The Constitution of India (COI) has given power to levy tax to central and State Government under seventh

schedule. The taxation in India is either charged y the State Governments or y the Central Government. In the asic scheme of taxation in India! it is conceived that Central Government will levy and collect tax revenue from Income Tax (exception "gricultural Income)! #xcise (except on alcoholic drin$s! #tc.) and Customs while State Government will get tax revenue from %ocal Sales Tax! #xcise on li&uor and tax on "gricultural Income and the 'unicipalities will get tax revenue from Octroi and (roperty Tax. Taxes are of two types viz. Direct Taxes and Indirect Taxes. )irect Tax is the tax! which is paid directly y people to the government! while indirect tax is paid indirectly y people to the government through registered government representatives. Income Tax is paid directly to the government therefore it is a direct tax while excise duty is paid y people to the manufacturer who pays it to the government! therefore it is an indirect tax.

Direct Tax: *'r. +* a proprietor of ",C trading company! earns profit of -s. .! /0!00012. 3e is lia le to pay income tax on profit earned y him. 3e himself will e responsi le for payment of income tax. That is means it is direct payment y the assessee to the Government! hence it is called direct tax. Indirect Tax: 'Mr. Y' purchases a mobi e phone for his persona use from !"#$ %td.. &e has been char'ed M("T )i.e. %oca *a es Tax+ ,xtra in addition to basic price of Mobi e -hone by !"#$ %td In short. he needs to pay basic price p us M("T )i.e. %oca *a es Tax+ to the "#$ %td. /ow iabi ity of payin' the tax co ected from consumer is on !"#$ %td. This examp e c ear y indicates that tax is actua y deposited by "#$ %TD but indirect y paid to the 'overnment by !Mr. Y. That is why M("T )%oca *a es Tax is an examp e of indirect tax+ The fo owin' dia'rammatic representation shows the prevai in' tax structure in India of Direct and Indirect Tax in #rief.

FLOW CHART OF TAXATION SYSTEM

The fo owin' dia'rammatic representation shows the prevai in' tax structure in India of Direct and Indirect Tax in #rief.

Central #xcise is an indirect tax4 which is levied and collected on the goods1commodities manufactured in India. Generally! manufacturer of commodities is responsi le to pay duty to the Government. This indirect taxation is administered through an enactment of the Central Government vi5.! The Central #xcise "ct! 6788 and other connected rules2 which provide for levy! collection and connected procedures. The rates at which the excise duty is to e collected are stipulated in the Central #xcise Tariff "ct! 67./. It is mandatory to pay Central #xcise duty paya le on the goods manufactured! unless exempted e.g.! duty is not paya le on the goods exported out of India. 9urther various other exemptions are also notified y the

Government from the payment of duty y the manufacturers. This act is app ied to who e of India except 0ammu 1 2ashmir. Central #xcise %aw is a com ined study of: Central #xcise "ct (C#")! 67884 Central #xcise Tariff "ct (C#T")! 67./4 Central #xcise -ules! ;00;4 and C#<="T Credit -ules! ;008

"s per section > of Central #xcise "ct (C#") excise duty is levied only if the following all conditions are satisfied: 2

There should e goods. Goods must e movea le Goods are mar$eta le

Goods are mentioned in the Central #xcise Tariff "ct (C#T"). Goods are manufactured in India.

I. M,"/I/3 45 344D* 6/D,7 $,/T7"% ,8$I*,: ?Goods? have not een defined in Central #xcise "ct.

"s per "rtic e 9::);<+ of $onstitution of India: Goods include all material commodities and articles. *a e of 3oods "ct defines 3oods means: ?every $ind of mova le property other than actiona le claims and money4 and includes stoc$s and shares! growing crops! grass and things attached to or forming part of the land which are agreed to e severed efore sale or under the contract of sale. In addition to this definition! under central excise the goods to ecome ?excisa le goods? have to pass following acid tests: Goods must e: 6) 'ova le ;) 'ar$eta le

