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Excise law
 

Excise law

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    Excise law Excise law Presentation Transcript

    • WHAT IS EXCISE DUTY The primary and fundamental meaning of "excise duty" or Duty of excise is tax on articles produced or manufactured in the taxing country and intended for home consumption (i.e. consumption within the same country). It is an indirect duty which the manufacture or producer passes on the ultimate consumer, that is, its ultimate incidence will always be on the consumer. What attracts the duty of excise is an activity, namely, the production or manufacture of goods. NATURE AND CHARGEABILITY OF CENTRAL EXCISE DUTY. Central Excise duty is an indirect tax levied on goods manufactured in India. The taxable event under the Central Excise law is manufacture and the liability of Central Excise duty arises as soon as the goods are manufactured. The duty, though it becomes payable on the manufacture of goods, is collected at the time of removal of goods from the factory. ACTS AND RULES FOR THE COLLECTION OF DUTY OF EXCISE. The Central Excise duty is collected under the authority of the Central Excise Act, 1944 at the rates specified under Central Excise Tariff Act, 1985. This duty is commonly referred as the Basic Excise Duty. In addition to this duty a few textile items, like fiber, yarn etc. also attract Additional Excise Duty under Additional Duties of Excise (Textiles and Textile Articles) Act, 1975. The Additional Duties of Excise (Goods of Special Importance) Act, 1957 and Miscellaneous Cess Acts provide authority for collection of Additional Excise Duty and Cess respectively on several manufactured items over and above Basic Excise Duty. PROCEDURE FOR COLLECTION OF DUTY. The following types of procedures are being followed by the Central Excise department for levy and collection of the Central Excise duties:-
    • 1. Applicable to cigarettes only. Here assessment precedes clearance which takes place under the supervision of Central Excise officers; 2. Compounded levy scheme – Applicable to Stainless Steel Pattis/Pattas, Aluminium circle, Processed textile fabrics – by independent processors, Embroidery in the piece, in strips or motifs, ingots and billets of non alloy steel falling under heading no.7206.90 and 7207.90 and Hot re-rolled products of non alloy steel of headings nos. 7211.11, 7211.19, 7211.30, 7211.52, 7211.59, 7211.60, 7211.92, 7211.99, 7213.90, 7214.90, 7215.90, 7216.10 and 7216.90. In this case the duty is charged at a flat rate depending upon the capacity of plant and machinery. 3. Self Removal Procedure – Applicable to all other goods produced or manufactured within the country. Under this system, the assessee himself determines the duty liability on the goods he clears. Physical Control – CREDIT SCHEME CENVAT The CENVAT SCHEME is designed to reduce the cascading effect of indirect taxes on final products. This is a more liberal and extensive scheme than the erstwhile MODVAT SCHEME with most goods brought within its ambit and no declarations or statutory records prescribed The Scheme allows instant CENVAT Credit to be taken of duties such as Excise Duty, SED, ADE and CVD paid on inputs and capital goods received in a factory for the manufacture of any dutiable final product (except matches). This credit can be utilised to pay Excise duty on any final product. All raw materials or inputs are covered except Light Diesel oil, High Speed Diesel and Motor Spirit. Similarly, capital goods including pollution control equipment, components, spares, accessories, moulds and dies and paints, packaging material and greases/coolants are eligible goods on which credit can be availed. Credit can be availed immediately on receipt of eligible, duty paid goods in the factory. There is no need for the manufacturer to file any declaration or obtain any permission.
    • In the case of Capital Goods, only 50% of the duty paid on the goods can be availed of in the same financial year; the remaining can be availed in the subsequent financial years provided the goods are still in use (except for spares and components). Further, no depreciation should be claimed by the manufacturer under Sec.32 of the Income Tax Act, 1961 on that part of the value of these Capital Goods, which is equal to the duty, paid on the goods. A manufacturer who manufactures only exempted final products is not covered under this Scheme. However, the Scheme allows those who manufacture both dutiable and exempted final products in the same factory to avail of its benefits subject to certain conditions viz., maintenance of separate records in respect of inputs used to manufacture exempted products or payment of 8% of the total price (excluding taxes) of the exempted final products or in the case of a few specified items, on reversal of the credit availed. Similarly, credit can be availed on Capital Goods if not used exclusively for the manufacture of exempted final products. The Scheme also, inter alia, provides the following facilities: Removal of inputs or capital goods as such on payment of an amount equal to the credit availed on such goods.  Removal of goods to job-workers for processing, testing, reconditioning or any other purpose provided that the goods are received back within 180 days or are removed from the premises of the job worker if permitted by the Commissioner of Central Excise  Refund of credit accumulated due to export under bond of the final products is permissible  Unutilised CENVAT Credit can be transferred on account of shifting of a factory to another site or due to change in ownership by sale, merger, amalgamation, lease or transfer to a joint venture wherein liabilities are also transferred; and  A special dispensation has been made in the case of goods manufactured in specified areas of the North East.  No statutory records have to be maintained or duty-paying documents submitted to the department on a periodic basis.
    • The manufacturer should take reasonable steps to ensure that the appropriate duty has been paid on the inputs or capital goods on which credit is availed, as indicated in the documents accompanying the goods. These documents are prescribed in Rule 7. Similarly, the manufacturer shall maintain his own records regarding receipt, disposal, consumption and inventory of the goods containing relevant information. THE BURDEN OF PROOF REGARDING ADMISSIBILITY OF THE CENVAT CREDIT LIES UPON THE MANUFACTURER. If CENVAT Credit is taken or utilised wrongly, the same, along with interest, will be recovered. A simple monthly return in a prescribed format has to be filed by the 10th of the month following the month during which credit was availed. Manufacturers availing of the Small Scale exemptions, based on value or quantity of clearances during a financial year, need to file this return only on a quarterly basis. REGISTRATION REGISTRATION AND ECC CODE PERSONS REQUIRING CENTRAL EXCISE REGISTRATION. Every manufacturer of excisable goods other than the ones specifically exempted, is required to get himself registered under the Central Excise law. A manufacturer is exempt from the requirement of getting himself registered so long as the goods manufactured by him attract Nil rate of duty or remain exempt from the whole of the duty of excise leviable thereon. Every person who intends to issue invoices under Rule 57G or Rule 57T or who intends to procure excisable goods under bond for special industrial purposes in terms of provisions of Chapter X , is required to get himself registered under the Central Excise law. PROCEDURE OF OBTAINING REGISTRATION.
    • The application for registration is to be filed with the Superintendent of Central Excise having jurisdiction over the premises in respect whereof the registration is to be obtained. The following documents are to be submitted for obtaining the registration  Duly filled in application in the form R-I in triplicate;  Grounds plan of the premises in duplicate including details of plant & machinery etc.;  Details of the proprietors/all partners/Directors of the company including      Name(s), Address(es) – Official/ residential. Possession letter/allotment letter/rent deed of the premises to be registered; Article of Association of the company or Partnership deed of the firm, as the case may be; List of items with their Tariff sub-headings proposed to be manufactured; list of items with their Tariff subheadings, if any, obtained, under Chapter X procedure or dealt within; and  Registration certificate issued under Shop and Establishment Act and PAN Number The application for registration in form R-I is either to be signed before the Superintendent of Central Excise or can be submitted duly attested and notarised by the notary public. GRANT OF REGISTRATION. After receipt of application for registration, the jurisdictional Superintendent is to grant registration within 30 days of the receipt of the application. Even if the registration is not granted, it will be deemed to have been granted. The registration is in respect of premises and not a person STAGE OF FILING APPLICATION FOR REGISTRATION. For the goods that attract Central Excise duty right from the beginning, the registration is to be applied for before the removal of the goods. These goods are not covered under Small-Scale Exemption notification. Even where a manufacture
    • of goods eligible for Small-Scale exemption opts for availment of Modvat credit, the registration is to be applied for before the removal of the goods. Manufacturers of Cosmetics and Refrigeration goods are to apply for registration after crossing the clearances of Rs.30 lakhs. Manufacturers of other goods are to apply for registration when the clearances exceed Rs.50 lakhs. VALIDITY OF REGISTRATION CERTIFICATE. A registration certificate is valid till the relevant unit is engaged in manufacturing of excisable goods. The registration certificate is not required to be renewed. TRANSFERABILITY OF REGISTRATION CERTIFICATE. Registration certificate is not transferable. When a registered person transfers his business to another person, the transferee has to obtain a fresh registration. REQUIREMENT OF AMENDMENT IN REGISTRATION CERTIFICATE. When a registered firm or a company or association of persons undergoes a change in Constitution, the jurisdictional Range Officer is to be intimated within 30 days of such a change for incorporation of this fact in the registration certificate. In case a registered person desires to manufacture a new product, he is to get the product endorsed on his registration certificate. REQUIREMENT OF EXHIBITION OF REGISTRATION CERTIFICATE.
    • Every registered person is required to exhibit the registration certificate or a certified copy thereof in a conspicuous part of the registered premises. WHETHER 100% EXPORT ORIENTED UNIT OR UNIT IN FREE TRADE ZONE IS REQUIRED TO BE REGISTERED. A 100% Export Oriented Unit or a unit in Free Trade Zone licenced or appointed under the provisions of Customs Act, 1962, is deemed to be registered under the Central Excise law. SURRENDER OF REGISTRATION CERTIFICATE. When the registered person ceases to carry out the operation for which he is registered, he is required to surrender his registration certificate immediately to the Range Officer. HOW TO OBTAIN DUPLICATE REGISTRATION CERTIFICATE. In case the original registration certificate is lost or destroyed, the assessee can apply for a duplicate registration certificate to the jurisdictional Range Superintendent after depositing a fee of Rs.30/- through a TR-6 challan in any nominated branch of Punjab National Bank. REQUIREMENT OF FILING DECLARATION FOR THE MANUFACTURERS EXEMPT FROM REGISTRATION. Where the goods are chargeable to nil rate of duty or where the exemption from whole of the duty of excise leviable thereon is granted on the basis of :      value of goods; or process of manufacture of goods; or quantity of clearances of goods made in a financial year; or payment of appropriate duty of excise in respect of the raw material used in the manufacture of the goods; or conditions, if any, specified in the schedule to the Central Excise Tariff Act, 1985 in respect of such goods; or
    •  conditions, if any, specified in any exemption notification, the manufacturer will have to file a declaration in the prescribed proforma with the jurisdictional Assistant Commissioner before 15th of April every year. In case of exemption based on value of clearances in a financial year, only those assesees whose value of clearances in previous financial year or in current financial year has exceeded Rs.40 lakhs or is likely to exceed Rs.40 lakhs, are required to file a declaration before 15th April with jurisdictional Assistant Commissioner. ECC CODE NUMBER AND ITS UTILITY. ECC code is known as Electronic Computer Code and is allotted to all registrants of Central Excise. This code comprises of 10 digits. The first 2 digits represent the Commissionerate, next 2 digits represent the division, next 2 digits represent the range, the 7th digit indicates the sector, 8th & 9th digit represent the unit within the sector and the last digit is a check digit. The ECC code number facilitates proper accountal of assessee’s records. This code number is a mandatory requirement and is given to the registrant by the Pay and Accounts officer. But the application in this regard is to be submitted to the jurisdictional Range Officer. ECC code number is required to be mentioned on all the statutory documents issued and maintained by the registrant. MANUFACTURE THE TERM MANUFACTURE – EXPLAINED. The term manufacture is defined under section 2(f) of the Central Excise Act, 1944. Manufacture involves bringing into existence a new substance having different name, character or use. As the duty is on goods, manufacture must be of goods. In order to be goods, the product should be marketable, i.e. the product should be known in the market as such and should be capable of being brought and sold in the market. It does not mean that the sale of the goods is a precondition for charging duty. Goods which have capability of being bought and sold in the market, will attract Central Excise duty even if they are not marketed and may be consumed captively.
