ACKNOWLEDGEMENT The Project titled “INDIRECT TAXATION WITH SPECIAL REFERENCE TO CENTRAL EXCISE” at Exide Industries ltd; is the outcome of the combination of my theoretical knowledge and practical experience. I am extremely grateful to Our Director Mr. Ajay Kumar to provide necessary and essential facilities to do this project report. My sincere thanks to our (Head of Department) Mr. Sunil Dhanawde, Department of Management Studies for providing me with an opportunity to study and to do this project work. I express a deep sense of gratitude to my Guide Mr. Vikas Barbate, MBA. Faculty Department of Management studies, for his encouragement, support and guidance to complete this project work successfully. Finally, I convey my heartiest thanks to Mr. V.V Sapre (ACCOUNTS HEAD) of EXIDE INDUSTRIES LTD, who kindly granted permission to do this project report in his esteemed organization.
This document is posted to help you gain knowledge. Please leave a comment to let me know what you think about it! Share it to your friends and learn new things together.
Transcript
ACKNOWLEDGEMENT
The Project titled “INDIRECT TAXATION WITH SPECIAL REFERENCE TO
CENTRAL EXCISE” at Exide Industries ltd; is the outcome of the combination of my
theoretical knowledge and practical experience.
I am extremely grateful to Our Director Mr. Ajay Kumar to provide necessary and
essential facilities to do this project report.
My sincere thanks to our (Head of Department) Mr. Sunil Dhanawde, Department of
Management Studies for providing me with an opportunity to study and to do this project
work.
I express a deep sense of gratitude to my Guide Mr. Vikas Barbate, MBA. Faculty
Department of Management studies, for his encouragement, support and guidance to
complete this project work successfully.
Finally, I convey my heartiest thanks to Mr. V.V Sapre (ACCOUNTS HEAD) of
EXIDE INDUSTRIES LTD, who kindly granted permission to do this project report in
his esteemed organization.
The development and combination of this project effort involves sincere contribution
from Mr. S.R.Yelmar (ASST MGNR), and Mr. D.D.Samant (ASST MGNR)
Certainly this project would not have been successfully completed without their co-
operation.
Ashish. B.Bhalerao
MBA Finance
INDEX
CHAPTER No. TOPICS PAGE NO.
EXECUTIVE SUMMARY
1.
INTRODUCTION
1.1 PROJECT INTRODUCTION
1.2 OBJECTIVES OF THE STUDY
1.3 SCOPE & LIMITATIONS
2.
COMPANY PROFILE
2.1 NAME, ADDRESS & LOCATION OF COMPANY
2.2 VISION , MISSION
2.3 HISTORY
2.4 DIFFERENT PRODUCT PROFILES OF THE COMPANY
2.5 AWARDS
3.
THEORETICAL BACKGROUND
3.1 REVIEW OF LITERATURE
3.2 FUNDAMENTAL CONCEPTS
4.
RESEARCH METHODOLOGY
4.1 RESEARCH CONCEPTUAL CLARIFICATION
4.2 SOURCES OF DATA COLLECTION
4.3 SAMPLE DESCRIPTION
5. DATA ANALYSIS
6.
FINDINGS
6.1 FINDINGS BASED ON ANALYSIS
6.2 RECOMMENDATIONS / SUGGESTIONS
6.3 CONCLUSION
BIBLIOGRAPHY
ANNEXURE
EXECUTIVE SUMMARY
HISTORY OF TAXATION
In India, the system of taxation as it is known today has been in force in one form or
another even from ancient times. There are references both in Manu Smriti and
Arthasastra to a variety of tax measures.
The origin of the word "Tax" is from "Taxation" which means an estimate. The levies and
taxes in various forms were imposed to meet the needs of the governments for their
military and civil expenditure, safety towards the common needs of the citizens.
CONCEPT OF INDIRECT TAXATION
Indirect taxes, ranging from VAT and customs duties to environmental levies, affect the
supply chain and the financial system. They create unique challenges to multi-national tax
functions.
CONSTITUTIONAL BACKGROUND OF INDIRECT TAXATION
Indian Constitution has given powers to Central Govt. and State Govt. to levy various
taxes and duties. Powers of Central and State Govt. are enlisted in Seventh Schedule to
our Constitution.