II. =&"T I* M4("#I%ITY> 'ovea le means goods! which can e shifted from one place to another place! e.g.! motor car! mo ile phone! computer etc. The goods attached to earth are immova le goods! such as! )ams! -oads! and ,uildings etc. 'ovea le Goods are manufactured or produced ut immovea le goods are constructed. )ue to this 'ova le aspect under central excise! although flat is manufactured y uilder it is not an excisa le commodity. III. =&"T I* M"72,T"#I%ITY> 'ar$eta le means goods which are capa le of eing sold! there should e at least one uyer for the commodity in the mar$et is sufficient to call the good as mar$eta le. e.g.! 'olten iron ore at 6>00 degree to 6800 degree Celsius is not mar$eta le! therefore not a good. Similarly! flour produced in own factory for use as raw material in own factory for further production of read is a good ecause it is mar$eta le. "ctual sales are not relevant for calling any item as goods. Sale is not relevant. Goods produced for free distri ution! as sample! gifts! or replacement during warranty period is also lia le of excise duty. #xcisa le Goods are those goods! which are mentioned in the items of tariff in C#T". Sec ;(d) defines @#xcisa le Goods as goods specified in the schedule of C#T" 67./ as eing su Aect to a duty of excise and includes salt.B Goods produced for free distri ution! as sample! gifts! or replacement during warranty period is also lia le of excise duty. I(. 344D* M6*T #, M,/TI4/,D I/ $,/T7"% ,8$I*, T"7I55 "$T )$,T"+> Goods specified in the Schedule to Central #xcise Tariff "ct! 67./ as eing

su Aect to a duty of excise and include saltC. Thus! unless the item is specified in the Central #xcise Tariff "ct as su Aect to duty! no duty is levia le. Some goods li$e wheat! rice! cut flowers! horses! soya eans etc. are not mentioned in Central #xcise Tariff at all and hence they are not Dexcisa le goodsC! though they may e DgoodsC. (. 344D* M6*T #, M"/65"$T67,D ?I/ I/DI"? %ast operative word of section > of Central #xcise "ct is that excisa le goods must e manufactured or produced in India. Thus! excise levy cannot e imposed on imported goods or goods manufactured in <epal. Once all a ove conditions are satisfied the person has to get himself registered under the Central #xcise. If production or manufacture is in special economic 5one then no excise duty is levied. ,xcise Duty is not evied on:

1. Services such as doctors treating the patients! accountants preparing the

accounts! in these cases service tax are levied.

2. Immova le goods such as roads! ridges and uildings. 3. <on2'ar$eta le goods! i.e.! goods for which no mar$et exists! e.g.! melted
iron ore at 6E00 degree Celsius.

4. Goods that are not mentioned in C#T"4 and 5. Goods manufactured or produced out of India.
The persons satisfying all the a ove conditions have to pay the excise duty. 'ainly we can categories them in following manner

1. #very 'anufacturer of dutia le excisa le goods 2. 9irst F Second Stage )ealer (Including 'anufacturerCs depotsF imports)
desiring to issue Cenvat le invoices.

3. (ersons holding warehouses for storing non duty paid goods 4. (ersons who o tain excisa le goods for availing end2use ased exemption 5. #xporter G manufacturers under re ate ond procedure! #OHCs F #(I

units which have interaction with the domestic economy (Through )T" sales or procurement of duty free inputs)

1. Manufacturer is a person who actually manufacturing or producing the excisable goods. 2. Also a person who gets the production of other and sell it after putting its own brand then he will not be called manufacturer, e.g., if ! "td# gets the fans made from some person and sell it after putting their brand name, the ! "td# will not be called as manufacturer. $he person actually ma%ing the fans will be called manufacturer. &hile understanding manufacturer we need to understand what manufacturing means' ( ). &*A$ )+ M,A- ./ MA-01A2$)3)-4' ( $he term manufacturing includes' (

Manufacturing 5eemed Manufacturing

6roduction Assembling

a. Manufacturing According to +ection 27f8 of 2entral ,xcise Act 9manufacture: includes any process' 1. )ncidental or ancillary to the completion of manufactured product or 2. &hich is specified in relation to any goods in the +ection or 2hapter notes of the +chedule to the 2entral ,xcise $ariff Act, 1;<5 as amounting to manufacture, or 3. &hich are specified in third schedule to the 2,$A, in=ol=es pac%ing or repac%ing of such goods in a unit container or labeling or re(labeling of containers or declaration or alteration of retail sale price or any other treatment to ma%e product a=ailable in the mar%etable to the consumer. 2lause 7ii8 and 7iii8 are called deemed manufacture. $hus, definition of manufacture# is inclusi=e and not exhausti=e. $he word 9Manufacture: as specified in =arious 2ourt decisions shall be called only when a new and identifiable goods emerge ha=ing a different name, character, or use> e.g., manufacture has ta%en place when table is made from wood or of pulp is con=erted into base paper, or sugar is made from sugarcane. b. 5eemed Manufacture 5eemed manufacture is of two types' ( 1. 2,$A specifies some processes as amounting to manufacture#. )f any of these processes are carried out, goods will be said to be manufactured, e=en if as per 2ourt decisions, the process may not amount to manufacture# ?+ection 27f8 7ii8@. 2. )n respect of goods specified in third schedule of 2entral ,xcise Act, repac%ing, re(labeling, putting or altering retail sale price etc. will be

