456291_58497_central_excise (1).ppt

7/27/2019 456291_58497_central_excise (1).ppt

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EXCISE DUTY PRESENTATION

SUFFICEINT FOR CA/CS/CMA

EXAM

CA MANISH PANDEY

+91-9903559137

[email protected]


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Basic of Central Excise


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MANUFACTURE AND EXCISIBILITY

Section 3 of Central Excise Act, 1944.

Basis of Levy.

What is Manufacture?.

CE Law gives only a truncated definition for manufacture

Includes Deemed Manufacture. Widest definition is available in Foreign Trade Policy but that is

not applicable to CE Law.

contd


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The statutory definition of

manufacture in central exciseact Manufacture includes any

process

(i) Incidental or ancillary to hecompletion of a manufacturedproduct;

(ii) Which is specified in relation to any

goods in the section or chapternotes of the First Schedule to thecentral excise tariff as amounting tomanufacture


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Continued..

(iii) Which in relation to the goodsspecified in the Third Scheduleinvolves packing or repacking ofsuch goods in a unit container orlabeling or re-labeling of containersincluding the declaration oralteration of retail sale price on it oradoption of any other treatment onthe goods to render the product

marketable to the consumer


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Continued

And the word manufacturer shall be construedaccordingly and shall include not only a personwho employs hired labor in the production ormanufacture of excisable goods, but also anyperson who engages in their production ormanufacture on his own account.


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contd

Leading casesDecisions of Supreme

Court.- Formation of a new Article

Vide Hawkins Cookers Ltd Vs Collector [- 1997 (96) ELT 507 SC.

- A new distinct and commercial commodity.

Vide TISCO V.O.I[2004(164) ELT 372 SC.


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The accepted wisdom about

manufacture in central excise

Manufacture implies a change; but not everychange is a manufacture. A new product shouldemerge from the raw material stage with a new

name, new use and marketability.


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2) Ingredients of excisablity

Fact of Manufacture.

Entry availability in CE Tariff.

Marketability.


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Manufacture in central

excise Two concepts

Actual substantive manufacture & Deemedmanufacture

Actual substantive manufacturedoes it includemere processing?

Deemed manufacture


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What is deemed

manufacture? Process or activity specified in section or chapter

notesfor example:

Labeling or re labeling of containers

Repacking from bulk packs to retail packs

Adoption of any other treatment to render theproduct marketable to the consumer


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Continued. Addition of chemicals and other

ingredients to certain products oftariff heading 3808

In relation to products of heading no

3920 & 3921process of metallizationor lamination or lacquering

In relation to some products ofheading 7013the process of printing

, decorating or ornamenting


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Continued.

In relation to flat-rolled iron & steel products underchapter 72the process of hardening ortempering

In relation to articles of iron and steel underchapter 73the process of galvanization


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Continued.

In relation to motor vehicles under chapter no 87building a body or fabrication or mounting orfitting of structures or equipment on the chassis

falling under 8706


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3) Select Decided cases in

Manufacture Affixing Information stickers on goods imported does not amount to

Manufacture.-CCE Vs. Proctor & Gamble Home Products 2004 [167] ELT 173[TRID].

Erection of imported Power Plant does not amount to manufacture.

-Spectrum Power Generating Co. Ltd VCCE2004(177)ELT 968 [Tri-D].

Conversion of old, diesel operated Buses into CNG Buses does notamount to Manufacture.

contd


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contd

-Nugas Technologies India (P) Ltd. VCCE [-171 ELT 376 Tri-D].

Gold Plating of watch cases does not amount to Manufacture.-Commissioner Vs Divya cases2004[169]ELT225[Tri-D]

Mixing of chocolate Powder with Sugar and Skimmed Milk to formdrinking chocolate does not amount to ManufactureCCE VsFountain Consumer Appliances Ltd2004 [171] ELT 329 (TriChennai)


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contd Branding, polishing and affixing MRP on locks

acquired from artisans does not amount toManufacture.

Key locks (I) P Ltd Vs. CCE2004(165) ELT,74(Tri-D).

Printing of date of Manufacture is a Legal

requirement and hence it is a Process ofmanufacture.

- Surat Beverages (P) Ltd Vs. Commissioner2004 (165) ELT313 [Tri- Mumbai].

Rubber lining/ Painting/ Cutting/ Welding/of Ironand Steel pipes and Tanks does not amount tomanufacture.- Tega (I) Ltd Vs. CCE2004(164)ELT390


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contd Transformation of Catalyst into spent Catalyst does not amount to

Manufacture.

-CCE Vs Deepak Fertilizers & Petro Corp.Ltd.- 2004 (178)ELT 686 [Tri-M].

The Test of Marketability is a Burden of Revenue.

-FGP(I) Ltd Vs U.O.I2004(168) ELT 289 [SC]

Testing/ Gardening/ Certification of Helium gas cylinders before Saleis an activity amounting to manufacture.

- Commissioner Vs Air liquide North (I) P. Ltd - 2004[174]ELT 201 [Tri - Del].


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4]ValuationThe Crux of the matter

Tending to become more like an opinion poll.

Section 4 and 4A/ Valuation Rules 2000.

What is Transaction value?.

Requirements for acceptance of Transaction Price

Sale of goods. For Delivery, at the time and place of removal

Seller and Buyer not related.

