INDIRECT TAX LAW

SUMMARY- EXCISE

CA MAHESH GOUR (09158190686)

CA AMI PANDYA

Acknowledgement
Luck favors the prepared Mind. It gives immense pleasure to present summary to help students in their
preparations. Special thanks to Deep Mehta for value addition in summary.

Happy Reading…!!!

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 CH.1 BASIC CONCEPTS IN CENTRAL EXCISE
➢ Excise Duty is Levied by CG under Entry 84 of union List on all goods (except alcoholic liquors for
human consumption, opium, Indian hemp, narcotics etc. on which excise is levied by states but
including medicinal and toilet preparations containing alcohol)
➢ Excise Duty is levied in whole of India (including J&K), Territorial waters of India (extend to 12
nautical miles), Designated areas in Continental Shelf/Exclusive Economic Zone of India (extend to
200 nautical miles)
➢ Excise duty charged on Excisable goods which are manufactured/produced in India.
➢ Basic Excise Duty/CENVAT = 12.5%
➢ Goods = Movable (other than immovable property) + Marketable (Capable of being bought and
sold for a consideration)
➢ Excisable goods = Listed in 1st/2nd Schedule of Tariff with rate of duty + salt + Goods with NIL rate +
Exempt goods.
➢ Non-excisable goods = not listed in tariff + Blank rate column goods
➢ Manufacture = Process converting raw material into final product such that final product has
distinct name, character, and use (general definition)
➢ Manufacture [Sec. 2(f)] =
a) Incidental and ancillary process to complete manufacturing [Sec. 2(f)(i)]
b) Deemed manufacture i.e. processes declared as manufacture in section/chapter notes of
1st schedule to CETA. [Sec. 2(f)(ii)]
c) Deemed manufacture i.e. in relation to goods listed in 3 rd Schedule to CEA (which are liable
to duty based on RSP,process of repacking, declaration, or alteration of RSP, labeling -
relabeling or any other treatment to render goods marketable to consumer) [Sec. 2(f)(iii)]
➢ Repacking, re-labelling, or branding of goods is manufacture only if it is deemed manufacture.
➢ Change in tariff heading is irrelevant to decide about manufacture.
➢ Manufacturer = Person who manufacture himself or through employees + Independent Job worker
➢ Exceptions where job worker is not manufacturer:
a) Branded jewelleryoption in which either brand owner or job worker may liable
b) Readymade garments  brand owner will be liable
c) Notification No14/86 Principle may liable (job worker can forego exemption and pay duty)
d) Dummy Job Worker  Principal owner will be liable
➢ Waste/Scrap is liable to duty if  movable, marketable, excisable and arising out of manufacturing
of goods. Waste/scrap of raw material, which has not undergone process of manufacture, cannot
be regarded as manufactured product.
➢ Waste arising in course of manufacture of exempted good  exempt from duty.
➢ Intermediate Products are liable to duty if in that intermediate stage, they are...  Movable,
marketable, excisable and arising out of manufacturing of goods. They are liable only if final
product is exempt and relevant date for duty would be date of issue for captive consumption.
➢ Clearance of goods manufactured by 100% EOU to DTA. Excise duty = customs duty.

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 ➢ Relevant date for rate of duty & tariff value
(i)Goods removed for Home Consumption  Date of removal from factory

(ii)Warehouse goods  Date of removal from warehouse

(iii)Goods used for capital Consumption  Date of issue for consumption

(iv)Molasses  Date of receipt of Molasses

(v) Others cases  removal from factory

➢ Non-excisable goods become excisable by notification  duty will not be applicable on goods
manufactured before notification.
➢ Excisable goods become non-excisable by issuing notification  duty will be applicable on goods
manufactured before notification.
➢ Sec 3  rate of duty may be increased by CG by 1) up to 50% if duty is NIL 2) up to double in other
cases.

CH.2: CLASSIFICATION AND TARIFF

➢ Classification means determination of relevant 8-digit code of goods.
➢ Goods are classified in  a) Sections b) Chapters (2 digits) c) Heading (4 digits) d) Sub-Heading (6
digits) e) Tariff items (8 digits)
➢ Since tariff is based on internationally adopted HSN, in case of doubt in Indian Tariff, HSN may be
relied.
➢ Classification is done as per Terms of Heading/sub heading and notes contained in sections and
chapters. In case of doubt, General Interpretative Rules may be used.
➢ In case of self-assessment Classification is done by Assessee and same can be challenged by dept.
and if dept. want to classify under other tariff Heading then burden to prove such classification shall
be on dept.
➢ Rule 1. Chapter title is for reference, classification is always done using section and chapters’
notes.
➢ Rule 2(a).Any Semi finished goods should be classified as finished goods, if they contain essential
character of finished goods. (A cycle without seat)
➢ Rule 2(b)Reference to material/substance, to include reference to mixture or combination of
that material or substance. (steel with carbon classified as steel)
➢ Rule 3(a)In case of any conflict between 2 headings, Prefer the specific Heading rather than
general Heading. (suitcase classified as ‘suitcase’ not as ‘plastic item’)
➢ Rule 3(b)When no specific heading is given, classification should be based on essential Character
(book with CD classified as Book)
➢ Rule 3(c)If there are 2 heading, prefer later (later is better)
➢ Rule 4in case of new item, for which no specific entry under CETA, then such goods are
classifiable under heading to which goods are most akin
➢ Rule 5(a)Specific shape/size packing material classifiable under heading of goods with which
those goods are going to be used.

