UNIT III
CENTRAL EXCISE LAW IN BRIEF
"Goods" includes any article, material or substance which is capable of being bought and sold for a consideration and such goods shall be deemed to be marketable.
"Excisable goods" means goods specified in [the Fourth Schedule] (5 of 1986) as being subject to a duty of excise and includes salt.
[ Explanation. - For the purposes of this clause, "goods" includes any article, material or substance which is capable of being bought and sold for a consideration and such goods shall be deemed to be marketable;]
"Manufacture" includes any process-
(i) incidental or ancillary to the completion of a manufactured product;
(ii) which is specified in relation to any goods in the section or Chapter notes of [the Fourth Schedule] (5 of 1986) as amounting to [manufacture; or]
[(iii) which, in relation to the goods specified in the Third Schedule, involves packing or repacking of such goods in a unit container or labelling or re-labelling of containers including the declaration or alteration of retail sale price on it or adoption of any other treatment on the goods to render the product marketable to the consumer,]
and the word "manufacturer" shall be construed accordingly and shall include not only a person who employs hired labour in the production or manufacture of excisable goods, but also any person who engages in their production or manufacture on his own account.
Valuation of excisable goods for purposes of charging of duty of excise. –
(1) Where under this Act, the duty of excise is chargeable on any excisable goods with reference to their value, then, on each removal of the goods, such value shall-
(a) in a case where the goods are sold by the assessee, for delivery at the time and place of the removal, the assessee and the buyer of goods are not related and the price is the sole consideration for the sale, be the transaction value;
(b) in any other case, including the case where the goods are not sold, be the value determined in such manner as may be prescribed.
[ Explanation. - For the removal of doubts, it is hereby declared that the price-cum-duty of the excisable goods sold by the assessee shall be the price actually paid to him for the goods sold and the money value of the additional consideration, if any, flowing directly or indirectly from the buyer to the assessee in connection with the sale of such goods, and such price-cum-duty, excluding sales tax and other taxes, if any, actually paid, shall be deemed to include the duty payable on such goods.]
(2) The provisions of this section shall not apply in respect of any excisable goods for which a tariff value has been fixed under sub-section (2) of section 3.
(3) For the purposes of this section,-
(a) "assessee" means the person who is liable to pay the duty of excise under this Act and includes his agent;
(b) persons shall be deemed to be "related" if-
(i) they are inter-connected undertakings;
(ii) they are relatives;
(iii) amongst them the buyer is a relative and distributor of the assessee, or a sub-distributor of such distributor; or
(iv) they are so associated that they have interest, directly or indirectly, in the business of each other.
Explanation. - In this clause-
(i) "inter-connected undertakings" shall have the meaning assigned to it in clause (g) of section 2 of the Monopolies and Restrictive Trade Practices Act, 1969 (64 of 1969); and
(ii) "relative" shall have the meaning assigned to it in clause (41) of section 2 of the Companies Act, 1956 (1 of 1956);
(c) "place of removal" means-
(i) a factory or any other place or premises of production or manufacture of the excisable goods;
(ii) a warehouse or any other place on premises wherein the excisable goods have been permitted to be deposited without [payment of duty;]
[(iii) a depot, premises of a consignment agent or any other place or premises from where the excisable goods are to be sold after their clearance from the factory,] from where such goods are removed;
[(cc) "time of removal", in respect of the excisable goods removed from the place of removal referred to in sub-clause (iii) of clause (c) , shall be deemed to be the time at which such goods are cleared from the factory;]
(d) "transaction value" means the price actually paid or payable for the goods, when sold, and includes in addition to the amount charged as price, any amount that the buyer is liable to pay to, or on behalf of, the assessee, by reason of, or in connection with the sale, whether payable at the time of the sale or at any other time, including, but not limited to, any amount charged for, or to make provision for, advertising or publicity, marketing and selling organization expenses, storage, outward handling, servicing, warranty, commission or any other matter; but does not include the amount of duty of excise, sales tax and other taxes, if any, actually paid or actually payable on such goods.]
Valuation of excisable goods with reference to retail sale price. –
(1) The Central Government may, by notification in the Official Gazette, specify any goods, in relation to which it is required, under the provisions of the Standards of Weights and Measures Act, 1976 (60 of 1976) or the rules made thereunder or under any other law for the time being in force, to declare on the package thereof the retail sale price of such goods, to which the provisions of sub-section (2) shall apply.
