Professional Documents
Culture Documents
v) Education Cess:
7) Important Definitions:
i) Goods
These are the goods specified in schedule to CETA 1985. Only these goods
can be levied Excise Duty as per the rates specified in the schedule
iii) Produced
a) Items like coffee, Tea, Tobaco, dairy products etc. which are
produced
b) Live products like horse, flower, fish etc. which are produced.
c) By products, scrap etc. which are not manufactured buy they get
produced.
d) It also covers manufactured goods.
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iv) Manufacture:
v) Manufacturer:
The manufacturer can send inputs for job work. Following are eligible to send
materials for job work (a) Manufactures (b) Exporters (c) Units in SEZ,
FOU, and EHTP & STP (d) who are supplying final products to United
Nations or international organization for their official use or to project
funded by them.
If job worker is actual manufacturer, he cannot avoid duty liability even if there is
agreement with principal that principal would meet all duty liabilities of
manufacturer
Duty liability is of the job worker who actually manufacturer the goods, unless the
raw materials supplier undertakes the responsibility of paying duty
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1) Once the liability of payment of excise duty / customs duty is established, the next
question is what the amount of duty payable is. The two step process is (a)
Correctly classify the goods, to find out rate of excise /customs duty (b) Find its
assessable value to which the rate of duty is to be applied for calculating amount of
duty payable.
The rate of duty is found out by classifying the product in its appropriate heading
under central excise tariff / customs tariff.
2) The Central Excise Tariff Act, 1985(CETA) classifies all the goods under 96
chapters and specific code is assigned to each item. There are over 1,000 tariff
headings and 2,000 subheadings. This classification forms basis for classifying the
goods under particular chapter head and sub-head to prescribed duty to be charged
on that particular product.
3) Central Excise Act (CEA) and Central Excise Tariff Act. (CETA) are linked
together as follows – (a) Section 2 of CETA states that rate at which duties of
excise shall be levied under CEA are as specified in schedule to CETA (b) Section
3(1) of CEA specifies that duty shall be levied and collected on all excisable goods
which are produced or manufactured in India as, and at the rates, set forth in the
schedule to the Central Excise Tariff Act (CETA). Thus both Acts are linked to
each other.
5) Central Excise Tariff is divided in 20 sections, while there are 21 sections in case of
customs tariff.
and Chapter 53 is other vegetable textile fabrics, Chapter 61is articles of Apparel
and so on.
There are 96 chapters in Central Excise Tariff out of which Chapter 77 is blank. In
customs Tariff, there are 99 chapters out of which chapter 77 is blank, which is kept
reserved for future use.
Some chapters are divided into sub-chapters e.g. chapter 72 (Iron and steel) is
divided into I primary materials, II – Iron and Non-Alloy Steel, III – Stainless Steel
and IV –Other Alloy steel.
7) Each chapter and sub-chapter is further divided into various headings depending on
different types of goods belonging to same class of products.
For instance, Chapter 50 relating to silk is further divided into 5 headings. 500 1
relates to silk worm cocoons, 5002 relates to raw silk, 50.03 relates to silk waste
etc. The headings are sometimes divided into further sub-headings. For example
5003 10 means ‘silk waste not carded or combed’ while 5003 90 means ‘other silk
waste’. These are preceded by single dash. 5003 90 is further classified as 5003 90
10 (Mulberry silk waste), 5003 90 20 (Tussar Waste) and 5003 90 90 (other).
8) All goods are classified using 4 digit system. These are called ‘headings’. Further 2
digits are added for sub-classification, which are termed as ‘sub-headings’. Further
2 digits are added for sub-sub-classification, which is termed as ‘tariff item’ Rate of
duty is indicated against each ‘Tariff item’ and against heading or sub-heading.
1. In heading No. 0901, ‘Coffee’ means the seed of the coffee tree (coffee), but
does not include the seed while still attached to tree. This heading includes
coffee in powder form.
It can be seen from the extract from tariff that ‘Coffee’ is classified under ‘0901’ It
is further classified as (a) coffee, Not Roasted (b) Coffee Roasted and (c) Other.
These are preceded by single dash (-) Coffee not roasted is further sub-classified as
(a) not decaffeinated (b) Decaffeinated. These are preceded by two dashes (--) ‘Not
decaffeinated’ is further classified as Arabica plantation and Arabic cherry. These
are preceded by three dashes. Arabica plantation is classified as a grade and B
grade. These are preceded by four dashes.
Thus, 0901 90 00 ‘other’ covers all items covered in 0901, except those covered in
roasted and not roasted coffee.
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1) Specific Duty
• Payable on basis of certain unit like weight, length, volume etc.
