indirect tax 2013

INDIRECT TAXATION PROBLEMS

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ED -RATESBasic Excise Duty is levied u/s 3(1) of Central Excise Act. The section is termed as ‘charging section’.General rate of duty of central excise on non-petroleum products has been increased from 10%to 12% w.e.f. 17-3-2012. (The duty rate was 14% during 1-3-2008 to 6-12-2008, which was reducedto 10% w.e.f. 7-12-2008 and to 8% w.e.f. 24-02-2009). This duty is applicable to majority of excisablegoods. There is partial exemption to a few products.• Education Cess @ 2% of excise duty under section 93 of Finance (No. 2) Act (w.e.f. 9-7-2004).• Secondary and Higher Education Cess (S&H Education Cess) @ 1% of the total duties of excisevide section 136 read with section 138 of Finance Act, 2007 w.e.f. 1-3-2007.Thus, total excise duty is 12.36%% in majority of the cases.Example 2: Basic Excise Duty = 12%Add: 2% Edu. Cess on 12% = 0.24%Add: 1% S & H Edu. Cess on 12% = 0.12%Total effective rate of duty = 12.36%National Calamity Contingent Duty – A ‘National Calamity Contingent Duty’ (NCCD) has been imposedvide section 136 of Finance Act, 2001 on some products. NCCD of 1% has been imposed on mobilephones w.e.f. 1-3-2008.In addition, cesses and duties have been imposed on some specified products.

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2.5.1 What is the Taxable Event?

The taxable event is of great significance in levy of any tax or duty. Excise duty is leviable on all excisable goods, which are produced or manufactured in India. Thus, ‘manufacture or production in India’ of anexcisable goods is a ‘taxable event’ for Central Excise. It becomes immaterial that duty is collected at a later stage i.e. at the time of removal of goods. Therefore, removal from factory is not the ‘taxable event’.

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5.5 COLLECTION OF EXCISE DUTYFOR COLLECTION OF CENTRAL EXCISE DUTY, THE FOLLOWING TWO PROCEDURES ARE FOLLOWED BY THE CENTRAL EXCISEDEPARTMENT:(I) PHYSICAL CONTROL PROCEDURE: APPLICABLE TO CIGARETTES ONLY. IN THIS CASE, THE ASSESSMENT PRECEDESCLEARANCE, WHICH TAKES PLACE UNDER THE SUPERVISION OF CENTRAL EXCISE OFFICERS;(II) SELF-REMOVAL PROCEDURE: APPLICABLE TO ALL OTHER GOODS PRODUCED OR MANUFACTURED WITHIN THECOUNTRY. UNDER THIS SYSTEM, THE ASSESEE HIMSELF DETERMINES THE DUTY LIABILITY ON THE GOODS ANDCLEARS THE GOODS.

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Example 29: Raj & Co. furnish the following expenditure incurred by them and want you to findthe assessable value for the purpose of paying excise duty on captive consumption. Determinethe cost of production in terms of rule 8 of the Central Excise Valuation (Determination of Priceof Excisable Goods) Rules, 2000 and as per CAS-4 (cost accounting standard) (i) Direct materialcost per unit inclusive of excise duty at 12.36% - ` 1,320, (ii) Direct wages - ` 250, (iii) Other directexpenses - ` 100, (iv) Indirect materials - ` 75, (v) Factory Overheads - ` 200, (vi) Administrativeoverhead (25% relating to production capacity) ` 100 (vii) Selling and distribution expenses - ` 150,(viii) Quality Control - ` 25, (ix) Sale of scrap realized - ` 20, (x) Actual profit margin - 15%.

