoice 3. Serially number invoice 4. No. of Invoice copies 5. Number of Invoice book 6. Authentication of invoices 7. Intimation of serial numbers 8. Rounding off of duty in invoice 9. provisions of CENVAT Credit Rules, 2002 regarding availment 10. Preparation of invoice when goods dispatched through more than one vehicle because of their

size. 11. Cancellation of invoices.

Each credit and debit entry should be made on separate lines and assigned a running serial number for the financial year. The PLA must be prepared in triplicate by writing with indelible pencil and using double sided carton. Original and duplicate copies of PLA should be detached by the manufacturer and sent to the Central Excise officer along with monthly/ quarterly periodical return in form Er-1/Er-3. Procedure Relating to Invoice An invoice is the document under the cover of which the excisable goods are to be cleared by the manufacturers. Rule 11 of Central Excise Rules, 2002 provides that no excisable goods shall be removed from a factory or a warehouse except under an invoice signed by the owner of the factory or his authorized agent. In case of cigarettes, which are under physical control, each invoice shall also be countersigned by the Inspector/Superintendent of Central Excise before the cigarettes are removed from the factory.



TR – 6 Challan Duty is payabe in authorizes bank by way of a TR-6 challan. The prescribed challan form TR6 should be filled in giving details like name and 15 digit ECC code number of manufacturer, code number of Excise Commissionerate/ Division/ range and code of branch of Bank. The challan should be serially numbered, from 1st April onwards. The prescribed challan form TD-6 should be filled in giving details like name and code number of manufacturer, code number of excise Commissionerate/Division/range and code of branch of bank. Four copies are submitted to authorize Bank. These should be marked as Original, Duplicate, Triplicate and quadruplicate. Credit can be taken as soon as cheques are deposited in collecting bank for collection.

Depositing Duty and TR – 6 Challan Depositing Duty Goods have to be cleared from factory (or under bond for export or chapter X procedure without payment of duty), under an Invoice. Duty is payable on monthly basis, by 5th of the following month. Duty can be paid through current account (PLA) and/ or Cenvat credit. Till 31-3-2003, duty was required to be paid on fortnightly basis. Prior to 31-3-2003, duty was payable on daily basis or consignment basis through PLA/Cenvat credit, before removal of goods from factory.

1. Invoice for removal of final products 2. Monthly payment (By 5th of following month) 3. Special provisions for month of March 4. Cenvat credit Available instantly 5. Payment Before Removal Each Time is also Permissible 6. EOU have to pay duty each time before clearance 7. Payment when due date is holiday can be made next day 8. Payment of rent, fines or penalties 9. Payment in case of prolonged bank strike 10. Consequences for Non-payment on Duty Date 11. Removal under Bond without Payment of Duty (In case of Export)

Payment of Duty The provisions of the Central Excise Act, 1944 Central Excise Rules, 2002 and Excise Manual 2001 related to payment of central excise duties are given hereunder –

1. Manner & time of Payment of Duty – Duty is payable by the 5th of following month. 2. Payment through personal ledger Account – Assessee should pay duty through account

current. Any assessee who has obtained 15 digit ECC number from Superintendent can operate a current account.

3. Prescribed form for payment – The prescribed challan form TR-6 should be filled in giving details like name and 15 digit ECC code number of manufacturer, code number of Excise Commission rate/Division/range and code of branch of bank.

4. Interest on Delayed Payment – If the assessee fails to pay the amount of duty by due date, he shall be liable to pay the ousting amount along with interest at the rate of 135 per annum on the put standing amount, for the period starting with the first day after date till the date of actual payment of the outstanding amount.

5. If the assessee defaults in payment consequences shall be – if the assessee defaults – a. In payment of any one installment and the same is discharged beyond a period fo thirty

days from the date on which the installment was due in a financial year, or b. In payment of installment by the due date for the third time in a financial year, whether

in succession or otherwise.



6. Payment of duty under protest – In case the classification or valuation of goods done by the Excise Authorities is not acceptable to the assessee, then, the assessee can file an appeal and, meanwhile make payment of duty under protest.