    • In addition there are certain processes, which are defined as amounting to manufacture. Such processes are specified in the Chapter notes and section notes in the First Schedule to the Central Excise Tariff Act, 1985. There is duty liability in respect of these specified processes even if they may not result in the emergence of a new and distinctive commodity. CLASSIFICATION CLASSIFICATION AND DECLARATION UNDER RULE 173B CLASSIFICATION OF EXCISABLE GOODS. The Central Excise duty is chargeable at the rates specified in the schedule to the Central Excise Tariff Act, 1985. The said schedule is divided into 20 sections and 96 Chapters. There are no Chapters with numbers 1,6,10,12 and 77. As such there are effectively 91 Chapters. Each Chapter is further divided into headings and sub-headings. In order to determine the applicable rate of duty in respect of a particular item, the positioning of that item under a particular head or sub-head is essential. The positioning of an item in the appropriate heading/sub-heading is called classification. The classification of an item is generally decided in view of how it is described in commercial parlance. However a deviation from this principle is made when the trade meaning or commercial nomenclature does not fit into the scheme of the statute. INTERPRETATIVE RULES FOR CLASSIFICATION. The Central Excise Tariff Act, 1985 incorporates five Rules of interpretation, which together provide necessary guidelines for classification of various products under the schedule. As regards the Interpretative Rules, the classification is to be first tested in the light of Rule 1. Only when it is not possible to resolve the issue by applying this Rule, recourse is taken to Rules 2,3 & 4 in seriatim. The provision of the individual Rule is as follows. RULE 1 This rule provides that section and Chapter titles are only for the ease of reference and, therefore, do not have any legal bearing on the classification of goods, which is determined according to the terms of headings and relevant section or Chapter notes and according to the other interpretative rules if such headings or notes do not otherwise require. Thus goods are to be classified in terms of the heading and relative sections or Chapter notes without recourse to any
    • interpretative rules. It is only when the goods cannot be classified on this basis, the assistance is to be sought from the interpretative rules. RULE 2(A) This rule provides classification of an article referred to in a heading, even if that article is incomplete or unfinished, or is presented in an unassembled or disassembled form. An important condition to be satisfied for classification in this manner is that in its incomplete or unfinished state, the article has the essential character of the complete of finished article. Some of the important aspects which are relevant in this regard are functional aspect, physical aspect and the degree of completion of the product. RULE 2(B) This rule relates to mixture or combination of materials or substances, and goods consisting of two or more materials or substances. According to this rule headings in which there is a reference to a material or substance also apply to that material or substance mixed or combined with other materials or substances. This rule does not apply where specific provisions exist in the headings or the sections or chapter notes excluding such classification. RULE 3 This rule lays down three steps for classifying the goods which are, prima facie, classifiable under several headings. The sequential order of the steps contemplated are  Most specific description;  Essential character; and  Heading which occurs last in numerical order; This rule applies when goods are prima facie classifiable under 2 or more headings. In the first step, {Rule 3(a)} the general guidelines are that a description by name is more specific than the description by character and a description which identifies the goods clearly and precisely is more specific than the one which is less complete. The second step {Rule 3 (b)} relates only to mixtures, composite goods consisting of different materials or components and goods put up in sets. This rule finds applicability if rule 3(a) does not help. In all such cases the goods are to be classified as if they consist of material or components which gives them their essential character.
    • When goods cannot be classified with reference to Rules 3(a) and 3(b), they are to be classified in terms of Rule 3(c)- in the heading which occurs last in numerical order among those which equally merit consideration. This is a fall back provision for resolving the matter when no heading can be regarded as providing a more specific description than the others and when it is not possible to identify the material or component which gives the concerned goods their essential character. RULE 4 When goods cannot be classified in accordance with rules 1,2, & 3, then they are to be classified in a heading of a product which is most akin to the goods in question. Kinship can, of course, depend on many factors such as description, character, purpose etc. RULE 5 This rule postulates that the classification of any product under a sub-heading is to be contemplated after the product concerned has been properly classified under its proper four digit Chapter heading. The classification in the subheading of a heading is determined mutatis mutandis in accordance with the principles applicable to classification in the four digit headings. POWERS OF THE C.B.E.C. TO ISSUE ORDERS OF CLASSIFICATION OF GOODS. Section 37B of the Central Excise Act, 1944 empowers the Central Board of Excise & Customs to issue orders, instructions and directions, for the purpose of uniformity in the classification of goods or with respect to the levy of excise duties on such goods. PROCEDURE FOR FILING DECLARATION UNDER RULE 173B. In order that assessee knows the correct classification and rate of duty applicable to the goods manufactured by him in advance, the instrumentality of classification declaration has been prescribed. The classification declaration is to be filed in quadruplicate in a prescribed proforma with the Superintendent of Central Excise, having jurisdiction over the factory. The details which are required to be given in the declaration include The full description of –
    • all excisable goods produced or manufactured by the assessee; all other goods produced or manufactured by him and intended to be removed from his factory; and all the excisable goods already deposited or likely to be deposited from time to time without payment of duty in his warehouse.  The Chapter, heading no. and sub-heading no., if any, of the schedule to the Central Excise Tariff Act, 1985, under which each good falls;  The rate of duty leviable on each such good ;  The exemption notification availed or proposed to be availed, if any,  Write up and flow chart on the process of manufacture; and  List of critical raw materials. In case the assessee is availing the benefit of small scale sector exemption notification, he is to give a declaration about the total value of clearances during the preceding financial year, the details pertaining to use of brand name, if any, on the goods manufactured, availment of Modvat credit etc. The declaration is to be filed by an assessee producing or manufacturing excisable goods for the first time within 30 days of commencing the production of such excisable goods and thereafter every year at the beginning of the financial year and also when there is a change in the rate of duty or tariff classification or whenever a new item is intended to be manufactured. The correctness of the declaration should be duly certified by the assessee. The assessee should also ensure that he satisfies all the conditions, if any, prescribed in any exemption notification the benefit of which he claims and should certify to this effect. CHECK LIST FOR THE ASSESSEE.  Whether the declaration is filed in the required no. of copies;  Whether all particulars about the assessee i.e. name and address, location of the factory, Central Excise registration no., range, division, ECC code no. have been furnished;  If it is not the first declaration, ensure that the previous serial no. of the declaration is mentioned;
    •  Whether the effective date for declaration has been indicated;  Whether the correct description of each excisable goods including the byproducts, waste products or intermediate products to be used for captive consumption along with brand name/trade name/ commercial name and complete specification has been mentioned.  Whether the unit of assessment, heading/sub-heading no. and effective rate of duty along with exemption notification have been provided;  Whether the conditions, if any, prescribed in the exemption whose benefit is claimed are duly satisfied;  Whether all the enclosures as mentioned under the heading 'Procedure for filing declaration under Rule 173B' are enclosed;  Whether the declaration bears the seal and signature of the assessee or his authorised signatory. ONUS FOR MAKING CORRECT DECLARATION ON ASSESSEE. The assessee is legally liable to ensure that the declaration made by him under Rule 173B is complete (i.e. no products whether dutiable or not, are omitted), factually correct and specific. Failure on this count may not only attract legal provisions but also may result in recovery of duty in respect of goods which do not discharge their duty liability correctly owing to improper declaration, by invoking extended period of limitation. The assessee cannot escape this onus by making vague declarations or on the plea that the departmental officers had been visiting the factory and were, therefore, conversant with the process of manufacture etc. VALUATION VALUATION AND DECLARATION UNDER RULE 173C VALUATION OF EXCISABLE GOODS. The valuation of the excisable goods is done in accordance with either of the two provisions enshrined in the Central Excise law. These provisions are
    •  Valuation under section 4 of the Central Excise Act, 1944 based on normal price which would be applicable to all cases, where maximum retail price based valuation is not notified by the Central Govt., or where Tariff values have not been fixed for the articles under section 3(2) of the Central Excise Tariff Act, 1985;  Valuation based on maximum retail price (MRP) under section 4A of the Central Excise Act, 1944, which would be applicable to those excisable goods that are notified by the Central Govt.; VALUE UNDER SECTION 4 OF THE CENTRAL EXCISE ACT, 1944. DEFINITION: - Section 4 levies duty on the normal price which has following ingredients:-      The price should be one at which the goods are ordinarily sold by the assessee; The sale should be in the course of wholesale trade; The sale should be at the time and place of removal; The buyer should not be a related person; and The price should be the sole consideration of sale. This assessable value is, however, subject to four exceptions, which are set out in the proviso to section 4 (1)(a). These exceptions are FIRST EXCEPTION If the goods are sold at different whole sale prices to different classes of buyers, each such wholesale price is deemed to be an assessable value. SECOND EXCEPTION If the goods are sold at different wholesale prices for different places of removal, each such price is deemed to be the assessable value. Thus an assessee can have more than one assessable value in respect of the same goods.
    • THIRD EXCEPTION If the goods are sold in the course of wholesale trade at a price fixed by law, such fixed price is taken as the assessable value. For example the Drugs Price (Control) Order fixes the wholesale price at which schedule drugs can be sold. In such cases, the price fixed under the Drugs Price (Control) Order is taken as assessable value. FOURTH EXCEPTION If the assessee arranges to sell the goods in the course of wholesale trade only through a related person, the price at which the goods are sold by such related person is taken as the normal price or the assessable value. This proviso is obviously intended to prevent avoidance of Excise duty by an assessee who can arrange to sell the goods in wholesale to a person at a lower price and thus pay lesser amount of duty. PERMISSIBLE DEDUCTIONS FROM WHOLESALE PRICE FOR DETERMINING ASSESSABLE VALUE. Only following items can be deducted from the wholesale price  Cost of packing, provided it is durable in nature and returnable to the assessee. Secondary packing necessary for making the goods marketable is includible in the assessable value. However, if any special packing is provided by the assessee at the instance of the wholesale buyer, which is generally not provided as a feature of wholesale trade, the cost of such packing shall be deducted from the wholesale cash price. The burden of proof that a packing is a special secondary packing, is on the assessee.  Cost of transportation (including cost of insurance) from place of removal to the place or places of delivery. If the freight is averaged, the average freight is deductible;  Excise duty, sales tax and other taxes. The quantum of excise duty is to be determined as per explanation to section 4(4)(d)(ii).  Trade discount allowable in accordance with the normal practice of wholesale trade. Such trade discount should not be refundable on any account, however. No deduction is permissible in respect of post manufacturing expenses, like marketing, selling and advertisement expenses. RELATED PERSON.