• At present specific rates have been announced for :
- Cigarette (length basis)
- Matches (Per 100 boxes)
- Sugar (Per quintal)
- Marble slabs (Sq. meter)
- Colour T.V. (Screen size cm.)
- Cement (Per Ton)
- Molasses (Per Ton)
2) Tariff Value
• Fixed by central Govt.
• It is a notional value for calculating duty
• Duty is payable as % of tariff value
• At present tariff value is fixed for
- Pan Masala packed in retail packs of 10 gm or less
- Specified readymade garments.
• Tariff value fixed = 60% of M.R.P.
Rule 4:
This rule states that if goods are not sold at the time of removed, then value
is basis on value of such goods sold by assessee at any other time nearest to
the time of removal subject to reasonable adjustments
This rule is applicable in following cases
- Removal of samples
- Free replacement under warranty claims.
Rule 5:
Sometimes goods may be sold at place other than place of removal. In such
case actual cost of transportation from place of removal up to place of
delivery of excisable goods is allowed as deduction.
This rule is applied in case of F.O.R. delivery contract
Rule 6:
If Price is not the sole consideration for sale then
Rule 7:
When goods are sold through depot there is no sale at the time of removal from
factory in such case price prevailing at depot is the basis of A.V. but time of
removal from factory is relevant.
Ex: Assessee transfers paper consignment from Delhi to Agra Depot on 5-7-2005&
is sold to unrelated buyer for Rs. 15,000 / Ton. Then consignment will be
assessed at mfg. point in Delhi for Rs. 15,000 / 7 ton.
Rule 8:
When excisable goods are not sold but used in manufacture of other articles it is
known as captive consumption.
Rule 9:
If assessee sells goods to related person, price relevant for valuation is a normal
transaction value at which related buyer sales to unrelated buyer. If related
person does not sell goods but uses or consumes then in production
Rule 10:
Rule 11:
If assessment is not possible under any of the foregoing rules value shall be
determined using reasonable means consistent with principles and general
provisions of these rules & provisions of Sec. 4
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1) CENVAT Credit
It is the credit of duty paid on
(a) Inputs & raw materials, capital goods
(b) Services
Used in or in relation to manufacture of excisable goods or in relation to receded
services provided on which service tax is payable. How to avail this credit & how
much credit can be availed by company is given in CENVAT credit rules – 2004.
2) Features of Scheme
A) Following inputs are eligible for cenvat credit by both manufacturer as well as
service provider.
I) Goods used as inputs
ii) Lubricating its
iii) Grease
iv) Cutting oil
v) Coolants
vi) Paints
vii) Packing material
viii) Accessories cleared along with final product
ix) However following I/Ps are not eligible
- Light diesel oil
- High speed diesel
- Petrol.
Credit can be taken as soon as I/P are recd. in factory I/Ps must be used in or in
relation to manufacture of excisable goods. It may or may not present in final
product. & one to one correlation is not necessary
vii) If common inputs, inputs services are used then credit can be availed only to
the extend of 20% of tax payable on taxable output service.
D) CENVAT credit is allowed on capital goods which are used in factory.
Purpose is not Imp. Following capital goods are eligible
a) Tools falling u/ch. 82
b) Machinery u/ch. 84
c) Elec. Machinery u/ch. 85
d) Measuring testing equipments u/ch. 90
e) Grinding wheels & goods falling u/ch. 6801.10
f) Abrasive powder u/ch. 68.02
g) Pollution central equipment
h) Spares & accessories of above (a to g)
i) Moulds & dies
j) Refractory material
k) Tubes, Pipes, & fittings there of
l) Storage tank.
50% credit this year balance in next year.
Depreciation cannot be claimed on Excise Duty portion of value of capital goods
E) Following are similar requirements for CENVAT on inputs & capital goods:
I) Credit of BED, SED, CVD, NCCD, AED, E.C. is available
ii) Input or capital should be used in factory, but can be sent out for job work
ii) Credit of inputs can be refunded if final product is exported & no drawback
is claimed
iii) Inputs can be sent directly to place of job worker from supplier. But capital
goods have to be first brought in factory & then sent to job worker.
1st stage & 2nd stage declare can issue cenvatable invoice provide he is regd. Under
C.E. Act
Factory
Depot.
Premises from
where goods sold
on behalf of mfrer
F) Superintendent: (Gazetted)
Each division is divided into several ranges & he is in-charge of one range.
G) Inspector: (Non-gazetted)
Lowest in rank. He reports to superintendent.
Appeal against commissioner’s order lie with CESTAT.
Appeal against order by officer up to rank additional commissioner – lie with
commissioner (Appeals)
2) Registration:
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x) If goods stored in stock room are damaged / destroyed duty can be waived
off or remitted by deptt.
xi) If DSA is not maintained: Penalty is up to duty payable and goods can be
confiscated.