Excise is a duty on excisable goods manufactured or produced in India. Each word of this
definition is vitally important to fix liability of Central Excise Duty.
Power to levy excise duty is derived from Constitution.
1. COMPANY INTRODUCTION
Exide, a global leader in stored electrical energy solutions with operations in over 80
countries and one of the world’s largest producers and recyclers of lead-acid batteries.
Exide is a dominant player in the Industrial Battery segment.
The Company exports batteries which have captured niches in South East Asian and
European markets.
Global Quality developed and produced according to international standards and ISO
9001, 14001& ISO /TS-16949.
EXIDE Offer a Wide Range of Battery’s.
EXIDE product range covering capacities from 2.5 Ah to 10,000 Ah and more.
1) In this diagram it is clarified that the amount of tax paid by the vendor to govt is collected from the company while selling.
2) Once the company processes the finished goods they are charged with certain profits and sold at appropriate selling price.
3) As the 50% of tax is paid by the vendor and recovered from company while selling. The company further avails the credit of 50% tax which have already being paid and remaining tax amount is paid to the govt.
Manufactures Pen Refill @ Rs 1/-
CENVAT CREDIT
The basic scheme concept of the scheme is to give instant credit of the Central Excise
Duty paid (including additional duty, special excise duty and counter vailing duty on
input) on goods used in the process of manufacture of Final product.
Such instant credit can be utilized towards the payment of excise duty on the final
product. In short, the manufacturer is reimbursed the amount of duty paid on the
components and raw materials used in production process. The assesse is eligible to take
100% credit of the duty paid on inputs.
The manufacturer can avail the benefits of CENVAT scheme provided that inputs and
finished products are excisable commodities and within the range of product under
notified scheme.
Why CENVAT?
MODVAT Credit Scheme, which is known as CENVAT Credit Scheme, was introduced
mainly to avoid the cascading effect of tax on tax so that in the domestic market as well
as in the international market, the goods manufactured in India can be offered to the
customer at a competitive price and at the same time, the end user does not pay the price
including the taxes paid at multiple stages.
FEATURES OF CENVAT SCHEME:
Coverage
Wider Acceptability
Simplified Procedure
Utilization Of Credit
How CENVAT scheme operates?
Example:
Product X
Amount of duty paid (Rs.)
A) Inputs
1) Steel 150
2) Aluminum 150
3) Components 90
4) Paints 50
5) Consumable (e.g. Welding Electrodes) 70
6) Packing Materials 40
TOTAL 550
B) Final Products – Assessable Value 10000
Duty (10%) 1000
C) Payment of Excise Duty on clearance of final
products Duty payable as per ‘B’
1000
Less CENVAT Credit on inputs availed as per ‘A’ 550
Duty payable by Cash 450
EXCISE CENVAT AVAILMENT:
The details are taken from the Document of Cenvat challan. Due to 3rd party
documentation it was unable to show the actual contents and the challan format.
The very 1st area of system lies on the first screen of system.
Select then area for [JITEX] – which states for (Incoming Excise Invoices).
The 2nd area lies for the G/R – Goods Receipt no. Input it in system.
The 3rd screen appears while clicking the G/R no.
1st Tab i.e. Excise Invoice
Input the following details in system.
Excise Document No. /Doc Date/ Excise Base amount-This amount is assessable amount
It is the value on which we avail 10% Cenvat
CENVAT EDU CESS HIGHER EDU CESS
10% 2% 1%
Click Post CENVAT
We receive a screen with Excise Invoice operation.
Take Excise Invoice No.
Serial No.
Acct Doc No.
Note: If by mistaken there is a wrong entry input in system it cannot be changed.
But it should be reversed in system.
IMPORTANT DEFINITIONS:
EXEMPTED GOODS
Exempted goods means goods which are exempt from the whole of the duty of excise
leviable thereon and includes goods which are chargeable to NIL rate of duty.
FIRST STAGE DEALER
First stage dealer means dealer who purchases the goods directly.
SECOND STAGE DEALER
Second stage dealer means a dealer who purchases goods directly from the first stage
dealer.