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SOLUTION

Answer:Particulars Amount (`)(i) Direct Material (exclusive of Excise Duty) [1,320 x 100/112.36] 1174.80(ii) Direct Labour 250.00(iii) Direct Expenses 100.00(iv) Works Overhead [indirect material (75) plus Factory OHs (200)] 275.00(v) Quality Control Cost 25.00(vi) Research & Development Cost Nil(vii) Administration Overheads (to the extent relates to production activity) 25.00Less: Realizable Value of scrap (20.00)Cost of Production 1,829.80Add 10% as per Rule 8 183.00Assessable Value 2,012.80

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EXAMPLE 31: HERO ELECTRONICS LTD. IS ENGAGED IN THE MANUFACTURE OF COLOUR TELEVISION SETS HAVING ITSFACTORIES AT KOLKATA AND GUJARAT. AT KOLKATA THE COMPANY MANUFACTURES PICTURE TUBES WHICH ARESTOCK TRANSFERRED TO GUJARAT FACTORY WHERE IT IS CONSUMED TO PRODUCE TELEVISION SETS. DETERMINE THEEXCISE DUTY LIABILITY OF CAPTIVELY CONSUMED PICTURE TUBES FROM THE FOLLOWING INFORMATION: - DIRECTMATERIAL COST (PER UNIT) ` 800; DIRECT LABOUR ` 100; INDIRECT LABOUR ` 50; DIRECT EXPENSES ` 100;INDIRECT EXPENSES ` 50; ADMINISTRATIVE OVERHEADS ` 50; SELLING AND DISTRIBUTION OVERHEADS ` 100.ADDITIONAL INFORMATION: - (1) PROFIT MARGIN AS PER THE ANNUAL REPORT OF THE COMPANY FOR 2012-13WAS 12% BEFORE INCOME TAX. (2) MATERIAL COST INCLUDES EXCISE DUTY PAID ` 73 (3) EXCISE DUTY RATEAPPLICABLE IS 12%, PLUS EDUCATION CESS OF 2% AND SHEC @ 1%.

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ANSWER: COST OF PRODUCTION IS REQUIRED TO BE COMPUTED AS PER CAS-4. MATERIAL COST IS REQUIRED TO BE EXCLUSIVE OF CENVAT CREDIT AVAILABLE.PARTICULARS TOTAL COST (`)1 MATERIAL CONSUMED (NET OF EXCISE DUTY) (800 – 73) 7272 DIRECT WAGES AND SALARIES 1003 DIRECT EXPENSES 1004 WORKS OVERHEADS 1005 QUALITY CONTROL COST6 RESEARCH AND DEVELOPMENT COST7 ADMINISTRATIVE OVERHEADS (RELATING TO PRODUCTION CAPACITY) 508 TOTAL (1 TO 7) 1,0779 LESS - CREDIT FOR RECOVERIES/SCRAP/BY-PRODUCTS/MISC INCOME -10 COST OF PRODUCTION (8-9) 1,07711 ADD - 10% AS PER RULE 8 10812 ASSESSABLE VALUE 1,18513 EXCISE DUTY @ 12% OF ` 1,185 142.214 EDUCATION CESS @ 2% OF ` 142.2 2.84415 SHEC @ 1% ON ` 142.2 1.422.’.TOTAL DUTY LIABILITY = ` (142.2 + 2.844 + 1.422) = ` 8 TOTAL (1 TO 7) 1,077

= ` 146.466NOTE - (1) INDIRECT LABOUR AND INDIRECT EXPENSES HAVE BEEN INCLUDED IN WORKS OVERHEAD (2) IN 146.466NOTE - (1) INDIRECT LABOUR AND INDIRECT EXPENSES HAVE BEEN INCLUDED IN WORKS OVERHEAD (2) IN

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32: A Trader supplies raw material of ` 1,150 to processor. Processor processes the rawmaterial and supplies finished product to the trader. The processor charges ` 450, which include ` 350as processing expenses and ` 100 as his (processor’s) profit. Transport cost for sending the raw materialto the factory of processor is ` 50. Transport charges for returning the finished product to the traderfrom the premises of the processor is ` 60. The finished product is sold by the trader at ` 2,100 fromhis premises. He charges Vat separately in his invoice at applicable rates. The rate of duty is 12% pluseducation cess as applicable. What is the AV, and what is total duty payable ?