    • Related person has been defined under section 4(4)(c) of the Central Excise Act, 1944. The definition is both exhaustive and inclusive. According to the first part of definition, which is exhaustive, "a person who is so associated with the assessee that they have interest, directly or indirectly in the business of each other" is a related person of the assessee. According to the second part related person includes holding company, subsidiary company, a relative and a distributor, a sub-distributor. The term holding company, subsidiary company and relative have the same meaning as in Companies Act, 1956. A person will be a related person of another if there exists mutuality of business interest. This interest refers to the interest in general between the business of two parties and does not refer to the interest which is created by sale of goods. The interest may be pecuniary or of such nature as would have the effect of promoting the business of each other. The quality and degree of interest which each has in the business of other may be different, the interest of one in the business of other may be direct, while the interest of the latter in the business of the former may be indirect. This would make no difference so long each has got some interest, direct or indirect in the business of the other. DETERMINATION OF ASSESSABLE VALUE WHEN THERE IS NO SALE BY RELATED PERSON. If the related person does not sell the goods, but captively utilises them, the proper officer can determine the assessable value. Section 4(1) contains inherent powers to determine the true value of the excisable goods after taking into account any concession shown to a favoured buyer as account of extra commercial consideration and the provisions of Rule 6(b) of the Central Excise (Valuation) Rules, 1975. DETERMINATION OF ASSESSABLE VALUE WHERE THE RELATED PERSON SELLS THE GOODS IN RETAIL. In this situation the value has to be deducted from the retail price of the goods in the manner specified in Rule 6(a) of the Central Excise (Valuation) Rules, 1975 i.e. a reasonable amount will have to be reduced from the retail price to arrive at the price at which the assessee would have sold the goods in the course of whole sale trade to a buyer other than the related person. VALUATION OF GOODS GOT MANUFACTURED ON JOB WORK BASIS.
    • If the processing results in the manufactured product, the assessable value will not be processing charges alone but the intrinsic value of the processed product which is the wholesale price at which it is sold for the first time in the wholesale market. ILLUSTRATION If the cost of raw material is Rs.50/- and the job conversion charges including job worker’s profit is Rs.100/- the assessable value of the goods will be Rs.150/- as this is the value at which the goods leave the factory and enter the main stream. THE ASSESSABLE VALUE WHERE THE RAW MATERIAL IS PROVIDED BY THE CUSTOMER. The value of the raw material supplied by the customer would form a part of the assessable value. The fact that manufacturer does not pay for the raw material, is immaterial. The matter stands concluded by the judgement of the Supreme Court in the case of Burn Standard Co. Ltd. Vs. UOI – (1991) 36 ECC-1(SC). In this case the assessee manufactured wagons for Railways. The latter supplied wheel sets and certain other items free of cost. The price charged for the vehicle did not include the value of the items supplied free of cost. The Supreme Court held that free supply items like wheel sets etc. form part of the complete wagon and would lose their identity. It hardly matters as to how and in what manner the components of wagons were procured by the manufacturer. The assessee would be liable to pay duty on the normal price of the wagon. THE EFFECT OF PRICE ESCALATION SUBSEQUENT TO THE REMOVAL OF GOODS, ON THE ASSESSABLE VALUE. The excess amount realised under an escalation clause would form part of the assessable value and thus attract Central Excise duty. THE EFFECT OF REDUCTION IN PRICE SUBSEQUENT TO REMOVAL ON PAYMENT OF DUTY, ON ASSESSABLE VALUE.
    • If the goods are removed on payment of duty, based on declared price, subsequent reduction of price for whatever reason, including Govt. interference, would not create a claim for refund of Central Excise duty paid on the quantum of price reduced. THE DETERMINATION OF ASSESSABLE VALUE WHEN THE GOODS ARE SOLD ONLY IN RETAIL. Even if the goods are not sold in wholesale and wholesale price thereof is not available, the assessable value is to be determined for charging Central Excise duty. The assessable value in such cases is determined in accordance with the provisions of the Central Excise (Valuation) Rules, 1975. The rules provide for arriving at the assessable value by reducing the retail price by such amount as is necessary and reasonable in the opinion of the proper officer. The quantum of deduction is to be determined after considering the nature of excisable goods, trade practice in that commodity and other relevant factors. ASSESSABLE VALUE OF GOODS CAPTIVELY CONSUMED. The assessable value of goods captively consumed is determined according to Rule 6(b) of the Central Excise (Valuation) Rules, 1975. The Rule provides for determining the value on the basis of the value of the comparable goods sold by the assessee or any other person. In case the value of comparable goods is not available, the value is based on the cost of production or manufacture including profits, if any, which the assessee would have normally earned on the sale of such goods. This profit is only a notional profit. The gross profit of the previous years, as per audited balance sheets, is added to the cost of production. THE POSITION OF INTEREST RECEIVED ON ACCOUNT OF DELAYED PAYMENTS IN INFLUENCING THE ASSESSABLE VALUE. Within the general credit period, the price is same whether it is paid on the date of delivery or on any day within such general credit period. The interest will be included in the assessable value.
    • In cases where interest is made payable after the general credit period is over, such interest will not form a part of the assessable value. Illustration. Assessee charges Rs.100/- per unit for his goods, if the payment is made within 45 days. Rs.100/- per unit will of course include the interest component pertaining to the general credit period of 45 days. Even if the payment is made at the time of delivery Rs.100/- would be the assessable value, irrespective of the possible inclusion of interest element in the price. If the assessee charges Rs.102/- per unit after 45 days and Rs.2/- per unit is identifiable as being relatable to time lag in payment, this amount of Rs.2/- per unit will not form a part of the assessable value. ROLE OF NOTIONAL INTEREST ON THE ADVANCES/DEPOSITS TAKEN BY THE MANUFACTURER FROM THE BUYER IN INFLUENCING THE ASSESSABLE VALUE. Interest on advance deposits is includible in the assessable value only if there is a nexus between the advance deposit and the sale price. The ratio decidendi of the Metal Box case – 1995 (75) ELT 449(SC) requires, before adding notional interest, establishment of the facts that the interest free advance reflected favoured or special treatment and that advances had the effect of pegging down the wholesale price. THE VALUE OF TRADE MARK AND ASSESSABLE VALUE. Where a manufacturer is the owner of the brand name, the price including the value of the brand name, at which he sells the goods in the course of wholesale trade, would constitute the normal price. But where the goods are manufactured by somebody else and then sold to a dealer who owns the brand name, the value of the brand name cannot be added for computing the assessable value for the brand name owner cannot be treated as manufacturer and the price at which the brand name owner sells the goods cannot be taken as assessable value. THE ROYALTY PAID TO ANOTHER PERSON REGULARLY FOR USING PATENTED KNOW HOW AND THE ASSESSABLE VALUE. If royalty is paid to another person regularly for using the patented know how, such a sum has direct nexus with the goods manufactured. Such royalty would be included in the assessable value.
    • CONSULTANCY /TECHNICAL SERVICES AND ASSESSABLE VALUE. The costs towards drawing, designing and technical specifications are clearly elements of machinery costs and are to be included in the assessable value. However, the cost towards project report, plant layout, civil works and training are in the nature of services and are not includible in the assessable value. Technical knowhow fee paid to the foreign collaborator is includible in the assessable value as it enhances the marketability of the product on account of improved quality. INSPECTION CHARGES AND TESTING CHARGES, WHETHER INCLUDIBLE IN THE ASSESSABLE VALUE. Where the manufacturer bears the cost towards inspection and testing of goods prior to their removal, such costs are included in the assessable value. The inspection and testing charges incurred subsequent to the clearance of the goods are also to be included in the assessable value if they form part of agreement for sale of goods. EXCESS AMOUNTS CHARGED TO CUSTOMER WHETHER DUTIABLE. If the amounts recovered from the customers is in excess of expenditure actually incurred on permissible deductions, the excess amount will form part of the assessable value. Amount charged and recovered from customers by separate bills will be considered as gross receipts or cum duty price and duty payable is to be calculated after working out the assessable value from the gross receipts. HANDLING COST AND ASSESSABLE VALUE. Handling cost incurred before the clearance of the goods from the place of removal is includible in the assessable value. WHETHER THE RENTAL CHARGES OR PAYMENT OF INTEREST ON DEPOSITS TOWARDS SAFE RETURN OF DURABLE PACKING IS A CONSTITUENT OF ASSESSABLE VALUE.
    • The retention charges/rentals and charges incurred for maintenance and service of durable and returnable containers are not to be included in the assessable value. As the cost of durable packing does not form a part of assessable value, there cannot be any rationale for inclusion of rental charges incurred in respect thereof. THE ASSESSABLE VALUE IN CASE OF REPAIR ACTIVITIES. If the assessee replaces certain parts while repairing a manufactured product, he is liable to pay duty only on value of spare parts manufactured and used in the said manufactured product. MAINTENANCE CHARGES, WHETHER, PART OF ASSESSABLE VALUE. Maintenance charges (being optional and distinct from warranty obligations), and sight service charges recovered for rendering special services are not includible in the assessable value. But if the price is marked up to cover servicing costs, prima facie such amount would form a part of the assessable value. WARRANTY EXPENSES AND THE ASSESSABLE VALUE. After sales service expenses for the warranty period are a part of the assessable value. But the expenditure incurred for after sale servicing under taken by the assessee after the expiry of the warranty period is not includible in the assessable value. THE COST OF ACCESSORIES SUPPLIED BY THE BUYER, WHETHER PART OF THE ASSESSABLE VALUE. There is a distinction between the component and the accessory. A thing is a part or a component of the other only if the other is incomplete without it. A thing is an accessory of the other if the thing is not essential for the other, but only acts to its convenience or effectiveness. The cost of accessory supplied by the buyer as a package of sale of the manufactured goods will be included in the assessable value if Modvat credit is taken in respect of the accessories. ADMISSIBLE AND INADMISSIBLE DISCOUNTS.