MERCHANT EXPORTER
A merchant exporter is a business man, who buys good n exports the same.
MANUFACTURER EXPORTER
A manufacturer exporter is one, who produces goods n exports the same
LARGE TAXPAYER UNIT (LTU)
Large Taxpayer Units have been setup as a self contained tax office under the Department of Revenue to act as a single window clearance point for all matters relating to Central Excise, Income Tax/ Corporate Tax and Service Tax.
Presently, there are four LTUs functioning in Bangalore, Chennai, Delhi and Mumbai
SALIENT FEATURES OF CENVAT
1) CREDIT ON DUTY PAID TO MANUFACTURER OF EXCISABLE GOODS
The provisions of CENVAT scheme shall apply to the manufacturer of notified
excisable goods that uses the notified inputs in the manufacture of final product.
2) CREDIT ON DUTY PAID ON INPUTS
The CENVAT scheme is principally based on system of granting credit of duty paid on
inputs. Under CENVAT scheme, the manufacturer while making the payment of duty on
final product can avail and utilize the instant credit of duty paid on inputs. This will result
in avoidance of duty on duty.
3) INPUTS MAY BE USED DIRECTLY OR INDIRECTLY
The inputs in respect of credit of duty paid is claimed, must be directly or indirectly used
in relation to the manufacture of the final product.
4) NO CREDIT ON HSD AND PETROL
Duty paid on high speed diesel and motor spirit (petrol) is not available as CENVAT
credit, even if these are used as raw materials.
5) NO CREDIT IF THE FINAL PRODUCT IS EXEMPT FROM DUTY
No CENVAT credit is available if the final product is exempt from duty.
6) SPECIFIED DOCUMENTS AND RECORDS
CENVAT credit can be availed on the basis of specific documents as a proof of payment
of duty on Inputs. The manufacturer should maintain proper records for receipt, disposal,
consumption and inventory of the inputs and capital goods containing details such as
value, duty paid, person from whom inputs are purchased.
7) INSTANT CREDIT
Credit of duty paid on inputs can be taken instantly i.e. as soon as the inputs reach the
factory. In case of capital goods 50% credit is available in the current year and balance
50% in subsequent financial year.
8) PROCESSES LOSSES
CENVAT credit is available on all inputs even if some of inputs go as process loss.
EXCISE EXPORT PROCEDURE:
A with regard to exports would assume significance considering the fact that exports out
of the country are to be zero rated. Apart from this principle, the exporters are also
entitled to certain additional benefits like sourcing inputs required for production of goods
to be exported without payment of applicable duties. The benefits that are available to
exporters are not provided under any one single law and include the Central Excise Act,
1944 and Rules, Customs Act, 1962, Foreign Trade Policy of the Government
considering the fact that most of the manufacturers who export goods have to comply
with the provisions of both Central Excise and Customs laws apart from adhering to the
basic guidelines laid down by the government under the Foreign Trade Policy for
promotion of exports.
There are mainly three categories of exports:
Export of all excisable goods to all states except Nepal and Bhutan
Export to Nepal and Bhutan
Export to Foreign countries
The procedures relating to export can be classified into two:
Export of goods without payment of duty.
Export of goods on payment of duty under rebate.
The conditions and procedure relating to export without payment of duty are contained in
Notification of Central Excise issued under rule 19 of the Central Excise 2002
EXCHANGE RATES FOR IMPORT & EXPORT OF GOODS (Foreign only)
S. No. Foreign currency Rate of exchange of one unit of foreign
currency equivalent to Indian rupees
(For Imported
Goods)
(For Export
Goods)
1. Australian Dollar 46.05 44.65
2. Canadian Dollar 46.40 45.10
3. Danish Kroner 8.45 8.15
4. EURO 62.80 61.10
5. Hong Kong Dollar 5.85 5.75
6. Norwegian Kroner 8.15 7.85
7. Pound Sterling 74.15 72.20
8. Swedish Kroner 7.15 6.90
9. Swiss franc 49.00 47.65
10. Singapore Dollar 35.85 34.90
11. US Dollar 45.70 44.75
S. No. Foreign currency Rate of exchange of 100 unit of foreign
currency equivalent to Indian rupees
(For Imported Goods) (For Export
Goods)
1. Japanese Yen 55.60 53.95
EXPORT WITHOUT PAYMENT OF DUTY [Rule 19]
(1) Any excisable goods may be exported without payment of duty from a factory of the
producer or the manufacturer or the warehouse or any other premises, as may be
approved by the Commissioner.