Price is the sole consideration for sale. The legal fiction created by the definition of time

of removallet us note this


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A tour of the valuation rules

2000 The official name for the rules is this

Central Excise Valuation (Determination of price of excisable

goods) Rules, 2000 These rules apply when any of the

ingredients of transaction value ismissing

The rules are used for ascertaining thenormal transaction value at whichthe greatest aggregate quantity ofgoods are sold


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The valuation rules.

They are 11 rules in all

Rule 1name & entry into force from 1-7-2000

Rule 2definitions Rule 3exhortation to decide the value (when

the transaction value is unavailable orunacceptable)


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The valuation rules.

Rule 4ascertainable equivalent price of suchgoodsnearest in time to the time of removal ofgoods from the factorymargin adjustment on

account of differences in dates of deliveryallowed

Rule 5cases when the delivery of goods is at aplace other than the factory


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The valuation rules..

Rule 6when there is additional consideration tothe sale not reflected in the transaction pricechargedsolution: monetize the additional

consideration and add it up to the tax value Rule 7Depot / branch salessolution: adopt the

nearest prevailing depot price


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Valuation rules.

Rule 8captive /self consumption/usesolution:tax value is 110% of the cost of production of thegoods (as per CAS 4)

Rule 9sales to related personssolution: resaleprice of related person / 110% of the cost wherethe related person does not resell but consumesor uses for self


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Valuation rules.

Rule 10sales to inter-connected undertakings/holding company /subsidiary companysolution:: do as per rule 9 above.

Rule 10Ajob work on behalf of a principalmanufacturersolution: resale price of theprincipal manufacturer

Rule 11residual method

5) E l i F V l


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5) Exclusions From Value -By Statute

Excise Duty.

Sales Tax.

Other taxes such as Octroi, entry tax.

-By Court / Tribunal Decisions

Trade Discount.

Cash Discount/ Prompt Payment discount.

Turn over discount.

Quantity discount.

Yearend/ Bonus discount. contd

contd


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contd Freight and Freight insurance, including equalised Freight.

Boughtout items [not integral/ critical to Product].

Carry bags for Laptops.

Syringe bought out and supplied with P & P medicines.

Computer Software ( discuss with NCR case)

Third party Inspection charges at the instance of and borne by thebuyer.

Excess of Freight collected over actual expenditure on freight. Interest on receivables contd

contd


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contd Erection, Commissioning charges if products emerge as immovable

property.

Free items supplied with products.

Advertising charges borne by the clientbuyer on his own account. Additional warranty charges.

Notional interest on Advances/ deposits from buyers not influencingthe price.

Straw supplied with Juice.

Rental paid on durable and returnable container

Liquidated damages received for non- lifting of molasses

6) I l i i t V l


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6) Inclusions into Value -By Statute

Advertising.

Publicity. Marketing/ Sales Promotion.

Storage/ Outward handling.

Servicing.

Warranty. Commission.

-By Tribunal/ Court Decisions

Dharmada.

Design/ Development/ Engineering. contd

contd


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contd

Royalty.

Amortised Cost of tools/ dies/moulds received from buyers.

Interest on inventory.

Value of waste retained by Jobworker.

Packing.Cost of material supplied by

Customer.

7) Val ation When goods are


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7) Valuation When goods areassembled at site

Is it a Composite/ turnkey/ workscontract?

Excise duty is not leviable onimmovable property but on Parts /

Components/ goods already

manufactured.

Case StudiesLifts/ Boiler Plants/

Industrial Furnaces.

8) V l ti i J b k


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8) Valuation in Jobwork When does Jobwork amount to Manufacture?.

Labor/ Jobwork charges + Raw material costs are includible inassessable value.

Ujjagar Prints etc Vs U.O.I.

Empire Industries Vs U.O.I.

Pawan Biscuits Co. Vs CCE.

Is buyers profit margin includible in Assessable Value in the hands ofJobworker?.

Food Specialities Ltd Vs U.O.I.


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Continued.

The impact of new valuation rule 10A

The Central Board of Excise & Customs circular no902/22/2009 dated 20-10-09 in the case of vehicle

body builders

Job work exemption under notification no 214/86

9) MRP b d V l ti


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9) MRP based Valuation Section 4A/ weights & Measurements Act.

MRP minus prescribed abatement is the assessable value.

Regionwise MRP accepted

If different MRPs are printed, the maximum MRP will be taken as thebasis.

Sale of phones with MRP fixed, to customer, by phone companies U/S4A only.

MultiPiece Packages.

10) Ref nds & Rebates


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10) Refunds & Rebates

Section 11B/ Rule 18/ cenvat Rule 5/ Section 11BB.

One year time limit / Provision for Interest.

Theory of unjust enrichment.

Refund claim thro credit notes what happens?

Mafatlal Industries Vs U.O.I. L&T Sargent Lundy Ltd Vs CCE

11)SSI Exemption


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11)SSI Exemption

Notification no: 8/ 2003 as amended.

Basic ceiling Rs.1.5 Cr.

Outer ceiling Rs. 4 Cr.

Only listed goods benefit.Use of Trademark/ symbol/ brand of

another person disentitles.

contd


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contd

Perennial issuesClubbing of

Clearances and use of Brand name.

