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C E N T R A L E X C I S E
INTRODUCTION TO CENTRAL EXCISE:
The Constitution of India (COI) has given power to levy tax to
central and
State Government under seventh schedule. The taxation in India
is either
charged by the State Governments or by the Central Government.
In the
basic scheme of taxation in India, it is conceived that Central
Government
will levy and collect tax revenue from Income Tax (exception
Agricultural
Income), Excise (except on alcoholic drinks, Etc.) and Customs
while State
Government will get tax revenue from Local Sales Tax, Excise on
liquor and
tax on Agricultural Income and the Municipalities will get tax
revenue from
Octroi and Property Tax.
Taxes are of two types viz. Direct Taxes and Indirect Taxes.
Direct Tax is the tax, which is paid directly by people to the
government,
while indirect tax is paid indirectly by people to the
government through
registered government representatives.
Income Tax is paid directly to the government therefore it is a
direct tax
while excise duty is paid by people to the manufacturer who pays
it to the
government, therefore it is an indirect tax.
Direct Tax:
'Mr. X' a proprietor of ABC trading company, earns profit of Rs.
8, 50,000/-.
He is liable to pay income tax on profit earned by him. He
himself will be
responsible for payment of income tax. That is means it is
direct payment by
the assessee to the Government, hence it is called direct
tax.
Indirect Tax:
'Mr. Y' purchases a mobile phone for his personal use from ABC
Ltd..
He has been charged MVAT (i.e. Local Sales Tax) Extra in
addition to basic
price of Mobile Phone by ABC Ltd In short; he needs to pay basic
price plus
MVAT (i.e. Local Sales Tax) to the ABC Ltd. Now liability of
paying the tax
collected from consumer is on ABC Ltd. This example clearly
indicates that
tax is actually deposited by ABC LTD but indirectly paid to the
government
by Mr. Y. That is why MVAT (Local Sales Tax is an example of
indirect tax)
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The following diagrammatic representation shows the prevailing
tax structure in India of Direct and Indirect Tax in Brief.
MEANING OF CENTRAL EXCISE ::
Central Excise is an indirect tax; which is levied and collected
on the goods/commodities manufactured in India. Generally,
manufacturer of commodities is responsible to pay duty to the
Government. This indirect taxation is administered through an
enactment of the Central Government viz., The Central Excise Act,
1944 and other connected rules- which provide for levy, collection
and connected procedures. The rates at which the excise duty is to
be collected are stipulated in the Central Excise Tariff Act, 1985.
It is mandatory to pay Central Excise duty payable on the goods
manufactured, unless exempted e.g., duty is not payable on the
goods exported out of India. Further various other exemptions are
also notified by the Government from the payment of duty by the
manufacturers.
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This act is applied to whole of India except Jammu &
Kashmir. Central Excise Law is a combined study of:
Central Excise Act (CEA), 1944; Central Excise Tariff Act
(CETA), 1985; Central Excise Rules, 2002; and CENVAT Credit Rules,
2004
HOW TO DECIDE DUTIABILITY?
As per section 3 of Central Excise Act (CEA) excise duty is
levied only if the following all conditions are satisfied: -
PREREQUISITES FOR DUTIABILITY
There should be goods. Goods must be moveable Goods are
marketable Goods are mentioned in the Central Excise Tariff Act
(CETA). Goods are manufactured in India.
I. MEANING OF GOODS UNDER CENTRAL EXCISE: "Goods" have not been
defined in Central Excise Act.
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As per Article 366(12) of Constitution of India: Goods include
all material commodities and articles.
Sale of Goods Act defines Goods means: II.
"every kind of movable property other than actionable claims and
money; and includes stocks and shares, growing crops, grass and
things attached to or forming part of the land which are agreed to
be severed before sale or under the contract of sale.In addition to
this definition, under central excise the goods to become
"excisable goods" have to pass following acid tests: Goods must be:
1) Movable2) Marketable
II. WHAT IS MOVABILITY?
Moveable means goods, which can be shifted from one place to
another place, e.g., motor car, mobile phone, computer etc. The
goods attached to earth are immovable goods, such as, Dams, Roads,
and Buildings etc. Moveable Goods are manufactured or produced but
immoveable goods are constructed.Due to this Movable aspect under
central excise, although flat is manufactured by builder it is not
an excisable commodity.
III. WHAT IS MARKETABILITY?
Marketable means goods which are capable of being sold, there
should be at least one buyer for the commodity in the market is
sufficient to call the good as marketable.e.g., Molten iron ore at
1300 degree to 1400 degree Celsius is not marketable, therefore not
a good. Similarly, flour produced in own factory for use as raw
material in own factory for further production
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of bread is a good because it is marketable. Actual sales are
not relevant for calling any item as goods. Sale is not relevant.
Goods produced for free distribution, as sample, gifts, or
replacement during warranty period is also liable of excise duty.
Excisable Goods are those goods, which are mentioned in the items
of tariff in CETA. Sec 2(d) defines Excisable Goods as goods
specified in the schedule of CETA 1985 as being subject to a duty
of excise and includes salt.Goods produced for free distribution,
as sample, gifts, or replacement during warranty period is also
liable of excise duty.
IV. GOODS MUST BE MENTIONED IN CENTRAL EXCISE TARIFF ACT
(CETA)?
Goods specified in the Schedule to Central Excise Tariff Act,
1985 as being subject to a duty of excise and include salt. Thus,
unless the item is specified in the Central Excise Tariff Act as
subject to duty, no duty is leviable. Some goods like wheat, rice,
cut flowers, horses, soya beans etc. are not mentioned in Central
Excise Tariff at all and hence they are not excisable goods, though
they may be goods.
V. GOODS MUST BE MANUFACTURED "IN INDIA"
Last operative word of section 3 of Central Excise Act is that
excisable goods must be manufactured or produced in India. Thus,
excise levy cannot be imposed on imported goods or goods
manufactured in Nepal.
Once all above conditions are satisfied the person has to get
himself registered under the Central Excise.
SPECIFIC EXEMPTIONS UNDER CENTRA EXCISE:
If production or manufacture is in special economic zone then no
excise duty is levied.
Excise Duty is not levied on:
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1. Services such as doctors treating the patients, accountants
preparing the accounts, in these cases service tax are levied.
2. Immovable goods such as roads, bridges and buildings.
3. Non-Marketable goods, i.e., goods for which no market exists,
e.g., melted iron ore at 1600 degree Celsius.
4. Goods that are not mentioned in CETA; and
5. Goods manufactured or produced out of India.
PERSONS REQUIRING TO GET REGISTERED UNDER CENTRAL EXCISE
The persons satisfying all the above conditions have to pay the
excise duty. Mainly we can categories them in following manner
1. Every Manufacturer of dutiable excisable goods
2. First & Second Stage Dealer (Including Manufacturers
depots& imports) desiring to issue Cenvatble invoices.
3. Persons holding warehouses for storing non duty paid
goods
4. Persons who obtain excisable goods for availing end-use based
exemption
5. Exporter manufacturers under rebate bond procedure, EOUs
& EPZ units which have interaction with the domestic economy
(Through DTA sales or procurement of duty free inputs)
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1. Manufacturer is a person who actually manufacturing or
producing the excisable goods.
2. Also a person who gets the production of other and sell it
after putting its own brand then he will not be called
manufacturer, e.g., if X Ltd gets the fans made from some person
and sell it after putting their brand name, the X Ltd will not be
called as manufacturer. The person actually making the fans will be
called manufacturer.
