Excise Info

8/2/2019 Excise Info

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WHAT IS EXCISE?

HISTORY

Central Excise levy was existing for years. But in 1944, 11 different Acts werecombined into one Act and this was then named as "The Central Excise and Salt Act,1944". In 1996 it was renamed as "The Central Excise Act, 1944".

This Act is the original Act for excise, which contains the Tariff Items 1 to 67. In 1975the Tariff Item 68 was introduced with the description "all other goods not elsewherespecified". The Industry started describing it as "Terror Items". In 1985 thecontroversial Tariff Item 68 was abolished and a new Tariff Act known as "THE

CENTRAL EXCISE TARIFF ACT, 1985" (CETA) was introduced. This new act replacedthe first schedule to the original Act.

"THE ART OF TAXATION LIES IN SO PLUCKING THE GOOSE AS TO OBTAIN THELARGEST AMOUNT OF FEATHERS WITH THE SMALLEST POSSIBLE AMOUNT OFHISSING" - JEAN BAPTISTE COLBERT

Excise is one of the important indirect taxes which is based on this principle. Tosimply state Excise is a tax levied on goods manufactured or produced in India.Central Excise duties are the single largest source of Revenue for the CentralGovernment of India. On an average, out of every one Rupee Government earns, 19paise is contributed by Excise.

Apart from the Basic Excise duty, the following types of duties are also levied :

i. Special duty of excise specified in the Second Schedule to the Central Excise Tariff Act, 1985 leviable under the Central Excise Act, 1944.

ii. Additional duty of excise under the Additional Duties of Excise (Textiles & Textile Articles) Act, 1978.

iii. Additional duty of excise under section 3 of the Additional Duties of Excise(Goods of Special Importance) Act, 1957.

WHO COLLECTS IT ?

They are levied and collected by Central Excise Department under the authority of

the Central Excise Act, 1944 and Central Excise Rules, 1944. Section 3 is thecharging section which in turn derives the power to impose this tax from the Entry 84of the Union list under the Seventh Schedule read with Article 246 of the Constitutionof India. The Entry empowers the Central Government to levy Duty on all articlesproduced or manufactured in India (including tobacco) except Alcohol and Opium.

The power to collect Excise duty on Alcohol and Opium has been assigned to Statesand it is known as State Excise duty.

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CONCEPT OF MANUFACTURE AND MANUFACTURER

Manufacture

Manufacture not only includes any process incidental or ancillary to the completion of manufactured product but also what is stated to be amounting to manufacture as persection notes or chapter notes of the Central Excise Tariff Act, 1985.

The following four aspects must exist to attract the definition of manufacturing asgiven in central excise law :

1. A process to be carried out.2. The process carried out must result in the manufacture of a new product than

what was originally before.3. The product so produced must have a marketability and commercially known

and sold as such.4. The product must be movable in nature.

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REGISTRATION

Background

Rule 174 was amended vide Notification No. 11/92 CE (NT) dated 14-5-1992. This ruleconsist of 11 sub-rules which incorporates all the provisions regarding registration.Applicability

Section 6 of the Central Excise Act, 1944, a person who is engaged in production ormanufacture or any process of production or manufacture of any specified goodsincluded in Central Excise Tariff Act, 1985 shall get himself registered with the properofficer as per the procedure / documentation laid down in Rule 174 of the CentralExcise Rules, 1944. The Registration is applicable to the following category of persons as per Rule 174 and as per Notification No. 33/94 CE (NT) dated 4-7-1994.

1. Manufacturer.2. Curer.3. Producer.4. Broker/Commission Agent dealing in any excisable goods.5. Owner of private showroom or warehouse of excisable goods.6. Dealer/Importer who issues invoices under Rule 57G or Rule 57T (for purposes

of MODVAT credit).

HOW TO OBTAIN REGISTRATION (BY MANUFACTURERS)

To apply to Range Superintendent in the prescribed Form R-1. Since the application iscommon for all category of persons, only relevant portion of the application form is tobe filled in by the manufacturers. Similar application for registration should be madeby other categories also.
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ENCLOSURES TO THE APPLICATION FORM

1. The ground plan of the manufacturing premises as the case may be withspecific reference to store room of finished goods indicated clearly.

2. The details of products manufactured or stored in case of other categories(other than manufacturer) with their chapter heading, sub-heading as per

Central Excise Tariff Act, 1985.

HOW ISSUED

The Superintendent of Central Excise after verifying the application and all therelevant enclosures may visit the factory to verify whether all the particularsspecified in the application and the enclosures are correct and thereafterSuperintendent will affix the words "VERIFIED" and "APPROVED" and put his datedsignature. The relevant portion of the Registration Certificate (R2) will be filled andsigned by the Superintendent and a copy of the same sent to the manufacturer alongwith one copy of the approved ground plan. It is to be noted SSI units are permittedto declare the entire factory as store room which is procedural relaxation announcedby CBEC.

ONE UNIT ONE REGISTRATION

Under the Excise Rules each and every factory engaged in the manufacture of Excisable goods, is required to obtain registration and will be an assessee for thepurpose of levy and collection of excise duty. Therefore, if a company has got 3 or 4factories located at different places, each of the factory will obtain Registrationthough it may belong to one company only.

1. Time-limit for issue of R-2 : Time limit for issuance of RegistrationCertificate R-2 is within 30 days from the date of receipt of the applicationform. If the Registration Certificate is not issued within 30 days then the

registration applied shall be deemed to be granted.2. Display of Registration Certificate : Every Registration Certificate (originalor certified copy) must be exhibited in a conspicuous part of the registeredpremises.