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 ➢ Rule 5(b) General purpose material classifiable under their respective Heading.
➢ Market Parlance Theory  Commercial nature prevail over scientific characteristics of goods. End
use of product should be seen.e.g. Mineral water cannot be classified as a beverage.
➢ Part i) specific Use – classifiable under heading of goods with which it is to be used.
ii) General Use – classifiable under their respective headings
➢ Accessories i) Fitted – classifiable under heading of goods in which they are fitted
Ii) Not Fitted – classifiable under their respective headings

CH.3 VALUATION UNDER CENTRAL EXCISE

1. Production Capacity Based Duty [ Sec. 3A]

➢ In case of notified goods like pan masala, tobacco etc., duty is levied mandatorily based on capacity
of production. Do not apply to 100% EOU.
➢ Declaration of RSP is mandatory and Actual production is not relevant.
➢ Duty is fixed per month, payable in advance and delay in payment attract interest @ 18%.
➢ If no production for continuous 15 days or more, rebate will be allowed for period,
proportionately.

2. Tariff Value [Sec.3 (2)]

➢ Fixed and notified by CG.It is a notional value.
➢ If tariff value notified value = tariff value only. (overriding effect)
➢ Duty = Tariff Value * rate of duty

3. MRP or RSP based excise duty [Sec. 4A]

➢ Applies only if goods are sold in retail packages and declaration of RSP is mandatory under Legal
Metrology Act,2009.
➢ RSP = Price inclusive of all duties and taxes, payable by final consumer.
➢ Value = RSP – notified abatement., duty = Value * Rate of duty.
➢ More than 1 RSP on single pack, RSP = Highest of all RSPs
➢ If goods supplied as free sample/gifts = MRP of similar goods – abatement %
➢ Different RSPs on different packs for Different areas = Separate RSP should be taken.
➢ Scored out RSP  ignore
➢ Increase RSP after removal: 1) goods liable to Confiscation 2) increased RSP would be taken as RSP
of such goods as well as goods cleared 1 month before and then after.
➢ Goods removed without Declaring RSP: 1) goods liable to confiscation 2) RSP of such goods = RSP of
goods cleared 1 month before or after removal of such goods, whichever is higher.
➢ Sec 4A does not applies to bulk sale, goods supply to industry, goods buy for free distribution
later, sale to defense, Package up to 10 gmand 10 ml,export sale, supply to service institutions.
➢ Multipack of product with No MRP or MRP scored out, marking that they are not be sold
separately MRP ofmultipack taken.
➢ Multipack of products with MRP printed, not marking that not to be sold separately Sum of MRP
of pieces comprising multipack.

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 4. Transaction Value based duty [Sec.4]

➢ Sec.4 applies if sections 3(2), 3A, and 4A don’t apply.

➢ Transaction Value (TV) = Price actually paid or payable + other payments in connection with sale
(paid by buyer by reason of or in connection with sale.
➢ TV includes all costs forming part of sell price at the time and place of removal and profit margin
but does not include excise duty, sales tax or other taxes “actually” paid or payable.
➢ Value is determined for each removal. Change in Value after removal is irrelevant. Different
removal of same product may be valued differently, depending upon section or rules applicable.
➢ Place of removal: 1) Factory 2) Depot or place of consignment agent 3) Customers premises 4)
warehouse 5) port/inland Container Depot/Air Freight Stations.
➢ Time of removal: time when goods are removed from factory or warehouse.
➢ Related Person: interconnected undertaking being Holding-Subsidiary, relatives, sub-distributor of
relative distributor, persons having mutual interest in business of each other.
➢ If duty is charged at lower rate or there is additional consideration not charged to duty,
then correct duty = All sums * correct Rate of duty/ (100 + correct rate of duty)
➢ Inclusion in TV = 1) Advertisement (by assesses , for assesses) 2) Drawings and Design ( only current
nature) 3) Consultancy Charges (related to goods) 4) software (preloaded only) 5) Packing charges (
ordinary packing sold along with goods & Specific Requirement complied before Removal)
6)Storage and Handling ( up to time & place of removal) 7) Royalty (for use of goods) 8) interest
(only for borrowing working capital) 9) Transportation/Handling and Landing ( inwards & up to Time
and place of removal ) 10) Testing Charges ( in ordinary course of business & specific Requirement
of customers before removal ) 11) warranty Charges (Compulsory for the customers to pay & if
optional then option exercised before removal ) 12) Installation ,Erection & Commissioning Charges
result in emergence of movable property. 13) Commission is paid on principal to agent basis, to
Selling Agent. 14) After Service charge and pre- delivery Inspection charges incurred by the dealer.
15) Dharmada (recovered from buyer) 16) Bought out parts 17) Bought out Accessories (only if
makes value addition)

Exclusion from TV= 1) Discount of all kinds 2) Bank charges for outstation cheques 3) interest on
receivables 4) duty and taxes actually paid or payable

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 ➢ Central Excise Valuation Rules,2000

Rule Situation/Circumstance Assessable Value (AV)

4 If price of goods is not known at AV = Price of like goods sold nearest to

time of removal adjusted on account
time of removal.
of

difference in duties of delivery of like

goods and the original goods

5 If excisable goods are sold for delivery at a place AV = Transaction Value(TV) - Actual or
other than place of removal. Average Equalized cost of transportation

from place of removal up to place of

delivery of such goods.

But, cost of transport from factory to

place of removal is not deducted.

6 If price of goodsis not sole AV =TV + Money value of additional

consideration flowing directly/indirectly
consideration for sale. from buyer to assessee. Value of
materials/tools, etc. supplied buyer free
or at a concessional rate shall be included.
Notional interest oninterest free advances
given by buyer is included if price was
reduced on that account.

7 If excisable goods are transferred to a depot, AV = Normal Transaction Value (NTV) of

premises of a consignment agent or any other such goods sold from such other place at
place or premises from where they are to be or about the same time or at the time
sold. nearest to the time of removal of goods
under assessment.

8 Captive Consumption: If excisable goods are AV = 110% of Cost of Production or

not sold by assessee but are used for manufacture of such goods. Cost of
consumption by him or on his behalf in production is computed as per generally
production/ manufacture of other goods. acceptedcost principles and Cost
Accounting Standard (CAS)- 4 issued by
Institute of Cost Accountants of India.