While understanding manufacturer we need to understand what
manufacturing means: - I. WHAT IS MEAN BY MANUFACTIRING: - The term
manufacturing includes: -
Manufacturing Deemed Manufacturing Production Assembling
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a. Manufacturing According to Section 2(f) of Central Excise Act
manufacture includes any process:
1. Incidental or ancillary to the completion of manufactured
product or
2. Which is specified in relation to any goods in the Section or
Chapter notes of the Schedule to the Central Excise Tariff Act,
1985 as amounting to manufacture, or
3. Which are specified in third schedule to the CETA, involves
packing or repacking of such goods in a unit container or labeling
or re-labeling of containers or declaration or alteration of retail
sale price or any other treatment to make product available in the
marketable to the consumer. Clause (ii) and (iii) are called deemed
manufacture. Thus, definition of manufacture is inclusive and not
exhaustive. The word Manufacture as specified in various Court
decisions shall be called only when a new and identifiable goods
emerge having a different name, character, or use; e.g.,
manufacture has taken place when table is made from wood or of pulp
is converted into base paper, or sugar is made from sugarcane.
b. Deemed Manufacture Deemed manufacture is of two types: -
1. CETA specifies some processes as amounting to manufacture. If
any of these processes are carried out, goods will be said to be
manufactured, even if as per Court decisions, the process may not
amount to manufacture [Section 2(f) (ii)].
2. In respect of goods specified in third schedule of Central
Excise Act, repacking, re-labeling, putting or altering retail sale
price etc. will be manufacture. The goods included in Third
Schedule of Central Excise Act are same as those on which excise
duty is payable u/s 4A on basis of MRP printed on the package.
[Section 2(f) (iii)].
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c. Production Production has also not been defined in CEA but
production is used to cover items like coffee, tea, tobacco, etc.
which are called to have been manufactured nut produced. d.
Assembling Assembly of various parts and components amount to
manufacture provided it result in movable goods which have
distinctive identity, use, character, name etc. e.g., assembly of
computer is manufacture. Assembly of air conditioner in a car is
not manufacture as no new identifiable product emerges.
FIRST & SECOND STAGE DEALER DESIRING TO ISSUE CENVATBLE
INVOICES
First Stage Dealer is one who purchases goods directly from any
of the following:
The manufacturer under the cover of any invoice issued in terms
of the provision of Central Excise Rules, 2002 or from the depot of
the said manufacturer.
Goods purchased from the premises of the consignment agent of
the said manufacturer.
Goods purchased from any other premises from where the goods are
sold by or on behalf of the said manufacturer.
Goods purchased from an importer or from the depot of an
importer.
Goods Purchased from the premises of the consignment agent of
the importer.
Procedural requirement for the first & second stage
dealer
Registration :- They have to get themselves registered with the
excise authorities
Maintenance of stock register: Every dealer has to maintain
register for receipts and issue of inputs. This register is to be
maintained on daily basis
Invoice Requirements : - CENVAT credit in respect of the inputs
and capital goods purchased from a dealer shall be allowed if : -
1)The dealer maintains records indicating that inputs and capital
goods were supplied from the stock on which duty was paid by the
manufacturer / producer of such goods; and2)Only an amount of such
duty on pro-rata basis has been indicated in the invoice issued by
the dealers
Filing of the return : - Dealers are required to submit to the
superintendent of central excise, a return in prescribed from
within days from the close of each quarter of the year
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Flowchart for first stage excise dealer
The categorization of a dealer as first stage or second stage is
not predefined. It is decided during the purchase. Therefore, a
dealer may be a first stage dealer or a second stage dealer
depending on the type of purchase. Let us assume we are a First
Stage Dealer and you buy the goods from the importer or
Manufacturer.
Second Stage Dealer A registered dealer who purchases goods from
the First Stage Dealer is called a Second Stage Dealer. Flowchart
for Second stage excise dealer Let us assume we are a First Stage
Dealer and you buy the goods from the importer or Manufacturer.
PERSONS HOLDING WAREHOUSES FOR STORING NON DUTY PAID GOODS
Rule 20 of CE Rules permit warehousing of certain goods in
warehouses without payment of duty. These goods are coffee,
petroleum products, benzene, etc. In such cases, the duty liability
is on the person who stores the goods.
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PERSONS EXEMPTED FROM REGISTRATION UNDER CENRAL EXCISE
The following persons have exempted specified categories of
persons/premises from obtaining registration, as follows: -
1. Persons who manufacture the excisable goods, which are
chargeable to nil rate of excise duty or are fully exempt from duty
by a notification.
2. Small scale units availing the slab exemption based on value
of clearances under a notification. However, such units will be
required to give a declaration (Annexure-1) once the value of their
clearances touches Rs.90 lakhs.
3. In respect of ready-made garments, the job-worker need not
get registered if the principal manufacturer undertakes to
discharge the duty liability.
4. Persons manufacturing excisable goods by following the
warehousing procedure under the Customs Act, 1962 subject to the
following conditions a. The said excisable goods and any
intermediary or by-product including the waste and refuse arising
during the process of manufacture of the said goods under the
Customs Bond are either destroyed or exported out of the country to
the satisfaction of the Assistant Commissioner of Customs or the
Deputy Commissioner of Customs, in-charge of the Customs Bonded
Warehouse; b. The manufacturer shall file a declaration in the
specified form annexed hereto in triplicate for claiming exemption
under this notification; c. No drawback or rebate of duty of excise
paid on the raw materials or components used in the manufacture of
the said goods, shall be admissible
5. The person who carries on wholesale trade or deals in
excisable goods (except first and second stage dealer, as defined
in CENVAT Credit Rules, 2001).
6. A Hundred per cent Export Oriented Undertaking (EOU) or a
unit in Free Trade Zone or Special Economic Zone licensed or
appointed, as the case may be, under the provisions of the Customs
Act, 1962.
7. Persons who use excisable goods for any purpose other than
for processing or manufacture of goods availing benefit of
concessional duty exemption notification.
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PROCEDURE OF REGISTRATION UNDER CENTRAL EXCISE INCLUDING
RELEVANT SPECIMEN
Application for registration is given in prescribed format to
the Assistant Commissioner or Deputy Commissioner in duplicate.
(Form A - 1 for all persona except certain textile processors/
Cheroot manufacturers) Separate From A - 2 is prescribed for
registration of power loom weavers/Hand Processors/ dealers of
yarns and fabric and manufacturer of readymade garments. From A - 3
is the application for the registration specified for manufacture=r
of hand-rolled cheroots of tobacco
Application should be accompanied by : - A self-attested copy of
Permanent Account number (PAN) allotted by income tax
department
Copy of the registration Certificate obtained under local Sales
Tax (E.g. In Maharashtra MVAT Registration Certificate )
Copy of the registration certificate obtained under interstate
sales tax (viz. Central Sales Tax Registration Number)
Copy of the Shop Act license / NOC from the Grampanchayat or
from competent local authority
Copy of the Factory Registration certificate under factory
Act.
Balance Sheet of last three years (not applicable In Case of
assesses starting new business
Statement Of turnover for current financial year till date of
registration
The applicant or by his authorised agent having general "Power
of Attorney (POA)". The Range Officer shall have power to call the
original documents to verify power of attorney. Such document shall
not be retained by the Range Officer but be returned immediately
after verification
Memorandum of association and article of association in case of
company / in case of partnership Partnership deed / in case of co
operative society by laws etc.