3. Validity : Indefinite.4. Introduction of new products : If the new product suppose to be

introduced falls under different sub-heading then it is essential to send theRegistration Certificate for the incorporation of the new product in theRegistration Certificate.

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EXCISABLE GOODS

Excisable goods refer to those Goods which are mentioned in the Central Excise Tariff Act, 1944. Goods as per this Act must possess the following characteristics.

These are the 4 Ms

The goods should be MOVABLE. (no duty on immovable goods). The goods should be MARKETABLE (capable of being bought and sold).


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The goods should arise out of MANUFACTURING process. The goods should be MENTIONED in the Central Excise Tariff Act. (if one of the

criteria mentioned above is absent, the item cannot be described as goods toattract Excise levy, even if there is entry in the tariff).

Excisable Goods are of two kinds:

1. Unmanufactured Goods (Coffee, Tobacco).2. Manufactured Goods. Rates of duty are of three kinds:3. Specific; i.e., per kg.4. Ad valorem; i.e., on the value of goods expressed in terms of % of the value.5. Duty on production capacity : On certain Notified Goods under section 3A.

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ASSESSMENT"It refers to official determination of the liability of a person to pay a particular Tax".

Assessee

"Person who is liable to pay duty assessed on the Goods manufactured or producedby him."

Assessable Value

"It refers to the price at which the Excisable Goods are sold by the assessee."

TYPES OF EXCISE CONTROL

1. Physical Control : Applicable to manufactured tobacco and mainly tocigarettes. Assessment is done by Excise Officer and thereafter the goods areremoved under his supervision.

2. Self Assessment Procedure : This self removal procedure requires theassessee to file a classification declaration for his goods in quadruplicateunder rule 173B to inform the department of the claimed rate of dutyapplicable to his Goods.

3. Compounded Levy Scheme : It is meant for small-scale decentralised sectorlike embroidery, marble slabs etc.

4. Collection of Central Excise Duty at the point of consumption : It is confined toKhandsari Molasses going for manufacture of alcohol.

5. Levy of Excise Duty on the basis of capacity of production : This is a NewWeapon in the Government's armoury. A new section 3A has been introduced

to fight evasion.

EXEMPTION FROM DUTY

1. Under section 5A, the Central Government has the power to grant exemption,full or partial, from payment of duty.

2. Also section 11C contains a provision for waiver of duty in cases where therewas a general practice of non-levy which later on was found erroneous.

3. Burden to establish his eligibility rests on the claimant.


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4. Also it is open to Government to grant different levels Exemption to differentclasses of manufacturers.

5. Exemption is granted from 'duty of excise' means exemption only from BasicExcise Duty.

REMISSION OF DUTY

Rules 49(1), 147 and 196 provide for remission of duty if the assessee can prove tothe satisfaction of the proper officer that the final goods are unfit for consumption orfor marketing were lost or destroyed by natural causes or by unavoidable accidentbefore their clearance from the factory or warehouse.

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VALUATION OF GOODS FOR THE PURPOSE OF EXCISE DUTY

1. Where the rates of duty are on ad valorem basis, assessable value of the final

Goods are unfit for consumption or for marketing has to be found out beforethe amount of duty leviable thereon is determined and paid.2. Though the value of goods is required to be declared in assessee's invoice,

the invoice value is not necessarily the acceptable value under section 4.3. The most authoritative exposition of section 4 is contained in Union of India

vs. Bombay Tyres International Ltd. - 1983 (14) E. L. T 1986 (SC) Case. In thiscase, the Hon'ble Supreme Court had drawn the line at the factory gate up towhich all costs incurred to make the Goods complete and marketable had tobe included in the price. Costs incurred beyond the factory gate were notincludable. Warranty service and advertisement costs are, however anexception to this rule because they make the goods marketable at the factorygate.

EXCEPTIONS

1. If the goods are sold at different wholesale prices to different classes of buyers, each such wholesale price is deemed to be an "assessable value".

Thus excisable goods can have more than one "assessable value", with regardto class of buyer.

2. If the goods are sold at different wholesale prices at different places of removal, each such wholesale price is deemed to be an "assessable value".

3. If the goods are sold in the course of wholesale trade for delivery at the timeand place of removal at a price fixed under any law for the time being inforce, or at a price being maximum, fixed under any such law, then such priceor maximum price so fixed shall be deemed to be the normal price; viz.,"assessable value".

4. If the assessee arranges to sale goods in the course of wholesale trade onlythrough a "related person", the price at which goods are sold by such relatedperson is taken as "assessable value".

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RELATED PERSONS
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The next requirement of normal price is that it should not pertain to sales to relatedpersons. "A person who is so associated with the assessee that they have interest,directly and indirectly, in the business of each other".

WHO ARE THE RELATED PERSONS

The term RELATED PERSON has been defined under section 4(4)(c) as "A person whois so associated with the assessee that they have interest, directly and indirectly, inthe business of each other".

The term includes the following :

i. Holding Company.ii. Subsidiary Company.

iii. A relative who is a distributor.iv. A sub-distributor of such distributor.

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PERMISSIBLE DEDUCTIONS

1. Normal Trade Discount and Cash Discount.2. Durable and Returnable Packing and Cost of Packing not required to sell the

product at the factory gate.3. Equalised Freight from depot to customer's premises.4. Statutory levies like Excise duty, Sales Tax, Octroi etc.