9 If excisable goods are sold only to orthrough AV=NTV at which such goods are sold by
arelated person (excluding an inter-connected related person at the time of removal to –
undertaking).
• unrelated buyers; or

• related buyers who sell such goods in

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 retail.

In case of captive/self-consumption by
related person, value is determined as per
rule 8.

10 If excisable goods are sold by assessee only to or IF ICU is –

through an Inter-Connected Undertaking.
• related in terms of Section
4(3)(b)(ii)/(iii)/(iv) or

• buyer is holding/subsidiary company

of assessee

10A Valuation in case of goods manufactured by job- (i) If goods are sold directly from premises
worker on behalf of principal manufacturer of job worker: AV = TV of said goods sold
by principal

(ii) If goods are transferred to a

depot/consignment agent, etc. of
principal: AV
= NTV of such goods sold from such
other place at or about the same
point, or, at the time nearest to the
.
time of removal of said goods from the
factory of job-worker;
(iii) In any other case: AV is determined as
per foregoing rules

AV is determined using reasonable means

consistent with the principles and general
11 provisions of these rules and section 4(1)
If value of any excisable goods cannot be the Act.
determined under foregoing rules

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 CH 4. CENVAT CREDIT RULES ,2004

➢ CENVAT Scheme: CENVAT Scheme allows credit of excise duty/additional customs duty paid on
inputs and capital goods and service tax paid on input service, which is to be utilized for the
payment of excise duty on final products or service tax on output service to avoid cascading effect
of duty.

➢ Definitions:

1.Input [Rule 2(k)]

Input

For Manufacturer For Service provider

All goods used in factory by the manufacturer All goods used for providing output Service
of final product

Inclusion (Also inputs) Exclusions (not inputs)

(Shortcut: PEAW) (Shortcut: MR. DPCC)

1. CG used as part/component in 1. Diesel,Petroll,Motor spirit

Mfg. of FP 2. Motor Vehicles
2. All goods used for generation of 3. Any goods used in construction of
electricity or steam for captive use. immovable property (except for the
3. All goods including accessories provision of service portion in the
cleared along with FP where value execution of a works contract or
includible in valuation. construction service as listed under
4. Goods used for providing free clause (b)of session 66E of the FA,1994
warranty claims for final products 4. Any goods used primarily for personal
(condition: warranty value is use or consumption of any employee
included in the price) (used in guest house,club,quarters etc.)
5. Capital goods (however capital goods of
value up to 10,000 Rs.(consider as
input)

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 6. Any goods which have no relationship
with manufacturing of final product.

1) Capital goods [ Rule 2(a)]

i) Tool, boilers, Machinery, Electrical,optical [included in chapters 82,84,85,90] + Grinding

wheels and parts, artificial abrasive powder [included in heading 6804,6805] + pollution
control equipment

ii) Component, spares and accessories of above mention items

iii) Moulds and dies, jigs and fixtures, refractories and refractory material, tubes, pipesand
fittingthereof, storage tank

iv) Motor vehicles with parts and component, accessories [other than those falling under
falling under tariff heading 8702,8703,8704,8711] but including dumpers and tippers.

Note: Heading 8702,8703,8704 and 8711 cover motor vehicles meant for transport of
goods or persons as well as motor cycles, which are not capital goods. But, dumpers,
tippers, cranes, loaders, with their chassis and accessories are capital goods.

1) Input Service [ Rule 2(l)]

i) Provider of output service  used for providing an output service

ii) Manufacture of final product any service used directly /indirectly in or in relations to
manufacture of final product and for their clearance up to place of removal.

Inclusion: input services for repair, renovation of factory/premises, computer networking,inwards

transport/outward transport up to place of removal, storage up to place of removal,advertisement,sale
promotion,accounting,auditing,training,recruitment,legal service etc.

Exclusion:i) outdoor catering,health,fitness/beauty service all insurance service etc. used/consumed

primary for personal purpose of employee, ii) architect/port/airport/construction related services used for
construction of a building or civil structure or laying of foundation or making of structures for support of
capital goods iii) services in relation to motor vehicles not eligible as capital goods except when services
referred to motor vehicle insurance provided by assessee insurer.

2) EXEMPTED GOODS:

Excisable goods which are exempt from excise duty including NIL rate of duty., goods to which
benefit of exemption under notification No.1/2011-CE is availed.

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 3) Exempted service:

Taxable service which are exempt from whole of service tax leviable thereon, includes services
on which no service tax is leviable.

➢ CENVAT CREDIT RULES,2004

Rule 3:

1. Rule 3(1)Duties on which Cenvat Credit can be taken

For Manufacturer  Basic excise duty on input/cap. Goods,

Additional Customs duty u/s 3(1) [in case of capital goods 50% credit in 1st&

50% In next year]

Additional customs duty u/s 3(5) [ in case of capital goods 100% allowed in 1st

year]

service tax paid on input service.

For Service ProviderBasic Excise Duty Paid on input/Capital goods

 Additional Customs duty u/s 3(1) [in case of capital goods 50% credit in 1st

50% In next year]

Service tax paid on input service.

➢ Excise duty on TTA, NCCD and corresponding CVD,goods on special importanceutilized for
same type only
➢ Any duty/Tax shall not be utilized for payment of 2% BED and clean energy cess and
infrastructure cess
➢ Any penalty or interest cannot be paid out of CENVAT credit.
➢ Manufacturer allowed to utilized credit of EC & SHES for payment of excise duty.

Rule 3(2): CENVAT Credit in case exempted finished goods become dutiable

➢ Cenvat credit available for manufacturer on input available in stock, input available in finish
goods,input available in WIP on date of withdrawal of exemption.