    • Discounts known at or prior to the removal of the goods are allowable if the discounts are actually given. Trade discounts not given uniformly can be rejected considering the circumstances of transaction. There is no reason to suppose that a trade discount is always in the form of money. A quantity discount is an accepted form of trade discount and is allowable on goods sold in wholesale, is deductible like cash discount. Turnover discount given depending upon the purchases made by each dealer is an admissible discount. Prompt payment discount is a trade discount and allowable as deduction. Free samples of medicines given to the physician constitute an admissible discount. TAC/Warranty discount is in the nature of benefit given to the customers by way of compensation for loss suffered by them on the previous sale. As it is not in accordance with the normal practice of the wholesale trade at the time of removal of goods in respect whereof the claim is made, the discount is inadmissible. Year end discount or Campaign discount are in the nature of bonus or incentive given much after the removal of goods is complete and are, therefore, not deductible. COMPUTATION OF ASSESSABLE VALUE FROM WHOLESALE PRICE. The assessable value is computed from the wholesale price by using the equation : Assessable value =Wholesale price – Permissible deduction 1 + rate of duty 100 REQUIREMENT OF FILING PRICE DECLARATION IN CERTAIN CASES (RULE 173C).
    • An assessee is required to file price declaration with the Superintendent of Central Excise having jurisdiction over his factory in a prescribed form in the following cases:1. 2. 3. 4. 5. where the assessee sells goods to or through related persons; where the assessee uses such goods captively for manufacture and production of other goods; where the assessee removes such goods for free distribution; where the assessee removes such goods in any other manner which does not involve sale; where the assessee removes goods of the same kind and quality from his factories located in the jurisdiction of different Commissioners of Central Excise or Assistant Commissioner of Central Excise The declarations are to be filed in triplicate at the beginning of each financial year and thereafter as and when there is a change in the value or marketing pattern. In case the value declared by the assessee is not found to be correct, the divisional Assistant Commissioner may cause necessary enquiry to be conducted as contemplated in Rule 173C(3) of the Central Excise Rules, 1944. CHECK LIST IN RESPECT OF DECLARATION FILED UNDER RULE 173C. Please check whether:the declaration has been filed in the correct proforma in required number of copies; declaration date has been mentioned on the proforma; description of goods, heading, sub-heading, ECC code no. has been mentioned; the declaration contains the prices in respect of goods of each description and the excise duty, other taxes, discounts and all such deductions and addition made by the assessee to arrive at the assessable value;  appropriate mention has been made in case of sales to – an independent wholesaler or a related person or own depots or branches;  a certificate to the effect that the price declared represents sole consideration and there is no additional consideration flowing directly from such sales, has been given in the declaration;  the status of related person/depot/consignment agent and his relation with assesee has been mentioned and the copies of such agreements or contracts have been enclosed.    
    • PROVISIONAL ASSESSMENT WHAT IS PROVISIONAL ASSESSMENT. Where the assessee is unable to determine the value of excisable goods in terms of section 4 of the Central Excise Act, 1944 on account of non availability of any document or any information or where the assessee is unable to determine the correct classification of goods while filing classification declaration under Rule 173B, the said assesee may request the jurisdictional Assistant Commissioner in writing for permitting provisional assessment to duty. The Assistant Commissioner after causing such enquiry as he deems fit may direct that the duty leviable on such goods shall be assessed provisionally at such value or rate as may be indicated by him. This value or rate may not necessarily be the same as mentioned by the assessee. The provisional assessment is subject to the execution of bond in proper form by the assessee, with such surety or such sufficient security or under such conditions as the Assistant Commissioner may deem fit. The security amount is taken as 25% of the bond amount. The bond binds the assessee for payment of difference between amount of duty as provisionally assessed and as finally assessed. All the excisable goods covered under such request by the assessee are deemed to be cleared on provisional assessment till the date when the direction of the Assistant Commissioner is issued and communicated to the assessee. Where the Assistant Commissioner is satisfied that the self assessment made by the assessee is not in order, he may direct the assessee to resort to provisional assessment. FINALISATION OF PROVISIONAL ASSESSMENT. As per provisions of Rule 9B(6), the Provisional Assessment is to be fianalised by the Assistant Commissioner after causing the necessary enquiries. The Assistant Commissioner is to issue a speaking order for finalisation of assessment and demand of differential duty, if any, after observing the principles of natural justice. In case the assessee is aggrieved by the order, he may appeal to the Commissioner (Appeals)
    • PAYMENT OF DUTY HOW TO PAY DUTY. The assessee can pay duty from two accounts. One account is called current account also described as PLA. The other account is called the Modvat account. CURRENT ACCOUNT OR PLA After registration of a new factory, the assessee should deposit a token amount on TR-6 challan in any of the nominated branches of Punjab National Bank. T.R. abbreviates Treasury Receipt. After depositing the amount the assessee can take credit of that amount in the PLA to be maintained by him. The assesee, thereafter, should apply to the jurisdictional Range Superintendent along with a receipted copy of TR-6 for allotment of PLA number. The PLA number is allotted by the Chief Accounts Officer and it takes normally a week’s time for the allotment of the PLA number. The assessee must mention the PLA number on the TR-6. Even during the pendency of allotment of PLA number the assessee can effect clearances. The duty is to be deposited by the assessee by making a debit entry of the amount of duty in PLA account. PLA is to be maintained in triplicate using indelible pencil and double side carbon. The assessee should periodically make credit in current account by depositing on TR-6 challans. There should always be sufficient balance in the account to cover the duty on the goods intended to be removed. The debit entry towards payment of duty of an amount exceeding the balance available in the current account means removal of goods without payment of proper duty and such acts are liable to penalties under the law. PROCEDURE OF DEPOSIT OF DUTY DURING STRIKES ETC. The following procedure may be followed for deposit of duty during sudden strikes, riots, imposition of curfew or natural calamities such as floods/cyclones etc.
    • The assessee should send the cheque drawn in favour of the Chief Accounts Officer, Central Excise Commissionerate Delhi-I, C.R.Building, I.P.Estate, New Delhi by registered post acknowledgement due or through special messenger along with completed TR-6 challans in quadruplicate, with an undertaking that they have sufficient balance in their bank account and that they will bear the collection charges charged by the bank. A copy of such forwarding letter should also be handed over to the jurisdictional Superintendent. On the strength of the cheque so sent, the assessee may take credit in the PLA and clear the goods. The details with regard to the cheque and the particulars of the concerned assessee are intimated by the Chief Accounts Officer to the jurisdictional Superintendent. The duplicate and triplicate copies of the receipted challans are returned to the assessee for his reference and record and for preparing necessary monthly statements etc. Bank commission or collection charges, if any, are to be debited in the PLA. In case the cheque is dishonoured, the assesee is liable for penal action. This concession is not available to the assessees who work on overdrafts on their banks and are not able to give the declaration that they have sufficient balance in their account in the bank to meet the amount of the cheque MODVAT ACCOUNT. If the assessee is availing the benefit of Modvat scheme envisaged in Central Excise Rules, 1944 from Rule 57A to 57J and Rule 57Q to 57U, he can discharge his duty liability from the credit permissible in the relevant rules. For operating under the scheme the assessee is to maintain accounts in the form RG-23A parts-I and II for taking Modvat credit on inputs and RG-23C Parts I & II in respect of Modvat credit on capital goods. In these accounts the credit of duty paid on inputs and capital goods received in the factory, is taken and the credit is used for payment of duty on the goods manufactured and removed by the assessee. MODVAT RATIONALE OF MODVAT SCHEME.
    • Modvat abbreviates Modified Value Added Tax. The scheme is intended to avoid cascading effects of duty. Before the introduction of this scheme, barring some duty relief schemes provided to some specified goods, the inputs first suffered duty and the duty so paid became a part of the cost of the final product and the final product again suffered some duty. However, under Modvat scheme duty becomes payable at the value added at each stage of production as against on the gross value including duty paid in earlier stages of production. The scheme envisages taking of credit of duty paid on inputs as well as on capital goods. The scheme in practice provides for an alternative method for payment of duty. The duty on the final product, in terms of the scheme, gets paid from the credit of duty available on the basis of duty paid on inputs in capital goods. MODVAT SCHEME WITH REGARD TO INPUTS. AVAILABILITY OF THE SCHEME IN RESPECT OF THE DUTIES. The provisions relating to Modvat do not make available credit in respect of all the duties and taxes suffered by the inputs. The credit can be taken only of the following duties 1. the duty of excise specified in the first schedule to the Central Excise Tariff Act, 1985, leviable under Central Excise Act, 1944; 2. the special duty of excise specified in the second schedule to the Central Excise Tariff Act, 1985, leviable under Central Excise Act, 1944; 3. the additional duty of excise under section 3 of the Additional Duties of Excise (Textiles and Textile Articles) Act, 1978; 4. the additional duty of excise under section 3 of the Additional Duties of Excise (Goods of Special Importance) Act, 1957; and 5. the additional duty under section 3 of the Customs Tariff Act, 1975. AVAILABILITY OF THE SCHEME IN RESPECT OF INPUTS.