7. Payment of rent, files or penalties – The account current (PLA) can be used only for payment of excise duty. Other payment like rent, penalty, fine etc. should be paid directly through TR-6 challan. Particulars of payments, account heads should be specified in TR-6 challan.

ADMINISTRATIVE SET-UP OF CENTRAL EXCISE DUTY

Central Excise Duty is such tax whose scope is very vast. With industrial development, its importance is increasing. In such a situation, for a purpose of assessment and collection of tax, authorities are required. For administration of excise duty, the following are the authorities — APPOINTMENT, RIGHTS AND DUTIES OF EXCISE AUTHORITIES Rights and powers of various authorities of Central Excise are as under –

1. Central Board of Excise and Customs – This Board is setup under Central Boards of Revenue Ad, 1963. It is the highest authority in the matters pertaining to the administration and management of the excise duty. There is a president and 6 members in this Board. The work is divided by the president of Board. The members and President of this board are appointed by the Central Govt.

Functions and Powers of Board The board holds the right to frame the concerned rules and regulations regarding the excise

duty. The board sends informations relating to the excise duty, to all the officials concerned with

the Central Excise. All the officials have to follow its orders and directives. Every member of board divides the work between them. The board has the right to entrust any authority or power as deemed proper by it.

2. Chief Commissioner of Central Excise India, for the purpose of central excise duty, is divided in 23 areas

Central Board of Excise and Customs

Chief Commissioner of Central Excise

Commissioner of Central Excise

Additional Commissioner of Central Excise

Joint Commissioner of Central Excise

Assistant / Deputy Commissioner of Excise

Inspector

Superintendent for each Range



Rights and Powers of Chief Commissioner Mainly the power of Chief Commissioner is to supervisory nature. Chief Commissioner delegates administrative powers to Commissioners for routine work. Chief Commissioner Delegates some of these power to Assistant Commissioner, Additional

Commissioner, Deputy Commissioner and Superintendent. 3. Commissioner of Central Excise – Each area is divided into commissionerates and main

officer is called the commissioner. At present there are 60 Commissionerates. Commissioner is the most important person regarding excise duty. He is different from the district collector. His appointment and work area is decided by Central Board of Excise and Customs.

Rights and Powers of Commissioner He is the highest administrative authority of the excise duty in his region. The responsibility of the effective implementation of this Act fully lies upon the

Commissioner. Commissioner may make use of any of the rights or powers as described in the Act. The commissioner may transfer or assign of his rights, powers or duties to any of the

employees working under his charge. 4. Additional/Deputy - Commissioner of Central Excise – Additional Deputy Commissioner

works under the charge of commissioner. Rights and Power of Deputy Commissioner

Right to permit the export. In specific case, right to give the preliminary weighing orders. Right to order for the submission of statement regarding the products. Right to the appointment of the caretaker of the Godowns. Right to grant permission to increase the time limit of the return of goods. Right to approve the formula. Right to withdraw more than 75% of Bond amount by assessee. Right to grant relief. Right of compounding of crimes of assessee and then to decide amount payable in place of

it. 5. Assistant Commissioner – He is also an important authority in the excise duty sphere. His

rights and duties are those as are assigned to him by commissioner. Right to grant permission to take the goods out of factory. Right to grant permission to return the duty paid goods in the factory. Right to grant the refunds. Right to value of the goods, brought back. Right for fixing or prescribing the method of coding and packing. Right for sale of the goods forfeited. Right to grant permission to the duty payer to withdraw the amount from the current

account. Right to grant permission to fill up the bond for the provisional duty-determination. Right to forfeit the security. Right for calculation of the stock.

6. Superintendent – He too does not posses any of the rights of his own. Ordinarily, he is transferred the lower rights and duties —

Rights and Duties Right to approve the appointment of authorized agent. Right to grant permission to take the non-leviable goods out of the factory. Right to permit the sale or export within India. Right to accept the application for renewal.



Right to grant permission to extend the warehousing period in case of things other than the tobacco.

Right to grant order for advance payment of the duty. 7. Inspectors – In the chain of the excise duty officials, the last link is that of the Inspectors. They

work as per the directions of that excise duty officer under whose charge and control they are placed. Under Rule 5, the Commissioner may also entrust the Inspector with any functions, rights or duties.