Use of Foreignowned Trade mark/

Brand name by Indian SSI Units.Clearances Excluded / included for

Computing Rs.1.5 Cr and Rs 4 Cr.

Value Caps.


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Valuation of Depot Sales

(Stock Transfer)Where the excisable goods are transferred to :-

a depot/premises of consignmentagent/branch/any other place ,from where those excisable goods are to be

sold, in that case,

the Assessable Value shall be

The price at which maximum no. of goodsare sold, At the branch, At the time of removal from factory.


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Example of Stock Transfer

Factory Branch

Received

on

10/01/07

Sent to Branch on

01/01/07

Ex-factory Price = Rs. 500

Ex-Depot Price = Rs. 700

Price on 10/01/07 = Rs. 800

Sale on 15/01/07

Price on 15/01/07

= Rs.900

A.V. shall be Rs. 700 on which E.D. will be charged.


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Valuation of Captive

Consumption A.V shall be :-

even if the same or

identical or,

comparable goods

are manufactured & sold by the same assesee.

(Cost of Production)*110%


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Manner of Payment

Last Day :- 5thday of the following month

(Exception :- in case of goodsremoved during the march :- 31stMarch)

Explanation :- The date of presentation

of the cheque shall be the

date on which duty is paid,

subject to realizationof that

cheque


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Excise Invoice

The Invoice shall beserially numbered& shall contain:-

(a). Registration Number

(b). Description of goods

(C). Classification

(d). Time & Date of Removal

(e). Mode of Transport & Vehicle Registration No.(f). Rate of duty

(g). Qty. & Value of goods

(h). Amt. of duty

(i). Address of concerned Central excise Division.

It shall be prepared in Triplicate (Buyer/Transporter/Assesee).

Before using Invoice book, the serial no. should be intimated toSuperintendent.


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Return & AFIR

Return submission:- (a). Monthly

(b).Form ER-1

within 10 days from

the close of month.

Annual Financial Information Statement(AFIR) :-

* Annually

* Form ER-4

* 30th

November of succeeding year* filing only if duty of Rs. 1 crore or mor has been

paid

through PLA


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Records Required To Be

Maintained RG-23A- Part I (Stock Account of Input

Goods)

RG-23A- Part II (Credit on Input Goods)

RG-23C- Part II (Credit on Capital Goods)

RG-1 (Daily Stock Account)

PLA (Personal Ledger Account)


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RG-23A (Part I) Register

The Receipt,

Disposal,

Consumption,

Inventory of Inputs & Capital Goods.

RG 23A (Part II) Register


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RG-23A (Part II) Register

The Assessable Value,

Duty Paid,

Cenvat Credit taken or utilized,

Persons from whom Input/Capital Goods are procured.

Conditions for allowing Cenvat Credit on Input Goods:-

100% credit immediately on receipt of Input goods

Credit shall be taken on Process Losses

but noton Storage & Transit Losses

Input does not includes LDO, HSD, Petrol.

RG 23C (Part II) Register


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RG-23C (Part II) Register The Assessable Value,

Duty Paid,

Cenvat Credit taken or utilized, Persons from whom Input/Capital Goods are procured.

Conditions for claiming Cenvat Credit on Capital Goods:-

50% in the year of receipt.

Remaining 50% in subsequent year (if in possession)

but possession not necessary for components, spares& accessories, refractory & refractory material,moulds & dies.

Exception:- 100% allowed if capital goods cleared in the year of

receipt itself.

Credit on non-specified machine is not allowed.


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Daily Stock Account Maintain Proper Recordson a daily basisregarding :-

(a). Description of goods manufactured(b). Opening Balance

. Goods manufactured

(d). Goods removed

(e). Inventory

(f). A.V of goods

(g). Duty payable

(h). Actual duty paid

The first & last pageof account shall be duly authenticated.

Preserve Records for 5 yearsafter the end of F.Y. to which recordspertains.


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Personal Ledger Account

The Creditin taken when duty is deposited through TR-6Challans.

The Debitis passed when duty is required to be paid.

2 copies of PLA & TR-6

---- To be filed with ER-1.


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Job Work

If Input/Capital goods not received back within180 days, then Cenvat Credit taken on thosegoods has to be reversed.

Exception:- Jigs, Fixtures, Moulds.


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Returns in central excise

ER 1monthlydue by the 10thof the followingmonth

ER 2monthly, for EOUdue by the 10thof the

following month

ER 3quarterly for SSI unitsdue by the10th of thefollowing quarter


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Continued.

ER 4Annual financial statement for units payingINR I crore in excisedue by the 30thof April ofthe following year

ER 5CENVATAnnual Return of informationrelating to principal inputsdue by 30thApril ofthe following yearsome class of manufacturersgiven exemption


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Continued

ER 6monthly return of principal cenvat inputsdue by the 10thof the following monthsomeclass of manufacturers given exemption

ER 7Annual Installed capacity statementdueby the 30thApril of the following year


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Important procedures in

central excise Issue of invoice under Rule 11 of

central excise rules 2002

Provisional assessment under Rule 7& finalization

Time and manner of payment ofduty under Rule 8

Remission of duty under Rule 21 fordamaged/defective/unfit/unmarketable goods


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central excise

Credit of duty paid on sales returns under Rule 16

Rule 16-Aremoval of any inputs as such orpartially worked outside the factory for testing,

repair etc Rule 16-Bremoval of semi-finished products for

further work / finishing and return


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central excise

Rule -16Cremoval of finished goods outside fortest etc & return

Export without payment of duty as well under

claim for rebate of dutyLUT (UT1), Bond, ARE

Removal of excisable goods without duty forexport warehousing under Rule 20


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Penal provisions in central

excisesimply draconian &

colonial Prosecution for select offenses under section 9 of

the Act

Demand of duty under section 11A with normal

time limit of one year and 5 years for cases wheresuppression of facts by the assesses is alleged

Time limit for adjudication of SCN


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excise

Interest for delayed payment under section 11AB

Penalty equal to duty under section 11AC incases involving suppression of facts.