Copy of registration number obtained under Customs (Viz. Customs
Registration No. (BIN No.)) If Applicable
Import Export Code Registration Number copy obtained from
Directorate General Foreign Trades If Applicable
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The details of the three major excisable goods / inputs likely
to be manufactured / used / traded should be mentioned
One Cancelled cheque along with the letter from the banker
verifying account details
Current / Saving Bank Account statements of last few months of
company and directors respectively
A copy of the Ground plan
Flow chart showing exact process of manufacturing (In case of
manufacturer)
Copy of the board resolution in favor of registration under
central excise in case of company
Two address proof of applicant who want to get register 1) In
Case of let out property a) Copy of valid registered rent
agreement. b) Copy Electricity Bill /Telephone bill / Property Tax
assessment order or rent receipt of the owner. (Any Two) Date of
the document should not be older that 6 month c) No Objection
Certificate from the owner of the property as to registration under
Central Excise Act. 2) In Case of property owned by applicant
Copy Electricity Bill /Telephone bill / Property Tax assessment
order or rent receipt (Any Two) Name shown on the abovementioned
document should be matched with the name of the applicant mentioned
in the application form - Date of the document should not be older
that 6 month
Address & identity proof of directors in case of company
(Documents must be given of the director who is signing the
application (Two documents for Address proof & One for Identity
Proof (Having Photo Identity)) / the word director to be changed to
the partner in case of partnership firm. a) Copy photocopy of
Passport / Driving License / Bank Account / Voters identity card /
Ration Card / Maintenance Bill / Electricity Bill - for Residence
Proof Name shown on the above mentioned document should be matched
with the name shown of the director in the application form - Date
of the document should not be older
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that 6 month b) Self Attested Pan Card Copy of the director /
Partner
All other NOCs & documents according to the nature of the
business.
The registration certificate mentions the Excise Control Code
(ECC), the ECC is a 15 digit number which has first 10 digits of
PAN, next two digits are either XM for manufacturer or XD for
dealer and the last three digits are number like 001,002 etc.
When a manufacturer who is exempt from the registration is
required to file a declaration, the same will be filed with the
Assistant Commissioner of the jurisdictional Central Excise
Division.
The Verification By department: The verification shall be made
by the Inspector or Superintendent of Central Excise having
jurisdiction over the premises (Range Officer) in respect of which
the applicant has sought registration, within 5 working days of the
receipt of application. As per the rules/notification, the
registration certificate shall be issued within 7 working days. The
Range Officer (Superintendent) either himself or through the Sector
Officer (Inspector) shall verify whether the declared address and
operations (intended) are genuine and the declarations made in the
application are correct. If found in order, he will endorse the
correctness of the same and append his dated signature on the
office copies of the Registration application and the copy of the
application with the registrant. If any deviations or variations
are noticed during the verification, the same should be got
corrected. Any major discrepancy, such as fake address,
non-existence of any factory etc. shall be reported in writing to
the Divisional Officer within 3 working days and the Range Officer
shall initiate action to safeguard revenue.
Issue of Registration Certificate: All Registrations of each
type should be numbered in a single series for the Range as a
whole, commencing with serial no. 1 for each calendar year. The
issuing authority should make every effort to complete all
formalities and grant the Registration Certificate within 7 days of
receipt of application in his office. Every Registration
Certificate granted / issued by the registering authority shall be
under his signature. He should also countersign the ground plan
accompanying the Registration Certificate. The Registration
Certificate and the duplicate copy of the plan should be returned
to the registered person who shall exhibit his Registration
Certificate or a certified copy thereof in a conspicuous
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part of the registered premises. The Registering authority in a
permanent file shall keep the application as well as the ground
plan
Registration is not transferable.
If manufacturer cease to produce i.e., stops the production
permanently then he should apply for de-registration.
SPECIMEN OF GROUND PLAN
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PROFARMA OR SPECIMEN REGISTRATION FROM UNDER CENTRAL EXCISE
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CHARGEABILITY OF EXCISE DUTY & RELEVANT RECORDS
Excise duty is levied on production of goods but the liability
of excise duty arises only on removal of goods from the place of
storage, i.e., factory (where any part of the excisable goods other
than salt are manufactured or any manufacturing process is carried
out.) or warehouse (the place at which the goods are stored after
their production in factory) Excise duty is levied if goods are
marketable. Actual sale is not relevant. Therefore, goods, which
are given for free replacement during warranty period, are also
liable for excise duty. As Excise duty is levied at the time of
removal of goods. Hence the date of its actual production is not
relevant. The date of removal is relevant and the rate of excise
duty applicable on the date of removal shall be actual rate of
excise duty to be paid. Clearance means taking goods out of
factory. Thus, finished goods can be stored not removed in the
place of manufacture (factory) without payment of duty. There is no
time limit for removal of gods from place of manufacture i.e.,
factory. The records have to be maintained by manufacturer
indicating particulars regarding:
1. Description of goods manufactured or produced
2. Opening Balance of goods manufactured or produced
3. Quantity produced or manufactured
4. Stock of goods
5. Quantity of goods removed
6. Assessable Value
7. Amount of duty payable; and
8. Amount of duty actually paid
The record should be preserved for 5 years. If the records are
not maintained then penalty up to duty payable can be imposed and
goods can be confiscated. If goods are stored at any other place
other than factory, then goods can be cleared from factory without
payment of duty, if commissioner permits. Goods can be cleared out
of factory without payment of duty for carrying out tests and
omission per unit.
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TYPES & RATES OF EXCISE DUTIES
RATES OF EXCISE DUTY The basic rate of excise duty is 14% while
in some cases there is a special duty if 8% which makes the excise
duty in those cases at 22%. There is at present a cess for
education called education cess, which is 2% of the excise duty;
therefore, the effective excise duty comes out as 14.42% or 22.66%.
DUTIES UNDER CENTRAL EXCISE ACT Basic duty and special duty of
excise are levied under Central Excise Act.
BASIC EXCISE DUTY TO BE TERMED AS CENVAT - Basic excise duty
(also termed as Cenvat as per section 2A of CEA added w.e.f.
12-5-2000) is levied at the rates specified in First Schedule to
Central Excise Tariff Act, read with exemption notification, if
any. [section 3(1)(a) of CEA]. The present general rate is 14%
w.e.f. 1-3.2008. There is partial exemption to a few products.
SPECIAL DUTY OF EXCISE It is leviable under second schedule to
the CETA, 1985. At present, all excisable goods are exempt from
this duty
EDUCATION CESS ON EXCISE DUTY - In case of excise duty,
calculation of cess is easy. If excise duty rate is 14%, education
cess will be 0.28%. it is levied as a duty of excise under section
91 read with Section 93 of Finance (No. 2) Act, 2004 states that
education cess is duty of excise, to be calculated on aggregate of
all duties of excise including special excise duty or any other
duty of excise, but excluding education cess on excisable goods).
As per section 93(3) of Finance (No. 2) Act, 2004, all provisions
of Central Excise Act, including those relating to refunds,
exemptions and penalties will apply to education cess.
SECONDARY AND HIGHER EDUCATION CESS It is levied under section
136 read with section 138 of the finance Act, 207 as a duty of
excise @1% on aggregate of all the duties of excise (Excluding
education cess and secondary & higher education cess)
EXCISE DUTY IN CASE OF CLEARANCES BY EOU The EOU units are
expected to export all their production. However, if they clear
their final product in DTA (domestic tariff area), the rate of
excise duty will be equal to customs duty on like article if
imported in India. [Proviso to section 3(1)]. Note that even if
rate of customs duty is considered for payment of duty, actually
the duty paid by them is Central Excise Duty. The rate of customs
duty is taken only as a measure. The EOU units can sale part of
their final products in India at 50% of customs duty or normal
excise
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duty in certain cases.
NATIONAL CALAMITY CONTINGENT DUTY A National Calamity Contingent
Duty (NCCD) has been imposed vide section 136 of Finance Act, 2001
[clause 129 of Finance Bill, 2001, w.e.f. 1.3.2001]. This duty is
imposed on pan masala, chewing tobacco and cigarettes. It varies
from 10% to 45%.
DUTIES UNDER OTHER ACTS - Some duties and cesses are levied on
manufactured products under other Acts. The administrative
machinery of central excise is used to collect those taxes.