(2) Any material may be removed without payment of duty from a factory of the
producer or the manufacturer or the warehouse or any other premises, for use in the
manufacture or processing of goods which are exported, as may be approved by the
Commissioner.
(3) The export under sub-rule (1) or sub-rule (2) shall be subject to such conditions, and
procedure as may be specified by notification by the Board.
Rule 19 of Central Excise Rules 2002 governing export under bond/Letter of undertaking
states that any excisable goods may be cleared for export without payment of duty from
either the factory of manufacture or warehouse or any other premises approved by the
Commissioner of Central Excise.
EXPORT WITHOUT PAYMENT OF DUTY UNDER BOND/LETTER OF
UNDERTAKING
Export without payment of duty is further classified into the export to the countries other
than Nepal and Bhutan for which there is a different procedure. Exports to these two
countries are subject to more strict safeguards which have been notified separately and
would also be subject to restrictions in terms of discharge.
EXPORT TO ALL COUNTRIES EXCEPT NEPAL & BHUTAN CONDITIONS:
Merchant exporter shall furnish bond in Form B-1 & obtain certificate in Form CT-1.
A manufacturer-exporter may furnish annual Letter of Undertaking in Form UT-1(no
CT-1 is required in this case).
WHAT IS THE DIFFERENCE BETWEEN MERCHANT EXPORTER AND
MANUFACTURER EXPORTER?
A merchant exporter is a business man, who buys good n exports the same.
A manufacturer exporter is one, who produces goods n exports the same
FORMS TO BE USED:
ARE.1 is the export document for export clearance which shall be prepared in
quintuplicate (5 copies)
If the export is under bond executed by merchant exporter, the form should be signed by
both manufacturer as well as merchant exporter.
THE DIFFERENT COPIES OF ARE.1 FORMS SHOULD BE OF DIFFERENT
COLORS INDICATED BELOW:
Original White
Duplicate Buff
Triplicate Pink
Quadruplicate Green
Quintuplicate Blue
PROCEDURE FOR EXPORT UNDER DIFFERENT SITUATIONS:
A) Procedure for clearance from the factory or warehouse
A merchant-exporter who has furnished a bond shall be provided sufficient number of
certificates (CT-1), duly signed/certified, in multiples of 25 copies, normally covering
a period of one to three months. The certificate should be provided according to the
volume of exports.
The second part of CT-1 is very important.
B) Sealing of goods and examination at place of dispatch
The Superintendent or Inspector of Central Excise, will verify the identity of goods
mentioned in the application and also verify whether the duty assessed is appropriate
and the duty payable has been has recorded in the Daily Stock Account.
The exporter is required to prepare five copies of application in the Form ARE-1.
If he finds that the declaration in ARE.1 and the invoices are correct from the point of
view of identity of goods and its assessment to duty, he shall seal each package or the
container ensuring that the goods cannot be tampered with after the examination.
C) Distribution of ARE.1 in the case of export from the factory or warehouse
Original (First Copy) The said Superintendent or Inspector of Central Excise
shall return to the exporter immediately after
endorsements and signature.
Duplicate (Second Copy) The said Superintendent or Inspector of Central Excise
shall return to the exporter immediately after
endorsements and signature.
Triplicate (Third Copy) Sent to the bond sanctioning authority, either by post
or by handing over to the exporter in a tamper proof
sealed cover after posting the particulars in official
records.
Quadruplicate (Fourth Copy) Retain for official records.
Quintuplicate (Fifth Copy) Optional copy - The said Superintendent or Inspector
of Central Excise shall return to the exporter
immediately after endorsements and signature.
D) Distribution of ARE.1 in the case of export from other than factory or warehouse
Where goods are not exported directly from the factory of manufacture or warehouse,
the distribution of A.R.E.1 will be the same as above except that the triplicate copy of
application shall be sent to the Superintendent who shall, after verification forward
the triplicate copy in the manner specified.