APPEAL AND REVISION Excise Law empower excise officers to pass adjudication orders demanding du and interest and imposing penalty and confiscation of goods. Excise Act have made elaborate provisions for appeals against adjudication orders passed by excise authorities. APPEALS: GENERAL PROVISIONS General Provisions relating to appeals are given Ws 35 of Excise Act are discussed below

1. Appropriate authorities for appeals - The assessees as well as the Excise Department have a right of two or three stage remedies against the orders passed under Central Excise Act and Rules For orders passed by officers, lower than the rank of Commissioner of Central Excise, the

first appeal lies to the Commissioner (Appeals Where the order of the Tribunal does not related to the determination of rate of duty or

value of goods, a reference to the High Court, instead of Appeal to Supreme Court In cases a Commissioner of Central Excise passes the order-in-original, appeal lies directly

to the Appellate Tribunal 2. Pre-deposit for filling appeal- Section 35F of Central Excise Act provides that person desirous

of appealing against the order shall, pending the appeal, deposit the duty demanded or penalty levied.

3. Authorized representative in appeal- If a person has to make statement on oath or if he has to be examined/cross examined, he has to personally attend the hearing)

4. Signing of appeal- Central Excise (Appeals) Rules (3) provides that appeal to Commissioner (Appeals) should be signed.

5. Time limit for filling appeal- Every Statute prescribes time limit within which appeal has to be filled. Excise and Customs law allows time of 60 days for filling appeal to commissioner (Appeals) and three months for filling of appeal to CEGAT (customs, excise and gold Appellate Tribunal) after the order is communicated to him.

APPEALS TO COMMISSIONER (APPEALS) The statutory provisions and procedure related to Appeal before the Commissioner (Appeals) are as follows –

1. Scope and Time for Appeal- Sec. 35 (1)- Any person aggrieved by any decision or order passed under this Act by a Central Excise Officer, lower in rank than a Commissioner of Central Excise, may appeal to the Commissioner of Central Excise (Appeals) within 60 days from the date of the communication to him of such decision or order

2. Form of Appeal- Sec. 35 (2) – in Form No. E.A. - 1. It shall be accompanied by a copy of the decision or order appealed against.

3. Signing of Appeal- The grounds of appeal and the form of verification as contained in Form No. E.A.-1 shall be signed

4. Appeal made by the Department –an application to the Commissioner (Appeals) shall be made in Form No. E.A. 2

APPEAL TO TRIBUNAL



Customs, Excise and Service Tax Appellate Tribunal (CESTAT) is a quasi judicial body which hears cases Customs, Central Excise and service tax matters. It hears appeals against the orders of Commissioner of Customs/Excise and Commissioner (Appeals). The appeal must be filed in prescribed form within 3 months. Tribunal consists of technical as well as judicial members. It has benches at various places in India. If duty or penalty involved is less than Rs. 10 lakhs and issue does not relate to classification or valuation, hearing can be by single member bench. The Tribunal will pass such orders as it deems it, confirming, modifying or annulling the orders appealed against. It may also remand the case with direction to lower authority which passed the order. The statutory provisions and procedure related to Appeal before the Commissioner (Appeals) are as follows –

1. Scope of Appeal- Any person aggrieved by any of the following orders may appeal to the Appellate Tribunal against such order- a decision or order passed by the Commissioner of Central Excise as an adjudicating

authority ; an order passed by the Commissioner (Appeals) under section 35A; an order passed by the Central Board of Excise and Customs, an order passed by the Board or the Commissioner of Central Excise, )

2. Appeal b the Department against order of Commissioner (Appeals)- 3. Jurisdiction- The Benches of the Tribunal are composed of Judicial and Technical Members.

Single member Bench has the jurisdiction to hear appeals involving an amount of duty, fine or penalty not exceeding Rs. 50,000.

4. Form of Appeal- An appeal to the Appellate Tribunal shall be. made in Form No. E.A. 3 5. Fees payable for appeal before Tribunal- Prescribed fees for filing h appeal before Tribunal

as according to the amount of duty. If the a aunt of duty and interest demanded and(penalty levied is Rs. 5 lakhs or less, fees for filing appeal will be Rs. 1,000.