Provisions of Central Excise Act and Rules have been made
applicable for levy and collection of these duties / cesses.
ADDITIONAL DUTY ON GOODS OF SPECIAL IMPORTANCE - Some goods of
special importance are levied Additional Excise under Additional
Duties of Excise (Goods of Special Importance) Act, 1957.
DUTY ON MEDICAL AND TOILET PREPARATIONS - A duty of excise is
imposed on medical preparations under Medical and Toilet
Preparations (Excise Duties) Act, 1955.
ADDITIONAL DUTY ON MINERAL PRODUCTS - Additional duty on mineral
products (like motor spirit, kerosene, diesel and furnace oil) is
payable under Mineral Products (Additional Duties of Excise and
Customs) Act, 1958.
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VALUATION OF GOODS:
Excise duty is payable on the basis of: 1. Specific duty based
on measurement like weight, volume, length etc. 2. Percentage of
Tariff value. 3. Maximum Retail Price. 4. Compounded levy Scheme 5.
Percentage of Assessable Value (Ad-velour duty) The entire concept
of Basis of Valuation can be explained with the help of the
following flow diagram.
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SPECIFIED EXCISE DUTY IS THE DUTY ON UNITS LIKE WEIGHT, LENGTH,
VOLUME, ETC
Items Basic of specific Excise Duty
Cigarettes Length of Cigarette
Matches Per 100 Boxes
Sugar Per Quintal
Marble slab & Tiles Square meter
Color TV Screen size in cm
Cement Per Tonne
Illustration
Items Basic Excise Duty
Cement If retail price is up to Rs.190 per 50 Kg then CED is
Rs.350 per MT If retail sale price is above Rs.190 but up to
Rs.250, per 50 Kg then CED is 12 % of retail sale price In other
cases CED is Rs.600 per MT
Cement Clinker
Rs. 350 per metric tonne
EXCISE DUTY ON TARIFF VALUE
Tariff Value is the value fixed by government from time to time.
Government can fix different tariff value for different classes.
Tariff Value is fixed for Pan Masala, Ready Made Garments.
Illustration
Pan Masala in retail packages,- Amount (Rs.)
1) If retail sale price is not printed on the retail pack, -
Containing not exceeding tow gram per pack
Rs.1.50 per unit pack
Containing more than 2 grams but not exceeding 4 grams per
pack
Rs.3.00 per unit pack
Containing more than 4 grams but not exceeding 10 grams per
pack
Rs.3.00 + Rs. 1.25 per gram or part thereof exceeding 4
grams
2)If retail sale price (RSP) is printed on the retail pack
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I) Goods fall under tariff item 21069020-
a) Having betel nut content not exceeding 15 %
78 % of printed RSP
b) Other than those specified in (a) above
56 % of printed RSP
II) Goods fall under heading 2403 50 % of printed RSP
EXCISE DUTY ON MRP
Government can specify the goods on which excise duty will be
based on MRP. MRP shall be the maximum price at which excisable
goods shall be sold to the final consumers. It includes taxes,
freight and transport charges, commission to dealers etc. In case
multiple MRPs are printed on product, the maximum MRP among all
will be considered for valuation purposes. Excise duty on MRP is
applicable on products on which quoting of MRP is necessary under
the Weights and Measurements Act, e.g., Chocolates, Biscuits,
Wafers, Ice Creams, Camera, Refrigerators, Fans, Footwear,
Toothpaste etc. E.g.: - MRP declared on package of shaving cream is
Rs.100, notified abetment is 30 % and the rate of excise duty is
14.42 %, then , the assessable value of such package of shaving
cream = 100 -30 % of 100 = Rs.70 and the excise duty leviable on
such package = 70 *14.42% = Rs.10.09. Few commodities and their
respective abatement notified by the government are as under: -
Description Abatement as a percentage of retail sale price
Sharbat 28%
Toothpaste 33%
Thinners 38%
Electric Fans 38%
Aerated waters 40.50%
Computer parts / accessories, laptops and set top boxes ,
printers, monitors, modem have been brought under RSP based excise
duty
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EXCISE DUTY ON ASSESSABLE VALUE
Assessable Value is the value of transaction i.e., the value at
which transaction takes place, in other words it is the price
actually paid or payable for the goods on sales. It is also called
transaction value. It includes freight and transportation charges,
commissions to dealer etc. EXCISE DUTY IS PAID ON TRANSACTION VALUE
OR ASSESSABLE VALUE IF:
1. Goods are sold at the time and place of removal. 2. Buyer and
assessee (Manufacturer/seller) are not related. 3. Price is the
only consideration for sale, i.e., money or some valuable item is
received on sale.
INCLUSIONS AND EXCLUSIONS FROM ASSESSABLE VALUE INCLUSIONS TO
ASSESSABLE VALUE: -
1. Primary packing or main packing or necessary packing. 2.
Royalty charges. 3. Commission to sales agent. 4. Packing charges
(except durable and returnable package) 5. Loading and unloading
charges within the factory 6. Design and Engineering Charges 7.
Royalty charged in Franchise agreement 8. Advertising, marketing
etc incurred by the buyer on behalf of Assessee (not on principal
to principal basis)
9. Parts used for repair, replacement during the warranty period
10. Storage
EXCLUSIONS FROM ASSESSABLE VALUE: -
1. Durable and returnable packing. 2. Excise Duty. 3. Sales Tax
Sales tax, turnover tax, additional sales tax, surcharge on sale
tax, Octroi Etc.
4. Returnable primary packing like cold drinks bottles, LPG
cylinders.
5. Trade discount given at the time of sales. 6. Freight and
insurance.
Assessable Value = (Sales Price less Deductions)/(1+rate of
duty)
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Illustration 1 Computation of transaction value when sale price
includes excise and sales tax: - The-cum-duty price of the product
is RS.5, 94,984/-. It includes sales tax @4% and excise duty @14%
(Plus3% education cess and SHEC). Find out the assessable value and
excise duty and sales tax? Solution: - Let the assessable value of
the goods be Rs. X Since excise duty is14.42 % of X, the price of
the goods for levy of sales tax is A + 0.1442X = 1.1442X Sales tax
@ 4% of Rs. 1.1442 X = Rs. 0.045768X Total Price inclusive of
excise duty and sales tax is equal to Rs.5,94,984 /- i.e. X+ 0.1442
X + 0.045768X = Rs.5,94,984 i.e. 1.189968 X = Rs.5, 94,984 i.e. X =
Rs. 5, 94,984 / 1.189968 Therefore, X = Rs. 5, 00,000 i. Hence the
assessable value of the product is Rs. 5,00,000/- ii. Excise duty @
14.42% is Rs.72, 100/- . iii. Sales Tax @ 4% =(5,00,000+72,100) *4%
= Rs. 22,884 Illustration 2 Compute the assessable value of the
excisable goods, for levy of duty of excise on the basis of the
information given below: -
Particulars Amuont(Rs)
Cum Duty wholesale price including sales tax Rs. 2500/-
15,000/-
Normal secondary packing cost 1,000/-
Cost of special secondary packing 1,500/-
Cost of durable ad returnable packing 1,500/-
Freight 1,250/-
Insurance on freight 200/-
Trade Discount (Normal Practice) 1,500/-
Rate of central Excise duty (including EC & SHEC)
14.42%
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SOLUTIONS: Particulars Amuont(Rs) Amuont(Rs)
Cum - Duty Price 15,000
Deduction:
Sales Tax 2,500
Durable & Returnable packing 1,500
Freight 1,250
Insurance 200
Trade Discount 1,500
Total 8,050
Less : - Excise duty thereon @ 14.42% (8,050 *14.42 / 114.42
)
1,050
Assessable Value 7,035
% OF ASSESSABLE VALUE (AD-VALOREM DUTY)
When duty of central excise or customs is levied by applying the
given
percentage of value of the goods, then, it is known as
AD-VALOREM rate. In
other words, ad-valorem rates are based on value of goods.