Answer: Assessable Value is to be calculated on basis of selling price of trader which is ` 2,100 (cumduty).This price is to be treated as inclusive of excise duty. Hence, assessable value will be (2,100 x100)/112.36 i.e. . 1,868.99. Basic excise duty @ 12% will be ` 224.28. Education Cess (2%) is ` 4.49 andSecondary and Higher Education Cess is ` 2.24. Total duty payable will be ` 231.01 .9

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C E N T R A L E X C I S E V A L U A T I O N

Compute the cost of production of under-mentioned product for Captive consumption:1) Direct material 11,648 (2)Direct wages & salaries Rs 8,4002) Works overheads 6,200 (3) Quality control costs- 3,500 3) R&D costs 2,400 (4)Admn. Works 4,1004) Selling & dist 1,600 (5)Realisable value of scrap 1,2005) Admn. Overhead relate to production costs 6) Mat.costsincludes vat Rs 1648/=

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SOLUTION

1 Raw material – vat Rs 10,000

2 Wages & salaries 8,400

3 Works O.H. 6,200

4 Quality costs 3,500

5 R&D costs 2,400

6 Admn. O.H. 4,100

7 Total 34,600

8 Less scrap (- ) 1,200

Cost of production 33,400

Value

Under rule –(8)( cost +10%)

36,740

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COMPUTATION OF TRANSACTION VALUE WHEN SALE PRICE INCLUDES ED & ST

The cum duty price of a product is 10,62,024/= It includes ED 4% + education cessEtc + ST 2%.Find A.V. & ED & ST

Sales Tax = 10,62,024 * (2/102) = 20,824Price- ST = 10,62,024- 20,824 = 10,41,200ED= 10,41,024* (4.12/104.12)= 41,200A.V. = 10,00,000/=

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OUTWARD HANDLING CHARGES & A.V.

Compute A.V. from the following information :1 Whole sale price including ST Rs 15,000

2 Normal sec.packing 1,000

3 Cost of spl. Sec.packing 1,500

4 Cost –durable& returnable Packing 1,500

5 Freight 750

6 Ins 200

7 Trade discount 1,000

8 Rate of duty 12%. St Rs 2,000

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SOLUTION1) Price inclusive of duty Rs. 15,0002) Deductions (i) sales tax 20003) Durable &returnable packing 15004) Freight 7505) Insurance 2006) Trade dis 1,000 5450 7) Total 9,5508) ED @ 12.36% 10519) A.V. 8,499

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SSI EXEMPTION LIMITFrom the following details ascertain whether MN&O is eligible for SSI exemption:i)Clearances of branded goods Rs (lakhs)- 60ii) Export sale to nepal 80iii) Export sale to USA & canada 120 iv) Clearance of goods based on capacity 70v) Clearance based on MRP ( goodss eligible for (30 % abatement) 200vi)Job work u/ notification 214/86 CE 60The building was occupied by MNO ltd by 1/10/2012.The privious tenant cleared goods from 1/04/2012/To 30/09/2012 to the value of Rs 120 lakhs .

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SOLUTION1 Branded goods NC

2 To Nepal 80

3 To USA & CANADA nil

4 Clearance based on Annual cap

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5 On MRP 140

6 Job Work U/ 214/86-CE nil

7 Previous tenant 120

TOTAL 410

As the clearances for home consumption exceeds 400 lakhs MNO is not eligible for SSI Exemption

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SOLVE

Example 34: A manufacturer has appointed brokers for obtaining orders from wholesalers. The brokers procure orders for which they get brokerage of 5% on selling price. Manufacturer sells goods to buyers at ` 250 per piece. The price is inclusive of State Vat and Central excise duty. State Vat rate is 4% and excise duty rate is 12% plus education cess and SAH education cess as applicable. What is the AV, andwhat is duty payable per piece?

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SOLUTIONAnswer: Assume that Assessable Value = x. No deduction is available in respect of brokerage paid tothird parties from Assessable Value.Since Excise duty is 12%, education cess is 2%, SAH education cess is 1% and State Vat rate is 4%, price including excise will be 1.1 236x.State Vat @ 4% of 1 .1236x is 0.0449x. Hence, price inclusive of sales tax and excise duty will be 1.1 685x.Now, 1.1685x = ` 250.00Hence, X = ` 213.95Check the answer as follows –Assessable Value = ` 213.95Add duty @ 12.36% of ` 213.95 = ` 26.44Add State Vat @ 4% on ` 240.39 (213.95+26.44) = ` 9.62Total Price (Including duty and tax)(213.95+26.44+9.62) = ` 250.00

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PRODUCT NOT COVERED BY SEC .4AExample 35: Find Assessable Value and duty payable. The product is not covered under section 4A.Maximum Retail Trade Price : ` 1,100 per unit, State Vat, Octroi and other Local Taxes: 10% of net price,Cash Discount :2%, Trade Discount: 8%, Primary and Secondary packing cost included in the aboveMRP: ` 100, Excise duty rate: 12% ad valorem plus education cesses as applicable.

