By CA.
Sudhir V S
Learning Objectives
What Act & Rules applicable
When Central Excise is attracted?
What is manufacture? + Who is
manufacturer?
Principles of Classification
Principles of Valuation
Some value added + Cost Control in
Central Excise
Questions/ Doubt clearance throughout
session
Act & Rules
Central Excise Act, 1944
Central Excise Tariff Act, 1985
Central Excise Rules, 2002
CENVAT Credit Rules, 2004
Central Excise Valuation (Determination of Price
of Excisable Goods) Rules, 2000
Others
Notifications
Circulars
Case Laws
Act
Case Laws
Rules
Indirect
Tax
Laws
Trade
Notices
Circulars
No Law above the
Constitution of India
Types of Duties
Basic Excise Duty
Special Excise Duty
Additional Duties of Excise (Textiles and
Textile Articles)
Additional Duties of Excise - Goods of
Special Importance
National Calamity Contingent Duty
Education cess
Secondary and Higher Education cess
Step 1 : Goods exist; movable and marketable
Step 2 : Product under List II (State List) or List
III (Concurrent List) of the VII Schedule not
covered by Central Excise.
Step 3 : Classify the product as prescribed in
the
Central Excise Tariff Act,1985.
Broad category or specific coverage
Entry is not clear then the reference to the Rules
of Interpretation
Determination of Excisability of
Product
Step 4 : Whether the process is a Deemed Manufacture?
Activity like packing, labeling, repacking etc. are
undertaken,
On products as mentioned in Chapter notes and Third
Schedule
Step 5 :The process whether amounting to manufacture.
Comparing the Incoming material and outgoing material
Name, character or use.
Determination of Excisability of
Product
Step 6 :If the item is intermediate product avail
credit on inputs
Pay duty on the finished goods
Pass on credit to the industrial users
Step 7 :The product may be so competitive
It cannot bear any duty of excise.
Can be located at like Kutch or North India,
Himachal Pradesh
Contd..
Determination of Excisability of Product
Step 9 : Decision for Registering
Made at the point
Where no other economic or legal opinion exists.
Step 10: The trader who wishes to pass on the duty paid
on goods traded
Could also be registered.
What are Goods?
The definition under the Sale of Goods Act,
1930
Goods must be moveable,
saleable/marketable
Explanation to Section 2(d) of CE Act, 1944
-states goods include 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
What is Manufacture?
Process
undertaken
would
amount
to
manufacture as understood under the Central
Excise
The incoming material and the final outgoing
material are to be compared with respect to
their name, character or use.
Ensured that processes not amounting to
manufacture
are
not
described
as
manufacture
Result in attempts to deny credit
What is Removal?
Removal
means the physical act of
shifting/moving the goods
Under excise- the self-removal procedure
No excisable goods on which any duty is
payable
- shall be removed from any place where
they are produced or manufactured or
from warehouse without payment of duty
Rate of duty and tariff valuation would be
done on the date of removal.
What is classification?
Ascertaining
the
tariff
heading/subheading under which the product is
categorized
In line with Central Excise Tariff Act -Based
on HSN
See the Interpretative Notes at the
beginning of the Tariff + Notes in the
Section and Chapter
Rules for interpretation
Classification-Rules
Rule 2(a)-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.
Rule 2(b)-This rule on mixture or
combination of materials or substances,
->headings in which there is a reference to
a material or substance also applies to that
material or substance mixed or combined
with other materials or substances.
Classification Rules
Rule 3: classifying goods prima facie classifiable
under several headings.
(a)Specific over general description
(b) materials or components which give
essential character
(c)under the heading which occurs last in the
numerical order of headings which equally
merit attention
Rule 4-heading covering goods akin to such
goods
Rule 5 packing material
Valuation
A. Duty Based on capacity
B. Advalorem
1. Sec 3- Tariff Value Fixed
2. Notified under RSP
3. Set out in Third Schedule
4. Transaction Value
5. Exception to TV Goods sold; delivery at
time & place of removal; unrelated ; price
only consideration.
Valuation Rules
Rule 5 Sold other than factory
deduction for freight
Rule 6 Sole consideration Alternatives
Rule 7 Depot /Consignment agent
Rule 8 Captive consumed
Rule 9 Related person
Rule 10 Interconnected/ holding
Rule 10A Dispatched from JW premises
Cum duty if not collected
Tax Planning under
Central Excise
Availment
of SSI Exemption vis--vis
Payment of Duty
Tax Planning for Central Excise duty paid
under Rule 6 of Central Excise Valuation
Rules
Inter Unit Transfer
Tax planning in selecting appropriate status
of the entity
Tax Planning for the Export Transactions
Tax Planning under
Central
Tax PlanningExcise
for Leasing Transactions
CENVAT Credit on Capital Goods i.e.
Machinery which is used for Exempted
products
Adoption of Method under Rule 6 of
CENVAT Credit Rules, 2004
Intimation to the department
Facing the departmental Audit
Cost Control
Accommodation bills- Strictly No
Regular, timely credit availment
Job workers exemption not to claim
Examination of provision of services
Vendors / customer education
Checks and Balances as for rest SOP,
Internal Audit, Stage wise authorisationintegration to ERP
Internal Audit to include IDT [ CE ] in scope
Reconciliation of tax + credits
Other Cost Control
Missed
credits due to earlier issues,
preventive directions, AG audit
Avoid common mistakes [many other than
discussed]
Adequate
disclosure
of
activities,
valuation,
reverse
charge,
credit
availment, books of account, major
contracts
Built into MIS- monthly quarterly etc.
reaching the top.
General - IDT
Adequate Importance to IDT
SOP
- Training
- Integration to ERP
- Not considered for Internal Control / Risk
Analysis authorization
- Auditors Statutory, Tax & Internal may
not check [ or limited]
- Not part of Top Management MIS
General - IDT
Adequate Importance to IDT ..cont..
Revenue Officers are Empowered and
Corrupt Nobody want to deal
- Lack of Co-ordination of Production/
Marketing/ Procurement with Compliance
Team
Departmental Interaction Oral- both
ways?
Training/ Awareness to Top Management + Non Finance
Executives [ Especially Sales/ Purchase]
Enhanced Regular Training for Compliance Team
[email protected]