    • The credit of duty is available in respect of inputs specified in the notifications issued under Rule 57A of the Central Excise Rules, 1944. In order to be classified as inputs, the goods must be used either directly or indirectly in or in relation to the manufacture of final products. It is not essential that the input should be contained in the final product in order to be so classified. The following inputs are excluded from the scope of Modvat provisions     the goods falling under sub-heading no.2710.11, 2710.12, 2710.13 and 2710.19 (except natural gasoline liquid); high speed diesel oil falling under heading no.27.10; matches falling under heading 36.05 and cinematographic exposed and developed falling under heading 37.06;and ingots and billets of non-alloy steel on which the duty of excise is paid under section 3A of the Central Excise Act, 1944 falling under sub-heading no.7206.90 and 7207.90. The credit in respect of inputs falling under Chapter 24, i.e. the Chapter covering tobacco and manufactured tobacco is available only if the final product also falls under Chapter 24. The credit of duty on the following items is available as credit on inputs if they are specified Inputs which are manufactured and used within the factory of production; Paints; Inputs used as fuel; Inputs used for generation of electricity or steel, used for manufacture of final products or for any other purpose, within the factory of production;  Packing materials and materials from which such packing materials are made provided the cost of such packing materials is included in the value of the final product;  Accessories of the final product cleared along with such final product, the value of which is included in the assessable value of the final product.     The credit on the following items is not available as inputs
    •  Machines, machinery, equipment, apparatus, tools, appliances or capital goods as defined in Rule 57Q used for any purpose in the factory. However, the credit is available on the component parts as inputs if they are used in the manufacture of final products;  packing materials in respect of which any exemption to the extent of duty of excise payable on the cost of packing material is being availed ; and  crates and glass bottles used for aerated waters. AVAILABILITY OF SCHEME IN RESPECT OF FINAL PRODUCT. The scheme is applicable in respect of all the final products except the following: Match boxes falling under heading no.36.05 and cinematographic films falling under heading 37.06;  ingots and billets of non-alloy steel on which the duty of excise is paid under section 3A of the Central Excise Act, 1944 falling under sub-heading no.7206.90 and 7207.90.  hot re-rolled products of non alloy steel, on which the duty of excise has been paid under section 3A of the Central Excise Act, 1944, falling under sub-heading no.7211.11, 7211.19, 7211.30, 7211.52, 7211.59, 7211.60, 7211.92, 7211.99, 7213.90, 7214.90, 7215.90, 7216.10 and 7216.90. THE MANNER OF UTILIZATION OF INPUTS IN RESPECT OF WHICH THE CREDIT IS TAKEN. The inputs in respect of which the credit is taken are essentially to be used in or in relation to the manufacture of final product. However, the inputs can be removed for home consumption on payment of duty equal to the amount of credit availed in respect of such inputs or exported under bond. These provisions are incorporated in Rule 57F (1), 57F(2) and 57F(3). REMOVAL OF INPUTS OR PARTIALLY PROCESSED INPUTS. The removal of inputs or partially processed inputs is governed by the provisions of Rule 57F(4) of the Central Excise Rules, 1944. The inputs and partially processed inputs can be removed for the purposes of test, repair, refining, reconditioning or carrying out any other operation necessary for the manufacture of final products or for manufacture of
    • intermediate products necessary for the manufacture of final products. The inputs or the partially processed inputs after they are subjected to the requisite process are to be brought back to the factory within 180 days and are either to be used in the manufacture of final product or removed after payment of duty for home consumption or for export under bond. The inputs or partially processed inputs after they have been subjected to the requisite process and brought back to the factory, can be removed without payment of duty to a unit in Free Trade Zone or to a 100% EOU or to a unit in Electronic Hardware Technology Park or Soft ware Technology Parks or supplied to the United Nations or an International Organization for their official use or supply to projects funded by them, on which exemption of duty is available under notification no. 108/95-CE dated 28.8.95. The waste generated during the process performed outside the factory, is required to be returned to the factory. However, the requirement can be dispensed with, if the excise duty livable on such waste, is paid. The removal of inputs or partially processed inputs under Rule 57F(4) is undertaken after debiting an amount equal to 10% of the value of such inputs or the partially processed inputs. The amount can be debited either in the RG-23A Pt.-II account or in the current account. REFUNDS & REBATES Refund of excise duty paid can be claimed by filing an application to the Asst. /Deputy Commissioner of Central Excise having jurisdiction over the factory of the assessed (Sec. 11B). The application should be filed before the expiry of one year from the relevant date which is, generally, the date of payment of duty. This time limit does not, however, apply, where the duty has been paid under protest The application should be filed in a prescribed form and should be accompanied by evidence to establish that the amount of duty claimed as refund was collected from, or paid by; the applicant and the incidence of such duty had not been passed on by him to any other person. If the onus of proving that the incidence of duty has not been passed on is not discharged, and the amount is held to be refundable, it will be credited to a fund called the "Consumer Welfare Fund" (Section 12C) and utilized by the Central Government for the welfare of the consumers.
    • If the onus is discharged, the amount will be paid to the applicant. Refunds relating to rebate of excise duty paid on goods exported or on raw materials used in the manufacture of goods exported and unspent PLA deposits, shall also be paid to the applicant. If any refundable amount is not paid to the applicant within three months from the date of filing of an application which is complete in all respects, shall be paid for the period between the expiry of three months and the date of refund (Sec.11BB). RETURN & RECORDS Every assessee is required to maintain certain records and submit returns periodically as prescribed in the various rules. Before these records are brought into use, the assessee is required to give page numbers to the records and get the same counter signed from the Sector officer having jurisdiction over the premises. GENERAL RECORDS TO BE MAINTAINED BY THE ASSESSEE.     RG-1 register, i.e. daily stock account of excisable goods; Form-IV register of receipt and issue of raw material; Personal Ledger Account; Invoice book. ADDITIONAL RECORD TO BE MAINTAINED BY THE ASSESSEE AVAILING MODVAT.         RG-23A Pt.-I – entry book of input receipts; RG-23A Pt.-II – entry book for taking credit of duty paid on inputs; RG-23C Pt.-I – entry book of capital goods received; RG-23C Pt.-II - entry book for taking credit of duty paid on capital goods; Record of inputs sent for job work outside the factory under Rule 57F(4); Record of inputs received in the factory for job work; Challan book under Rule 57F(4) for sending inputs or partially processed inputs for job work; Challan book for sending capital goods for tests, repairs etc. under Rule 57S.
    • ADDITIONAL RECORDS TO BE MAINTAINED BY THE MANUFACTURERS OF. SUGAR       RG-4 – cane account; RG-6(C) or (G) – register of daily manufacture; RG-7 - daily drier account; RG-8 – Sugar store account; RG-9 – Gunny bag account; RG-11 – Daily account of sugar received for crushing. MATCHES  RG-2 – daily account of splints and veneers and composition of match heads;  RG-3 – register of stock and receipts of Central Excise Stamps purchased; TOBACCO PRODUCTS  RG-12 – register of manufacture of excisable tobacco products; EMBROIDERY  RG-25 – production register cum account current to be maintained by the manufacturers of embroidery working under special procedure. TEA  RG-17 – daily account of loose tea utilised in the production of package tea. ADDITIONAL RECORDS TO BE MAINTAINED BY UNITS WORKING UNDER CHAPTER X PROCEDURE.  RG-16 – register of excisable goods used for special industrial purposes.
    • ADDITIONAL RECORDS TO BE MAINTAINED BY INDEPENDENT PROCESSORS.  Lot register;  Register in respect of deemed credit taken under Rule 57A; RECORDS TO BE MAINTAINED BY REGISTERED DEALERS.  RG-23D – record of receipt of duty paid goods and issue thereof;  Invoice book. RETURNS TO BE FILED BY THE ASSESSEE.     RT-12 – Monthly return for the assessee working under Self Removal Procedure or RT-3 – Monthly return for the assessee working under Physical Control; In case of units availing small-scale exemption notifications RT-12 return is to be filed on quarterly basis. RT-5 – Quarterly return of the principle raw material consumed and excisable goods manufactured INDUSTRY SPECIFIC RETURNS.      RT-6 – matches - monthly return of stocks and receipts of band rolls; RT-7(C) or (G) – V.P.Sugar – monthly manufacturing report; RT-8 - V.P.Sugar – monthly manufacturing report; RT-9 – V.P.Sugar – monthly abstract of sugar received for crushing; RT-11 – quarterly return of excisable goods received and used for special industrial purposes under Chapter X procedure;  RT-13 – 100% EOUs – monthly return of excisable goods removed from 100% EOUs or unit working under Free Trade Zones or Export Processing Zones on payment of duty in the domestic tariff area; RETURNS TO BE SUBMITTED BY THE REGISTERED DEALERS.
    • Photocopy of relevant pages of the RG-23D register for the month for which return is submitted along with triplicate copies of invoices issued, photocopies of invoices under which duty paid goods received and original copies thereof for defacing and eventual return, are to be submitted. SUBMISSION OF REVENUE PARTICULARS OF EVERY ASSESSEE. Every assessee shall submit revenue paid report to the Range Superintendent in the prescribed proforma on 1st of every month. SEARCH, SEIZURE, ARREST, OFFENCE, PENALTY, PROSECUTION INTRODUCTION. In every statute, to ensure due compliance of law, preventive and investigative provisions are incorporated. Under the Central Excise Act, 1944 and the Rules made thereunder for collection of appropriate amount of excise duty the preventive and investigative provisions such as search, seizure, summons, arrest are provided for. Some of these measures are not expressly provided under the Central Excise Act, 1944 but have been adopted from the Customs Act, 1962 vide notification no. 68/63-CE dated 4.5.63 as amended issued under section 12 of the Central Excise Act, 1944. SEARCH. An officer not below the rank of Inspector of Central Excise, duly authorised can search at any time, any premises where the officer authorising search has reason to believe that excisable goods are manufactured or stored in contravention of the provisions of the Act or Rules or where he has reason to believe that the evidence pertaining to manufacturing and removal of such goods is available. The authorisation for search is called Search Authorisation or Search Warrant. For a registered premises or for stopping and searching any conveyance in transit no such warrant is required. The Search warrant is issued by an officer not below the rank of the Assistant Commissioner. The search is to be carried out in the presence of two independent witnesses. SEIZURE Whenever after the search of the premises or a conveyance, a proper officer of Central Excise, i.e. an officer not below the
    • rank of Inspector forms a reasonable belief that the goods liable to confiscation or the documentary evidence pertaining to evasion of Central Excise duty is available in the premises or conveyance searched, he can seize the goods as well as the documents under section 110 of the Customs Act, 1962 as made applicable to the like matters of Central Excise. The instrumentality of the seizure is a panchanama drawn on the spot in the presence of two independent witnesses. After seizure the proper officer either takes charge of the goods or keeps the offending goods in the custody of any person for safe keeping under a superdginama. The law, however, provides for the provisional release of the goods seized, pending the order of adjudication, on execution of a bond and deposition of such security as the officer competent to adjudicate the case may require. SUMMONS Under section 14 of the Central Excise Act, 1944, Superintendent or any officer senior to him, can issue summons to any person requiring him to give evidence or to produce any record etc. The persons so summoned are bound to attend and give their truthful statement and produce the summoned records/documents etc. The statement tendered under section 14 is admissible as evidence in a court of law. The summons are to be issued in writing and must bear the signature of the officer issuing it as well as his official seal, if any. At the stage of investigation under this provision, the person summoned has no right to have his lawyer present during the questioning by the officer. ARREST. Any officer not inferior in rank to an inspector is authorised to arrest any person whom he reasonably believe to be liable to punishment under the Central Excise Act, 1944. The person is to be produced before the Magistrate within 24 hrs. of his arrest. OFFENCES In the absence of any express definition of the term Offence in the Central Excise law, any violation of the provisions of the law would be construed as an offence. Whether or not any offence has been committed by an assessee is to be adjudged through a process of adjudication in accordance with the principles of natural justice. The law envisages action both in respect of offending goods and the offender.