Answer: Cash discount ` 22 (2% of ` 1,100) and trade discount ` 88 [8% of ` 1,100] are available asdeduction. Packing cost is not allowable as deduction. Hence, price of excise purposes is ` 990. [` 1,100– 22 – 88]. — Now, if X is the assessable value, excise duty is 0 1 .1236x. State Vat and local taxes@ 10 % of 1 .1236x will be 0.1236x and price including Excise duty is inclusive of excise duty and salestax will be 1 .2360x.Now, 1 .2360 x = ` 990.00Hence, x = ` 800.97Excise Duty @ 12.36% of ` 800.97 x = ` 99.00Check the answer as follows Assessable Value = ` 800.97Add duty @ 12.36% of ` 800.97 = ` 99.00Add State Vat @ 10% on ` 899.97 = ` 90.00(800.97+99)Total Price (After allowable deductions) = ` 989.97 or ` 990

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Q.3-P/46

Mahesh ltd started business on 1/06/2010.It availed SSI exemption for 2010-11.The following details are available for the year.1)Inputs purchased 12,500 kg @ rs 1.190.64. inclusive of ED @ 10.3%-1,48,83,000/=2)Capital goods purchased on 31/05/2010, Rs 80,90,400/= 3)Finished goods sold (at uniform rate thro out the year) Rs 3,00,00,000/=You are required to calculate the amount of ED payable during the year 2010-11Selling price is exclusive of CE which is 10..30%.There is no process loss.The input output ratio 1:2..

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SOLUTION

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Duty paid on inputs 1)RM = 148,83,000 X (10.3/110.3) = 13,89,800 2)Machinery 980,09,400 X ( 10.3/110.3)= 747,931

Total =21,37,731.

Duty payable : as the turn over is less than 400 laks he need have to pay duty upto 150 lakhs

& therefore may not avail cenvat credit but on crossing the limit he can avail 50% the entire Credit ,i.e. is Rs 10,68,865.50Duty payable on 150 lakhs = 150,00,000 X 10.3/100= 15,45,000Duty after adjusting credit = 15,45,000 – 10,68,865.50 = 476, 134.

SOLVE

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Example 37: M/s. XYZ Ltd., sold machinery to Mr. Kapoor at a price of ` 5 lakhs on 15th June, 2012 andthe same was removed from the factory at Kolkata. The rate of excise duty applicable is 12.36% on thedate of removal. Mr. Kapoor refused to take delivery of the machine when it reached his destination.In the meantime, M/x. XYZ Ltd. increased the prices of the similar type of machinery to ` 6 lakhs witheffect from 16th June, 2012. The machinery as refused by Mr. Kapoor has been sold on 20th June 2012to Mr. Lal at the revised price of ` 6 lakhs. The excise duty including Education Cess is 12.36% applicablewith effect from 10th June, 2012.Explain the following with reasons:(i) What is the value to be taken as assessable value?(ii) What is the rate of excise duty applicable and duty payable on above transaction?(iii) The Central Excise Officer is demanding duty on the price of ` 6 lakhs at the time of sale to Mr. L. Ishe right in his approach?(iv) Does cost of production have any bearing on the assessable value?

SOLUTION

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(i) The price prevailing at the time of removal from factory (i.e. ` 5 lacs on 15th June 2012 is theassessable value.(ii) The applicable rate of duty is @1 2.36% and duty amount is ` 61,800 (i.e. ` 5 lacs x 12.36/100).(iii) The Central Excise Officer is not right in his approach.(iv) Cost of production has no bearing with assessable value in present case. Central Excise valuationcan be below manufacturing cost. If price is the sole consideration and dealing between sellerand buyer are arm’s length, assessable value will be decided on the basis of selling price, even ifit is below manufacturing cost. So cost of manufacturing will not change the assessable value.