OTHER DEDUCTIONS

1. Installation/Erection/Commission Charges.2. Technical Consultancy Charges for operation of the machine.3. Inspection Charges at Customer's premises.

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MODVAT : MODIFIED VALUE ADDED TAX

BACKGROUND

Prior to the introduction of MODVAT, the Proforma Credit scheme as specified underRule 56A of the Central Excise Act, 1944 was in operation. The scheme was narrow inscope and only applied to specific situation.

INTRODUCTION

In the Union Budget of 1986 introduced the new system of MODVAT. It is a tax on theVALUE ADDITION. VALUE ADDITION means the value of the output as reduced by thetotal cost of bought out inputs. The Modvat scheme at present allows a set off of the


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excise duties and additional duties of custom on inputs against the duty liability onfinal product and capital goods.

PURPOSE

It was introduced in order to avoid Double Taxation on Inputs as well as on finished

goods.

MODVAT CREDIT (RULE 57A)

1. On Inputs

It is governed in terms of Rules 57A to 57J of Central Excise Rules. Themanufacturer of the final products shall be allowed to take the Credit of theSpecified duty paid on the Goods, used in or in relation to the manufacture of the final products, whether directly or indirectly and whether contained in theproduct or not.

Therefore the inputs should be such that they participate in the process of manufacture without which the end product cannot be manufactured. Also itcovers not only the goods which are used in the manufacture but which arealso used in the stages once removed from the process.

2. MODVAT credit on consumable stores

In general, it is to be noted that which are in the nature of consumables areeligible for MODVAT Credits as their usage would qualify them as inputs, asper the broad definition of Rule 57A of the Central Excise Rules.

3. MODVAT credit on packing material

MODVAT Credit is available on packing material used to pack finishedproducts chargeable to specific rates of duty.

4. MODVAT credit on inputs used as fuels.5. MODVAT credit on accessories if the cost of accessories is included in

assessable value.6. MODVAT credit on capital goods

New set of Rules 57Q to 57U have been inserted in Chapter V of the CentralExcise Rules for granting Modvat Credit on Capital goods. These provisionswhere inserted with effect from 1-3-1994.

PRE CONDITIONS TO BE FULFILLED

1. Final Product must be Dutiable2. Both Final product and capital goods must be specified for eligibility under the

table of Rule 57Q.3. Capital Goods should be duty paid with evidence of payment.

SALIENT FEATURES OF MODVAT


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No prior permission is required, but 57G declaration.No need of filing form D-3 for intimation of receipt of input.It is available for both Basic Excise duty and special excise duty.Removal of inputs for Home consumption or Export under Rule 57F(3).Also the adjustment of credit is allowed; i.e., for obtaining refund on credit if

goods exported and credit could not be adjusted in Domestic Sale.

Manufacturer availing Modvat facility should maintain the following register apart from filing the return.

a. RG-23A PART I to show input received/used/lying as stock. b. RG-23A PART II to show details of credit availed/utilised/balance.

MONEY CREDIT SCHEME

This is a scheme which governs grant of Credit of Money in respect of specified rawmaterials used in manufacture of specified excisable goods. Here there is no credit of duties but credit of Money. The provisions are contained in Rules 57K to 57T of theCentral Excise Rules.

DOCTRINE OF UNJUST ENRICHMENT

The law relating to refund of excise duty contained in section 11B of the CentralExcise Act, 1944 was amended drastically by the Central Excise and Custom Law(Amendment) Act, 1991 coming into force w. e. f. 20-9-1991.

The amending Act made significant changes in sections 11B and 11C and introducednew sections 12A, 12B, 12C and 12D in chapter IIA and section 11D in chapter II, tocurb the alleged unjust enrichment of the manufacturer on account of refund allowedunder the then existing law. The preamended section 11B permitted refund claimsunder Central Excise only to the assessee; i. e., one who paid the duty and not toothers; i. e., consumers etc. who might have borne the same. The law in fact was to

the effect that, if a refund was claimed by the assessee and that was found to be inorder, the Assistant Commissioner of Central Excise was bound to pay it. Suchrefunds though part of law, and had been going on since long, drew lot of criticism inthe Parliament in the year 1990-91 on account of resultant unjust enrichment of themanufacturers. "Unjust" means what is "not just or right" that is "unfair." Hence, thewords "unjust enrichment appear" to mean "making rich or richer in an unfair way."

"Unjust enrichment" is the theory pressed into services by Department wheneverclaims for refund is made by the assessee. It is argued that when the burden of impose is passed on to consumers, why should not relief of Indirect Tax like CentralExcise or Customs duty be passed on to the consumer.

The underlying assumption is that the person who pays it to the Government, passesit on to his customers by including it in his sale price and so effectively he losesnothing. Later on, if a part of the tax is refunded to him, on the ground that it was notpayable by him the refund would be an undeserving benefit to him. This has beentermed as "unjust enrichment" of the manufacturer or the "Doctrine of UnjustEnrichment".

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APPEALS

"When an order is passed by an Adjudicating authority against the assessee,aggrieved by this decision the assessee is given an opportunity to file an appeal tothe higher authority as per the provisions of the law".

APPEALS TO APPELLATE TRIBUNAL

Appeals to Appellate Tribunal can be filed in respect of the following,

i. A decision or order passed by the Commissioner of Central Excise as anadjudicating authority;

ii. An order passed by the Commissioner (Appeals) under section 35A.