    • The Central Excise Act also provides for initiation of prosecution proceedings in certain cases, depending upon the gravity of the offence. Prosecutions are launched by the department through complaints in the competent jurisdictional courts leading to the trial of the accused person. If found guilty, such persons may be punished with fine or imprisonment or both. FINES AND PENALTIES. The Central Excise Act, 1944 and the Central Excise Rules, 1944 provide for following categories of fine or penalties  Penalties on the persons who are responsible to conduct the business of the company or firm, which may include their managers, partners or directors;  Penalties on persons who abet any of the offences mentioned in Rules or Section 9 of the Act;  Penalties on the companies and firms;  Confiscation of the goods in respect of which the offence has been committed or the duty has been evaded;  Confiscation of the land, building, plant, machinery etc. used in connection with the manufacture, production, storage, removal or disposal or excisable goods; and  Penalty on a person for obstruction or giving false or misleading information.  Besides these fines and penalties, the Act provides powers under section 9(B) to publish name, place of business of persons convicted under the Act. The property of the confiscated goods vests with the Central Govt. The owner of the goods, however gets an option to redeem the goods on payment of fine imposed by the competent adjudicating authority. The evasion of Central Excise duty is considered a very serious offence and penalty imposable in certain serious cases is equivalent to the amount of duty evaded. It is, therefore, desirable that the assessee should ensure proper maintenance of Central Excise records, payment of proper duty at proper time and due observance of the provisions of law. The law also contains provisions for charging of interest where the duty is not timely paid. PROSECUTION.
    • Besides the departmental adjudication, prosecution can also be launched under Central Excise Act, 1944 for offences described under section 9(1) of the Act. The law also provides for prosecution against any person, director, manager, secretary or other officer of a company or partner of the firm or proprietor of a concern who is responsible for the conduct of the business of the company/firm/concern and is found guilty of the offences under the Central Excise law. The prosecution proceedings are generally initiated in serious cases having substantial revenue involvement. If as a result of the trial the charges made in the complaint against the accused are proved the court may award the following punishments  Imprisonment up to 7 years depending upon the gravity of the case;  Imposition of fine as per the provisions;  Forfeiture of any goods in respect of which the court is satisfied that an offence has been committed - this may include vehicle used for carrying such goods, packages used for packing such goods and implements or machinery used in the manufacture of such goods; and 26. publication of name, place of business etc. of persons convicted under the Act. JOB WORK INTRODUCTION. Before a product gets manufactured it has to undergo several processes. It may not be possible for an industry to carry all such processes within its premises. In such an eventuality the unit will have to opt for processing of the raw materials or intermediate product from outside. The processes performed outside are called ‘job work’. The law takes care of the need of a manufacturer for such job work. The provisions contained in the law in respect of job work are as follows RULE 56B – SPECIAL PROCEDURE FOR REMOVAL OF FINISHED EXCISABLE GOODS OR SEMI- FINISHED GOODS FOR CERTAIN PURPOSES. Under this Rule, an assessee can send semi-finished excisable goods for carrying out certain manufacturing processes or excisable goods for carrying out tests, with a prior permission of the Assistant Commissioner, to a job worker without
    • payment of duty and to bring them back or remove them to another registered premises for removal on payment of duty or for export. The provisions of this Rule do not apply to the goods known as ‘prototypes’ sent out for trial or development tests. The benefit of this provision is available in respect of semi-finished excisable goods only if the manufacturing process to which such goods are subjected, does not result in a change in the sub-heading in which the goods have been classified. Rule 57F(4) – removal of inputs as such or partially processed inputs in respect of which Modvat credit has been availed. The provision has been explained in detail in the Chapter on Modvat. Procedure under notification no.214/86-CE dated 25.3.86 (as amended). This notification exempts specified items, if manufactured in a factory on job work basis. The exemption is available to the job worker only if the supplier uses the returned goods in the following manner In or in relation to the manufacture of specified final products, or  on which duty of excise is leviable in whole or in part; or  for removal to a unit in a Free Trade Zone or to a 100% EOU or to a unit in Electronic Hardware Technology Park or Soft Technology Parks or for supply to the United Nations or an International Organisations for this official use or for supply to the projects funded by them, on which exemption of duty is available under notification no.108/95-CE dated 28.8.95; or  for removal under bond for export Cleared as such from the factory of the supplier of the raw materials or semi finished goods –  on payment of duty for home consumption; or  without payment of duty under bond for export;  without payment of duty to a unit in a Free Trade Zone or to a 100% EOU or to a unit in Electronic Hardware Technology Park or Soft Technology Parks or for supply to the United Nations or an International Organisations
    • for this official use or for supply to the projects funded by them, on which exemption of duty is available under notification no.108/95-CE dated 28.8.95.  clears them for home consumption on payment of duty; or  sends them to another job worker for being used in the manner given at (a), (b) or (c) above. Also the supplier is required to give an undertaking to this effect and to the effect of discharging the duty liabilities in respect of a final product, to the Assistant Commissioner of Central Excise having jurisdiction over the factory of the job worker. The supplier is also required to prod transfer interrupted been used or removed in the manner undertaken. PROCEDURE UNDER NOTIFICATION NOS. 83/94 AND 84/94 BOTH DATED 11.4.94 (AS AMENDED). These two notifications are meant to facilitate SSI units in getting job work done from other units. SSI units send inputs or semi finished goods for manufacture or processing on job work basis. The goods received from the job worker are used by the SSI unit for further manufacture. Notification no.84/94 provides that a Small Scale Unit availing benefit of notification 8/98 and 9/98 can send any specified input without payment of duty to the job worker on the condition that the goods would be used for further manufacture by the SSI on their return and that in the event of failure the excise duty if any, payable on such goods, shall be paid by the supplier of the raw materials or semi finished goods. Also, the goods manufactured by the SSI out of the returned goods should be wholly or partially exempt, i.e. the value of clearances of the SSI should be below Rs.100 lakhs or Rs. one crore, for it to be eligible for this benefit. Notification no.83/94 provides that the job worker will not be required to pay any excise duty if the specified goods received by him are used for making specified goods on job work basis and returned to the supplier for further manufacture. The supplier of the goods is required to give an undertaking to the proper officer having jurisdiction over the factory of the job worker that the specified goods received from the job worker will be used in the factory of the supplier in or in relation to the manufacture of specified goods which are exempt from the whole of the duty of excise leviable thereon under the Small Scale exemption notification and that in the event of his failure to do so he would pay excise duty, if any, payable on such goods. The waste generated during the course of job work is to be used in the manufacture of specified goods either within the factory of the job worker or within the factory of the supplier of specified goods for job work.
    • EXEMPTION TO SMALL SCALE IND. (SSI) The contribution of Small Scale Sector in the industrial growth of the Indian economy and to the Gross Domestic Product is significant besides the potential for employment generation. The Small Scale Sector has for itself a special dispensation in the Central Excise law in order to make it competitive in the domestic and global market. Central Excise duty concessions have been extended to the units in the small-scale sector based on their turnover so as to facilitate them to graduate by availing these concessions in a graded manner. ELIGIBILITY Manufacturers of specified commodities having clearances not exceeding Rs. 3 crores in the preceding Financial Year are eligible for this exemption. REGISTRATION OF SMALL SCALE COMPANIES Every manufacturer of excisable goods is required (under Rule 9 of Central Excise Rules 2002) to get registered with the Central Excise Department before starting production. SSI units are exempted from registration till their value of clearances reaches the specified limits. (exemption limit – 10 lakh rupees) WHO IS COVERED BY THE SSI SCHEME At present, in terms of notification nos. 8/2003-CE and 9/2003-CE, both dated 1st March, 2003, and effective from 1st April, 2003, a general small scale excise duty exemption scheme has been made operational providing slab-rated concessions from excise duty in respect of clearances of specified excisable goods. Under these notifications, all goods specified in the First Schedule to the Central Excise Tariff Act, 1985 are eligible to avail the exemptions/concessions except for those goods which are chargeable to NIL rate of duty or which are exempt from whole of the duty and certain products as given in the Annexure to these notifications. The salient features of these exemption schemes, as contained in the aforesaid notifications are as under:-
    • WHERE THE SSI UNIT DOES NOT AVAIL CENVAT Notification No.8/2003-CE, dated 1st March, 2003. For first clearances effective from 1st April of a financial year up to an aggregate value of Rs. 1 Crore, duty is exempted in respect of those SSI units which do not intend to avail CENVAT Credit WHERE THE SSI UNIT AVAILS CENVAT Notification No.9/2003-CE, dated 1st March, 2003. The graded scheme of exemption in respect of those SSI units which intend to avail CENVAT is as under:First clearances effective from 1st April of a financial year, up to an aggregate value of Rs.1 crore - 60% of the normal rate of duty Subsequent Clearances at the normal rate of duty The following clearances are excluded from computation of value of clearances :   Clearances of the specified goods which are used as inputs for further manufacture of specified goods within the factory irrespective of the value of clearances. Clearances of excisable goods affixed with the brand name or trade name of another person who is not eligible for availing the exemption under the aforesaid notification. It may not be noted that wef 1.4.2003, the value of exempted goods will also be taken into consideration for computing the aggregate value. Units availing SSI exemption are permitted to remove specified goods to a place outside the factory for getting any job work done on any specified goods without payment of duty (Notification number 83/94 and 84/94 Central Excise dated 11.4.94 as amended) QUARTERLY RETURN OF PRODUCTION AND CLEARANCE (ER 1)
    • This return is to be filed once in a quarter, before the 20th day of the close of each quarter. A quarterly return of Cenvat Credit taken is also to be filed. VISITS BY OFFICERS No SSI factory should be visited by Central Excise Inspectors except with the specific permission of the Assistant Commissioner and for a specific purpose. WHO TO APPROACH IN CASE OF PROBLEMS FACED In case of any problems faced, the SSI is advised to approach either the jurisdictional Range Supdt., or the Asstt. Commissioner/ Deputy Commissioner of the Division or the Commissioner of Central Excise. PROCEDURE FOR EXPORT INTRODUCTION. Export is a key area of the economy. It is an important means of earning foreign exchange and is thus vital for financing imports. The Central Excise department attaches considerable importance to export. The law affords several benefits of substantive nature as well as procedural nature. In this Chapter, a passing reference has been made to the substantive benefits. The procedure however, has been described in detail. BENEFITS AVAILABLE IN RESPECT OF GOODS EXPORTED OUT OF INDIA. The benefit in respect of duties on inputs used in the manufacture of goods meant to be exported as well as in respect of duty on the finished goods exported is envisaged under the Central Excise law. These benefits are available either in the form of rebate or the clearances of such inputs or finished goods under bond. The scheme under which the benefits are made available, is incorporated in Rule 12 and Rule 13 of the Central Excise Rules, 1944. The benefit in respect of duties on inputs used in the manufacture of goods exported, is available if the exporter does not claim drawback under the Central Excise Duties Drawback Rules, 1995. The rebate of duty in respect of inputs is also not available if the credit of duty paid on inputs has been availed of.