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Answer:Calculation of Assessable ValueOffered Price to DEF = 14,000ADD: Discount = 1,000ADD: Packing charges = 1,300ADD: Free after sale service = 500ADD: Dharmada charges = 200Assessable Value = 17,000

E-Example 39: How will the assessable value under the subject transaction be determined under section 4 of the Central Excise Act, 1944? Give reasons with suitable assumptions where necessary.Contracted sale price for delivery at buyer’s premises ` 10,00,000. The contracted sale price includesthe following elements of cost:(I) Cost of drawings and designs ` 3,000(II) Cost of primary packing ` 3,500(III) Cost of packing at buyer’s request for safety during transport ` 7,500 (IV) Excise duty ` 2,11,200(V) VAT (Sales tax) ` 37,000 (VI) Octroi ` 9,500(VII) Freight and insurance charges paid from factory to ‘place of removal ` 20,000 (VIII) Actual freight and insurance from ‘place of removal’ to buyer’s premises ` 42,300

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Answer:39Sale price ` 10,00,000Less: Excise Duty ` 2,11,200VAT ` 37,000Octroi ` 9,500Freight and insurance from Place of removal to buyers ` 42,300= 3,00,000Assessable Value = 7,00,0000

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Example 41: B Ltd manufactures two products namely, Eye Ointment and Skin Ointment. Skin Ointment is aspecified product under section 4A of the Central Excise Act, 1944. The sale prices of the two productsare ` 43 per unit and ` 33 per unit respectively. The sale price of both the products included 14% exciseduty as BED, education cess of 2% and SAH of 1%. It also includes CST of 4%. Additional information isas follows:Units cleared: Eye Ointment - 1,00,000 units, Skin Ointment – 1, 50,000 units. Deduction permissible undersection 4A: 40%Calculate the total excise duty liability of B Ltd for both the products.

solutionAnswer:Eye Ointment:Let us assume X as the assessable valueAssessable Value = xAdd: BED @14% = 0.14XAdd: Education Cess @2% = 0.0028XAdd: SAH @1% = 0.001 4X= 1.1 442XAdd: CST @ 4% = 0.045768XSelling price = 1.1 89968X

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Solution 41.

Assessable value ` 43 x 1/1.189968Total Assessable Value = ` 36.1354 per unitExcise duty @14% = ` 36, 13,540 (i.e. ` 36.1354 x 1,00,000 units)Education Cess @2% = ` 5, 05,896SAH Cess @1% = ` 10,118Total Excise Duty = ` 5,059= ` 5, 21,073Skin OintmentMaximum Retail Price = ` 33Less: Abatement @40% = ` (13)Assessable Value (per unit) = ` 20Total Assessable Value = ` 30,00,000 (i.e. ` 20 x 1,50,000 units)Excise Duty @14% = ` 4,20,000Education Cess @2% = ` 8,400SAH Cess @ 1% = ` 4,200Total Excise Duty = ` 4,32,600B Ltd liable to pay total excise duty = ` 9,53,673

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Example 44: A manufacturer having a factory at Mumbai has uniform price of ` 2,000 per unit (exclusiveof taxes and duties) for sale anywhere in India. During the financial year 2012-13, he made the followingsales:Particulars Quantity sold in units Cost of transportation (`)Goods sold at factory in Mumbai 1,000 NilGoods sold from New Delhi 500 12,000Goods sold from Chennai 600 48,000Goods sold from Kolkata 900 30,000Find assessable value per unit and total excise duty payable by the manufacturer. Excise duty @12% plus2% education cess and 1% Secondary and Higher Education cess

SOLUTION 44

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Answer: (Rule 5 of valuation rule)Selling price per unit = ` 2,000Less: cost of equalized freight = ` 30Assessable value per unit = ` 1,970Total excise duty payable = ` 7,30,476 (3,000 units x ` 1 ,970 per unit x 12.36%)Working note:(1)Particulars Quantity sold in units Cost of transportation (`)Goods sold at factory in Mumbai 1,000 NilGoods sold from New Delhi 500 --12,000Goods sold from Chennai 600--- 48,000Goods sold from Kolkata 900---- 30,000Total 3,000 90,000(2) Cost of equalized freight = ` 30 (` 90,000/3,000 units)(3) The aforesaid equalized freight has to be certified by the Cost Accountant/Chartered Accountant/Company Secretary in practice.