Penalty under Rule 25maximum upto duty or Rs2000/-whichever is greater, with confiscation ofthe goods


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excise

Rule 26penalty for abettors , transporters, issuersof false invoicesmax upto duty or Rs 2000/-whichever is greater

Rule 27general penalty where no penalty isspecified for any offense in the rules, max of Rs5,000/- with possible confiscation of the goods


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excise

Tax defaultpenalty under rule 8dailyclearance on payment of duty in cash, plusprohibition of using cenvat credit, till dues arepaid up.

Rule 12CCblanket powers given to thedepartment to impose restrictions onManufacturers and Dealers involved in taxevasion


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excise

Section 11DDApower to order provisionalattachment of property to protect Revenueduring he pendency of proceedings

Section 14power to issue summons Section 13power to arrest


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CENVAT CREDIT

The foundation of the value-added tax system

Avoids cascading effect of tax on tax on tax

Integrates goods and services

Cenvat credit Rules 2004apply toManufacturers & Service providers


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Cenvat credit ruleswhat

is the gain?

Input stage duty relief in the form of tax credit to

Capital goods

Inputs

Input services


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Cenvat creditCapital

goods All goods falling under the following chapters

Chapter 82tools etc

Chapter 83miscellaneous articles of base

metals

Chapter 84machinery, equipment etc


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Capital goods.. Chapter 85electrical / Electronic

machinery & equipment etc

Chapter 90optical,photographic, medical , checking,

measuring equipment etc Abrasives under heading no 6805

Grinding wheels & the like under

heading 6904


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Capital goods

Pollution control equipment

Components, spares & accessories of the goodsfor the above two categories

Moulds, dies , jigs and fixtures Refractories, and Refractory materials

Tubes, pipes and fittings thereof

Storage tank


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Capital goods

Used in the factory of the manufacturer of finalproducts, but does not include any equipment orappliance used in the office

Or, used for providing output service

Motor vehicles registered in the name of thefollowing service providers are allowedcourieragency, GTA, Rent a cab operator , touroperator, outdoor caterer


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Capital goods.

Ownership of capital goods is not required for amanufacturer or service provider except for themotor vehicle credit

Credit to be taken for 50% of the duty in the firstyear and the rest in any subsequent year

Depreciation under Income tax prohibited

C it l d


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Capital goods.. The 50% restriction does not apply

to special CVD of 4% paid onimported capital goods

Removal of capital goods requiresreversal of credit2.5%

depreciation on credit for everyquarter of use

Removal on scrapping of capitalgoods requires payment of duty ontransaction value


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Capital goods.

Provision for removal of capital goods for test, repair etc

Moulds, dies , jigs and fixtures can be deployed at thepremises of the job worker

Capital goods can be produced and used in the factory ofproduction for manufacture of excisable goodsduty exempt


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Capital goods.

Capital goods on which credit is taken should notbe solely used in the manufacture of exemptedgoods

Capital goods which are not defined in the CCRbut used in the factory of production will qualifyfor credit as Inputs. Benco Products Vs CCECESTAT larger bench decision


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INPUTS Wide definition in the CCR

Inputs means all goods exceptlight diesel oil, high speed dieseland petrol

Used in or in relation to themanufacture of final products

Whether directly or indirectly

Whether contained in the final

product or not


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Inputs.

Inputs include ---

Lubricating oils

Greases

Cutting oils

Coolants

Accessories of the final products


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Inputs

Goods used as

Paint or packaging material or as fuel or forgeneration of electricity or steam

Used in or in relation to the manufacture of finalproducts or for any other purpose

Within the factory of production


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Inputs For service providers:

All goods except light diesel oil, highspeed diesel , petrol and motorvehicles

And used for providing output service

Inputs will not include cement, anglesand channels, CTD / TMT bars & otheritems used for construction in thefactory / building or in laying offoundation or structural support ofcapital goods

t i


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Input services

For manufacturers:

Any service used by a manufacturer

Whether directly or indirectly

In or in relation to the manufacture of finalproducts

And clearance of final products upto the place ofremoval

I t i


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Input services..

For service providers:

Any input service used by a provider of outputservice for providing an output service

I t i ll d t b th


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Input services allowed to both

manufacturers to service

providers Services used in relation to

Setting up

Modernization

Renovation

Repairs

Of a factory or the premises of the serviceprovider

C i


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Common services.

Or an office relating to such factory or thepremises

Advertisement

Sales promotion Market research

Storage upto the place of removal

Procurement of inputs

C i


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Common services.

Activities relating to Business such as

Accounting

Auditing

Financing

Recruitment and quality control

Coaching and training

C i


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Common services.