Appeal to High Court or National Tax Tribunal on Substantial Question of Law Tribunal is final fact finding authority. However, if there is a substantial questions of law arising out of order of Tribunal (in cases other than relating to rate of duty and valuation); an appeal can be made to High Court (Now National Tax Tribunal) within 180 days. Form of Application Appeal As per rule 8 an application requiring the High Court to direct the Appellate Tribunal to refer to the High Court any, question of law shall be made in Form No. E.A. 6 and such application shall be filed in quadruplicate. Hearing of Appeal The appeal will be heard by High Court bench of at least two judges. Decision will be by majority. If the judges are equally divided on the issue, matter will be referred to third judge. He will hear only on the point on which the judges were differing. The point will then be decided by majority. Appeal to Supreme Court The Central Excise Act, 1944, provides a two tier machinery for redressal of grievances against the decision of the Appellate Tribunal –

1. Judgement of High Court in appeal, if high Court certifies it to be a fit case for appeal to Supreme Court.



2. Order of Appellate Tribunal where it relates to question relating to rate of duty excise or value for purpose of duty.

Procedure for appeal to SC – Appeal to Supreme Court should be presented within 60 days from the date the order is communicated. Appeal should be seven extra sets and should recite all relevant facts and set forth objections to the order and ground of appeal. An authenticated copy of order appealed against should be attached. There are civil appeals. After filing of appeal, Supreme Court will hear it exparte and may either dismiss it summarily or issue notice to parties or admit the appeal. Revisions Section 35EA of Central Excise Act deals with powers of revision of Board or Commissioner of Central excise in certain cases while section 35EF deals with revision by Central Government. Revision by Broad or Commissioner of Central Excise in Certain cases Provisions regarding Revision by Board or Commissioner are given under section 35EA of Central Excise Act. Revision by Central Government The Central Government may, on the application of any person aggrieved by any order passed under section 35A, annul or modify such order. The Commissioner (Appeals) under section 35A is not legal or proper; direct the proper officer to make an application on his behalf to the Central Government for revision of such order.

1. Procedure for Filing Application- The revision application should be in prescribed form EA- 8 in duplicate. It should be signed by principal office by two copies of order of Commissioner (Appeals) and two copies of original order

2. Time limit for filling Application – Revision application must be filed in 3 months from communication of the order.

3. Revision Application by commissioner- Application for revision can also be made by Commissioner of Central Excise. No fees are payable along with such an application. No time limit has been prescribed for filing the application.

4. Fees payable with application- The application should be in prescribed form with fees of Rs. 1,000 if the duty and interest demanded exceeds Rs. one lakh and Rs. 250 if duty and interest and penalty is less than Rs. one lakh. No fee is payable if revision application is made by Commissioner of Central Excise

5. SUO Motu Revision by Central Government- Central Government can, on its own motion, annul or modify the order of Commissioner (Appeals)

6. Refusal of Petty Revision Applications- Central Government may refuse to admit application for revision, if the amount of duty or fine or penal cloy not exceed Rs. 5,000

7. No Provision of Appeal. Against Revision Order of Central Govt.

Penalty and Prosecution Offences and penalties under the Central Excise Act, 1944 Offence means any act or omission made punishable by any law for the time being in force. Section 9 of the act enumerates the following types of offence-

1. Contravening any of the provisions relates to transit of excisable goods to any part of India. 2. Contravening any of the provisions Relates to transit of exciseable goods to any part of Indian. 3. Contravening any of the provisions relates to registration of persons. 4. Evading the payment of any duty payable under this Act, 5. Removing or concerning himself with removal of any excisable goods in contravention of any of

the provisions of this Act or any rule made there under.



6. Acquiring possession of or otherwise engaged in transporting, depositing, keeping, concealing, selling or purchasing, or otherwise dealing with, any excisable goods, which, he knows or has reason to believe, are liable for confication.

7. Failling to supply any information which he is required by rules made under this Act to supply, or supplying false information.

8. Contravening any of the provision of this Act or the rules made there under in relation to credit of any duty allowed to be utilized towards payment of excise duty on final products.