According to the section 35B(2) the Commissioner of Central Excise may direct acentral excise officer to appeal on his behalf to the Appellate Tribunal. It is possibleonly if he is of the opinion that an order passed by the Appellate Commissioner of Central Excise under section 35 as it stood immediately before the appointed day, orthe Commissioner (Appeals) under section 35A, is not legal or proper.

SECTION 35L : APPEALS TO THE SUPREME COURT

Appeal to the Supreme Court shall lie only in the following cases,

1. a judgement of the High Court delivered on a point of reference made undersection 35G, in case the High Court, either on its own motion or on the basisof an application, certifies the matter as fit for appeal to the Supreme Court.

2. any order of the Tribunal pertaining to value of goods or the rate of duty of excise.

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CENTRAL EXCISE AND GOLD APPELLATE TRIBUNAL (CEGAT) RULES

The CEGAT Rules lay down procedure to be followed by both assessee and by thedepartment for filing of appeals and stay applications in the Tribunal. The Rules werebrought into force with effect from October, 1982.

The various Rules under it state the procedures to be followed. They are as follows :

1. It states that the Bench shall hear and decide all appeals and applications asmay be directed by the President. (Rule 4).

2. It requires the Appeal Memorandum to be in the relevant form and permitsfiling of the appeal either in person or by an agent or through registered post.(Rule 6).

3. It states that Memorandum of Appeal must be filed in the form of the paperbook and must contain the statement of facts and the grounds of appeal.(Rule 8).

4. It requires the Appeal Memorandum to be accompanied by five copies of theorder appealed against, one of which shall be certified copy, and in case an


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appeal is against an order in appeal, five copies of the order in original arealso required to be filed. (Rule 9).

5. It authorises the Tribunal either to reject or to require modifications of appealswhich are defective in nature and which don't contain all the requireddocuments. (Rule 11).

6. It governs the preparation of paper book and permits the applicants to file the

paper book either with the appeal or within one month of the date of filingappeal. (Rule 16).7. It authorises the Tribunal to dismiss the appeal for default, due to non

appearance of the appellants on the date of hearing. (Rule 20 and Rule 21).

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SMALL SCALE AND COTTAGE INDUSTRIES SECTOR

Rationale of small scale and cottage industries

1. Labour intensive.2. Broad-based and dispersed.3. Facilitate the creation of wider entrepreneurial base.4. Effective mobilisation of the available resources.5. Development of small towns and cities.6. Modest capital resources.7. Substantial overall contribution.

Small Scale industries are actually the backbone of a developing country.

NEW EXEMPTION SCHEME FOR S. S. I. UNITS

1. Notification 8/99Effective from : 1-4-1999

Eligibility To Manufacturer whose valued clearance has not exceeded Rs. 3 crores in theprevious financial year. No need to have Registration Certificate of Directorateof Industries.

Applicability

Only on goods mentioned in the Annexure to the Notification.

Turnoverlimit

Rate of Duty

Remarks

10-50Lacs

NIL (Subject to not availing-MODVAT which can be

availed after Rs. 100 Lacs)50-100Lacs

5% ADV

100-300Lacs

NormalDuty


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Conditions

While availing exemption upto Rs. 50 lacs and concessional rate of dutybetween 50-100 lacs, the manufacturer cannot avail Modvat facility on inputsupto Rs. 100 lacs.

1. Exemption shall not apply to goods bearing BRAND NAMES or TRADENAMES of another person.

2. Exemption shall not apply to goods exported but will apply to export of goods to Nepal and Bhutan.

3. Exemption shall not apply to clearance under Chapter X procedure.4. Exemption shall not apply to the exempted goods or goods attracting

nil rate of duty.

Restrictions

5. Exemption shall be after taking into account clearances from allfactories together and not separately for each factory.

6. Exemption shall be after taking into account total clearances by allmanufacturers in the same units.

The Brand name condition is not applicable in the following situations.

7. Where the goods are parts or component of any machinery cleared foruse as original equipment under Chapter X procedure.

8. If the goods bear brand name of the followings:9. Khadi and Village Industries Commission,10. State Khadi and Village Industries Board,11. National Small Scale Industries Corporation Ltd.,12. State Small Industries Development Corporation Ltd.,13. State Small Industries Corporations.

2. Notification 9/99Effective from : 1-4-1999

Background

Notification 9/99 dated 1-4-1999 imposes condition on availment of Modvat bySSI units in the sense that if a SSI unit wants to avail Modvat they have tonecessarily pay the full rate of duty right from the beginning and that theoption once exercised cannot be changed during the FINANCIAL YEAR.

This new notification 9/99 dated 1-4-1999 contains proceduralrelaxations/concessions for the unit wishing to avail Modvat facility. Howevernotification 8/99 remains untouched.

Salient features


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1. Clearances upto 50 lacs : For those SSI units under the above category,they can avail Modvat facility subject to payment of 60% of the normalduty applicable to the final products.

2. Clearances between Rs. 50 lacs and 100 lacs. In the above situation,the SSI units will be required to pay 80% of the normal rate of dutyapplicable to the final product.

Conditions to avail benefit under Notification 9/99

3. The Manufacturer must exercise his option in writing at the beginningof the financial year, and once exercised it shall be effectivethroughout the year.

4. While exercising his option the manufacturer has to file a declaration inwriting to the Asst. Commissioner with a copy to the Superintendenthaving the following details,

Name & Address,

a. Location of factories,b. Description of the product,c. Aggregate value of clearances of the specified goods.

5. Value of clearances is already effected from the commencement of thefinancial year till the date exercising the option if opted for 8/99 onlyshall be taken into account for computing the value of eligibleclearances specified in the notification for the purpose of payment of 60% or 80% of the effective rate.