Computer networking Credit rating

Share Registry

Security

Inward transportation of inputs &capital goods

Outward transportation upto theplace of removal

I t t f t f


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Important features of

cenvat credit

Input credit can be availed immediately onreceipt of the goods accompanied by therelevant invoice

No one-to-one correlation between input andoutput

Cenvat credit is a legal and vested right

I t t f t f


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cenvat credit

Input service tax credit should be taken only aftersettling the service supplier invoice with value andtax

Transfer of credit on transfer of business allowed Transitional credit

I t t f t f


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cenvat credit

Importance of new rule 6 in CCR 2004

Options there under

Maintain separate accounts

Or pay 5% on the value of exempted goods andsix % on the value of exempted services

I t t f t f


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cenvat credit

Or take credit proportionate to the taxableturnover as per formula prescribed

Inputs & capital goods & input services should notbe exclusively utilized in the manufacture /provision of exempted goods or exemptedservices

Clearances to EOU/SEZ/BTP/STP/EHTP & exportswill not require reversal of credit

Important feat res of


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cenvat credit

Storage of inputs outside the factory allowedsubject to applying for the same

Significance of tax invoice in CENVAT credit

system First stage dealer/second stage dealer/input

service distributor

Adj di ti P di


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Adjudication Proceedings

under Service Tax

88


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Provisions at a Glance Section 14 of CEA, 1944 - Power to summon persons to give

evidence and produce documents in inquiries under this Act

Section 73 of FA, 1994 - Recovery of service tax not levied orpaid or short-levied or short-paid or erroneously refunded

Section 73A of FA, 1994 - Service Tax Collected from any

person to be deposited with Central Government Section 73B of FA, 1994 - Interest on amount collected in

excess

Section 73C of FA, 1994 - Provisional attachment to protectrevenue in certain cases

88

89


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..Provisions at a Glance

Section 73D of FA, 1994 - Publication ofinformation in respect of persons in certain cases

Section 74 of FA, 1994 - Rectification of mistake

Section 75 of FA, 1994 - Interest on delayedpayment of service tax

Section 83A of FA, 1994Power of Adjudication

Section 87 of FA, 1994 - Recovery of any amount

due to Central Government

89

Power to summon persons to give 90


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Power to summon persons to giveevidence and produce

documents in inquiries Sub section (1) of Section 14 of CEA, 1944 Any Central Excise Officer duly empowered by the

Central Government in this behalf, shall have power tosummon any person whose attendance he considers

necessary either to give evidence or to produce adocument or any other thing in any inquiry which suchofficer is making for any of the purposes of this Act. Asummons to produce documents or other things may befor the production of certain specified documents orthings or for the production of all documents or things of

a certain description in the possession or under thecontrol of the persons summoned.

90

Inquiry before Show Cause91


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Notice F.No 137/39/2007-CX-4 dated 26-2-2007 and F.No. 137/39/2007-CX-4 dated 21-1-2008

At first instance: For calling for information/documentsnormally the mode of communication should be eithein the form of a telephone call or by way of sending asimple letter.

Second instance: Issuance of summons should beresorted to, only when the above mentioned modes ofcommunications are found to be ineffective or arelikely to jeopardize revenue interest or when it is

essential to ensure personal presence of the personconcerned to tender evidence or record statement inconnection with a service tax evasion case;

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Inquiry 92
http://www.taxmanagementindia.com/visitor/detail_circular.asp?ID=2318http://www.taxmanagementindia.com/visitor/detail_circular.asp?ID=7415http://www.taxmanagementindia.com/visitor/detail_circular.asp?ID=7415http://www.taxmanagementindia.com/visitor/detail_circular.asp?ID=7415http://www.taxmanagementindia.com/visitor/detail_circular.asp?ID=7415http://www.taxmanagementindia.com/visitor/detail_circular.asp?ID=7415http://www.taxmanagementindia.com/visitor/detail_circular.asp?ID=7415http://www.taxmanagementindia.com/visitor/detail_circular.asp?ID=2318http://www.taxmanagementindia.com/visitor/detail_circular.asp?ID=2318http://www.taxmanagementindia.com/visitor/detail_circular.asp?ID=2318http://www.taxmanagementindia.com/visitor/detail_circular.asp?ID=2318http://www.taxmanagementindia.com/visitor/detail_circular.asp?ID=2318


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.Inquiry

Simple Notices are not summons

Simple notices are not summons but, it should be anendeavor that no notice should left unattended /unreplied.

Even if some notices are wrong, must be repliedpolitely.

Precautions during inquiry proceedings

Inquiry before issuance of show cause notice is very

critical stage and therefore, must be handledcarefully.

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Inquiry 93


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..Inquiry

Making statement in the course of inquiry Statement must be given carefully. It is difficult to rebut the

statement later.

Statement can be used against the person making such statement.

Where statement is to be retracted, it should be retracted as soonas possible.

Collected cheques under force during inquiry:

There is power with the department to collect / recover amountduring inquiry.

93

Forced recovery during 94


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Forced recovery duringinvestigation

In NARESH KUMAR & COMPANY Versus UOI [2010 -TMI - 77634CALCUTTA - HC] has held that, Theauthority concerned has no jurisdiction orauthority to collect any amount at the time of

raid simply it is not empowered legally to do so.