(2) Where the goods specified under sub-section (1) are excisable goods and are chargeable to duty of excise with reference to value, then, notwithstanding anything contained in section 4, such value shall be deemed to be the retail sale price declared on such goods less such amount of abatement, if any, from such retail sale price as the Central Government may allow by notification in the Official Gazette.
(3) The Central Government may, for the purpose of allowing any abatement under sub-section (2), take into account the amount of duty of excise, sales tax and other taxes, if any, payable on such goods.
[(4) Where any goods specified under sub-section (1) are excisable goods and the manufacturer-
(a) removes such goods from the place of manufacture, without declaring the retail sale price of such goods on the packages or declares a retail sale price which is not the retail sale price as required to be declared under the provisions of the Act, rules or other law as referred to in sub-section (1); or
(b) tampers with, obliterates or alters the retail sale price declared on the package of such goods after their removal from the place of manufacture, then, such goods shall be liable to confiscation and the retail sale price of such goods shall be ascertained in the prescribed manner and such price shall be deemed to be the retail sale price for the purposes of this section.
Explanation 1. - For the purposes of this section, "retail sale price" means the maximum price at which the excisable goods in packaged form may be sold to the ultimate consumer and includes all taxes, local or otherwise, freight, transport charges, commission payable to dealers, and all charges towards advertisement, delivery, packing, forwarding and the like and the price is the sole consideration for such sale:
Provided that in case the provisions of the Act, rules or other law as referred to in sub-section (1) require to declare on the package, the retail sale price excluding any taxes, local or otherwise, the retail sale price shall be construed accordingly.
Explanation 2. - For the purposes of this section,-
(a) where on the package of any excisable goods more than one retail sale price is declared, the maximum of such retail sale prices shall be deemed to be the retail sale price;
(b) where the retail sale price, declared on the package of any excisable goods at the time of its clearance from the place of manufacture is altered to increase the retail sale price, such altered retail sale price shall be deemed to be the retail sale price;
(c) where different retail sale prices are declared on different packages for the sale of any excisable goods in packaged form in different areas, each such retail sale price shall be the retail sale price for the purposes of valuation of the excisable goods intended to be sold in the area to which the retail sale price relates.]
Non-reversal of CENVAT credit - Where an assessee has paid duty of excise on a final product and has been allowed credit of the duty or tax or cess paid on inputs, capital goods and input services used in making of the said product, but subsequently the process of making the said product is held by the Court as not chargeable to excise duty, the Central Government may, by notification, order for non-reversal of such credit allowed to the assessee subject to such conditions as may be specified in the said notification:
Provided that the order for non-reversal of credit shall not apply where an assessee has preferred a claim for refund of excise duty paid by him:
Provided further that the Central Government may also specify in the notification referred to above for non-reversal of credit, if any, taken by the buyer of the said product.]
Registration – (1) Every person, who produces, manufactures, carries on trade, holds private store-room or warehouse or otherwise uses excisable goods, shall get registered;
Provided that a registration obtained under rule 174 of the Central Excise Rules, 1944 or rule 9 of the Central Excise (No.2) Rules, 2001 shall be deemed to be as valid as the registration made under this sub-rule for the purpose of these rules.
(2) The Board may by notification and subject to such conditions or limitations as may be specified in such notification, specify person or class of persons who may not require such registration.
(3)The registration under sub-rule (1) shall be subject to such conditions, safeguards and procedure as may be specified by notification by the Board.
Persons Requiring Registration:
a) Every manufacturer of excisable goods (including Central/State Government undertakings or undertakings owned or controlled by autonomous corporations) on which excise duty is leviable.
b) First and second stage dealers (including manufacturer’s depots and importers) desiring to issue Cenvatable invoices.
c) Persons holding warehouses for storing non-duty paid goods.
d) Persons who obtain excisable goods for availing end use based exemption.
e) Exporter-manufacturers under rebate/bond procedure; and Export Oriented Units, which have interaction with the domestic economy (through DTA sales or procurement of duty free inputs).
f) Persons who get yarns, fabrics, readymade garments etc. manufactured on job work under Rule 12B. (not required now)
2. Separate registration is required in respect of separate premises except in cases where two or more premises are actually part of the same factory (where processes are interlinked), but are segregated by public road, canal or railway-line. The fact that the two premises are part of the same factory will be decided by the Commissioner of Central Excise based on factors, such as:
a) Interlinked process product manufactured/produced in one premises are substantially used in other premises for manufacture of final products.
b) Large number of raw materials are common and received /proposed to be received commonly for both /all the premises.
c) Common electricity supplies.
d) There is common Labour/ Work Force.
e) Common administration/work management. Common sales tax registration and assessment Common Income Tax assessment.
f) Any other factor as may be indicative of inter-linkage of the manufacturing processes.