6. Also Exemption shall not apply to goods bearing BRAND NAMES or TRADE NAMES of another person.

Restrictions

7. Exemption shall be after taking into account clearances from allfactories together and not separately for each factory.8. Exemption shall be after taking into account total clearances by all

Manufacturers in the same factory.

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PROCEDURAL RELAXATIONS RELATING TO FILING DECLARATION

1. The SSI unit need not file a declaration till their value of clearance crosses Rs.40 lacs.

2. No officer to visit any small scale factory without a written authorisation of theAssistant Commissioner.

3. Special cell created in each commissionerate to assist and advise SSI units4. No need for separate Excise records. Private records showing date-wise

production, sales and bills or invoices.5. Option to pay normal excise duty in place of concessional duty.6. Job worker of the SSI unit not required to pay any Excise duty on the job work

though he is a manufacturer.


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7. Modvat credit of duty paid on the capital goods can be availed but cannot beutilised till the unit crosses 1 crore value of clearance even if presently theclearances of the SSI unit is exempted.

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MOVEMENT OF GOODS BY SSI UNITS AVAILING EXEMPTION/CONCESSIONALDUTY UNDER NOTIFICATION NOS. 8/99

In order to facilitate the SSI units availing exemption/concession under notificationno. 8\99 and also in order to ensure that the job workers receiving goods from suchSSI units are not made liable to pay excise duty on processed goods, twoNOTIFICATIONS are being issued; viz., 83/94 dated 11-4-1994 and 84/94 dated 11-4-1994.

Particulars Notification83/94 11-4-

1994 asamended

Notification84/94 11-4-1994

as amended

Applicability

To unitsworking under8/99 & 9/99.

To units workingunder 8/99 &9/99.

Coverage To exemptExcisable goodsmanufacturedin a factory as a

job work.

To exemptexcisable goodscleared by amanufacturer toa place outsidefor job work.

Type of

goods

Excisable goods

manufacturedand cleared bySSI unit.

Raw material or

semi-finishedgoods.

Purpose To manufactureexcisable goodson job work.

For getting jobwork doneoutside with SSI.

Condition Excisable goodsto be receivedback bysupplier for usein or in relationto themanufacture of goods whollyexempt.

To use goodsreturned after

job work in or inrelation to themanufacture of goods which arewholly or partlyexempt.

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SMALL SCALE INDUSTRIES ALLOWED TO PAY DUTY ON MONTHLY BASIS


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The finance minister in his Budget speech for the fiscal year 1999-2000 hasannounced a scheme of allowing SSI units to pay duty on a monthly basis with a viewto give incentive to them in the form of ease of Liquidity and simplification of procedure.

Notification No. 36/99-C. E. (N. T.) dated 26-5-1999 has been issued for this purpose,

whereby new Rule 173GG has been inserted. Interest rate of thirty per cent perannum will be payable if the manufacturer fails to pay the amount of duty payable fora calendar month by fifteenth of the next month. Apart from the interest, amandatory penalty of Rs. 500 per day is also payable for the period of delay, startingfrom 16th day of the succeeding month till the date of actual payment alongwith theoutstanding amount. However the total amount of the duty payable for the calendarmonth together with the interest and penalty shall not exceed the value of clearances during that calendar month. Sub-rule (4) says that if the manufacturerfails to discharge the duty liability in the specified time period for the second time ina financial year, he shall not be allowed to pay the excise duty on monthly basisunder this scheme for the remaining part of the financial year.

Manufacturer falling in the small scale category by virtue of his 'turnover in the

preceding financial year' criterion, if does not avail exemption under Notification No.8/99-C. E. or 9/99-C. E., and avails paying duty at normal rate, is not eligible for thisscheme.

STATEMENT SHOWING MONTH WISE DUTY PAYMENT FOR THE QUARTERENDING

Sr. No.

Invoice No.andDate

Name of theConsignee

ECC No.of Consignee

AssessableValue

Duty paid

Detailsof dutydebited

(1) (2) (3) (4) (5) (6) (7)

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EXCISE SCHEMES ON SMALL SCALE INDUSTRIES SECTOR

The objective of Directive Policy is to create a "WELFARE STATE"; i.e., to ensure thatthe ownership and control of the material resources of the community are sodistributed as best to subserve the common good and that the operation of theeconomic system does not result in the concentration of the wealth and means of theproduction to the common detriment.

The small scale sector helps the government to achieve the above constitutionalmandates and in the development of the welfare state. This sector is developed,nurtured and encouraged by the government with a view of ensure that the materialresources of the country are as widely distributed as possible and that the wealth andmeans of production are not concentrated in the few hands creating monopolies. One


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of the major fiscal incentives provided by the government to the small scale sector isthe exemption from the payment of excise duty on the specified goods manufacturedby the small scale units by issuing necessary notifications from time to time.

PRESENT SCHEMES OF EXEMPTION RELATING TO SSI SECTOR

At present there are two exemption notifications bearing Nos. 8/99-CE & 9/99-CEboth dated 1-4-1999 in operation providing the slabwise exemption to the SSI sectorin respect of Excisable goods specified therein. Both the above notifications providedifferent choices to a small scale manufacturer with regard to the availment of theexemption as under :

a. To avail total/partial exemption upto the turnover of Rs. 100 lakhs and to availthe benefit of Modvat credit thereafter. (Vide Notification No. 8/99-CE.)

b. To avail the benefit of Modvat credit from the beginning simultaneously withthe payment of duty at the concessional rate on the first clearancesaggregating to Rs. 100 lakhs. (Vide Notification No. 9/99-CE.)

c. To pay duty at the full applicable rate from the beginning by forgoing thebenefit of the exemption. (Vide Notification No. 8/99-CE.)