Ad-valorem rates
have inbuilt elasticity and quantum of duty levied automatically
varies as
the value of the goods vary
E.g. : - If Excise duty rate is 14.42% and ad-valorem and the
assessable
value of the goods is Rs. 1,00,000 then, the excise duty works
out to be
Rs.14420
CENVAT UNDER CENTRAL EXCISE
The CENVAT Credit system is based on the Value Added Tax concept
to
reduce the cascading effect hence we will first understand the
concept of the
value added tax & cascading effect. And then we will move to
CENVAT credit
system.
BASIC CONCEPT OF VALUE ADDED TAX (VAT)
Value Added Tax means on tax on value addition. Value addition
means the value of output as reduced by value of inputs. Under
value added tax all taxes borne in respect of inputs is allowed to
be set off against the taxes paid on final product in order to
subject only value addition, at each stage to taxation. The system
of VAT avoids the cascading effect
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Cascading effect:
The literal meaning of cascade is overlapping. Cascading effect
in Taxation, in simple terms means Tax on Tax. It is the
fundamental of any Tax structure in India that, no tax should be
charged on the Tax. When a raw material passes through various
stages of manufacture, before it is made available to the ultimate
consumers as finished good, the manufacturing cost of the finished
good includes raw material cost and Tax on the same. When consumer
buys these finished goods the tax is levied on above mentioned cost
of manufacture which results in cascading effect of the tax. The
following example elaborates this in simple way: For simplifying
the tax calculation we will assume, rate applicable is 10%
Transaction without VAT
Type of the Dealer
Cost Tax Amount @ 10%
Invoice value
Tax Payable
Remarks
For Raw material supplier
Sales for RM supplier
10,000 1,000 11,000 1,000
Tax To Be paid by Raw Martial Supplier, which will be collected
from Manufacturer
For Manufacturer
Purchase
10,000 1,000 11,000
Sales 21,000 (10000+1000+10000)
2,100 (21,000*10%)
23,100 (21,000+2100)
2,100
While Selling goods manufacturer has added Profit + Cost of
Rs.10,000
Total Excise Duty Paid 3,100
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Summary: - Cost of the product in hands of final consumer : -
Rs. 23100 Total Tax Paid to the government : - Rs. 3,100
(1,000+2,100) Tax to be paid by manufacturer : - Rs. 2,100
Transaction with VAT
Type of the Dealer
Cost Tax Amount @ 10%
Invoice value Tax Payable
Remarks
For Raw material supplier
Sales for RM supplier
10,000 1,000 11,000 1,000
Tax To Be paid by Raw Martial Supplier, which will be collected
from Manufacturer
For Manufacturer
Purchase10,000 1,000 11,000
Sales 20,000 (10000+10000)
2,000 (20,000*10%)
22.000 (20,000+2000)
1,000
While Selling goods manufacturer has added Profit + Cost of
Rs.10,000
Total Excise Duty Paid 2,000
Summary: - Cost of the product in hands of final consumer : -
Rs. 22000 Total Tax Paid to the government : - Rs. 2,000
(1,000+1,000) Tax to be paid by manufacturer : - Rs. 1,000
Analysis of the Above Computation
Particulars without CENVAT
with CENVAT
Diff Reasons for Diff.
Cost of the product in hands of final consumer
23,100 22,000 1,100
The cascading effect i.e. Tax on Tax is
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Total Tax paid to the government
3,100 2,000 1,100 resulted in to this difference. (The same
point is elaborated below)
Tax to be paid by manufacturer
2,100 1,000 1,100
1) Transaction without VAT
Supplier supplies his output to manufacturer at Rs. 10,000.
Thus, manufacturer gets the material at Rs. 11,000 inclusive of tax
@ 10%. He carries out further processing and sells his output at
Rs. 23,100. While calculating his cost, manufacturer has considered
his purchase cost of materials as Rs. 11,000 and added Rs. 10,000
as his conversion charges plus profit. While selling product,
manufacturer will charge tax again @ 10%. Thus final consumer /
customer will get the item at Rs. 23,100 (21,000+10% tax). As
stages of production and/or sales continue, each subsequent
purchaser has to pay tax again and again on the material which has
already suffered tax. This is called cascading effect.
2) Transaction with VAT
VAT was developed to avoid cascading effect of taxes. In the
aforesaid example, value added by manufacturer is only Rs. 10,000
(20,00010,000), tax on which would have been only Rs. 1,000, while
the tax paid was Rs. 2,000. In VAT, the idea is that manufacturer
will pay tax on only Rs 10,000 i.e. value added by him. Then, it
makes no difference whether a product passes through 5 or 10 stages
or even 100 stages, as every person will pay tax only on value
added by him to the product and not on total selling price.
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CENVAT CREDIT SYSTEM
CENVAT Credit scheme before 1.4.2000 was known as MODVAT credit
scheme. MODVAT means modified value added Tax now it has been
changed to CENVAT. CENVAT stands for "Central Value Added Tax".
This scheme is introduced with a view to remove the effect of the
double taxation how this is being achieved can be understood with
the help of the following example ABC Ltd is a manufacturer and it
purchases certain components from PQR Ltd for use in manufacturing.
PQR Ltd has to pay excise duty on components manufactured by it and
it would have been recovered from ABC Ltd. Now, ABC Ltd has to pay
excise duty on toys manufactured by it as well as bear the excise
duty paid by its supplier, PQR Ltd. This results in multiple
taxation. CENVAT is a scheme where ABC Ltd can take credit for
excise duty paid by PQR Ltd so that lower excise duty is payable by
ABC Ltd. Under this scheme, a manufacturer can take credit of
excise duty paid on raw materials and components used by him in his
manufacture. Accordingly, every intermediate manufacturer can take
credit for the excise element on raw materials and components used
by him in his manufacture. Since it amounts to excise duty only on
additions in value by each manufacturer at each stage, it is called
value-added-tax (VAT) The CENVAT credit can be utilized towards
payment of excise duty on the final product. Advantages of CENVAT
It reduces the effects of taxation at multiple stages of
manufacture. It facilitates duty free exports. It increases the tax
base. Disadvantages of CENVAT It increases paper work and leads to
multiplicity of records. It leads to corruption. It leads to
litigation.
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GENERAL HIGHLIGHTS OF CENVAT SCHEME
Credit of inputs Input may be used directly or Indirectly: - The
input may be used directly or indirectly in or in relation to
manufacture. The input need not be present in the final
product.
Inputs eligible for Cenvat to service provider / Manufacturer.
No input credit if final product/output service exempt from
duty/ service tax: Credit on basis of specified documents: -
Credit is to be availed only on the basis of specified documents as
proof of payment of duty on inputs or tax on input services.
Cenvat on inputs (Capital Goods):- Credit of duty paid on
machinery, plant, spare parts of machinery, tools, dies, etc., is
available. However, up to 50% credit is available in current year
and balance in subsequent financial year or years The new terms
used in the above highlights are
CENVATABLE INPUTS INCLUDES FOLLOWING
1. Input credit on Raw Materials 2. Input credit on Consumables
Stores 3. Input credit on Capital goods 4. Input credit on
services
1. INPUT CREDIT (CENVAT) ON GOODS& CONSUMABLES:-
All goods, used in or in relation to the manufacture of final
products whether directly or indirectly and whether contained in
the final product or not
'Input' includes lubricating oils, greases, cutting oils,
coolants,
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accessories of the final products cleared along with the final
product, goods used as paint, or as packing material, or as fuel,
or for generation of electricity or steam used in or in relation to
manufacture of final products or for any other purpose, within the
factory of production
Input also includes goods used in manufacture of capital goods
which are further used in the factory of manufacturer
Inputs used for test quality control check An input becomes a
waste and is sold as scrap Inputs contained in waste Final product
cleared in durable and returnable packing
2. INPUT CREDIT (CENVAT) ON CAPITAL GOODS: -
Tools, hand tools, knives etc. falling under chapter 82 *
Machinery covered under chapter 84 * Electrical machinery under
chapter 85 * Measuring, checking and testing machines etc. falling
under chapter 90 * Grinding wheels and the like goods falling under
sub-heading No 6801.10 * Abrasive powder or grain on a base of
textile material, falling under chapter heading 68.02.