4) Removal of Goods:
I) Excisable goods can be removed from factory only under an invoice.
ii) Excise invoice must contain following details:
a) E.C.C. No.
b) Name of consignee / customer
c) Description & classification of goods
d) Time & date of removal
e) Mode of Transport & Vehicle reg. no.
f) Rate of duty
g) Quantity & value of goods
h) Duty payable on goods.
iii) Invoices should be serially numbered. Sr. Nos. can be printed, Franked or
type written but cannot be hand written. Serial no. should start from 1st April
& continue for whole financial year.
iv) Invoice should be in triplicate
Original marked in “original for buyer”
Duplicate marked in “Duplicate for transporter”
Triplicate market in “Triplicate for Assessee”
Additional Copy market in “Not for CENVAT Purpose”
v) Before making use of invoice book serial Nos. should be informed to range
suptt.
vi) There should be only one invoice book in use at a time. However separate
sets of invoices can be maintained with different serial nos. with permission
of A.C. / D.C.
General permission has been granted to use 2 different invoice books – one
for home consumption one for export.
vii) Each foil of invoice shall be pre-authenticated by assessee or his duly
authorized person.
viii) In case invoice is cancelled information should be sent to range supdt. On
same day.
ix) Invoice must be prepared for captive consumption. Date of removal is date
on which goods are issued for such use.
x) Duty is payable at rate & valuation as applicable at the time of actual
removal from factory or warehouse.
iii) SSI units availing SSI exemption are required to pay duty by 15th of
following month. For other SSI 5th is deadline.
iv) Only for March, duty payable for month to be paid by 31st of March.
v) If 5th /15th is holiday then it is payable on next day of working.
vi) If duty is not paid on due date assessee is liable to pay outstanding amount
along with interest @ 13% P.A.
vii) P.L.A. : Personal Ledger A/C
When duty is paid by TR-6 challan in Bank PLA is credited. At end of
month when duty is payable PLA is debited.
viii) PLA & CENVAT or can be used duty for duty payment & not for other
payments like fines, penalties etc.
ix) TR-6 Challan:
Payment of duty is made in designated bank for which this challan is used.
It contains following details.
- Name of Co.
- E.C.C. No.
- Code no of commissioner rate / Division / Range / Bank
Challans should be serially numbered from 1st April onwards. Proper A/C
code should be used for different duties.
6) Returns :
7) Exports Procedure
A) Export incentives
WTO stipulates free & fair global trade hence export incentives are not
allowed under WTO
B) Export Priority
I) Movement of export consignment will not be interrupted & will not
be withheld of any reason whatsoever by any agency of central /
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state Govt. In case of any doubt deptt. Can ask undertaking from
assessee that export is on sole responsibility of exporter
ii) No seizure shall be made by any agency which will disrupt
manufacturing & schedule of exports
iii) In exceptional cases stock can be seized on prima facie evidence, but
seizure should be lifted within 7 days.
C) Benefits to Exporter
I) Exports of almost excisable goods except hides, Skin, leather & salt
to all countries except Nepal & Bhutan are exempted from C.E.
duties.
ii) Even inputs can be exported without payment of duty. CENVAT
credit availed on such inputs need not be reversed. This credit can be
utilized for payment of duty on products cleared for home
consumption
iii) SEZ can import without payment of duty and finished goods can be
exported.
iv) Concession to EOU on similar basis.
v) Refund of duty if CENVAT credit cannot be used
vi) Schemes such as DBK Advance license, DEPB etc.
8) Show Cause Notice
• When duty is
- Not levied
- Not paid
- Short levied
- Short paid
- Erroneously refunded
Notice is issued by C.E. officer demanding duty specified in notice
• This may happen due to :
- Classification / exemption notifications claimed by assessee not
acceptable to Dept.
- A.V. not acceptable to assessee / Dept.
- Duty paid at concessional rate though concession was not available
- Clandestine removal of goods
- Non accounting of goods
- Clearance in name of dummy units
- Duty erroneously refunded
- Any other reason
• Notice demanding duty is known as “Show cause notice” (SCN)
Following are Imp. Features of SCN
- Mandatory requirement
- To be served within one year from “Relevant Date”
- Period is extended to 5 years is short payment by reason of
Fraud
Collusion
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Willful misstatement
Suppression of facts
Contravention of provisions of excise act or rules
- Relevant date is considered as under
Filing monthly returns – date of filing (10th of next months)
(If returns filed on 4th August - It is relevant)
If return filed on 18th August – it is relevant
If return not filed - 10th of next month
Provisional assessment of duty
Date on which assessment is finalized and amount paid is adjusted
Erroneous refund
Date on which refund has been made
- SCN should be approved & signed by officer empowered to
adjudicate cases
Demand of Duty Adjudicating Officer
Without limit commissioner
> 20-50 lakhs. Addl. Commissioner
> 5 – 20 lakhs Joint commissioner
Up to 5 lakhs A.C. / D.C.