E) Dispatch of goods by self-sealing and self-certification
Self-sealing and self-certification is a procedure by which the exporter who is a
manufacturer or owner of a warehouse or a person (who should be permanent
employee of the said manufacturer or owner of the warehouse holding reasonably
high position) duly authorized by such owner may remove the goods for export from
his factory or warehouse without examination by a Central Excise Officer.
F) Export by parcel post
In case of export by parcel post after the goods proposed for export has been sealed,
the exporter shall affix to the duplicate application sufficient postage stamps to cover
postal charges and shall present the documents, together with to the postmaster at the
office of booking.
G) Examination of goods at the place of export
The place of export may be a port, airport, Inland Container Depot, Customs Freight
Station or Land Customs Station.
The exporter shall present together with original, duplicate and quintuplicate
(optional) copies of the application (A.R.E. 1) to the Commissioner of Customs or
other duly appointed officer
The goods are examined by the Custom officers for the purposes of Central Excise to
establish the identity and quantity, i.e. the goods brought in the Customs area
The officer of customs shall return the original and quintuplicate (optional copy for
exporter) copies of application to the exporter and forward the duplicate copy of
application either by post or by handing over to the exporter in a tamper proof sealed
cover to the officer specified in the application, from whom exporter wants to claim
rebate.
EXEMPTION BASED ON VALUE OF CLEARANCES (SSI)
The Small Scale Units (SSI) is given certain relief under the Central Excise Law by
passing exemption notifications. These exemption notifications are popularly called SSI
exemption notification because they were originally meant to be an incentive to SSIs.
The exemption to SSIs started with the Notification No. 175/86
The manufacturer availing the notification has to satisfy certain conditions for availing
the benefit and the goods manufactured should be covered under this notification.
MEANING OF SMALL SCALE UNITS
The definition basically takes the investment made on the plant and machinery by any
industries as the basis for determining the small scale industries.
PRODUCTS COVERED UNDER THIS SSI EXEMPTION NOTIFICATION
The exemption to be given to SSIs is not applicable for all the goods. The benefit of the
said notification is restricted to the products listed in the notification. The notification
covers most of the products
However, tobacco products, pan masala, watches, matches and some textile products are
specifically excluded from SSI exemption.
ELIGIBILITY
The units whose value of clearances computed in accordance of the notification is less
than 400 lakh (4 crore) in the previous financial year are eligible for the benefit of the
notification
The limit will be calculated by taking into account the clearances in respect of one
manufacturer from one or more factories or from a factory by one or more
manufacturers.
For example, if ABC Ltd. wants to claim the benefit of the notification in the year
20102011, then it has to see whether the clearances of the year 2009-2010 has
exceeded Rs. 4 crore.
Exempted units whose turnover is more than prescribed limit (called specified limit)
have to file a declaration in prescribed form with Assistant Commissioner of Central
Excise and should obtain a dated acknowledgement. Such declaration is filed only
once in the lifetime of the assesse and not every year.
The ‘specified limit’ for this purpose is Rs.60 lakh below exemption limit. In present
provisions this limit works out to be Rs.90 lakh (Rs.150 lakh – Rs.60 lakh).
Therefore, the declaration shall be filed by units whose turnover exceeds Rs.90 lakh.
Small units whose turnover is below the specified limit (Rs.90 lakh) per annum shall
not file any declaration at all.
If the manufacturer wishes to pay normal duty availing CENVAT facility, he can do
so.
The manufacturer has to intimate his option with the following details either to
Assistant Commissioner of Central Excise or Deputy Commissioner.
(a) Name and address of the manufacturer;
(b) Location of the factory/factories;
(c) Description of the inputs used in the manufacture;
(d) Description of goods manufactured;
(e) Date on which this option is exercised;
(f) Aggregate value of clearances of goods.
RELAXATION IN THE DUTY
Value of clearances in Rs. lakh in a financial year Duty Structure
Amount Duty
0- 150 lakh 0%
>150 lakh Normal duty
CLUBBING OF CLEARANCES
As per section 2(f) of the Central Excise Act, 1944 a manufacturer means not only a
person who employs hired labour but also person who engages in production or
manufacture on his own account. The words “on his own account” have caused
considerable legal action.