This is not an exhaustive list of indicators nor is each indicator necessary in each case. The Commissioner has to decide the issue case by case.
3. Separate Registration is required for each depot, godown etc. However, in the case of liquid and gaseous products, availability of godown before grant of registration should not be insisted upon.
4. Registration Certificate may be granted to minors provided they have legal guardians, i.e. natural guardians or guardians appointed by the Court, as the case may be, to conduct business on their behalf.
Following are some of the export procedures:
a) Exports are free from excise duty.
b) One can export goods without payment of excise duty under bond under rule 19. Goods can also be exported with payment of excise duty and later on rebate can be claimed under rule 18.
c) Container containing export goods is required to be sealed by Excise Officer. Rules do not permit self sealing of such containers.
d) Excisable goods should be exported under cover of invoice and Form ARE-1. Goods should be exported within six months from the date of clearance from factory.
e) Merchant exporter has to execute a bond and issue CT-1. It is required so that goods can be cleared without payment of duty. A manufacturer has to issue a letter of undertaking.
f) Export to Nepal/Bhutan is required to be made on payment of excise duty. This rule is not applicable when supply is against international bidding.
g) EOU has to issue CT-3 certificate for getting inputs without payment of excise duty.
Excise duty is levied on all manufacturers on manufacture of goods and will be paid on their removal. In order to protect the interest of new industries and other small scale industries, Govt. of India has come out with a notification no. 8/2003-CE to provide exemption to small scale industries in order to provide an incentive for them to grow in the economy. The following is the detailed article which explains about the notification.
Exemption for SSI
SSI (Small Scale Industries) is eligible for exemption from duty under Notification No. 8/2003-CE dated 1-3-2003. The SSI unit need not be registered with any authority.
Eligibility for SSI concession-
A Unit whose turnover was less that Rs 4 crores in the previous year is entitled to full exemption up to Rs 150 lakhs in the current financial year. An SSI unit can avail Cenvat credit on inputs and input services only after it starts paying duty. However, Cenvat credit of capital goods can be availed even if these were received during the period of exemption.
Articles eligible for SSI exemption
Broadly, items generally manufactured by SSI (except in tobacco, matches and textile sector) are eligible for SSI exemption. Some items like pan masala, matches, watches, tobacco products, Power driven pumps for water not confirming to BIS, products covered under compounded levy scheme etc. are specifically excluded, even when these can be manufactured by SSI. Some items like automobiles, primary iron and steel etc. are not eligible for SSI exemption, but anyway, these are beyond the capacity of SSI units to manufacture. SSI unit manufacturing goods with other’s brand name not eligible for exemption Goods manufactured by an SSI unit under the brand name of others, are not eligible for SSI concession, unless the goods are manufactured in a rural area. However, SSI exemption will be available to packing material even if it bears some other brand name.
Mode of calculation of limit of Rs 150 lakhs/Rs 400 lakhs-
While calculating limit of Rs 400/150 lakhs:
• Turnover of Exports, deemed exports, turnover of non-excisable goods, goods manufactured with other’s brand name and cleared on full payment of duty, job work done under notification No. 214/86-CE, 83/94-CE and 84/94-CE, processing not amounting to manufacture and traded goods is to be excluded.
• Value of intermediate products (when final product is exempt under notification other than SSI exemption notification), branded goods manufactured in rural area and cleared without payment of duty, export to Nepal and Bhutan and goods cleared on payment of duty is to be included.
• Value of turnover of goods exempted under notification (other than SSI exemption notification or job work exemption notification) is to be included for purpose of limit of Rs 400 lakhs, but excluded for limit of Rs 150 lakhs.
Procedural relaxations-
SSI units eligible for SSI concession are required to pay duty on quarterly basis and file quarterly returns even if they do not avail the SSI exemption
Turnover of all units of same manufacturer to be clubbed-
Turnover of all units belonging to a manufacturer will be clubbed for calculating SSI exemption limit.
Normally, if assessee is engaged in manufacturer on job work basis, he has to pay duty on material cost plus job charged. However, if a product covered under MRP provision is manufactured on job work basis, duty will be payable as per provisions of section 4A, i.e. on basis of MRP less abatement.