    • EXPORT UNDER CLAIM FOR REBATE. Under Rule 12 of the Central Excise Rules, 1944, rebate on duty paid on the exported goods or the duty paid on materials used in the exported goods, notified for the purpose, is granted to the exporter subject to the conditions laid down in the notifications. The various notifications issued under Rule 12 are as given below S.NO. NOTIFICATION NO. & DATE SUBJECT 1. 41/94-CE(NT) dated 22.9.94 Notified excisable goods for grant of rebate (as amended) 2. 42/94-CE(NT) dated 22.9.94 Notified material used in the manufacture of exported goods for grant of rebate. (as amended) 3. 43/94-CE(NT) dated 22.9.94 Grant of rebate on castor oil and ground nut oil exported without observing AR-4 (as amended) procedure. 4. 44/94-CE(NT) dated 22.9.94 Rebate of duty on excisable goods exported as ship’s store (as amended) 5. 46/94-CE(NT) dated 22.9.94 Rebate of excise duty paid on mineral oil products exported as stores to Aircraft (as amended) on a foreign run. The assessee’s desirous of exporting goods under claim for rebate can clear excisable goods for export or materials for use in the manufacture of excisable goods to be exported on payment of duty either through PLA or through RG-23A pt.-II or RG-23C pt.-II and may subsequently claim the rebate of duty paid, from the jurisdictional Assistant Commissioner or the Maritime Commissioner, as the case may be, in accordance with the provisions of Rule 189 of the Central Excise Rules, 1944. EXPORT OF GOODS UNDER BOND WITHOUT PAYMENT OF DUTY. Under Rule 13, the following operations with regard to export are permissible :- (I) export of excisable goods under bond ; (ii) utilisation of raw materials, consumables, components etc. without payment of duty for the manufacture of export
    • goods and (iii) removal of excisable goods without payment of duty for the manufacture of specified excisable goods to be exported or for replenishment of duty paid materials used in the manufacture of such export goods, already exported. The Central Govt. has notified the excisable goods and materials to be used in the manufacture of excisable goods to be exported, as per the notifications listed below: Notification no. 47/94-CE (NT) dated 22.9.94 (as amended) (exemption to inputs for manufacture in bond);  Notification no. 48/94-CE (NT) dated 22.9.94 (as amended) (export in bond of all excisable goods);  Notification no. 49/94-CE(NT) dated 22.9.94 (as amended) (movement of intermediate goods without payment of duty for supply to manufacturers of export goods in terms of advance intermediate licence scheme). The assessee’s desirous exporting excisable goods under bond are required to execute B-1(General Security/Surety) or B16 (General Security/Surety) bond under Rule –14 either with the jurisdictional Assistant Commissioner or with the Maritime Commissioner and maintain a running bond account with the Range Superintendent. The goods will be allowed to be cleared for export under bond without payment of duty by debiting the amount of duty in the running bond account. The credit in respect of duty debited is made available on furnishing the proof of export of the goods. The assessee’s desirous of obtaining materials for manufacture of export products or in terms of advance licence under notification no.49/94-CE (NT) dated 22.9.94 as amended, are required to follow the Chapter X procedure. PROCEDURE FOR EXPORT. The assessee has the option to clear the export goods with or without sealing of the consignment at the place of removal. In case he opts for factory sealing, the goods would be examined at the factory. Otherwise, the goods would be examined by the customs officer at the port of exportation. EXAMINATION AND SEALING OF GOODS AT THE PLACE OF REMOVAL. The assessee has to file AR-4 application duly filled in, normally 24 hrs. in advance with the jurisdictional Superintendent in six copies. The proper officer after identification and verification of the goods with AR- 4, and the duty payment particulars (in case the export is under claim for rebate) or after debiting the running bond account or against the specific bond, shall seal the consignment with the Central Excise seal and make necessary endorsement of the same on the AR – 4. The original duplicate and the 6th copy of the AR-4 are thereafter handed over to the exporter. The exporter desirous of
    • exporting the goods in a container, are required to obtain the permission of the proper officer and shall also present the shipping bill duly processed by the customs authorities of the port of exportation or the ICD as the case may be, along with the AR-4 at the time of sealing of the container. The inspector supervising the container’s stuffing as well as the Range Superintendent will make an endorsement on the body of the shipping bill. The assessees opting for sealing of their consignment or container are required to pay the supervision charges in terms of the provisions of, and at the rates prescribed in the Customs (Fees for rendering services by Customs Officers) Regulation, 1968. DESPATCH OF GOODS WITHOUT EXAMINATION UNDER RULE 187 A. The assessee can clear the export goods either on payment of duty under claim for rebate or under bond under the cover of an invoice and shall send the original, duplicate and six triplicate copies of the AR-4 with the consignment. The triplicate and quadruplicate and quintuplicate copies of the AR-4 shall be submitted to the Range Superintendent within 24 hrs. of clearance of such consignment, after verifying the particulars of duty paying or payable shall forward the triplicate copy to the jurisdictional Assistant Commissioner of Central Excise or the Maritime Commissioner as the case may be, either by post or on request handing over the same to the exporter in a sealed cover. Quadruplicate copy of the AR-4 is sent to Chief Accounts Officer and quintuplicate copy is retained by the Range for record. PROCEDURE IN RESPECT OF GOODS NOT EXPORTED DIRECTLY UNDER RULE 187 OR 187A. Where the goods are not exported directly from the factory of the manufacturer, the triplicate and quadruplicate copies of the AR-4 are sent by the proper officer to the Superintendent having jurisdiction over the factory of the manufacturer, who after verification, would forward the triplicate copy to the Maritime Commissioner either by post or by handing over to the exporter in a tamper proof sealed cover, or the Assistant Commissioner of Central Excise having jurisdiction over the factory, as the case may be. The quadruplicate copy is sent to the Chief Accounts Officer by the Superintendent. EXPORT PROCEDURE FOR EXEMPTED UNITS. The exempted units desirous of exporting their goods are required to file declaration under notification no. 13/92- CE (NT) dated 14.5.92 as amended and obtain declarants code number. The code number is mentioned in all the clearance documents which are pre-authenticated by the manufacturer or his authorised agent. In case of export through merchant
    • exporter, the clearance documents shall be marked ‘Export through merchant exporter’ and the merchant exporter’s export - import Code number should also be mentioned. The exempted units are required to maintain simple account of production and clearance and they shall file a quarterly statement to the jurisdictional Range Superintendent and also submit proof of export. INFORMATION TO BE GIVEN ON AR-4. The exporter is required to give the following information on the AR-4 form  Running sl. No. of the AR-4 beginning from each financial year;  Scheme under which export has been made, i.e. value based advanced licencing scheme/ quantity based advanced licencing scheme/ under claim for duty drawback etc.;  Whether the exported goods have been manufactured availing/without availing Modvat credit under Rule 57A; and  Particulars of bond executed or the duty debit particulars as the case may be. EXPORT BY MERCHANT EXPORTERS. A merchant exporter can export excisable goods either directly from the premises of the manufacturer, with or without sealing of export consignment, or through his premises under claim for rebate of duty or under bond. In case of export under bond, the merchant exporter is required to execute bond either with the jurisdictional Assistant Commissioner having jurisdiction over the factory of the manufacturer or with the Maritime Commissioner. The merchant exporter can execute consolidated B-1 general bond with the Maritime Commissioner and obtain "Block Transfers" from him along with attested copies of B-1 consolidated bond executed for various ports or manufacturers and export the goods under bond. The merchant exporter can also export goods on manufacturer’s bond. He can also claim rebate of duty paid on exported goods either from the Assistant Commissioner of Central Excise having jurisdiction over the factory of the manufacturer or from the Maritime Commissioner. The merchant exporter is also required to take disclaimer certificate from the manufacturer as well, in case he wants to avail the export benefits. REFUND OF MODVAT CREDIT UNDER RULE 57F(13) OF THE CENTRAL EXCISE RULES, 1944.
    • Under Rule 57F(13) an exporter can take Modvat credit on the inputs used in or in relation to the manufacture of goods exported under bond and utilised the same towards payment of duty on similar final products cleared for home consumption or for export on payment of duty. Where for any reason such adjustment is not possible, the credit can be refunded in cash to the exporter, subject to such other conditions as provided in the said Rule or in the notification no.85/87 (NT) dated 1.3.87 as amended issued under Rule 57F(13). SPECIAL PROCEDURE TO EXPORT TO NEPAL. Export to Nepal is governed by special procedure provided in notifications issued under Rule 12 & 13. The procedure is as explained below NOTIFICATION NO. 47/94-CE(NT) DATED 22.9.94 – PAYMENT OF REBATE TO HIS MAJESTY’S GOVERNMENT OF NEPAL. Goods for export to Nepal are to be cleared from the registered factory on Nepal Invoice prepared in quadruplicate and marked ‘For Export to Nepal’ on payment of duty. The Nepal Invoice is to be presented along with the goods to be exported before the Central Excise officer. The Central excise officer shall verify the goods and seal the packages with the Central Excise seal. After making necessary endorsement on the Nepal invoice to this effect, he will hand over the original copy of the invoice to the exporter. Duplicate and triplicate copies of the Nepal invoice after being put in a sealed cover are handed over to the exporter for giving the same to the Customs officer incharge of the Land Customs Station, mentioned on the invoice and through which the goods are to be exported to Nepal. On arrival at the Land Customs Station, exported goods are to be presented to the Customs officer along with the original copy of the Nepal invoice and sealed cover containing duplicate and triplicate copy of invoice. The Customs officer incharge, after verification of the goods with the invoice makes an endorsement on all copies of the invoice. The original copy is handed over to the exporter and the duplicate and triplicate copies are sent directly to the Nepalese Customs Officer incharge of the check post through which the goods are to be imported into Nepal. The Nepalese Customs officer will return the duplicate copy of the invoice after endorsement regarding verification and allowing import into sNepal, to the Customs officer incharge at Indian Land Customs Station who is to forward the same to the Deputy Director of Inspection, Customs and Central Excise, Nepal Wing, for grant of rebate to His Majesty’s Government of Nepal. NOTIFICATION NO. 51/94-CE(NT) DATED 22.9.94 AS AMENDED – PROCEDURE FOR EXPORT TO NEPAL AND BHUTAN WITHOUT PAYMENT OF DUTY.