Also see: ABHISHEK FASHIONS PVT. LTD. versus UOI[2006 -TMI - 701 - HIGH COURT OF GUJARAT]- Inabsence of any statutory provision on the basis ofwhich any such recovery can be made, theaction of the respondent authorities in collectingthe cheques from the petitioner cannot besustained in law

94

N t 30/2005 dt 10/8/2005 d 48/2010 dt 8/9/201095
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Not. 30/2005 dt. 10/8/2005 and 48/2010 dt. 8/9/2010

Superintendent of Central Excise

Not exceeding Rs. one lakh (excluding thecases relating to taxability of services orvaluation of services and cases involvingextended period of limitation.)

Assistant Commissioner of Central Excise orDeputy Commissioner of Central Excise

Not exceeding Rs. five lakhs (except caseswhere Superintendents are empowered to

adjudicate.)

95

Power of Adjudication S. 83A96
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j

Joint Commissioner of Central Excise Above Rs. five lakhs but not exceeding Rs. fifty lakhs

Additional Commissioner of Central Excise

Above Rs. twenty lakhs but not exceeding Rs. fifty lakhs

Commissioner of Central Excise Without limit

96

Show Cause NoticeSection 7397


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Normal Period of Limitation

(1) Where any service tax has not been levied or paid or hasbeen short-levied or short-paid or erroneously refunded,the 2[Central Excise Officer] may, within one year from therelevant date, serve notice on the person chargeable withthe service tax which has not been levied or paid or which

has been short-levied or short-paid or the person to whomsuch tax refund has erroneously been made, requiring him toshow cause why he should not pay the amount specified inthe notice:

97

.SCN - Section 73

E t d d P i d f Li it ti 98


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Extended Period of Limitation PROVIDED that where any service tax has not been

levied or paid or has been short-levied or short-paid orerroneously refunded by reason of

(a) fraud; or (b) collusion; or

(c) wilful misstatement; or (d) suppression of facts; or

(e) contravention of any of the provisions of thisChapter or of the rules made thereunder with intentto evade payment of service tax,

by the person chargeable with the service tax or hisagent, the provisions of this sub-section shall have

effect, as if, for the words "one year", the words "fiveyears" had been substituted.

98

SCN Period of limitation 99


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SCNPeriod of limitation

Explanation: Where the service ofthe notice is stayed by an order ofa court, the period of such stayshall be excluded in computing theaforesaid period of one year or fiveyears, as the case may be.

99

SCNRelevant Date 100


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(6) For the purposes of this section, "relevant date" means,

(i) in the case of taxable service in respect of which service tax has not been

levied or paid or has been short-levied or short-paid (a) where under the rules made under this Chapter, a periodical return,

showing particulars of service tax paid during the period to which the saidreturn relates, is to be filed by an assesse, the date on which such return isso filed;

(b) where no periodical return as aforesaid is filed, the last date on whichsuch return is to be filed under the said rules;

(c) in any other case, the date on which the service tax is to be paidunder this Chapter or the rules made thereunder;

(ii) in a case where the service tax is provisionally assessed under this Chapteror the rules made thereunder, the date of adjustment of the service taxafter the final assessment thereof;

(iii) in a case where any sum, relating to service tax, has erroneously beenrefunded, the date of such refund.

0

Contents of SCN101


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Contents of SCN

SCN should not be vague or ambiguous

SCN must be specific

RUD should be supplied with SCN

Corrigendum to SCN may be issued but no newground be raised

No corrigendum after submission of reply to SCN

1

Serving of SCN Section 37C of102


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Serving of SCNSection 37C of

CEA, 1944(1) Any decision or order passed or any summons or noticesissued under this Act or the rules made, thereunder shall beserved,

(a) by tendering the decision, order, summons or notice, orsending it by registered post with acknowledgement due, tothe person for whom it is intended or his authorized agent, if

any;

(b) if the decision, order, summons or notice cannot be servedin the manner provided in clause (a), by affixing a copythereof to some conspicuous part of the factory or warehouseor other place of business or usual place of residence of the

person for whom such decision, order, summons or notice, asthe case may be, is intended; .

2

Serving of SCN Section 37C ofCEA 1944

103


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CEA, 1944 (c) if the decision, order, summons or notice cannot be served

in the manner provided in clauses (a) and (b), by affixing a

copy thereof on the notice board of the officer or authoritywho or which passed such decision or order or issued suchsummons or notice.

(2) Every decision or order passed or any summons or noticeissued under this Act or the rules made thereunder, shall bedeemed to have been served on the date on which thedecision, order, summons or notice is tendered or delivered bypost or a copy thereof is affixed in the manner provided in

sub-section (1).

3

Serving of SCN 104


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Mere issue of SCN is not sufficient, it has to be served on the

person

Refusal to accept notice is due service of notice

In case of partnership firm, SCN can be issued to any partner

In case of company, SCN can be issued to any of director,

secretary or principal officer

Notice to agent is valid.

4

Reply to SCN 105


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Submission of Reply to SCN with 30 days or extended period assought.

Assessee can take inconsistent and contrary stands

Assessee can raise dispute to demand on different grounds

If the statement of a third person relied upon by thedepartment, assessee can demand cross-examination of suchperson and have statement by such person.

Personal hearing may be opted. In case the officer ischanged, new officer should give personal hearing.