Rule 3(3): CENVAT Credit in case exempted service become Taxable service

➢ Cenvat credit available for service provider on input available in stock, input available in finish
goods, input available in WIP on date of withdrawal of exemption.

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Rule 3(4): Utilization of CENVAT Credit

➢ CENVAT may utilized for towards payment of excise duty or service tax, for reversal of CENVAT
on capital goods and inputs, Reversal of duty under rule 16.

Rule 3(5): Removal of input/capital goods (as such) on which CENVAT Credit has been availed

➢ Applicable to both, manufacturer, and service provider.

➢ Remove as such only after payment of amount equal to CENVAT Credit availed.
Exception: input removed to provide free warranty, sale of waste of packing material

Rule 3(5A): Removal of capital goods after being used

➢ Remove capital goods after used only after payment of amount or reversal of CENVAT Credit.

Rule 3(5B): Input and capital goods write off (before use)

➢ CENVAT Credit to be reversed. However, on subsequent utilization credit can be availed again.

Rule 3(5C): Remission of duty

➢ Amount equal to credit availed on inputs is to be paid/reversed.

Rule 3(6): Credit for duty under rule 3(5) and 3(5A)

➢ Credit will be available as credit to user of those goods.

Rule 3(7): CENVAT Credit in respect of goods procured from 100% EOU/STP/EHTP

➢ Manufacturer or service provider is entitled to avail CENVAT Credit of duty paid by EOU/STP/EHTP
while clearing goods. CENVAT available on customs duty u/s 3(1) and 3(5),if VAT is exempted.

RULE 4: CONDITION FOR AVAILING CENVAT CREDIT

Rule 4(1) credit on inputs available immediately after receiving into factory of Mfg./premises of SP

Rule 4(2) Credit on capital goods available immediately after receiving in to factory of mfg./premises of
SP

Amount of credit: 50% in 1st year and bal. in next year. But in SSI, 100% credit in 1st year.

Rule 4(3) credit on capital goods, available even on capital goods acquired on hire purchase, lease or
finance.

Rule 4(4)no cenvat when depreciation claimed

Rule 4(5)(a) If input/capital goods are sent for job work, these should be bought back within prescribed
time (input =180 days, capital goods = 2 years)

(b) CENVAT credit shall be allowed in respect of jigs, fixtures, moulds and dies sent by manufacturer to
another Manufacturer or job worker (No time limit)
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Rule 4(6) Finished goods removed directly from job worker premises = permission of AC/DC required.

Rule 4(7) a. in case of reverse charge = CENVAT credit allowed when ST paid to Dept.

b. other cases = after bill or invoice received(if not paid within 3 months= reversal of credit required)

c. in case of input service, where ST paid is refunded, reversal of credit is required.

RULE 5: REFUND OF CENVAT CREDIT

➢ Persons eligible for refund: Exporter of goods and services (exported under bond without payment
of duty)
➢ Refund Amount:(export T/O of goods + export T/O of services) * Net CENVAT Credit

Total T/O

 Net CENVAT Credit = Total CENVAT credit availed on inputs or inputs

services by eligible person – Amt. reversed [Rule 3(5C)]

 Export T/O of goods = goods cleared without payment of duty during

relevant period

 Export T/O of service =Payment received for export service

Export service whose provision has been completed for which payment

had been received in advance in any period prior to relevant period

Advances received for exported services during period for which

Provision of service has not been completed

 Total T/O = Value of all excisable goods cleared during relevant periods
(including exempted goods, dutiable goods and excisable goods exported)

Value of exported services and all other services during relevant periods

Value of inputs removed as such under rule 3(5)

➢ No refund if duty drawback or rebate availed.

➢ Refund claim is filed quarterly.
➢ Exported goods mean any goods which are to be taken out of India to a place outside India.

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RULE 5A: REFUND OF CC TO UNITS IN SPECIFIED AREAS

➢ If a manufacturer:
Has cleared goods from a unit located in States of Assam, Tripura, Meghalaya, Mizoram,
Manipur,Nagaland, Arunachal Pradesh, Sikkim (Shortcut– SATNAM3) claiming exemption under
notification No.20/2007; andHe is unable to utilize the Cenvat credit of the duty taken on Inputs
required for manufacture of dutiable final products specified in the said notification, for payment of
duties of excise on said final products, Then, the CG may allow refund of such credit.

RULE 5B: REFUND OF CENVAT CREDIT IN CASE TAX IS ON REVERSED CHARGE

Amount of refund:

A= [(turnover of output service under partial reversed charge * Cenvat credit taken)] -ST paid by SP for
Total turnover of goods and services during half yearsuch partial charge

OR

B = amount of ST paid or payable by recipient of service

W/L

➢ Period of refund claim = half year

➢ Due date of filing refund claim =1 yr from due date of filing return of half year

RULE 6: DUTY OF ASSESSEE REGARDING MAINTENANCE OF RECORDS:

➢ This rule is applicable for the situation whenassessee deals in final goods/output services some of
which are exempt,some are non-excisable and some are dutiable.
➢ Input: separate books of account maintained
Cenvat credit is not available for inputs exclusively used in manufacturing of exempted
goods/service
if inputs are used for manufacturing of dutiable goods/service then CENVAT is FULLY
Available

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 ➢ Input: separate books of account not maintained

Manufacturer option1 Manufacturer Service provider option1 Service provider

option2 option2

Amount paid 6% Pay on amount = Amount paid 7% of value Pay on amount

Cenvat credit of exempted service and = Cenvat credit
of value of exempted
attributable to input avail 100% CENVAT attributable to
goods/non-excisable
and input service used input and input
goods and avail 100%
in or in relation to the service used in
CENVAT
manufacture of or in relation to
exempted goods/non- the
excisable goods manufacture of
exempted
service

➢ Capital Goods:
Cenvat credit is not available for manufacturer of exempted goods/services
If capital goods are used partly for exempt or dutiable goods/services, then CENVAT is
FULLY available

Transportation of goods or passenger by rail service: 2% of exempted service should be taken instead of
7%.