    • Export under bond without payment of duty to Nepal and Bhutan is subject to the following conditions The payment for goods shall be in freely convertible foreign currency; and The importer shall open an irrevokable letter of credit in favour of the exporter in India before the export takes place, subject to certain conditions prescribed in the notification.  The exporter is required to execute a bond in Rule 13 before the Assistant Commissioner of Central Excise having     jurisdiction over the factory of the manufacturer or any other place from where the goods are to be exported and is to furnish a certificate in Appendix 1 to the said notification from the Reserve Bank of India or any other bank duly authorised to deal in foreign exchange showing that full payment has been received. On receipt of the said certificate and on completion of the conditions of the bond, the exporter shall be discharged of his liabilities under the bond. Capital goods are permitted to be exported to Nepal against any global tender invited by His Majesty’s Government of Nepal and the payment for which is received in the Indian currency, without payment of duty, subject to the condition that the exporter executes a bond and furnishes a certificate duly signed by the concerned Bank of India that full payment has been received in Indian currency by the said bank. On receipt of such certificate and on completion of the conditions of the bond, the exporter is discharged of his liabilities under the bond. The exporter is to follow the procedure as provided in Appendix 2 to the said notification. The procedure is explained below The exporter is to make 6 copies of the invoice as prescribed in Annexure-A to the notification and make the following declaration on the same: " I/we declare that the goods entered herein are intended for export to Nepal/Bhutan in bond, and shall not be diverted or delivered en route to any other country". The exporter shall present all the 6 copies of the invoice duly filled in along with the goods before the proper officer of Central Excise. The proper officer after verification of the goods and sealing them would make an endorsement on all the copies of the invoices. The original copy of the invoice is given to the exporter. Duplicate, triplicate and quadruplicate copies under sealed cover are given to the exporter for delivering the same to the Customs officer incharge of the Land Customs Station through which the goods are to be exported. The quadruplicate copy is forwarded to the Central Excise officer who has accepted the bond and quintuplicate copy is retained by the proper officer. On arrival at the Land Customs Station, the goods are presented before the Customs
    • officer incharge along with original copy of the invoice and the sealed cover containing copies of invoices. The Customs officer, after verification of the goods with the invoices would make the endorsement on the invoice and hand over the original copy to the exporter. The duplicate and triplicate copies are sent directly to the Napalese or Bhutanese, as the case may be, Custom officer incharge Land Customs Station through which the goods are to be imported into Nepal or Bhutan. The Customs officer incharge of Land Customs Station at Nepal or Bhutan will return the duplicate copy of the invoice, after making an endorsement thereon regarding verification and allowing of import into Nepal or Bhutan, directly to the Customs officer incharge Land Customs Station in India. The same is eventually forwarded to the Central Excise officer incharge of the factory or warehouse from where the goods were removed for export. PROPER MARKING OF PACKAGES MEANT FOR EXPORT. Rule 185 provides for legible marking of export packages in ink or oil colour with a progressive number commencing with the sr.no.1 for each calendar year and with the exporter’s name and special mark, if any. Assessee seeking exemption from the provisions of Rule 185 are to apply to the Assistant Commissioner of Central Excise having jurisdiction over the factory. PENAL PROVISIONS. In case the exporter who has removed the goods for export under bond, fails to produce proof of export before the proper officer in the manner provided in the relevant notification issued under Rule 13, he shall be liable to pay duty leviable on such goods upon written demand made by the proper officer and shall also be liable to penalty equal to twice the amount of duty and subject to a maximum of Rs.2000/- under Rule 14A. Penalty up to Rs.2000/- under Rule 14B can also be imposed if the exporter removes excisable goods under bond on which duty involved is more than bond amount or the balance in the running bond account. Under both the Rules i.e. 14A and 14B, the proper officer can also refuse to permit such offender further export of excisable goods under bond. CHECKLIST FOR EXPORT OF GOODS UNDER BOND ( EXCEPT TO NEPAL AND BHUTAN ). Please check whether
    •  The goods intended for export are permitted for export to the country to which exports are intended to be made and their export is not prohibited under any law for the time being in force;  The quantity of goods to be exported has been ascertained well in advance of the date of export;  The duty involved on the goods meant for export has been ascertained and appropriate bond covering the duty element has been furnished;  The inspection and sealing of the goods to be exported is desired in the factory or warehouse or other point of storage and not at the point of export. IN CASE THE ANSWER IS YES, THEN:-  whether prior intimation of the intended export in the form AR-4 (in sixtuplicate) properly filled, has been submitted to the jurisdictional range Superintendent well in time i.e. at least 24 hrs. in advance;  whether the goods to be exported have been inspected by the Central Excise officer and the packages containing such goods are properly sealed with the Central Excise seal;  whether the packages in which the goods are to be exported are legibly marked in ink or oil colour or in such other durable manner with the progressive number commencing with number 1 for each calendar year and with the exporter’s name and special mark, if any.  whether the description of goods furnished in AR-4 corresponds the goods packed for export;  whether the particulars of goods in AR-4 correspond to the particulars in the shipping bill filed by the exporter;  whether, on completion of inspection, the invoice has been prepared and issued for removal of goods in accordance with the AR-4 and bond amount and whether the duty amount has been incorporated in the AR-4;  whether after inspection the packages of the goods intended for export, the necessary endorsement has been made by the Central Excise officer on the AR-4;  whether original, duplicate and sixtuplicate copies of the AR-4 have been received from the Central Excise officer after proper endorsement. IF THE EXAMINATION OF THE GOODS IS DESIRED AT THE POINT OF SHIPMENT, THEN:-  Whether the original, duplicate and sixtuplicate copies of properly filled AR-4 along with the invoice and the goods have been sent to the place of export;
    •  Whether the triplicate, quadruplicate and quintuplicate copies of the AR-4 have been sent to the Range Superintendent within 24 hrs. of the removal of the consignment;  Whether the condition given in iv), v) & vi) in para d A above have been complied with. If required, the triplicate copy of AR-4, duly endorsed has been obtained from the Central Excise officer in a tamper proof sealed cover for delivery to the Assistant Commissioner of Central Excise or Maritime Commissioner, as the case may be.  The running bond account has been maintained properly and all the relevant entries have been made in the account;  The proof of export of a particular consignment has been obtained within a period of 6 months from the date of removal of the factory, warehouse or place of storage and is sent to the Central Excise officer within the stipulated period of 6 months. CHECK LIST FOR EXPORT UNDER CLAIM FOR REBATE OF DUTY. In addition to observing the points mentioned in the preceding check list, it must be checked whether the AR-4 contains a specific declaration regarding the authority with whom the rebate shall be filed. NOTIFICATION [Notification No. 45/99-C.E. (N.T.), dated 25/6/1999] CENTRAL EXCISE RULES – THIRTEENTH AMENDMENT OF 1999 In exercise of the powers conferred by section 37 of the Central Excise Act, 1944 (1 of 1944) the Central Government hereby makes the following rules further to amend the Central Excise Rules, 1944, namely : These rules may be called the Central Excise (Thirteenth amendment) Rules, 1999.  They shall come into force on the date of their publication in the Officeal Gazette.
    •  In rule 9B of the Central Excise Rule, 1944, in sub-rule (5), the following proviso shall be inserted at the end, namely :"Provided that, if an assessee is entitled to a refund, such refund shall not be made to him except in accordance with the procedure established under sub-section (2) of section 11B of the Act." [Notification No. 45/99-C.E. (N.T.), dated 25/6/1999] ASSESSMENT ON THE BASIS OF SALE PRICE – AMENDMENT TO NOTIFICATION NO. 20/99-C.E. (N.T.) In exercise of the poser conferred by sub-section (1), read with sub-section (2) of section 4A of the Central Excise Act, 1944 (1 of 1944), the Central Government, being satisfied that it is necessary in the public interest so to do hereby makes the following further amendments in the notification of the Government of India in the Ministry of Finance (Department of Revenue), No. 20/99-Central Excise (N.T.), dated the 28th February, 1999, namely :In the said notification, in the Table, against serial No. 10, for the entry in column (4), the entry "45%" shall be substituted;  against serial No. 22, for the entry in column (4), the entry "40%" shall be substituted; and  against serial No. 26, for the entry in column (4), the entry "40%" shall be substituted. CIRCULARS [C.B.E.C. Circular No. 465/31/99-CX, dated 1/7/1999] TRANSACTION COST – ACTION TO REDUCE TRANSACTION COST – INSTRUCTIONS  I am directed to say that the trade and Industry has represented before the High-Powered Committee on Transaction Costs, for certain modifications in the procedures, especially relating to exports which will ultimately ensure reduction in the transaction cost for the exporters.
    •  The first request is that Inspectors and Superintendents should put stamp with their full name. On the documents verified and signed by them so that at the time of subsequent processing of documents cross-verification from the concerned officer is possible without any delay. The Board has accepted this recommendation. Accordingly, it is directed that all the Central Excise Officers should put stamps with their full name on the documents verified and signed by them.  Secondly, it has been stated that proof of export is required to be submitted to the Division Office, where bond is opened. Range office always insists on written communication for acceptance of Proof of Export by division office from exporters. Once the proof of export is submitted to Division Office it should be communicated directly to the Range Office without involving exporters. Documents may be scrutinised at the time of submission. It has been required that the Range Office should not insist that exporters bring written communication from Division Office. The Board has accepted this request and accordingly directs that it will be the responsibility of the Divisional Office to send certificate of proof or export to the Range Officer immediately on its issue. The exporters should not be insisted upon to bring it from the Divisional Offices. [Commissioner of Central Excise Trade Notice No. 21/Gl-18/C.E./PRO/CAL-II/1999, dated 10/3/1999] VIDEO CASSETTES MADE FROM UNRECORDED VIDEO CASSETTES – EXCISABILITY OF [CHAPTER 85]  Attention of the Trade and field formations is invited to the fact that from 1986 to 1997, the Central Excise Tariff covered the video cassettes under sub-heading 8524.24 (changed to 8524.34 under Budget 1996) and the unrecorded video cassettes under 8523.14. Under Finance Act 1997 (effective from 14/5/1997) note 7 was inserted in Chapter 85 treating recording of sound or other phenomenon amounting to manufacture.  Recorded video cassettes containing tapes of width exceeding 15mm (Betacom) were exempt from 1/3/1989 to 1/3/1997 vide Notification Nos. 83/89, 74/90, 48/94 and 8/96. During Budget 1997, these types of video cassettes got the Tariff entry against Heading 85.24 specifically covered under the newly created sub-heading 8524.34. In 1998 Budget, this separate entry was done away with and simultaneously under Notification No. 5/98; dated 2/6/1998 (Sl. No. 226) full exemption was allowed.
    •  For recorded video cassettes containing tapes of width exceeding 15mm (U-matic or other similar format) there was exemption available. However, vide Notification Nos. 83/89, 74/90, and 48/94, the television image and sound recorded media such as video tapes and video disks were exempt provided such articles are made from unrecorded articles and are intended for sale or supply in U-matic video tape formats of width not less than 19 mm to Doordarshan. This exemption was withdrawn w.e.f. 23/7/1996. During Budget 1997, this type of video cassettes fell under separate sub-heading 8524.35 carrying duty @ 18% adv. which was changed in sub-heading 8524.34 during Budget 1998 but finally got covered under Notification 5/98, dated 2/6/1998.  Waiver of duty under Section 11c for both types of video cassettes intended for television broadcasting is being considered by the C.B.E.C.