Provisions of Exemption to job work under Notification No.214/86
a) No duty liable to job worker- It has been held that there is no duty liability on the job worker when material is sent under Cenvat provision or under 214/86-CE.
b) Declaration under notification 214/86-CE- It is advisable that the declaration under Notification No. 214/86-Ce is given if the material is being sent directly to place of job worker from supplier of inputs, without bringing it in the factory, to avoid fruitless controversies.
c) Raw material as well as semi-finished goods can be sent out for job work. The exemption is available even if the job worker manufactures an intermediate product.
d) Notification No.214/86-CE does not prohibit a job worker from utilizing other inputs in addition to raw material received by him and recover charges therefore from the principal manufacturer.
Provisions related to Removal of goods for Job Work
a) Removal for processing/test- The inputs/capital goods can be removed as such or after partial processing to job worker for further processing, testing, repairs, reconditioning, or for manufacture of intermediate goods necessary for manufacture of final products or any other purpose without any duty payment.
b) Goods should be returned to factory/premises of service provider- After carrying out the operation/test/repair etc., the goods should be returned to the factory or premises of supplier within 180 days. If these are not received back within 180 days of their being sent out, manufacturer/ service provider should pay an ‘amount’ equivalent to Cenvat credit attributable to inputs/ capital goods. Payment can be through Cenvat credit or P LA. If the inputs/ capital goods come back after 180 days , then manufacturer/service provider can again take Cenvat credit of duty reversed by him.
c) If part of goods is received back 180 days, the obligation for debiting the credit shall arise only in respect of Cenvat credit attributable to that part which is not received within 180days.
d) No Reversal even if capital goods not returned within 180 days- Incase of Capital goods sent to job workers even if they are not returned by job worker within 180 days , Cenvat Credit is not required to be reversed .
e) Moulds and dies, jigs and fixtures are not required in 180 days- The requirement that the
f) capital goods/ input must come back within 180 days is not applicable to moulds and dies.
g) DOCUMENTATION IN DIFFERENT SITUATIONS :Direct dispatch of inputs to job worker – It is advisable that even when goods are sent directly to job worker’s place, a delivery challan should be prepared by manufacturer for control purpose. The delivery challan should clearly state that goods have been sent directly to job worker’s place by the supplier The manufacturer can avail Cenvat credit only after all inputs are received after job work.
h) Returning of goods by job worker – Goods should be returned by job worker under his own challan, giving reference to challan of the manufacturer who has sent the inputs/capital goods. Goods can be returned by job worker in piece-meal under different challans on different dates.
Cenvat Credit rule 6(3)(b) (i.e. Payment of ‘amount’) will apply
SOME IMPORTANT POINTS TO BE KEPT IN MIND REGARDING JOB-WORK :
a) Use of incidental material is no bar in job work – Additional of minor items by job worker would not detract it being a job work. If some negligible raw material is used by job worker, it will still be job worker, if such use is only incidental nature.
b) No duty on Invisible losses – No duty is payable on invisible losses during processing even if such losses were higher than those permitted by raw material supplier and raw material supplier issues debit note for excess losses.
c) Goods can be sent another unit of same manufacturer for job work and return.
d) Waste generation after goods are returned is permissible – Generation of waste and scrap is only incidental to manufacturing of final product and it cannot be said that input (proportionate to the weight of waste and scrap generated) have not been used in the manufacture of such specified final product. Percentage of waste generation will no be relevant.
e) Job worker can pay duty even if material sent under – Normally, job worker is not required to pay duty, if material is sent under Cenvat provisions. However, in some cases, he may like to pay duty, if –
(a) He has put his own inputs
(b) He has unutilized Cenvat credit.
f) Procedure permissible even if identity of inputs gets lost or inputs burnt – Cenvat credit is available even if identity of inputs is lost when job worker returns the goods after processing.
PLACE OF REMOVAL :When goods are sold at the factory of job worker by principal Manufacturer – Value will be the ‘transaction value of the goods at which the goods are sold’ by the principal manufacturer for delivery at the time of removal of goods from the factory of job worker.
When goods are sold by principal Manufacturer from some other place – If goods are delivered at other place (e.g. depot, branch, godown etc.) and sold from there, the valuation will be on the basis of ‘normal’ transaction value of goods at or about the same time’ by the Principal manufacturer from such place. Cost of transport from premises from where goods sold to place of delivery will not be included in the assessable value.
Inputs sent directly to job worker from place of manufacturer of inputs – In some cases material may be procured by principal manufacturer, but may be sent directly to job worker for manufacturer. In such case, if the name of job worker is shown as consignee, the job worker can avail Cenvat credit on basis of such invoice.
Job worker can take Cenvat Credit on basis of invoice issued by registered dealer. Job worker cannot avail Cenvat credit if raw material supplier has availed the same.
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