Pollution control equipment. Components, spares and accessories
of the goods specified above. Moulds and dies. Refractories and
refractory material. Tubes, pipes and fittings thereof, used in the
factory. Storage Tank. Air- Conditioners, refrigerating equipments
and computers would be eligible to CENVAT credit as capital goods
(Should not be used in the offices)
If the truck purchased by the assessee in relation to bring the
raw material, consumable & capital goods at premises then
CENVAT credit in respect of duty paid on purchases of truck will be
allowed as input credit on capital goods. The CENVAT scheme can be
explained in short with the help of the following example.
3. INPUT CREDIT (CENVAT) ON SERVICES
Any Service used by a provider of taxable service for providing
an output service; or
Any Service used by the manufacturer, whether directly or
indirectly, in or in relation to the manufacture of final products
and clearance of final products from the place of removal;
And includes services used in relation to setting up,
modernization, renovation or repairs of a factory, premises of
provider of output service or an office relating to such factory or
premises, advertisement or sales promotion, market research,
storage up to the place of removal, procurement of inputs,
activities relating to business, such as accounting, auditing,
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financing, recruitment and quality control, coaching and
training, computer networking, credit rating, share registry and
security, inward transportation of inputs or capital goods and
outward transportation up to the place of removal
CENVAT credit in respect of service tax paid on mobile phones
(If used in relation to output service or in relation final
manufacturing of the finished goods)
YOU CAN NOT TAKE CENVAT / INPUT CREDIT ON THE FOLLOWING
(SPECIFICALLY DISALLOWED)
Light diesel oil, high speed diesel oil and motor spirit,
commonly known as petrol.
Inputs destroyed before use / pilfered from store room Air-
Conditioners, refrigerating equipments and computers would not be
eligible to CENVAT credit as capital goods if it is used in the
offices
Anything which is not used in the factory of the manufacturer
will not be eligible for the CENVAT credit
The inputs used for construction and foundation of the machinery
are not qualify for input credit. Similarly material used for
maintaining factory building are not inputs (Except in case of
Storage tank as it is specifically included in the capital goods)
1) The foundation made of cement, being immovable property is not
capital goods; and 2) Cement was not used directly or indirectly in
the manufacture of the final product
Inputs used in generation of the electricity, which is consumed
by residential colony of the factory workers families, schools, etc
will not be eligible for the CENVAT credit
Material used for repair do not qualify as inputs because
repairs of final product or of the final goods does not amount to
manufacturer
If the truck is purchased for delivery of the finished product
then the excise duty paid on such truck will not be allowed as
CENVAT credit
The CENVAT credit shall not be allowed on such quantity of
inputs/ input service that are used in the manufacture of exempted
goods / exempted services
CREDIT ON BASIS OF SPECIFIED DOCUMENTS
Invoice of manufacturer from factory Invoice of manufacturer
from his depot or premises of consignment agent
Invoice issued by registered importer Invoice issued by importer
from his premises or consignment registered with Central Excise
Invoice issued by registered first stage or second stage
dealer
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Supplementary Invoice Bill of Entry Certificate issued by an
appraiser of customs in respect of goods imported through foreign
post office
Challan of payment of tax where service tax is payable by other
than input service provider
Invoice, bill or Challan issued by provider of input service on
or after 10-9-2004
MEANING OF CENVAT CREDIT It means aggregation of following
duties and taxes: -
Basic excise duty on indigenous inputs. Special excise duty.
Additional Customs Duty paid u/s 3(5) of Customs Tariff Act w.e.f.
1-3-2005. This credit will not be available to service
providers
Additional Excise Duty paid under Additional Duties of Excise
(Goods of Special Importance) Act [AED(GSI)].
Education cess on manufactured excisable goods. This credit can
be utilised only for payment of education cess on final product or
output services.
National Calamity Contingent Duty (NCCD) leviable under section
136 of Finance Act, 2001 and corresponding CVD paid on imported
goods. This credit can be used for payment of NCD on outputs only
and not for any other duty.
Service tax on input services. Education cess paid on service
tax. This credit can be utilised only for payment of education cess
on final product or output services.
If all the above duties & cesses paid in case of imported
inputs & capital goods , corresponding CVD paid is also
eligible for CENVAT credit.
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Illustration 1 : - Amount of the CENVAT Credit admissible Based
on the following information, determine the CENVAT Credit available
for use in the current year under CENVAT Credit Rules, 2004.
Goods Excise Duty paid at the time of purchases of the goods
(Rs.)
Pollution Control Equipments 25,000
Spares for pollution Control Equipments
5,000
Equipments used in office 12,000
Storage Tank 10,000
Paints used for painting machinery used
6,000
Packaging Material 4,000
Lubricating oils 8,000
High Speed Diesel oil 7,000
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Solutions:
Goods Amount (Rs.) Reasons for admissibility / in
admissibility
Pollution Control Equipments
12,500 It is capital goods 50 % credit in current year.
Spares for pollution Control Equipments
2,500 It is capital goods 50 % credit in current year.
Equipments used in office
NIL Specifically Excluded from capital goods.
Storage Tank 5,000 It is capital goods 50 % credit in current
year.
Paints used for painting machinery used
6,000 It is inputs, Hence, credit fully admissible.
Packaging Material 4,000 It is inputs, Hence, credit fully
admissible.
Lubricating oils 8,000 It is inputs, Hence, credit fully
admissible.
High Speed Diesel oil Nil Specifically excluded from input.
Total CENVAT Credit Available
38,000
Illustration 2: - An Assessee purchased inputs weighing 1,000
Kgs, The duty paid on inputs was Rs. 10,000 during transit, and 500
Kg. inputs were destroyed. Solution: - Here, 500 Kg goods were
destroyed in transit and thus, they could not be used in or in
relation to manufacture of excisable goods. Thus, the destroyed
quantity of inputs doesnt qualify to be inputs within meaning of
CENVAT Credit rules, 2004. Therefore, the CENVAT Credit admissible
to the assessee will be Rs. 5,000 (10,000 *500 Kg /1000 Kg) in
respect of the goods received by the assessee and used in or in
relation to manufacture or production of excisable goods
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JOB WORK & CENVAT WITH RELEVANT RECORDS
"Job work means processing or working on raw materials or semi
finished goods supplied to job worker. So as to complete a part or
whole of the process resulting in to manufacture or finishing of an
article or any operation; which is essential for the aforesaid
process" Large industries always get some processing done from
outside on job work basis. This is called job work or sub
contracting in engineering industry and processing in chemical or
textile industry Following are the provision regarding the job work
under Central Excise Act: -
When job workers contribute his own raw material to articles
supplied by customers and manufactures different goods, it does not
amount to job work But, addition of minor items by job worker
should not distract it being job work
If an item is only repaired of reconciled, no duty liability
arises as no new product emerges
If goods are manufactured during job work, excise liability will
arise, as duty is on manufacture and who has supplied the raw
material is immaterial
The job worker, who is engaged in manufacturing of readymade
garments on job work basis, is exempt from duty. Exemption has been
made in this case
DUTY PAYMENT PROVISIONS
Goods cleared from factory are cleared under an invoice. Duty is
payable on monthly basis by 5th of the next month in which duty
payment becomes due, i.e., the month in which goods are cleared
from the factory. Duty is paid through current account called PLA
and /or Central Value Added Tax Credit, i.e., CENVAT Credit. Small
Scale Industry (SSI) is required to pay the duty by 15th of the
next month. However, the duty for the month of March is paid by
31st March itself not on 5th of next month i.e., 5th of April
because government accounts closes on 31st March. If the due date
is Sunday or holiday, the duty can be paid on next working day. If
duty is not paid then assessee is liable to pay the interest also
on outstanding amount. If duty and interest is not paid for 30 days
after due date, then the facility to pay duty on monthly basis will
be withdrawn till the time interest and duty is paid or 2 months,
whichever later. Thus, the facility of monthly payment of excise
duty is withdrawn at least for 2 months. During this period duty
will be paid on removal basis.