Different types of Excise Forms & ProceduresApplication for Registration in Form R1.Registration Certificates in Form R2.Declaration of Goods under Rule 173B.Price Declaration under Rule 173C.

Annexure I - Proforma for Declaring Assessable value of Excisable goods sold to orthrough related persons as defined in section 4 of the Act.

Annexure II - Proforma for Declaring the Assessable value of Excisable goodsmanufactured by an assessee who :

i. Uses such goods for manufacture or production of other goods in his factory.ii. Removes such goods for free distribution.

iii. Removes such goods in any other manner which does not involve sale.

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MAINTENANCE OF EXCISE RECORDS

Personal Ledger Account (PLA)

Rule 173G governs the maintenance of a Personal Ledger Account. Rule 173Grequires the assessee to periodically deposit cash payments into the Treasury under TR-6 challan in order to ensure that the balance in the PLA is sufficient to dischargeduty which is due on the goods which are intended to be removed at any time. Interms of the provisions of Rule 173G, assessees are required to apply to the exciseauthorities for allotment of a specific number of the PLA that they intend to maintain.

RT-12 RETURNS


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The monthly RT-12 returns is to be filed in terms of Rule 173C(3) of the CentralExcise Rules. It is to be filed in quintuplicate, showing the following before 5th of nextmonth.

i. quantity of excisable goods manufactured or received under bond during themonth;

ii. quantity (if any) used within the factory for the manufacture of anothercommodity;iii. the quantity removed on payment of duty from the place specified under Rule

9 or from the store room or other place of storage approved by theCommissioner under Rule 47;

iv. duty paid on such quantity;v. particulars of invoices or like documents under which such quantity was

removed;vi. quantity removed without payment of duty for export or otherwise; and

vii. such other particulars as may be prescribed or as the Commissioner mayrequire.

The RT-12 return is the basic document to be filed with the excise authorities by the

assessees on an on-going basis and is intended to enable the excise authorities toobtain complete details of all manufacturing activities carried on by the assessee atthe factory of manufacture.

The monthly RT-12 return is to be accompanied by the following documents :

i. receipted TR-6 challans under cover of which PLA deposits are made by theassessees;

ii. original and duplicate copies of the PLA folios;iii. one copy of each of PART-I & II of RG 23(A) & RG 23(C) MODVAT Accounts;iv. Suppliers' invoices on the basis of which MODVAT credit has been availed, in

original.

TR-6 CHALLAN

The prescribed challan form "TR-6" should be filed in quadruplicate and shouldcontain the following particulars :

a. Name, address, and Code No. of manufacturer.b. Code No. of Excise Commissionerate / Division / Range.c. PLA No.d. Account head of duty.e. Commodity name & Code No. (6 digit code; i.e., tariff item No.).f. Amount deposited in cash / cheque / D.D.g. Assessee or his duly authorised agent can sign TR-6 challan for taking credit

in PLA, counter signature of authorised officer of bank is essential to provethat amount has been credited to Government Account.

RG 23A REGISTER

The manufacturer has to maintain record of each input separately in prescribedregister in Form RG 23A Part I. This register is essentially a stock register, whichgives quantitative details of each input received (with details of duty paying


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documents), quantity issued for production, issued for a clearance as such andquantity lying in stock on any day.

RG 23A Part II, which is similar to PLA. It is a current account of MODVAT creditreceived, credit utilised and credit balance. This gives details of (a) credit availedagainst each input (b) credit utilised against clearance of final products/waste/inputs

as such (c) Balance credit available. The RG 23A Part II register has to be maintainedin triplicate using double sided carbon paper and indelible pencil (Practically, use of ball pen is accepted). An extract of RG 23A Part I, II has to be submitted to RangeSuperintendent every month, within five days of close of the month, along withoriginal duty paying documents. The original duty paying documents will be returnedby Excise Superintendent to the year after defacing these with rubber stamp "credittaken under Rule 57A" on the duty paying document, to ensure that these are notmisused. These should be returned by Superintendent to user of inputs. Since crediton any input can be availed for payment of duty on any final output, it is notnecessary to maintain product wise RG 23A Part II. However, if a manufacturer is alsomanufacturing some goods which are exempt from duty, he will have to maintainseparate register in respect of inputs used in exempt final goods or pay 8% dutyreversal on clearance of such exempt final goods and maintain common account

availing credit on all the inputs.

METHODOLOGY FOR MAINTENANCE OF EXCISE RECORDS

Rule 226 of the Central Excise Rules lays down the methodology to be observed formaintenance of excise records. The Rule states that the assessee shall, at the time of making any entry in the excise records, insert the date of making entry. Further, theexcise records shall be properly maintained and no cancellation/corrections of anyentries are permissible, except for correction of errors duly initiated by authorisedperson. The assessee who fail to enter the required particulars or make false entriesor fraudulently alter any entry shall be liable to penalty extending upon Rs. 2,000 andthe goods with regard to which entries have not been made in the excise recordsshall be liable to confiscation.