9. Attempting to commit, or abetting the commission of, any of the offences. Penalty regarding above offences

1. Penalty equation to excise duty payable on seized goods. Or

2. 2,000, whichever is more. Penalty in case of above mention offences

1. Evasion of Excise duty 2. 2,000 whichever is more.

Punishment The punishment for the above offences is as under-

1. In case of an offence relating to any excisable goods, where the duty leviable thereon under the Act exceeds 1,00,000.

Punishment Imprisonment for a term, which may extend to 7 years and with fine. (However, such punishment shall not be for less than 6 months unless special and adequate reasons to the contrary are recorded. The reasons that shall not be special and adequate for reducing punishment below six month are the same.

2. In any other case Imprisonment for a term, which may extend to 3 years or with fine or with both.

In case of second and subsequent offence If any person convicted of an offence under this section is again convicted of an offence under this section, then, he shall be punishable for the second and for every subsequent offence with imprisonment for a term which may extend to 7 years and with fine. Note : Section 9 A of Central Excise Act provides that any offence under the Act may, either before or after institution of prosecution, be compounded by the Chief Commissioner on payment of prescribed amount



Unit – 5 M.P. EXCISE DUTY: GENERAL INTRODUCTION

For imposing and collecting the excise duty on intoxicated and narcotic items 'M.P. Excise Act' is applicable is the state. This act is based on 'Excise Act 1915.' The M.P. Government impose excise duty on intoxicating items like country liquor, foreign liquor, Beer, Bhang etc. in various ways e.g. licence fee, permit fee, Duty on removal of intoxicated items from ware house. The Government of M.P. Collects revenue about 6,000 crores per annum through state excise duty. So state duty has second place in the state tax revenue after VAT. OBJECT OF STATE EXCISE DUTY The excise duties are levied with two objects in view. Firstly, to generate the revenues of the States and secondly to minimise the use of intoxicants and harmful shrub ESTABLISHMENT AND CONTROL OF STATE EXCISE DUTY The State Government may, by notification, for the whole or for any specified part of the Madhya

1. Appoint an officer, hereinafter referred to as the Excise Commissioner who, subject to such control as the State Government may direct, shall superintend the administration of Excise Department and the collection of the excise revenue.

2. Appoint officers of the Excise Department of such classes and with such designations, powers and duties as the State Government may think fit.

3. Delegate to the Chief Revenue authority or the Excise Commissioner all or any of its powers under this Act

4. Withdraw from any officer or person all or any of his powers under this Act; Establishment of flying squads The State Government may, by notification, establish flying squads for investigating into any case of alleged or suspected evasion of excise revenue or any case of alleged or suspected contravention of any of the provisions of this Act or the rules made there under and shall specify there in the area over which the flying squad shall exercise jurisdiction IMPORTANT DEFINITIONS Some important terms have been defined under section — In this Act, unless there is anything repugnant in the subject or context.

1. Beer- "Baer" includes ale, stout, porter and all other fermented liquors usually made from malt; 2. Bottle- "Bottle" means to transfer liquor from a cask or other vessel to a bottle, jar, flask or

other similar receptacle for the purpose of sale, and bottling includes re-bottling. 3. Chief Revenue Authority- "Chief Revenue Authority" means the authority declared by the

State Governments to be the Chief Revenue Authority for the purposes of this Act; 4. Excisable articles- "Excisable article" means—

Any alcoholic liquor for human consumption; or any intoxicating drug; or opium and poppy straw.

5. Excise Duty- "Excise Duty" and "countervailing duty" means any such excise duty or countervailing duty, as the case may be, as is mentioned in entry 51 of list II in the Seventh Schedule to the Constitution;

6. Excise Officer- "Excise Officer" means a Collector or any officer or other person appointed or invested with powers under section 7;

7. Excise Revenue- "Excise revenue" means revenue derived or derivable from any duty, fee, tax, penalty, payment or confiscation imposed or ordered or agreed to under the provisions of this Ad, or of any other law for the time being in force relating to liquor or intoxicating drugs.