5

Challenge to invoking ofextended period of limitation

106


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extended period of limitation Where extended period of limitation has been invoke,

carefully examine the SCN to see: Whether, allegation for invoking extended period is specific or

general.

Which of the allegation has been invoked.

Calculate period before knowledge of facts to the department

and after knowledge of facts to the department.

What evidences have been adduced by the department toprove its allegation.

Whether department has discharged its initial burden to prove theallegation.

6

Challenge to invoking of 107


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extended period of limitation Mere non declaration is not sufficient but a positive mis

declaration is necessary See: circular no. 5/92 dated 13/10/192 CE

PADMINI PRODUCTS Versus CCE [2008 -TMI42519SC= mere failureor negligence on the part of the producer or manufacturer either notto take out a license in case where there was scope for doubt as to

whether license was required to be taken out or where there wasscope for doubt whether goods were dutiable or not, would notattract Section 11-A of the Act.

7

. Challenge to extended periodof limitation

108
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of limitation Suppression, miss declaration must be willful

Intention to evade duty is not mere failure to pay duty. It mustbe something more.

Mere inaction is not suppression

Mere omission to give correct information is not suppression itis willful

No suppression if assesse was ignorant about legal provisions

No suppression if assesse had a bonafide belief.

If there is a confusion prevailing in field, no suppression

8


109


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of limitation If there is a clarificatory circular, it is a ground of banafide

belief.

Contradictory judgments on of the tribuanl or courts are validground of no suppression.

No suppression if department is aware of facts

No suppression if SCN were issued on the same subject

If demand is based on return, no suppression

No suppression in case of PSU / govt. undertakings

No suppression if figures were disclosed in published balancesheets.

9


110


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of limitation Revenue neutral position

Where assessee is able to take the cenvat credit of tax paid,suppression can not be held

But, mere availability of cenvat credit is no conclusive thatthere was no suppression of facts.

Suppression of facts is a question of facts and must be challengedaccordingly.

0

Others aspects of SCN and 111


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demand Demand based on third partys records without considering

other parameters are not sustainable.

Demand based on mere presumption is not sustainable.

In case of normal period of limitation, if service tax with interestis deposited before issuance of SCN, no notice would be

served and penalty be imposed. In case of extended period of limitation, where service tax

with interest and 25% penalty is deposited, no notice wouldbe issued and penalty be imposed.

1

Forced Recovery ST from112


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Forced Recovery ST from

third personSection 87(b)

Section 87(b) empowered the central exciseofficers to recover the amount from the thirdperson.

O.N.G.C. LTD. Versus DC. OF CCE [2010 -TMI -77636 - ANDHRA PRADESH HIGH COURT]recovery can not made from the third partiesmerely by issuing notice in the absence ofassessment order.

Swami Vivekananda113
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Swami Vivekananda

said..

The lamp is constantly burning out, and that is itslife. If you want to have life, you have to die everymoment for it. Life and death are only differentexpressions of the same thing looked at from

different standpoints; they are the falling and therising of the same wave, and the two form onewhole. One looks at the "fall" side and becomes apessimist another looks at the "rise" side andbecomes an optimist.

(KARMA-YOGAChapter VIII)


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EXCISE AUDIT

TYPES OF AUDIT IN


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S O U

CENTRAL EXCISE DEPT

INTERNAL AUDITSPECIAL AUDIT U/S

14A &14AASTATUTORY AUDIT BY C&AG

PROCEDURES IN EXCISE AUDIT ANNUAL & MONTHLY PROGRAMME


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ANNUAL & MONTHLY PROGRAMME

SELECTION OF ASSESSEE PRELIMINARY DESK REVIEW

TOUR OF THE PLANT

INTERVIEW OF KEY PERSONNEL

EVALUATION OF INTERNAL CONTL

PREPARATION OF AUDIT PLAN

CONDUCT OF AUDIT

PREPARATION OF AUDIT REPORT

REQUIREMENT ON THE PART OF CA

WELL VERSED WITH THE ACCOUNTING


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WELL VERSED WITH THE ACCOUNTINGSYSTEM ADOPTED BY VARIOUS UNITS

SHOULD NOT BE A COST AUDITOR FOR THESAME UNIT

CAS-4 CERTIFICATIONS NOT ISSUED FOR THESAME UNIT

SOUND WORKING KNOWLEDGE OF CENTRALEXCISE LAWS ESPECIALLY EXCISE AUDIT,CENVAT & VALUATION

WHAT IS EXPECTED OF COST


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ACCTS

TO SCRUTINISE ER-5 & ER-6 RETURNS

TO VALIDATE, INTERPRET & ANALISE

DATA AS PER THESE RETURNS TO IDENTIFY VALUATION ISSUES IN

CASE OF RELATED UNITS

TO VALIDATE & INTERPRET CAS-4CERTIFICATE

SCOPE OF THE WORK


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SCOPE OF THE WORK

SUCH ASSIGNMENTS ARE SELECTIVE IN NATURE

SERVICES OF CA ARE ONLY ADVISORY IN NATURE

ONLY FOR DESK REVIEW

REPORT OF CWA FORM PART OF WORKINGPAPERS OF DEPT.