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Example 45: Compute the assessable value and amount of excise duty payable under the CentralExcise Act, 1944 and rules made there-under from the following information:Particulars No. of units Price at Factory Per unit Price at Depot Per unit Rate of DutyAdvaloremGoods (i) transferred from (ii) factory todepot on 8th February 1,000 ` 200 ` 220 12%(ii) Goods actually sold at depot on18th February 950 ` 320 ` 350 8%

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Solution 45Answer: (Rule 7 of valuation rules)Amount (`)Assessable Value = 2,20,000 [i.e. 1,000 units × ` 220]Basic Excise Duty = 26,400 [i.e. ` 2,20,000 × 12/100]2% Education Cess = 528 [i.e. ` 26,400 × 2/100]1% SAH Edu. Cess = 264 [i.e. ` 26,400 × 1/100]Total Excise Duty = 27,192 [i.e. ` 26,400 + `528 + `264]

Example 46: Name the Cost Accounting Standard which is to be used while calculating cost ofproduction for valuation for captive consumption under Central Excise. Is the standard mandatory?AS per that standard, which of the following costs are includible/not includible in ‘Cost of Production’?(i) Research and Development Cost(ii) Interest on capital borrowed,(iii) Lay-off wages to workmen(iv) Packing cost.Answer: (Rule 8 of valuation)

ANS 46

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The Cost Accounting Standard 4 is required to be used while calculating cost of production for valuationfor captive consumption under Central Excise. As per circular issued by CBEC, cost of production isrequired to be calculated as per CAS-4 issued by the Central Council Members of The Institute of CostAccountants of India (ICAI). Hence, the standard is mandatory.Cost includible Cost not includible(i) Research and Development (i) Interest on capital borrowed(ii) Packing cost (ii) Lay off wages to workmen

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Example 38: ABC Ltd of Kanpur agreed to sell an electronic motor to DEF Ltd of New Delhi for ` 15,000.00on ex-factory basis. Other particulars are:(i) Transportation and transit insurance were arranged by ABC Ltd. This was at the request of DEFLtd and amounted to for ` 1,250 and ` 1,500 respectively which were charged separately. Actualtransportation charges amounted to ` 1,000 only.(ii) A discount of ` 1,000 was given to DEF Ltd. on the agreed price on payment of an advance of` 3,500 with the order. (Ignore notional interest on advance).(iii) Interest of ` 800 was charged from DEF Ltd. as it failed to make the payment within 30 days.(iv) Packing charges of the motor amount to ` 1300.(v) The expenditure incurred by ABC Ltd. towards ‘free after sale service’ during warranty periodcomes out to be ` 500 per motor.(vi) Dharmada charges of ` 200 were recovered from DEF Ltd.(vii) ABC Ltd. sold a lubricant worth ` 250 along with the motor to the interested customers. Lubricantwhich was purchased from the market by ABC Ltd. at ` 200 ensured durability and high efficiencyof the motor. DEF Ltd. opted for the said lubricant

Fill in the blanks

1) Goods covered by central excise tariff but fully exempt from duty are _______2) (excisable/not excisable)2)SSI units whose turnover exceeds Rs ________ per annum have to furnish declaration in prescribed form for central excise purpose.3)Compressing & bottling gas is/is not manufacturing service4)Affixing brand name , labelling or relabelling & repacking from bulk to small pack of ready made garments ________ (is/is not ) manufacture5)Cenvat credit _______( can/cannot )be utilized for payment of service tax on output service.