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ORGANISATION STRUCTURE OF THE EXCISE DEPARTMENT

The structure of the Excise Department is largely similar to the structure of theIncome Tax Department. Recruitment to the Customs and Excise Department isthrough the Indian Revenue Service. The successful candidates in the civil serviceexamination are required to choose between the direct or indirect tax streams. Theapex body in-charge of administration of the collection of both customs duties andcentral excise duties is the Central Board of Excise and Customs (CBEC). This is a

statutory board, set up under the Central Boards of Revenue Act, 1963. The Boardcurrently consists of a Chairman and five members. The responsibilities are equallydivided between the Chairman and the members. The Chairman is the first amongequals. The Chairman and the members are currently of the rank of ex-officioAdditional Secretaries to the Government of India.

Immediately below the CBEC are the Chief Commissioners. These Chief Commissioners are administratively in-charge of several Commissionerates, rangingfrom two to four, each of which is headed by a Commissioner. Chief Commissioners


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are responsible for all matters under their jurisdiction and report to the CBEC as awhole. The Commissionerate, as its name implies, is the main organisationalmechanism for the collection of excise duties. The organisation structure of aCommissionerate is as follows :

Commissioner

Additional Commissioner/Joint CommissionerDeputy CommissionerAssistant Commissioner (Divisions)Superintendent (Ranges)Field Officers (Inspectors)

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ASSESSMENT AND APPELLATE PROCEDURE

Demands (Section 11A)

Section 11A(1) states that in cases where excise duty has not been paid or short paiderroneously refunded, the central excise authorities may within 6 months of therelevant date issue a notice on the assessees requiring him to show cause as to whyhe should not pay the amount specified in the notice.

The S.C., in UOI vs. Madhumilan Syntex Pvt. Ltd. (1988) (35) ELT-349, held that theissuance of show cause notice is a condition precedent for demand of duty under thesection and in the absence of such a notice, any demand of duty would becontravention of section 11A(1).

Refunds (Section 11B)

Sub-section (1) states that any person claiming a refund may make an application tothe Assistant Commissioner in the prescribed format within 6 months from therelevant date and the application should be accompanied by documentary or otherevidence.

Sections 11AA, 11AB, 11AC and 11BB

Sections 11AA and 11BB provide for charge of interest on delayed payments/refundsof excise duties at the rate of 20%/15% respectively, which will apply todemand/refunds on and from the expiry of 3 months from the date of the order of demand/receipt of refund application.

With the insertion of section 11AB, slight changes have been made in the basis forcomputation of interest, applied to cases where duties have not been paid or refundsgranted due to fraud, collusion or any wilful misstatement or suppression of facts etc.

The provision regarding charging of interest on confirmed duty demands require thecomputation of the said interest from the first day of the month succeeding themonth in which the duty ought to have been paid. Therefore, the date of adjudicationorder would not be relevant for the purpose. However, in cases where such chargesare not invoked, the date of adjudication order will continue to the basis forcomputation of interest, as per Rule 11AA.


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PENALTY

Section 11AC, regarding imposition of mandatory penalty in cases where exciseduties were not levied or excise refunds were granted due to fraud, collusion or wilfulmisstatement or suppression of facts etc. This penalty will be equivalent to quantumof duty determined to be payable under section 11A.

SPECIAL AUDIT

New Section 14A has been inserted in the Act governing the provisions pertaining tospecial audit of assessees. Such audits may be authorised by the PrincipalCommissioner of Central Excise and may extend to factories, depots and distributors.

The special audit would be carried out by a cost accountant to be appointed by thePrincipal Commissioner and the assessees who are so audited would be required topay the costs of such an audit.

APPEALABLE ORDERS

Not all orders or decisions are appealable. The principle is that all judicial or quasi- judicial orders are appealable. In the landmark case in Jaswant Sugar Mills (AIR 1963SC-677), the S.C. held that a decision or order is judicial if certain criteria are met.

The criteria are :

1. that the decision is a determination arising out of investigation of a questionby the application of objective standards to facts in the light of existing legalrules.

2. the decision or order declares right or imposes obligations upon parties.3. the decision or order is subject to procedural attributes such as granting the

party an opportunity of presenting its case, ascertainment of facts byevidence and the decision results in the disposal of the matter and thefindings are based on questions of law and facts.

APPEALS TO COMMISSIONER (APPEALS)

Section 35(1) states that any person aggrieved by the decision or order of a CentralExcise Officer, lower in rank than the Commissioner of Central Excise, may appeal tothe Commissioner (Appeals) within 3 months from the date of communication of suchdecision or order. The proviso to section 35(1) states that the Commissioner(Appeals) may condone the delay in filing the appeal and extend the period forfurther 3 months, if he is satisfied that there was sufficient cause which preventedthe appellants from filing the appeal in time.

PROCEDURE FOR FILING APPEALS

Appeals are only admissible if they are in the prescribed format and comply with theprocedural requirements. Appeals to the Tribunal requires the filing of paper booktogether with the appeals. The paper book is to contain all copies of documents,statements, correspondence, etc. which are sought to be relied upon. The reason forfiling the paper book is that in the normal course, the original records of theDepartment are not called for and examined by the Department. Appeals to the


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Tribunal are to be accompanied by filing fees of Rs. 200 or Rs. 1,000 as the case maybe, again depending on the quantum of duty and penalty involved.

REMAND ORDERS

Both the Commissioner (Appeals) as well as the Tribunal have the power of remand.

Remand orders are passed when the appellate authorities are not in a position tofinally dispose of a matter due to the fact that not all points either in law or in facthave been argued or have been considered by the lower authorities. Further, theappellate authority may itself be of the view that a remand is required for a properconsideration of all relevant issues which may require an investigation into facts.