The Department normally denies the benefit of the exemption on the ground that one
manufacturer wants to split up one unit into various units to take advantage of Nil duty
clearances up to Rs.150 lakh in respect of each unit.
It is the argument of the Department that there is considerable revenue loss when the
manufacturer purposely plans his affairs in this manner while continuing to exercise
managerial control over all the units. Therefore, the Department denies the benefit of the
exemption notification when they find common directors or common shareholders or
common employees or common usage of facilities including funds.
The main aspects which lead to clubbing of clearances are as under:
Reason to start is due to customers not willing to pay the excise duty
Beneficial financial interest in new unit
Working in cycle and as one unit
Common procurement or sale
Common stock usage
The reasons for commencing investigation are same location, same product, sharing of customers, same partners, interest free advances, shared facilities, sharing of expenses and incomes etc.
4. RESEARCH METHODOLOGY
INTRODUCTION
Research methodology is a way to systematically solve the problems. It may be
understood as a study about how research is done mathematically & scientifically. It
includes the overall research design, the sampling procedure, data collection method and
analysis procedure.
RESEARCH
“A careful investigation or inquiry especially through search for new facts in any branch
of knowledge”
TYPES OF RESEARCH
Descriptive Vs. Analytical
Applied Vs. Original
Quantitative Vs. Qualitative
Conceptual Vs. Pragmatic.
TYPES OF RESEARCH USED FOR PROJECT
ANALYTICAL RESEARCH
Analytical Research is that research where the researcher use that facts or information
which is already collected by some other person. The research uses this facts or
information and makes critical evaluation of data for providing results or solution to
specific problem.
In analytical research two types of analysis can made:-
1. Analysis of Historical records, Recording of notes, content analysis, tape and film
listening and analysis.
2. Analysis of document, Statistical compilations, reference and abstract guides,
content analysis.
DESCRIPTIVE RESEARCH
Designed to provide further insight into the research problem by describing the variables
of interest, can be used for profiling, defining, segmentation, estimating, predicting, and
examining associative relationships.
CAUSAL RESEARCH
Designed to provide information on potential cause-and-effect relationships, most
practical in marketing to talk about associations or impact of one variable on another.
4.1 RESEARCH CONCEPTUAL CLARIFICATION
METHODOLOGY USED FOR PROJECT
Research methodology is way to systematically solve the research problem. Research is a
scientific and systematic search for pertinent information on a specific topic. It has its
special significance in solving various operational and planning problems of business and
industry in it we study the various steps that are generally adopted by researcher in
studying his research problem along with the logic behind them.
For this project analytical research is carried.
The methodology used for calculating excise duty of the company had based on
formula and the values from previous reports of the company.
The methodology is to know the excise duties paid annually i.e. 2010-11.
The methodology to analyzing various different “Legislations & Acts” made by the
government for collection of revenue from manufacturing industry.
For theories related to topic, exchange rates and interpretation was gathered from
various financial management books, web sites and communication of people who
have good knowledge about these topics.
4.2DATA COLLECTION METHOD
SOURCE OF DATA
Both primary and secondary data are used for the data collection.
PRIMARY DATA
Primary data are those data which are collected as fresh for the first time, and thus happen
to be original in character. The primary data is collected from the (Level M1) respondents
through questionnaire. The responses are collected from them and used for analysis
SECONDARY DATA
Secondary data are those data which have already been collected by someone else and
which have already been passed through the statistical process. The secondary data is
collected from books, Web sites, magazine etc. The data relating to the history of the
company is collected from the personal website of the company.
Primary DataPrimary Data
Data Collection Method
Data Collection Method
Secondary DataSecondary Data
CommunicationCommunicationInformation System
Information System
INFORMATION SYSTEM
SAP: Systems Applications and Products in Data Processing.
A company that develops software which allows businesses to track customer and
business interactions.
SAP is well-known for its data management programs.
COMMUNICATION
People who have good knowledge about these topics. People such as senior officers,
accountants, managers.
Different sources of communication were used such as email, telephone, IM messenger.