➢ In case of export service if payment in foreign currency has not been received for a period of 6
months, then CENVAT credit will be reversed.
➢ If payment is received after 6 months but within 1 year, Service provider shall be Entitled to take
credit.
➢ In case of delay in payment of shortfall attracts interest 24% p.a. from the due date i.e. 30 th June till
the date of actual payment.

RULE 7: INPUT SERVICE DISTRIBUTOR (ISD)

➢ ISD means any premises of manufacturer or service provider where input service and invoice for
input services are received and payment is made therefore.
➢ Credit is available for input service only (no credit for capital goods and inputs)
➢ Credit of service tax attributable to service used wholly by a unit shall be distributed only to that
unit.
➢ Credit of service tax attributable to service used by more than 1 unit shall be distributed pro rata
based on Turnover of units during relevant periods
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 ➢ Transfer of credit need not be at a fixed interval.
➢ Transfer of credit should be either under invoice or challan
➢ ISD shall furnish half yearly return within 1 month after the end of half year.

RULE 7A: DISTRIBUTOR OF CREDIT ON INPUTS BY THE OFFICE OR ANY OTHER PREMISES OF OUTPUT
SERVICE PROVIDER

➢ Service provider is entitled to avail credit for inputs and CG (not exclusively used for providing
exempted services).
➢ Proper records are maintained.
➢ Special feature if this rule is that – Unutilized amount of credit can be transferred to another office
of service provider by way of challan or invoice and amount transfer shall not exceed amount for
which credit is available.
➢ Every premises is required to registered separately and half yearly returns are required to be filed
within 1 month after end of the half year.

RULE 8: STORAGE OF INPUT OUTSIDE THE FACTORY OF MANUFACTURER (ONLY FOR INPUTS)

➢ The AC/DC may authorize and place where goods are stored will be considered as an extension of
factory for purpose of CENVAT Credit.

RULE 9: DOCUMENTS, RECORDS AND RETURNS FOR CENVAT CREDIT

➢ Rule 9(1): Documents for availing CENVAT Credit [Shortcut: SBI-FMC]

Supplementary invoice, Bill of entry, Invoice of importer, invoice of First/second stage

dealer, invoice of Manufacturer factory/depot/consignment agent place, Challan evidencing
payment of ST.

➢ Rule 9(2): Particulars of documents: All as per Rule 11 of CER + minimum mandatory Particular like
name, address, RC no., description of goods/service, value, duty etc.
➢ Rule 9(4): CENVAT credit allowed only if first/second stage dealer has maintained records indicating
that fact that input or CG was supplied from the stock on which duty was paid by the producer and
only amount of duty on pro-rata basis has been indicated in invoice.

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 ➢ Returns under CENVAT Credit [rule 9 (7 to 11) and rule 9(A)]

Manufacturer 1st/2nd stage dealer Service Provider Input service

or regd. importer distributor

A) Not availing value A) QURTERLY A) Half yearly A) Half yearly

based Exemption=
B) Annexure form B) ST3 to be filed B) ST3 to be filed
ER1,2
C) Mandatory E- C) within 25 days C) within 1 month
monthly within 10
filing from end of half from end of half year
days from end of
year
month D) Within 15 days D)Mandatory E-Filing
from end of quarter D) Mandatory E- when Gross tax
B) availing value
Filing when Gross greater than or equal
based Exemption= (REVISED RETURN
tax greater than or to 1 lakh.
ER3 WITHIN 60 DAYS
equal to 1 lakh.
FROM DATE OF (REVISED RETURN
Quarterly
FILING ORIGINAL (REVISED RETURN WITHIN 60 DAYS
 within 10 days RETURN) WITHIN 60 DAYS FROM DATE OF
from end of Quarter. FROM DATE OF FILING ORIGINAL
FILING ORIGINAL RETURN)
C) in respect of
RETURN)
principal input

ER 4, 5,6

 monthly within 10
days from end of
month

(E-FILING
MANDATORY)

RULE 10: TRANSFER OF CENVAT CREDIT

➢ CENVAT credit may be transfer: 1.one premises to another premises (only if factory is shifted)

2.One person to another person if change in ownership, merger etc

Conditions: All goods and liabilities available are transferred + AC/DC is satisfied

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RULE 11: TRANSITIONAL PROVISION

Assessee is availing value based Exemption (SSI) Assessee is not availing value based Exemption (SSI)

CC on CG yes, CC on IPS and Input  no CC on CG, IPS and Input  Yes

exemption to assessee ceases =CC on CG yes assessee availed exemption(SSI) =CC on CG C/F

CC on IPSno CC on IPS & inputslapse

CC on inputs
available on goods lying in stock

RULE 12: SPECIFIC PROVISION IN RESPECT OF GOODS MANUFACTURED IN THE FACTORIES LOCATED IN
THE SPECIFIED AREAS

➢ Units availing area-based exemptions: units located in north Eastern states, Kutch district (Gujarat),
state of Jammu & Kashmir and state of Sikkim
➢ Scheme: they take CENVAT credit, pay duty utilizing CENVAT credit y one to one correlation,duty on
final product,pain in cash,is refunded back
➢ Eg: credit = 20, duty pays = 33 (20 through CENVAT + 13 by cash) so, refund allowed = 13 Rs.