Supdt. Cannot issue S.C.N.
In case of fraud etc. S.C.N. must be issued by commissioner / Addl.
Commissioner
- SCN must give following details
Essential Particulars
Nature of contravention
Provisions contravened
Charges
Grounds
- It should not be vague, confusing or self contradictory
- If SCN is given on one ground demand cannot be confirmed on other
ground.
Adjudication
a) Means to hear & decide judicially
b) Departmental adjudication means various powers given to excise officers
c) Uncontrolled authority may cause damage to assessee. Act has provided
opportunity to appeal against order passed by an authority
d) Following are original jurisdiction
Authority Jurisdiction
I) Supdt. - Remission of duty up to Rs. 1,000 for loss of goods
ii) AC/DC - Remission up to Rs. 2,500
- Duty / CENVAT credit - up to 5 laths
- Refund claims under valuation
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10) Interest
I) If duty is not paid when it ought to have been paid, Interest payable at the
rates. The actual rate of interest is of 13% for delayed no. of days
ii) The date on which payment of duty is made is to be included for purpose of
calculation of interest
iii) Assesse may agree to abide by the order of board and pay duty voluntarily
on his own. If he pays full amount of duty within 45 days from such order,
without reserving right of appeal against such payment at any subsequent
stage, he is exempted from payment of interest even if the duty was due
earlier. However, if he makes payment under protest the interest is payable
from the month following the month in which the duty ought to have been
paid.
v) This relaxation does not apply if assessee pays duty on receipt of a show
cause notice to him
vi) In many cases, Tribunal has held that interest is not payable if duty is paid
before show cause notice
11) Penalty
a) Excise authorities are empowered to impose penalties like fines,
confiscation of goods, etc. which are provided in Central Excise Rules.
b) Excise officers can impose (a) penalty for violation of law (b) Confiscate the
goods (c) Give option to pay fine in lieu of confiscation
o) Personal penalty can be imposed only on persons who deal with goods by
acquiring possession r dealing with them. Auditors, Legal advisers or
auditors do not deal with excisable goods as contemplated u/s 9(1) (bbb) of
CEA or rule 209A (now rule 26) and no penalty can be imposed on them.
p) Any person who issues (I) an excise duty invoice without delivery or goods
mentioned therein or abates in making such invoice or (ii) any other
document or abates in making such has taken any ineligible benefit under
the Act or the rules made there under like claiming of Cenvat credit or
refund shall be liable to a penalty not exceeding the amount of such benefit
or Rs. 5,000 whichever is greater.
missing, unless the master of vessel is able to account for the loss of
or deficiency in goods.
d) When the goods are liable for confiscation, the packages in which
contravening excisable goods are packed, such packages are also liable for
confiscation.
f) If the contravening goods are found to have been sold, sale proceeds
of such sale are liable to confiscation
g) If the goods are confiscated and are not redeemed, they become
property of central Government. In that case, no duty liability arises on
assessee whose goods are confiscated.
14) Refund
a) Due to mistake or urgency manufacturer may pay higher duty than required. In such
case he can file refund claim
b) Refund can also be claimed when appeal has been decided in favour of an assessee.
c) Refund claim should be
- Lodged within one year from relevant date
- In prescribed form
- Lodged by manufacturer (if not passed on to buyer )
- Lodged with AC/DC
d) Doctrine of “Unjust enrichment “
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- If manufacturer had charged E.D. to his buyer, it means he has recovered duty from
buyer
- If refund is paid to manufacturer there will be excess & undeserved profit. To him –
Once from customers & again from Govt. – This is called “Unjust Enrichment”
- Refund should be paid to customer however many times it is not possible to locate
individual customer & refund him duty.
- Also duty illegally collected by Govt. cannot be retained by Deptt.
- Refund due is therefore transferred to “Consumer Welfare Fund”
This fund is utilized for protection & benefit of consumers.
Audit Features
I) Departmental - To cheek whether assessee is paying duty &
Following requirements of Act/ Rules
- Carried out by Excise Deptt.
• The first option, i.e. nil duty up to Rs. 150 lakhs. And normal
duty for subsequent clearance is automatic. However, if assessee
wants to pay normal duty, he must inform option to department. He
should inform in writing to assistant commissioner with a copy to
superintendent of Central Excise, the following.
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