8. Export- "Export" means to take out of the State otherwise than across a Customs frontier as defined by the Central Government;

9. Import- "Import" (except in the phrase "import into India") means to bring in the State otherwise than across a customs frontier as defined by the Central Government;

10. Intoxicant- "Intoxicant" means any liquor or intoxicating drug; "Intoxicating drug" means— the leaves, small stalks and flowering or fruiting tops of the Indian hemp plant (Cannabis

sative), including all forms known as "bhang," sindhi" or "ganja"; any mixture, with or without neutral materials, of any of the above forms of intoxicating

drug, or any drink prepared there from; and any other intoxicating or narcotic substance which the State Govt. may, by notification,

declare to be an intoxicating drug. 11. Liquor- "Liquor" means intoxicating liquor, and includes spirits of wine, spirit, tan, beer, all

liquid consisting of or containing alcohol, and any substance which the State Government may, by notification, declare to liquor for the purposes of this Act;

IMPORT, EXPORT AND TRANSPORT RESTRICTION

1. Power to prohibit import, export or transport (Sec. 8) 2. Restriction on import, export or transport (Sec. 9) 3. Requirement of pass for import, export or transport (Sec. 10 4. Passes for import, export or transport (Sec. 11) 5. Passes issued by other authorities may be deemed passes granted under this Act (Sec. 12)

The sanction shall be given by the State Government after payment of any duty to which it may be liable under this Act, or execution of a bond for such payment, the main provisions regarding Duty are as under —

1. Duty on excisable Articles 2. Duty at different Rates –sub-Section (1) 3. Duty not imposed on liquors import outside India 4. Exemption for Duty 5. Enhancing or Reducing the Duty rate 6. Ways of levying such duty 7. Compliance of Conditions

PROVISIONS RELATING TO PASS

1. Requirement of pass for import, export or transport 2. Passes for import, export or transport 3. Passes issued by other authorities may be deemed passes granted under this Act.

MANUFACTURE OF INTOXICANTS Main provisions relating to manufacture of intoxicants items are as under

1. Licence required for manufacture, etc., of intoxicants. (Sec. 13) ) 2. Exemption from licencing regarding Tari 3. Exemption for home consumption 4. Power to grant lease of right to manufacture, etc. 5. Exclusive privileges of manufacture sale etc. may be granted 6. Lessee's permission to draw 7. Manufacture and sale of liquor in Military Cantonments 8. Establishment or licensing of distilleries and warehouses 9. Payment of duty on removal from distillery, brewery or place of storage



Possession of Intoxicants Provisions relating to possession of intoxicants are given under section 16 of the Act –

1. Limit of quantity for possession 2. Restriction on in excess of the limit 3. Prohibition

Sales of Intoxicants Provisions relating to sale of intoxicants are discussed below-

1. Licence required for sale of intoxicant 2. Measurement and testing – Every person who manufactures or sells any intoxicant under a

licence shall be bound for the following— Use of prescribed measures, weights and Testing

3. Prohibition of employment of male persons under the age of twenty-one years and of woman 4. Prohibition of sale of liquor intoxicating drug to persons under the age of twenty-one years). 5. Prohibition of Advertisements relating to liquor 6. Closing of shops for the sake of Public Peace

LICENCE, PERMIT AND PASS Provisions regarding Licences, Permits and Passes are given under Sec. 28 to 33 of the M.P. Excise Act. These are –

1. Form and conditions of licence etc. (Sec. 28) 2. Payment of supervision charges (Sec. 28A) 3. Power to take security from licensee (Sec. 29) 4. Technical defects, irregularities and omissions (Sec.30) 5. Power to cancel or suspend licence, etc. (Sec. 31) 6. Compensation allowed 7. Recovery from ex-licence 8. Power to withdrawal licences (sec. 32) 9. Refund of fee paid in advance (sec. 32-3) 10. Surrender of licences (sec. 33

Prescribed Licence Fees The State Government hereby prescribes the annual Licence fee for F.L. Restaurant, Hotel, Civilian, Club and Commercial club licence from 1st April, 2012, as per table given below table — No. Type of Licence Annual Licence Fee 1. 2. 3. 4. 5.