RULE 12A: PROCEDURE AND FACILITIES FOR LARGE TAX PAYER(LTP)

➢ LTP: person who has paid during FY preceding to year in which application is made:

Central Excise Duty exceeding 5 crores in cash;

Service tax exceeding 5 crores in cash;

Advance income tax (under Income Tax law) exceeding 10 crores

Note: Manufacturer falling under ch.24 (tobaccoetc.) and Ch.21 have been kept out of scheme

➢ Scheme framed for centralized assessment for the income tax, centralexcise, and Service tax (but
not custom duty)
➢ Office for centralized assessment is referred as LTP Unit(LTU) and LTP willing to avail facility to LTU
shall make and application to commissioner of LTU.
➢ Scheme can be availed anytime during FY but exit from Scheme possible only on the change of FY
on application made at least 30 days before the end of FY. i.e. before 1 st march.

RULE 12AAA: POWER TO IMPOSE RESTRICTIONS

➢ CENTRAL GOVERNMENT having regard to extent of evasion of duty, nature and type of offences,
may place restrictions on a manufacturer, FSD, SSD, exporter, registered importer or service

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 provider specify nature of restriction including suspension of registration in case of dealer
(suspension when evasion exceeds 10 lakhs)
➢ Time period of which restriction could be imposed

offences committed restriction could be imposed

1st time 6 months

subsequently 1 year

RULE 13: DEEMED CENVAT CREDIT

➢ By issuing notification under this rule, the CENVAT credit will notify the rate/amount at which
CENVAT credit is available (actual rate or amount is irrelevant).

RULE 14: RECOVERY OF CENVAT CREDIT

➢ Cenvat credit is wrongly utilized/erroneously refunded, interest under excise and ST applicable
➢ Failure to pay amount payable under Rule 3(5), Rule 3(5A), Rule 3(5B), Rule 3(5C)

RULE 15: PENALTY

➢ In case of wrong availment/utilization and failure to pay an amount under Rule (5), Rule 3(5A), Rule
3(5B), Rule 3(5C)

Bonafide mistake Fraud Cases

input/CG= confiscation + 5000 Rs or any input/CG = Penalty sec 11AC

amount (not exceeding 10% of duty), w/L Input service =Penalty sec 76 &78 of FA,1994
input service = amount (not exceeding 10%
of ST)

RULE 15A: GENERAL PENALTY= fine up to 5000 Rs.

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 CH.5 EXPORT INCENTIVE PROCEDURE

➢ Export on payment of Duty:1. Rebate on duty paid on final product under rule 18
2. For input either Cenvat Credit or rebate may be claimed

➢ Export of goods without payment of duty under bond:

1. Final product  no duty (Rule-19)

2. inputs  Claim Cenvat Credit or Claim rebate or procure without paying duty

➢ Conditions for rebate on final Product (Rule 18) [Exported to any country other than Bhutan) :

1. Exported after payment of duty, directly from factory or warehouse.

2. Exported within 6 months + within extended period as Comm. May allowed.

3. Includes Excisable goods supplied as ship’s store for consumption as comm. May consider
reasonable.

4. Rebate = minimum 500 Rs.

5. Market price of goods must be higher than rebate claimed.

6. No rebate on prohibited goods.

7. No rebate on which area based exemption is claimed.

8. DTA Clearance to SEZ – Rebate available

➢ Rebate of excise duty paid on Material used in goods exported(Bhutan excluded):

1. Rebate allowed to: Manufacturer or Processor

2. Rebate allowed of: duty paid on excisable goods used in manufacture or processing of
exported goods.

3. Manufacturer or processor shall file declaration with claim of rebate only with the Assistant
Commissioner having jurisdiction over factory.

4. Such Commissioner shall verify input-output ratio (to check likelihood of tax evasion)
mentioned in declaration filed for granting permission.

5. Final goods shall be exported under A.R.E. 2

6. Presentation of claim of rebate: AC/DC

7. No rebate if credit or drawback claim.

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 8. Rebate = minimum 500 Rs.

9. Market price of goods must be higher than rebate claimed.

10. Deficiency in claim: communicated by AC/DC within 15 days

➢ Procurement of inputs without payment of excise duty for use in goods exported
under bond:
1. Registration: manufacturer shall register under rule 9

2. Manufacturer shall declare input-output ratio.

3. Verification of such input-output ratio by commissioner.

4. Manufacturer may remove goods as such or for repairs, reconditioning etc.

5. Goods must be exported without duty on application in form ARE-2.

6. Procedure specified in notification No.42/2001-CE shall apply

7. Export of goods to Bhutan: conditions, procedure in notification no.45/2001- C.E. shall apply

Provisions of this notification shall apply only where payment is

in freely convertible currency.

➢ Export Warehousing (Rule 20):

1. Goods may be warehoused without payment of duty.

2. Warehoused goods may be exported on payment of duty under claim of rebate or under bond.

3. Warehoused goods may be diverted for home consumption on permission from AC/DC in full
or in part, on payment of duty with interest @ 24% from date of clearance from factory till date
of payment of duty.

4. Exporter shall furnish a general bond (B-3) under rule 19 read with notification issued, backed
by 25% security of bond amount.

5. The officer in charge of warehouse may permit waiver from physical warehousing where
exporter so request in writing.

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 Ch.6 Small Scale Industries (SSI)
Notification No.8/2003

1.Assesses having eligible turnover up to 400 lakhs during preceding F.Y. are eligible for exemption in
respect of goods specified in Annexure to notification.

2.Conession to SSI:

Captive Consumptions of specified goods = without limit

Clearance of specified goods = up to 150 lakhs (1st 150 lakhs turnover from 1stApril)

No cenvat credit on 1st 150 lakhs and balance turnover eligible for cenvat.

Declaration is to be filed crossing limit 90 lakhs.

3.Ineligible good:

 pan masala, watches, tobacco products, Automobiles, primary iron &steel etc.

4.Other Concessions for SSI Units:

Quarterly return

NO registration till crossing 140 lakhs.

Duty payment Quarterly instead of monthly (this facility is available for the whole FY even
when it crosses 400 lakhs in CY)

Full 100% CENVAT credit on capital goods in 1st year.

One Consolidated entry in PLA for all day removals.

Audit once in 2 to 5 years.