04/07/2

023

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EXAMPLE 49: A COMPANY MANUFACTURING A DUTIABLE PRODUCT IN THE FACTORY AT COCHIN, WAS MAKINGSALES THROUGH ITS DEPOT IN MUMBAI. THE SALE PRICE AT MUMBAI DEPOT AT ` 30,000 PER PIECE INCLUSIVE OFTRANSPORT CHARGES FROM COCHIN TO MUMBAI OF ` 3,000. THE DEPOT PRICE INCLUDES EXCISE DUTY @ 16% PLUSCESS @ 3% BUT EXCLUDES MAHARASHTRA VAT. ANNUALLY 2,000 PIECES ARE SOLD BY THE DEPOT. THE COMPANYDECIDES TO MAKE DIRECT SALE FROM COCHIN TO ITS CUSTOMERS WHICH WOULD ATTRACT CST AT 2% TO BE BORNEBY THE COMPANY. THE COMPANY WANTS TO CLOSE DOWN THE DEPOT AT MUMBAI BRINGING COST SAVING OF` 5,00,000 PER ANNUM. THE SALE PRICE WILL CONTINUE TO BE AS EARLIER.

EVALUATE THE IMPLICATIONS OF THE DECISION.

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04/07/2

023

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Fill in the blanks:

An assessee can claim refund of ED with in _____ from the relevant date u/s11 (b)of the central excise act.

EOU has to issue ___________ certificate for obtaining inputs w/o Payment of ED.

ANS: 1) 1YR (2)CT-3

04/07/2

023

TRUE or FALSE?TRUE or FALSE?

WASTE & SCRAP ARE ALWAYS TREATED AS EXCISABLE GOODS.

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Fill in the blanks:

vi)In case of central execise & customs appeals must be filed with in ____Days from the date of communication of order.vii)Job work done under cenvat provisions ________( is /is not)exempt from service tax.viii)Goods under central excise should be _______ (movable /immovable) and _________ (marketable/packaged)ix)CETA specifies some _____( processes /operations)as amounting to manufacture.x)Processing can amount to manufacture if a ____(new /existing) and ___(identifiable/ similar) known in the market emerges. xi)Erection of civil structure ________ (is /is not)manufacture.

04/07/2

023

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Vat & cst

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Example 24:M/s. Snow White Ltd., Mumbai sells iron rods to M/s. Hyderabad Ltd. in Vijayawada for a value of` 10,00,000 inclusive of Central Sales Tax @ 2%. The local sales tax on iron rods in Mumbai is 12.5%. Boththe dealers are registered dealers.(i) Ascertain the Central Sales-tax payable.(ii) If Hyderabad Ltd. were unable to submit Form ‘C’, being an unregistered dealer, what will be theCentral Sales Tax liability, if the local sales tax rate is 12.5% ?Note: Iron rods are not declared goods

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SOLUTION

CST payable = ` 19,608 [(i.e. ` 10,00,000 x 100/102) x 2/100]CST payable = ` 1,22,549 [(i.e. ` 10,00,000 x 100/102) x 12.5/100]

Example 25:Mr. K of Kolkata sells goods to Mr. C of Chennai and delivers the same at Kolkata to MKS Transport.The lorry receipt was sent to Mr. C by post. While goods were in transit, Mr. C sells the goods to Mr. V ofVijayawada by making an endorsement of LR and goods were diverted to Vijayawada. Is the secondsale between Mr. C and Mr. V chargeable to tax?

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SOLUTION

Answer:The first sale by Mr. K to Mr. C is chargeable to central sales tax. However, sale of goods by C to V isexempt under Section 6(2) i.e. subsequent sale by transfer of documents to avoid multiple tax incidences.Note: Form E-I from K and Form C from V has to be received by C.

Example 23:Total interstate sale for the Financial Year 2011-12 of X Ltd. is ` 1,50,70,000, which consists of the following:`4 % CST sales 91,50,0002% CST sales 59,20,000Out of the goods sold for ` 91,50,000, on 16.7.2011 that were liable to CST @ 4% goods worth ` 50,000were returned on 12.12.2011 and goods worth ` 1,20,000 were returned on 01.2.2012. A buyer to whomgoods worth ` 55,000 carrying 2% CST was dispatched on 16.4.2011, rejected the goods and the samewere received back on 15.1.2012.Compute the taxable turnover and tax liability of X Ltd., since all the relevant Forms have been received.