LIMITATIONS OF WORK


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LIMITATIONS OF WORK

CWA NOT ALLOWED TO VISIT UNITS

CONFLICT OF INTEREST

PART OF AUDIT TEAM & NOT INDEPENDENT

COMPLETELY ONLY EMPANELLED CWA ARE CONSIDERED

ONE/TWO DAYS ONLY

DOCUMENTS TO BE


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OCU S OSCRUTINISED

MONTHLY RETURNS

ER-5 & ER-6 RETURNS

ANNUAL REPORT W.R.T. QUANTITATIVE DETAILS

COST AUDIT REPORT

CAS-4 CERTIFICATE

REPORTING


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FORMAT TO BE DESIGNED BY INSTITUTE

IT IS IN THE NATURE OF ADVISE NOTE

TO BE SUBMITTED TO SUPT. INCHARGE OF TEAM

TO BE COMPLETED BEFORE AUDIT SCHEDULE

POINTS TO PONDER


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TREND ANALYSIS OF CENVAT/DUTY

RISK LOSS ANALYSIS

INPUT/OUTPUT RATIO

VALUE ADDITION

RECONCILIATION OF DUTY

OTHER RATIOS

WHAT TO KNOW FROM


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P&L

SALE VALUE AND ED PAID

PURCHASE AND CENVAT

LOSS BY FIRE/THEFT

WRITING OFF OF OBSOLETE ITEMS

DISCOUNT RECEIVED/PAID

OTHER INCOMES

DEPRECIATION

WHAT TO KNOW FROM


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P&L

ROYALTY/TECH KNOW HOW

DESIGN & DEVT. CHARES

INSURANCE CLAIMS

ERRECTION CHARGESST ANGLE

EXCISE DUTY PAID

STATISTICAL TECHNIQUES


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RISK ASSESSMENT

RIST LOSS ANALYSIS

TREND ANALYSIS

ABC ANALYSIS

INPUT-OUTPUT RATIO

RISK LOSS ANALYSIS


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IN RESPECT OF

EXCISE DUTY PAID OF FINISHED GOODS

CENVAT ON INPUT vs PURCHASES

SALES REVENUE WITH INCOME TAX AND SALESTAX RETURNS

RLAED PAIDSTEP 1


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NOTE DOWN DUTY PAID AS PER RT12

DEDUCT ED RELATING TO PREVIOUS PERIODS, EXPORTGOODS, INPUTS CLEARED AS SUCH, WASTE, MISCHEAD OF PLA, ETC.

NET DUTY PAYABLE ON FINISHED GOODS

RLA- STEP 2


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TOTAL SALE VALUE AS PER P&L a/c

DEDUCT SALES TAX (as per sales tax returns)

DEDUCT EXPORT VALUE, SCRAP SALE VALUE, VALUEOF EXEMPTED GOODS, TRADING GOODS, ETC.

GET SALE VALUE OF DUTIABLE GOODS

RLASTEP 3


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IF NET SALE VALUE IS INCLUSIVE OF ED, CALCULATEED PAYABLE AS

NET SALE VALUE x16

116IF NET SALE VALUE IS EXCLUDING ED,

ED PAYABLE IS

SALE VALUE x 16/100

RLASTEP 4


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COMPARE THE ED AS PER RT12 (step 1)

With

ED PAYABLE AS PER P&L a/c (step3)

If the difference is very negligible, ignore

Otherwise, we have to ask for reconciliation by theassessee.

RATIO ANALYSIS


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SALES TO RAW MATERIALS

SALES TO OTHER INCOME

SALES TO DISCOUNT

SALES TO SCRAP SALES

SALES TO EXPORTS

SALES TO DEBTORS

SALES TO EXCISE DUTY

CONTENT OF COST AUDIT REPORT


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1 REPORT BY COST AUDITOR

2 DETAILS OF ASSESSEE

3 COST ACCOUNTING SYSTEM

4 FINANCIAL POSITION

5 EXPENSES TO BE SPECIFIED

6 RATIOS

7 RAW MATERIALS

8 POWER AND FUEL

9 WAGES AND SALARIES


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9 WAGES AND SALARIES

10 STORES AND SPARES

11 DEPRECIATION

12 OVERHEADS

13 ROYALTY/TECH KNOW-HOW

14 SALES

15 ABNORMAL COSTS

16 OTHER ITEMS

17 AUDITORS OBERVATIONS

EXPENSES/INCOMES


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TO BE SPECIFIED

Expenses to be specified

Expenditure on spl exhibitions

j) Expdr.-abonormal or non-recurring

Incomes to be specified

c) Abnormal or non-recurring incomes

RATIOS & RAW MAT


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Cost of production on Cap Employed

Actual production vsInstalled capacity

Cost of major RM consumed

Specify Significant transport cost

Analysis of variances

Comment of Inventory accounting

STORES AND SALES


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COMMENT ON THE METHOD

OF STORES ACCOUNTING

NON-MOVING ITEMS OVER 2 YRS

PRODUCT-WISE SALES REALISATION

EXPORT REALISATION-PROFIT?

AUDITORS OBSERVATION


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PRINCIPLE DEVIATIONS

NEGLIGENCE & NON-COMPLIANCE

SCOPE OF INTERNAL AUDIT

AGREEMENTS OF SALE/PURCHASE

SEPARATE ANNEX FOR DIFF

UNITS


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456291_58497_central_excise (1).ppt

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