Remand orders must set out the parameters or the criteria which have to be takeninto account by the adjudicating authority in the de novo proceedings. In otherwords, the de novo proceedings are to be confined to the points expressly mentionedin the remand order of the appellate authority. The adjudicating authority is bound bythe directions of the remand order and can't go beyond or ignore the directions. Inother words, the lower authorities have no jurisdiction to consider any points whichare outside the limits of the remand order.

RECTIFICATION OF MISTAKE

Section 35C(2) authorises the appellate tribunal to rectify a mistake apparent fromthe record within a period of four years from the date of the order passed.

A mistake on record is something which may be established on a prima facie readingof the order. It is not an error or mistake which may only be established by a longdrawn process of reasoning on a point on which there may be two different views.

Therefore, an apparent mistake on record must be an obvious and immediate errorwhich would come to light on a bare reading of the order. If the orders are passed ona complete omission of a submission made or by overlooking the relevant provisions

of law, such orders are vitiated and suffer from a mistake on record.

The Tribunal is required to consider all applications for rectification of mistakeapparent from the record and to pass appropriate orders on such applications.

SECTION 35D : PROCEDURE OF THE APPELLATE TRIBUNAL

This section lays down the jurisdiction of several Benches of the Tribunal. Section35D(2) states that matters pertaining to valuation and/or classifications can only beheard and disposed of by the Regional Benches with authorisation of President.

SECTION 35E : POWERS OF CBEC/COMMISSIONER

Section 35E(1) states that the CBEC may, on own motion, call for and examined anyorder passed by the Commissioner as an adjudicating authority and if it is of the viewthat such an order is erroneous, it may direct the Commissioner to apply to the

Tribunal for a determination of the points arising out of the order. Section 35E(2)authorises the Commissioner on his own motion to examine any orders passed by anadjudicating authority subordinate to him and if he is satisfied that such an order iserroneous in law, he may direct such authority to apply to the Commissioner(Appeals) for a consideration of all such points as the Commissioner may deem fit.


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SECTION 35EE : REVISION

a. Suo motu exercise of the powers of the Central Government: Section 35EE(4)authorises the Central Government to suo motu pass orders for modifying orannulling orders of the commissioner (Appeals). However, section 35EE(5)lays down restrictions on the suo motu powers. However, suo motu orders of

revision can only be passed upon due notice to the assessees issued withinthe time limit specified under section 11A.b. Revision applications to the Central Government by the aggrieved persons :

The revision applications filed by the aggrieved party must pertain to :

i. loss of goods in transit.ii. rebate of duty of excise on finished goods or on excisable materials

used in the manufacture of finished goods which are exported outsidethe country.

iii. goods exported outside India (Except Nepal or Bhutan) withoutpayment duty. The limitation period for filing of the revisionapplications is three months from the date of receipt of the impugnedorder.

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SECTION 35F : PRE DEPOSIT OF DUTY DEMANDED OR PENALTY LEVIED

It states that where the impugned order appeals against pertains to any dutydemanded or penalty levied, the person desirous of appealing against such an ordershall deposit with the adjudicating authority the duty demanded or penalty levied.

The Supreme Court in, Navinchandra Chhotelal vs. CBEC (1981) (8) ELT-679, heldthat the consequence of a failure to deposit the said amount would be the rejectionof the appeal, unless the Tribunal has specifically dispensed with the pre-deposit.

Section 35F authorises the Tribunal to dispense with the pre deposit of dutyand/penalty imposed if it is satisfied that such a deposit would result in unduehardship. The Tribunal's order under section 35F is final and there is no right of appeal against such an order. However, such an order may be impugned underarticle 226 of the Constitution of India by filing writ petitions in the High Court.

SECTION 35G : STATEMENT OF CASE TO THE HIGH COURT

Section 35G(1) states that either the assessee or the Commissioner may, within sixty

days of the receipt of the order of the Tribunal under section 35C, apply to the Tribunal in the prescribed format together with filing fees for reference of anyquestion of law arising out of the Tribunal's order to the High Court. The tribunalshall, within 120 days of the receipt of the application, draw up a statement of thecase and refer the matter to the High Court.

SECTION 35H : STATEMENT OF CASE TO THE SUPREME COURT


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This section states that if on application made under section 35G(1), the Tribunal isof the view that on account of conflicting decisions of the High Court in respect of thequestions of law, it is expedient to make a direct reference to the Supreme Court, itmay draw up a statement of the case and refer the matter through the Presidentdirect to the Supreme Court.

SECTION 35-I : POWER OF HIGH COURT/SUPREME COURT

If the High Court or the Supreme Court is not satisfied with the statement of casedrawn up by the Tribunal, the court may refer the case back to the Tribunal, the courtmay refer the case back to the Tribunal for the purpose of making suitable additionsor alterations as the court may direct in that behalf.

SECTION 35J

It states that where a case has been referred to the High Court under section 35G. itshall be heard by a Bench of not less than two judges and shall be decided bymajority. In case there is no majority the judges shall state the point of law uponwhich they differ and this may be heard by one or more other judges and the pointshall be decided by majority.

SECTION 35K : DECISION OF THE HIGH COURT/SUPREME COURT

The High Court or the Supreme Court which hears a case stated to it under section35G shall decide the question of law raised therein and shall deliver a judgmentcontaining the grounds of the decision. A copy of the judgement shall be sent to the

Tribunal, which shall thereafter pass such orders as are necessary to dispose of thecase in terms of the Court's judgment.

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