Exemption for payment of duty if goods manufactured under brand name of others in rural
area.

5.Exclusions while computing Exemption Limit of ` 150 Lakhs Turnover (Dutiable Goods)

1. Clearances which are exempt from the whole of excise duty under any other notification or

on which no excise duty is payable for any other reason:

 Value of NIL Rate Duty Goods as well as exempted Goods

 Value of Non-Excisable Goods

Value of the Goods Traded

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Value of the Intermediary goods which are Captively consumed as per normal provisions

Value of the Goods exported to any country other than Bhutan

Value of the Deemed Exports

 Value of the Goods manufactured in the capacity of Job worker under notification

No.214/86, 83/94 and 84/94

2. Clearances bearing the Brand Name or Trade Name of another person, which are ineligible for
exemption.
3. Clearances of the specified goods, which are used as inputs for further manufacture of any
specified goods within the factory of their production (i.e. clearances of intermediate goods, which
are exempt separately under this notification)

6. Exclusions while computing Eligibility Limit of ` 400 Lakhs Turnover (Excisable Goods)

Value of Non-Excisable Goods

Value of the Goods Traded

Value of the Goods exported to any country other than Bhutan

Value of the Deemed Exports

 Value of the Goods manufactured in the capacity of Job Worker under notification

No.214/86, 83/94 and84/94.

Clearances bearing the Brand Name or Trade Name of another person, which are ineligible

for exemption.

Clearances of the specified goods, which are used as inputs for further manufacture of any

specified goods within the factory of their production (i.e. clearances of intermediate goods,

which are exempt separately under this notification).

7.Goods Manufactured by SSI Units which bear the Brand Name or Trade Name of another person:

1. As per notification No.8/2003, if an SSI unit manufacturers goods bearing the Brand Name or Trade
Name, whether registered or not, of any other person, then SSI exemption is not available in respect of
those goods

2. SSI will have to pay tax on sale of goods bearing Brand Name or Trade name of another person without
any exemption.

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3. Some Exceptions where goods bearing Brand Name or Trade name of another person are eligible for
exemption [it means these will be included while computing the exemption limits of `150 Lakhs and eligi-
bility limit of ` 400 Lakhs]:

i. Where the goods are manufactured in a factory located in the Rural Area;

ii. Where the goods bear the Brand Name or Trade name of:

a) National Small Industries Corporation (NSIC); or

b) State Small Industries Corporation (SSIC); or

c) State Small Industries Development Corporation (SSIDC); or

d) Khadi and Village Industries Commission (KVIC); or

e) State Khadi and Village Industry Board (SKVIB);

iii. Where the goods are Account Books, registers, writing pads and file folders;

iv. Where the goods are in the nature of packing materials, namely, printed cartons of paper

or paper board, metal containers, HDPE woven sacks, adhesive tapes, stickers, PP caps,

crown corks, metal labels, plastic bags (w.e.f. 11.02.2009);

v. Where the goods being in the nature of components or parts of any machinery, equipment

or appliances are cleared for use as original equipment in the manufacture of the said
machinery, equipment, or appliances; and

vi. Goods are manufactured in a factory belonging to central government or state government.

vii.Trademark use of foreign company is assigned in favour of assessee.

IDT Case Laws

Excise – Basic Concepts

Name of Case Law Subject Decision

Not
Tarpaulin International Eye Lets on Tarpaulin
manufacturing

Not
Steel Authority of India (SAIL) Washing of Iron Ore
manufacturing

Generation of Metal Scrap during repair of Not

Grasim Industries
machinery manufacturing

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 Not
Sony Entertainment Packing of Imported CDs in a Jewel Box
manufacturing

Not
Osnar Chemicals Mixing of Polymers and additives to base Bitumen
manufacturing

Printing on jumbo rolls of GI paper as per design and

Fitrite Papers specification of customers with logo and name of Manufacturing
product in colorful form

Solid & Correct Engineering

Machine is not assimilated in permanent structure Movable
Works

Bata India Theoretical Sale of product being sold Not Marketable

Medley Pharmaceuticals Free Physician samples Marketable

Assembling testing equipment for testing final

Usha Rectifier Marketable
product

Marketable
Nicholas Piramal Short Shelf Life during that
period only.

BalrampurChini Mills Bagasse which is marketable but not manufactured Not Dutiable

Excise – Classification

Name of Case Law Subject Decision

Soft Serve classified as Ice-cream or another dairy

Connaught Plaza Restaurant Ice-cream
product

Antiseptic Cleansing Solution used for cleaning the

Wockhardt Life Sciences skin of patient before operation classified as Medicament
Medicament or other residuary entry

Cream available on prescription of dermatologist for

Ciens Laboratory treating dry skin classified as medicament or Medicament
cosmetics

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 Excise – Valuation
Name of Case Law Subject Decision

Only if they are

Pre-Delivery& Inspection Charges be included in
TATA Motors charged by the
Transaction Value
assessee to buyer

Sales Tax retained by the manufacturer from its Included in

Maruti Suzuki
customer under a tax concession transaction value

Such price will not be

Where product is sold below C.P. for market
Fiat India accepted as
penetration
transaction value

Excise – General Procedure

Name of Case Law Subject Decision

Interest payable if amount of differential duty paid

CEAT No
in full before final assessment order is passed

Time-limit u/s 11A of CEA, 1944 applicable for

Hans Steel Rolling Mill No
recovery of dues under compounded levy scheme

Contaminated, under or over filled bottles or badly No as they are Not

Amrit Bottlers
crowned bottles amount to manufacture Marketable

Rule 18 of Central Excise Rules, 2002 allows export

Spentex Industries rebate as well as C. Cr. of duty paid on input and Yes
final product