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Duty is paid by assessee through current account known as PLA
(Personal Ledger Account). The PLA is credited when duty is paid
i.e., deposited in the bank by filling a Challan called TR-6 on
monthly basis. Only excise duty paid comes in PLA the items like
fine, penalty, interest does not appear in PLA.
A PLA contains:
1. Serial number and date 2. Details of G.A.R.-7 Challan number
3. Balance duty etc.
The PLA is maintained in triplicate using both sided carbon.
ACCOUNTING ENTRIES IN CASE OF MANUFACTURER - CUM SERVICE
PROVIDOR
Accounting groups and accounting heads
The accounting groups and accounting heads are discussed
hereunder:
(I) GROUPS OF ACCOUNTS
Sr. No.
Sides of Account
Particulars Remarks
(a) Income side
Sales All the sales which is covered under CENVAT to be booked
under this group.
(b) Expenses side
Expenses
Net effect of all excise account will be transferred to excise
expenses account which will be created under this group & other
any other expenses head can be created under this group.
(c) Liabilities side
Duties of Taxes
All heads concerning to excise should be created under this
head.
(d) Asset side Current Assets, Loans and Advances
CENVAT Credit which is available for utilization in the next
year will be booked under this group.
(e) Fixed Asset
Fixed Asset Asset purchased has to be recorded under this
group.
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(II) ACCOUNTING HEADS
Sr. No.
Accounting Heads Under Group Remarks
(a) Sales of Excisable goods
Sales
At the time of removable of the excisable goods from the
premises
CENVAT payable Duties & Taxes
CENVAT payable - EC Duties & Taxes
CENVAT payable - SHEC
Duties & Taxes
(b) Excisable Purchases Inputs
Purchases
At the time of goods are entered & received in premises
CENVAT Receivable (Inputs )
Duties & Taxes
CENVAT Receivable (Inputs ) - EC
Duties & Taxes
CENVAT Receivable (Inputs ) - SHEC
Duties & Taxes
(c) Excisable Purchases Capital Goods
Fixed Assets
At the time of Capital Goods are entered & received in
premises (Respective Asset head need to be given instead of this
account E.g. Machinery.)
CENVAT Receivable (Capital Goods)07-08
Duties & Taxes
CENVAT Receivable (Capital Goods)08-09
Current Assets, Loans & Advances
CENVAT Receivable (Capital Goods) EC 07-08
Duties & Taxes
CENVAT Receivable (Capital Goods) EC 08-09
Current Assets, Loans & Advances
CENVAT Receivable (Capital Goods) SHEC 07-08
Duties & Taxes receivable
CENVAT Receivable (Capital Goods) - SHEC 08-09
Current Assets, Loans & Advances
(d) Sales of Services Chargeable To ST
CENVAT Sales
When bill of service is raised on customer.
CENVAT Payable Duties &
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(Output Services) Taxes
CENVAT Payable (Output Services) EC
Duties & Taxes
CENVAT Payable (Output Services) SHEC
Duties & Taxes
(e) CENVAT Payable (Output Services) Due
Duties & Taxes
When payment is received from customer
CENVAT Payable (Output Services) EC Due
Duties & Taxes
CENVAT Payable (Output Services) SHEC Due
Duties & Taxes
(f) Service Taxable Expenses
Expenses
When service taxable bill is received from vendor.
CENVAT Receivable (Input Services)
Duties & Taxes
CENVAT Receivable (Input Services) EC
Duties & Taxes
CENVAT Receivable (Input Services) SHEC
Duties & Taxes
(g) CENVAT Receivable (Input Services) Due
Duties & Taxes
When payment is done to vendor
CENVAT Receivable (Input Services) EC Due
Duties & Taxes
CENVAT Receivable (Input Services)SHEC Due
Duties & Taxes
(h) Excise Duty Expenses Expenses Net Effect of the all excise
accounting transferred to this account.
(i)
Other accounting heads to be opened as normally opened in books
of account.
(II) ACCOUNTING ENTRIES NOW ACCOUNTING ENTRIES ARE TO BE PASSED
IN FOLLOWING MANNER: We will see the accounting entries of the
following Illustration: - XYZ Ltd. Furnishes you the following
details for the period ending April 2007
Plant & Machinery purchased on 01/04/2007 (inclusive of
excise duty
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@ 14.42%) from PQR Ltd. Of Rs. 11,44,200/-
Raw material purchased on 01/04/2007 (inclusive of excise duty
@14.42 %) of Rs. 28,60,500/-
Input Services availed of during the month (Taxable value)
amount fully paid for (Rate @12.36%) Rs. 1,00,000/-
Finished goods cleared on 30/04/2007(Assessable Value) (Rate @
14.42%) of Rs. 40,00,000/-
Solution with relevant documentation: -
Invoice Showing Purchase of Fixed Asset
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Accounting Entry For the invoice of Fixed Asset
Sr. No.
Accounting Heads Debit Amount
Credit Amount
Remarks
1. Excisable Purchases Capital Goods / Plant and Machinery A/c
Dr.
100.00 As capital Goods half credit can be utilised in this year
& half credit will be carried forward as it will be available
in next year.
2. CENVAT Receivable (Capital Goods) 07-08 Dr.
7.00
3. CENVAT Receivable (Capital Goods)EC 07-08 Dr.
0.14
4. CENVAT Receivable (Capital Goods)SHEC 07-08 Dr.
0.07
5. CENVAT Receivable (Capital Goods) 08-09 Dr.
7.00
6. CENVAT Receivable (Capital Goods)EC 08-09 Dr.
0.14
7. CENVAT Receivable (Capital Goods)SHEC 08-09 Dr.
0.07
8. PQR Ltd. Cr. 114.42
9. Excisable Purchases Capital Goods / Plant and Machinery A/c
Dr.
10,00,000 Based On the above proportion following entry can be
passed.
10.CENVAT Receivable (Capital Goods) 07-08 Dr.
70,000
11. CENVAT Receivable (Capital Goods)EC 07-08 Dr.
1,400
12.CENVAT Receivable (Capital Goods)SHEC 07-08 Dr.
700
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13. CENVAT Receivable (Capital Goods) 08-09 Dr.
70,000
14.CENVAT Receivable (Capital Goods)EC 08-09 Dr.
1,400
15. CENVAT Receivable (Capital Goods)SHEC 08-09 Dr.
700
16.XYZ Ltd. (Sundry Creditor) Cr. 1144200
RG23C Part-I is register of capital goods
The from RG 23C Part I is required to be maintained for the
purpose recording the Duty credit taken on Capital Inputs and
subsequently the credits can be set off against the Duty payable by
the manufacturer. RG23C Part-II is register of cenvat credit on
capital goods.