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SOLUTION

Answer:Statements showing taxable turnover and CST payable:Particulars Taxable Turnover (`)CST payable WorkingsSales against Form ‘C’ 86,34,615 1,72,692 91,00,000 – 1,20,000 = (`) 89,80,000. CST = ` 1,72,692 (89,80,000x100x104) x 2/100Sales against Form ‘C’ 57,50,000 1,15,000 ; 58,65,000 x 100/102 = ` 57,50,000Sales without Form ‘C’ 1,15,385 4,615 1,20,000 x 100/104 = ` 1,15,385Total 1,45,00,000 2,92,307Working Note:Particulars 4% CST sales (`) 2% CST sales (`)Sales 91,50,000 59,20,000Less: sales returns within six months from the date of sales 50,000Less: rejected — 55,000Sub-total 91,00,000 58,65,000

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Mr. Raja, a first stage dealer in packing machinery in the State of Tamil Nadu furnishes the following data:` (i) Total inter-state sales during F.Y. 2010-11(CST not shown separately) 92,50,000 (ii) Above sales include: Excise duty 9,00,000 Freight (Of this ` 50,000 is not shown separately in invoices) 1,50,000 Insurance charges incurred prior to delivery of goods 32,000 Installation and commissioning charges shown separately 15,000 Incentive on sales received from manufacturer 30,000

Determine the turnover and CST payable, assuming that all transactions were covered by valid ‘C’ Forms.

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ANSWERComputation of Mr. Raja turnover and central sales tax payableParticulars `Total inter-State sales 92,50,000Less: Freight shown separately in the invoices 1,00,000Installation and commissioning charges shown separately 15,000-------------Aggregate turnover 91,35,000========CST payable is ` 1,79,118 (i.e. ` 91,35,000 x 2/102)Taxable turnover is ` 89,55,882 (i.e. ` 91,35,000 – 1,79,118)Notes:Excise duty forms part of the sale price and is not deductible.Freight not shown separately in the invoices and insurance charges incurred prior to delivery of goodsare not deductible in calculating the turnover.Sale price includes incentive on sales received from manufacturer.The CST on transactions covered by valid ‘C’ forms is 2% or the State sales-tax rate, whichever is lower.It has been assumed that in this case, the State VAT rate is higher than 2%. Therefore, the rate of CST istaken as 2%.

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SCHEDULE

Class/Week Topic Reading Assignment

1 Topic Chapter Task



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CUSTOMS

PR

OB

L EM

S &

SO

L UT

I ON

S

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CUSTOM TA

RIFF A

CT 1975

SC

HE

DU

LE

S

–I

&

I

I

HS

N

-5

C

OL

H

EA

DI

NG

&

R

AT

ES

O

F

DU

TY

SA

FE

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AR

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DU

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COMPUTATION OF LANDED COST

1) Assessable value of goods Rs 10,00,000/=2) Basic custom’s duty @ 10 %3)ED on like articles 12%4)Addl custom’s duty equalling ST = 4%5)Education cess 2% higher education cess 1% Compute customs’ duty & imported cost of goods

Ans:

Sl no. Details Amount Rs

1 A.V. 10,00,000

2 Basic CD 100,000

3 Total 11,00,000

4 Addl Duty/ED @ 12 % 132,000

5 Cess @ 3%on 232,000 6,960

6 Total value u/s 3(5) of cta 12,38.960

7 Addl. duty@ 4% 49,558

8 Landed cost 12,88,518

9 Total customs duty 288,518 54

INTRODUCTION/COURSE DESCRIPTION

IntroductionIntroductory notes

Introductory notes

Introductory notes

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OBJECTIVES AND RESULTS

ObjectivesCourse objective 1Course objective 2Course objective 3

ResultsExpected results

Skills developedSkill 1Skill 2

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VOCABULARY

Term OneDefinition ADefinition B

Term TwoDefinition

Term ThreeDefinition

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Add procedure here

Step oneStep two

PROCEDURES/LECTURE SLIDE

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GRAPHS/CHARTS 1

Test 1 Test 2 Test 3 Test 40

102030405060708090

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FirstSecondThird

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GRAPHS/CHARTS 2

Project

Item 1Item 2Item 3Item 4

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CONCLUSION

Add your conclusions here.

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QUESTIONS/DISCUSSIONS

Question OneDiscussionDiscussion

Question TwoDiscussion

Questions ThreeDiscussion

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