No, Penalty can be

imposed only on 4
If manufacturer removes the goods and stores persons
Balaji Trading Co. them with the firm for further sales, penalty under
1. Producer
rule 25 can be imposed 2. Manufacturer
3. Registered person
of warehouse
4. Registered dealer

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 CENVAT Credit

Name of Case Law Subject Decision

C. Cr. on testing material if it is used to ensure

Flex Engineering Admissible
marketability of product

C. Cr. on tower parts & to cellular mobile service

Bharti Airtel Not Admissible
provider

C. Cr on Service Tax paid on

Admissible
1. Custom house agent’s services
Admissible
2. Shipping Agent’s services
Dynamic Industries Admissible
3. Container services
Not Admissible
4. Overseas commission agents

for the purpose of export of manufactured goods

Admissible if place of
C. Cr. of Service Tax paid on outward transportation
Haryana Sheet Glass removal is buyer’s
of goods cleared from factory
factory

Commercial training and coaching institute can

claim C. Cr. of IPS in respect of catering,
Bansal Classes Not Admissible
photography & tent services used to encourage
coaching class students

C. Cr. of service tax paid on house-keeping and

Rane Steering Systems landscaping availed to maintain their factory Admissible
premises in eco-friendly manner

Not Admissible
CadilaHeathcare(Overruled) Services of commission agent eligible as IPS for C. Cr
(Overruled)

Therefore, now services of commission agent is ELIGIBLE as IPS for C. Cr.

Technical testing and analysis services for testing

Cadila Healthcare of clinical samples prior to commencement of Admissible
commercial production eligible as IPS for C. Cr.

Prime Health Care C. Cr. of Toothpaste is eligible as Input in Combo Admissible

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 pack of Toothpaste (manufactured by assessee) and
Toothbrush (bought out from market)

C. Cr. allowed for shortage of material which are Admissible if sue to

Bhuwalka Steel
received in the premises of manufacturer Normal Loss

Admissible if
C. Cr of inputs (contained in WIP and destroyed in remission of duty on
Fenner India
fire) be eligible or reversed under rule 3(5C) final product is not
claimed

C. Cr. available if assesse clears exempted by-

Hindustan Zinc Admissible
product and dutiable final product

C. Cr. availed of capital goods which were later

TATA Advanced Materials destroyed by fire and insurance company Not to be Reversed
reimbursed the amount inclusive of duty

Penalty on directors of company for wrong C. Cr.

Ashok Kumar Fulwadhya Cannot be Imposed
availed by company

Excise – SSI

Name of Case Law Subject Decision

Brand name of another firm in which assessee is

partner be considered as the brand name
Elex Knitting Machinery Yes
belonging to the assessee for the purpose of
claiming SSI exemption

Clearances of two firms having common brand

name, goods being manufactured in the same
Deora Engineering Works factory premises, having common management Yes
and accounts can be clubbed for the purpose of SSI
exemption

An assessee using a foreign brand, assigned to it by

Otto Bilz the brand owner with the right to use the in India Yes
exclusively, is eligible for SSI exemption

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 Important Amendments

1. Infrastructure cess levied on motor vehicles falling under heading 8703.

2. Lubricating oil(produced from waste oil), undergone any of the process listed in chapter Note 4 of
Ch.27  amount to manufacture and excise duty would be leviable.
3. Edible coconut oil packed in retail packs would be classifiable as coconut oil & not hair oil.
4. Valuation for Jewellery will be governed by sec.4 (transaction value).
5. Scope of definition of CG widened: include i) wagons ii) Equipment/appliances used in office within
factory iii) CG used outside the factory of manufacturer of final product for pumping of water, for
captive use within factory.
6. Scope of definition of input widened: i)all goods used for pumping of water for captive use. Ii) All
capital goods which have value up to 10,000 Rs. Per piece.
7. SBC and KKC cannot be paid by utilizing CENVAT Credit of any duty/tax and credit of KKC to be
utilized only for payment of KKC.
8. CENVAT Credit of only NCCD to be utilized for payment of NCCD on all goods.
9. CENVAT credit not to be used for payment of Non-CENVATable infrastructure cess.
10. Jewellery Manufacturer (except manufacturer of plain Silver Jewellery ) with T/O up to 12 crores in
preceding year eligible to avail 100% CENVAT Credit on capital goods in year of purchase.
11. CENVAT Credit allowed on tools sent (without bringing to own premises) to another
manufacturer/Job worker for production.
12. Permission( of AC/DC) given for sending input/partially processed input outside factory to job
worker valid for 3 FY.
13. NO CENVAT on inputs/IPS used in manufacturing of Exempted goods/for provision of Exempted
Services( EXCEPTION : Jewellery Job worker).
14. Exempted goods/final products include NON-Excisable goods and Exempted service includes an
activity which is not a service.
15. CENVAT Credit on inputs/IPS used exclusively in manufacturing of Exempted goods/Provision of
Exempted services to be reversed
16. Option to pay 6% on exempted goods or 7% of exempted services or reverse proportionate credit.
17. Duty paid on exempted goods  to be reduce from 6% (e.g.2% is paid then it will reduced from 6%)
18. Amount payable to be 2% of exempted value in case of transport of goods/passengers by Rail.
19. Reversal of credit not required in case of ethanol produced from molasses generated from cane
crushed in sugar season 2015-16.
20. Manufacturer with multiple units enabled to maintain a common warehouse & distribute credit on
inputs to individual Manufacturing units under invoice issued by a warehouse.
21. Manufacturer/Sp to file annual return (by 30th November of succeeding year)(for furnishing info.
Relating to principle inputs).
22. Withdrawal of circular/Instruction on Excisabilty of Bagasse,Aluminium/Zinc dross.( treat as
exempted goods for purpose of reversal of CENVAT Credit).
23. Exemption from sealing in Packages to export of bulk cargo which is difficult to seal in package.
24. Chartered Engineer Certificate to be submitted for claiming rebate of inputs used in goods exported

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