Restaurant or Public shops a. City up to 10 lakh population b. City 5 latch to 10 lakhs population c. City more than 3 lakhs but up to 5 Lakh population d. City 1 to 3 lakhs population e. District Head office population 40,000 to 1 Lakh Tourist Place a. Category – A b. Category – B c. Category – C Haritage Hotel in rural area Resort Bar Hotel and Bars of M.P. Tourism Corporation

Rs. 8,80,000 7,10,000 6,20,000 5,30.000 4,40,000

3,30,000 2,80,000 2,60,000

1,70,000 4,40,000 2,35,000



Payment of Licence Fee and Security Amount In case an applicant is selected as licensee, he shall deposit security amount equal to 1/12th of the duty amount payable on the annual minimum guaranteed quantity within three days of being informed of his selection and that licence fee of the first month as an advance by 27th March

M.P. Excise Duty: Rates and Practical Problems SIMPLIFIED TABLE FOR EXCISE RATES Above mentioned Excise Rate schedule is complicated, here a simplified table is given to calculate state Excise Duty payable on intoxicants supplied from ware house. Item Excise Rate Applicable 1 2 3 4 5

Country Liquor a. Plain country liquor b. Spiced country liquor Bhang a. Bhang Chota or Bhang Mithai licence holder b. Other licence holder or traders Wine a. Wine to Civilians b. Wine to Military (50% concessional rate) c. Wine manufacture in M.P. Beer a. Drought Beer to Civilians b. Drought Beer to Military (Concessional) c. Other Beer to Military Foreign Liquor Brandy, Whisky, Rum, Zin etc. Ex- ware house supply rate or

Rs. 92 per proof litre Rs. 92per proof litre Rs. 100 per Kilogram Rs. 300 per Kilogram Rs. 125 per proof litre Rs. 62.5 per proof litre (No duty payable) Nil Rs. 20 per Bulk Litre Rs. 10 per Bulk Litre Rs. 115 per case or 40% or supply rate from ware house, whichever is more.

Price range 1. Price up to Rs. 800 per case of (12 quart

bottles)

Rs. 625 per case Or 120% or price whichever is higher

2. Price range Rs. 801 to Rs. 1100 a. Rs. 975 per case Or

b. 100% or price whichever is higher 3. Price range is Rs. 1,101 to Rs. 1,600 a. Rs. 1,100 per case

or b. 75% of price whichever is more

4. Price range is Rs.1,601 to Rs. 2,80C a. Rs. 1,250 per case Or

b. 50% of price whichever is more 5. Price range is Rs. 2,801 to Rs. 4,000 a. Rs. 1,500 per case

Or b. 45% of price whichever is more

6. Price range is Rs. 4001 to Rs. 10,000 a. Rs. 1,850 per case or

b. 25% of price whichever is more 7. Price range is more than Rs. 10,000 a. Rs. 2,600 per case

Or b. 22% of price whichever is more



Concessional Rates for Military Organization

1. In case of Rum - 30% of effective rates for civilians. 2. In case of other foreign country liquor - Brandy, Whisky, Zin, Vodka, Mixture etc. 50% of

effective rate. III. 3. Beer or Malt - 50% of effective rate for civilians.

Some Important points consiferable while computing excise duty payable or Collected Excise duty in case country liquor Rs. 92 per proof litre in same either plain or spiced. Bhang issued to Bhang-Ghota or Bhang Mithai is chargeable Rs. 100 per k.g., in other case Rs. 300

per k.g. Drought Beer duty rate for civilians is Rs. 20 per bulk litre supplied to license holder or Beer Bars.

In case of military forces concessional rate 50%, i.e. Rs. 10 per bulk litre shall be applicable. Excise rate for wine Rs. 125 per proof litre and concessional rate for military 50% of thereof. Excise rate for foreign liquor shall be determined as per price range, as per following formula

according to table given behind a. Fixed duty rate as per price range

Or b. Percentage rate on price actual Whichever is more.

If supply rate price rate of foreign figure is not mentioned along with foreign liquor, it shall be assumed that price per case not more than Rs. 800 per case and Fixed Rs. 625 per case shall be applicable.

In case of foreign liquor or beer supplicable supplied to military organisation concessional rate shall be

a. 30% for Rum b. 50% for other - Brandy, Whisky, Zin, Beer etc.

B.Com. V Sem (Tax) Subject- Central & Provincial Excise...

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