RG23C Part-II is the register maintained to record Cenvat credit
on all Capital Goods and duty from cenvat credit account is
debited.
Invoice Showing Purchase of Raw Material
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Accounting Entry For the invoice of raw material purchases
Sr. No.
Accounting Heads Debit Amount
Credit Amount
Remarks
1 Excisable Purchases Inputs Dr. 100.00
2 CENVAT Receivable (Input) Dr. 14.00
3 CENVAT Receivable (Input) - EC Dr.
0.28
4 CENVAT Receivable (Input)SHEC Dr.
0.14
5 Supplier A/c (Sundry Creditor) Cr.
114.42
6 Excisable Purchases Inputs Dr. 25,00,000
7 CENVAT Receivable (Input) Dr. 3,50,000
8 CENVAT Receivable (Input)EC Dr.
7,000
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9 CENVAT Receivable (Input)SHEC Dr.
3,500
10 Supplier A/c (Sundry Creditor) Cr.
28,60,500
An account in form of RG 23A - Part I : - This is a record of
inputs The from RG 23A Part I is required to be maintained for the
purpose recording the Duty credit taken on Material Inputs used in
manufacturing process and subsequently the credits can be set off
against the Duty payable by the manufacturer.
An account in form of RG 23A - Part II : - This is a record of
CENVAT credit on inputs RG23A Part-II is the register for Cenvat
Credit. Cenvat credit on all raw material is taken in part - II and
duty from cenvat credit account is debited. Invoice Showing
Purchase of Services
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Accounting Entry For the invoice of purchases of services.
Sr. No.
Accounting Heads Debit Amount
Credit Amount
Remarks
1. Service Taxable Expenses Dr. 100.00
2. CENVAT Receivable (Input Services) Dr.
12.00
3. CENVAT Receivable (Input Services) EC Dr.
0.24
4. CENVAT Receivable (Input Services) SHEC Dr.
0.12
5. Input Service Provider (Sundry Creditor) Cr.
112.36
6. Service Taxable Expenses Dr. 1,00,000
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7. CENVAT Receivable (Input Services) Dr.
12,000
8. CENVAT Receivable (Input Services) EC Dr.
2400
9. CENVAT Receivable (Input Services) SHEC Dr.
1200
10.Input Service Provider (Sundry Creditor) Cr.
112360
Sales Invoice rose on account of sales of finished goods.
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Accounting entry for sales
Sr. No.
Accounting Heads Debit Amount
Credit Amount
Remarks
1. Sundry Debtors (Sundry Debtor) Dr.
114.42
2. Sales of Excisable Goods Cr. 100.00
3. CENVAT Payable Cr. 14.00
4. CENVAT Payable EC Cr. 0.28
5. CENVAT Payable SHEC Cr. 0.14
6. Sundry Debtors (Sundry Debtor) Dr.
45,76,800
7. Sales of Excisable Goods Cr. 40,00,000
8. CENVAT Payable Cr. 5,60,000
9. CENVAT Payable EC Cr. 11,200
10. CENVAT Payable SHEC Cr. 5,600
Daily Stock Account (D.S.A.)
Every assessee requires maintain records of stock on daily basis
known as Daily Stock Account. It was earlier known as RG 1
Register. The DSA is to be kept in the factory and should be
preserved for period of 5 years immediately after the financial
year to which it pertains. The assessee shall duly authenticate the
first & last page of such accounts / records.
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Adjustment / Set off Entries
A. Towards CENVAT Credit (Basic)
1. CENVAT Payable Dr. 4,32,000
2. CENVAT Receivable (Capital Goods) 07-08 Cr.
70,000
3. CENVAT Receivable (Inputs ) Cr. 3,50,000
4. CENVAT Receivable (Input Services) Cr.
12,000
B. Towards Education Cess
1. CENVAT Payable EC Dr. 8,640
2. CENVAT Receivable (Capital Goods)-EC 07-08 Cr.
1,400
3. CENVAT Receivable (Inputs )-EC Cr.
7,000
4. CENVAT Receivable (Input Services)-EC Cr.
240
C. Towards Secondary & Higher Secondary Education Cess
1. CENVAT Payable SHEC Dr. 4,320
2. CENVAT Receivable (Capital Goods)-ESHC 07-08 Cr.
700
3. CENVAT Receivable (Inputs )-SHEC Cr.
3,500
4. CENVAT Receivable (Input Services)-SHEC Cr.
120
Account Current / Personal Ledger Account The account current,
also called PLA i.e. personal ledger account, is an account current
with the central government, which is utilized for payment of
duties of excise. The account current is credited when the sum is
deposited into the treasury and debited on payment of the excise
duty. Each credit and debit entry should be made on separate lines
and assigned a running serial number for the financial year. The
PLA must be prepared in triplicate by writing with indelible pencil
and using double sided carbon. Original and duplicate copies of PLA
should be detached by the manufacturer and sent to the central
excise officer along with monthly / quarterly periodical return in
form E.R. -1 / E.R.-3
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Payment of final amount Due
1. CENVAT Payable Dr. 1,28,000
2. CENVAT Payable EC Dr. 2,560
3. CENVAT Payable SHEC Dr. 1,280
4. Bank Account Cr. 1,31,840
Performa of Payment Challan in form No G.A.R. 7
Extract of the profit & Loss and Balance sheet after passing
the above mention entries (except Final payment Entry through
G.A.R. - 7)
SINEWAVE COMPUTER SERVICES PVT. LTD.(scspl)
Profit & Loss account for the period of 1st April 2007 to
30th April 2007
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Particulars
Amount(Rs.)
Amount(Rs.)
Particulars
Amount(Rs.)
Amount(Rs.)
Purchase Accounts
25,00,000 Sales Accounts
40,00,000.00
Excise Purchase Inputs
25,00,000 Sales of Excisable goods
40,00,000
Direct expenses
1,00,000
Service Taxable Expenses
1,00,000
Gross profit c/o
14,00,000
40,00,000 40,00,000.00
Gross profit b/f
14,00,000.00
Net Profit 14,00,000
Total 14,00,000 Total 14,00,000.00
SINEWAVE COMPUTER SERVICES PVT. LTD.(scspl)
Balance Sheet as on 30th April 2007
LiabilitiesAmount(Rs.)Amount(Rs.) Assets Amount(Rs.)
Amount(Rs.)
Capital Accounts
Fixed Assets
Loans (Liability)
Current Assets
4648900.00
Current Liabilities
3248900.00 Closing stock
(See Note 1)
Duties & Taxes (see Note 2)
131840.00 Loans & advances (Asset)
72100.00
Sundry creditors
3117060.00 Sundry Debtors
4576800.00
Profit & Loss A/c
1400000.00
Opening Balance
0
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Current Period
1400000
Total 4648900.00 Total 4648900.00
Note 1 : Closing stock valuation has to be done & required
to be shown in the books same adjustment entry not passed in this
relevant extract
Note 2 : The payment entry against final liability of excise is
not yet passed as it is required to show where the amount due
against the excise liability appears in the balance sheet..
MONTHLY RETURN FOR PRODUCTION AND REMOVAL OF GOODS AND OTHER
RELEVANT PARTICULARS AND CENVAT CREDIT
Every Assessee shall submit to the superintendent of central
excise a monthly return of production, removal of the goods and
other relevant particulars in E.R. 1 form within 10 days after the
close of the month to which it relates. It is to be filed in
duplicates
The return shall be accompanied by treasury receipted Challan
for deposits of duty, original and duplicate copies of the PLA and
extracts of CENVAT register and other documents as required by the
commissioner it is to be filed in duplicate
Excise return is submitted to the excise department with the two
copies of PLA and GAR-7 Challan. The excise return is prepared in
form ER-1 and ER-3.