manufacture#. $he goods included in $hird +chedule of 2entral ,xcise Act are same as those on which excise duty is payable uAs 4A on basis of M36 printed on the pac%age. ?+ection 27f8 7iii8@. c. 6roduction 6roduction has also not been defined in 2,A but production is used to co=er items li%e coffee, tea, tobacco, etc. which are called to ha=e been manufactured nut produced. d. Assembling Assembly of =arious parts and components amount to manufacture pro=ided it result in mo=able goods which ha=e distincti=e identity, use, character, name etc. e.g., assembly of computer is manufacture. Assembly of air conditioner in a car is not manufacture as no new identifiable product emerges. 1irst +tage 5ealer is one who purchases goods directly from any of the following'

$he manufacturer under the co=er of any in=oice issued in terms of the pro=ision of 2entral ,xcise 3ules, 2BB2 or from the depot of the said manufacturer. 4oods purchased from the premises of the consignment agent of the said manufacturer. 4oods purchased from any other premises from where the goods are sold by or on behalf of the said manufacturer.

4oods purchased from an importer or from the depot of an importer.

4oods 6urchased from the premises of the consignment agent of the importer.

6rocedural reCuirement for the first D second stage dealer 3egistration '( $hey ha=e to get themsel=es registered with the excise authorities Maintenance of stoc% register' ,=ery dealer has to maintain register for receipts and issue of inputs. $his register is to be maintained on daily basis

)n=oice 3eCuirements ' ( 2,-EA$ credit in respect of the inputs and capital goods purchased from a dealer shall be allowed if ' ( 18$he dealer maintains records indicating that inputs and capital goods were supplied from the stoc% on which duty was paid by the manufacturer A producer of such goods> and 28Fnly an amount of such duty on pro(rata basis has been indicated in the in=oice issued by the dealers 1iling of the return ' ( 5ealers are reCuired to submit to the superintendent of central excise, a return in prescribed from within days from the close of each

Cuarter of the year 1lowchart for first stage excise dealer $he categoriGation of a dealer as first stage or second stage is not predefined. )t is decided during the purchase. $herefore, a dealer may be a first stage dealer or a second stage dealer depending on the type of purchase. "et us assume we are a 1irst +tage 5ealer and you buy the goods from the importer or Manufacturer.

+econd +tage 5ealer A registered dealer who purchases goods from the 1irst +tage 5ealer is called a +econd +tage 5ealer. 1lowchart for +econd stage excise dealer "et us assume we are a 1irst +tage 5ealer and you buy the goods from the importer or Manufacturer.

-ule ;0 of C# -ules permit warehousing of certain goods in warehouses without payment of duty. These goods are coffee! petroleum products! en5ene! etc. In such cases! the duty lia ility is on the person who stores the goods. The following persons have exempted specified categories of persons1premises from o taining registration! as follows: 2

1. (ersons who manufacture the excisa le goods! which are chargea le to nil
rate of excise duty or are fully exempt from duty y a notification.

2. Small scale units availing the sla exemption ased on value of clearances
under a notification. 3owever! such units will e re&uired to give a declaration ("nnexure26) once the value of their clearances touches -s.70 la$hs.

3. In respect of ready2made garments! the Ao 2wor$er need not get registered if

the principal manufacturer underta$es to discharge the duty lia ility.

procedure under the Customs "ct! 67E; su Aect to the following conditions a. The said excisa le goods and any intermediary or y2product including the waste and refuse arising during the process of manufacture of the said goods under the Customs ,ond are either destroyed or exported out of the country to the satisfaction of the "ssistant Commissioner of Customs or the )eputy Commissioner of Customs! in2charge of the Customs ,onded Jarehouse4 b. The manufacturer shall file a declaration in the specified form annexed hereto in triplicate for claiming exemption under this notification4 c. <o draw ac$ or re ate of duty of excise paid on the raw materials or components used in the manufacture of the said goods! shall e admissi le

4. (ersons manufacturing excisa le goods y following the warehousing

5. The person who carries on wholesale trade or deals in excisa le goods (except
first and second stage dealer! as defined in C#<="T Credit -ules! ;006).

H. " 3undred per cent #xport Oriented Hnderta$ing (#OH) or a unit in 9ree
Trade Ione or Special #conomic Ione licensed or appointed! as the case may e! under the provisions of the Customs "ct! 67E;.

K. (ersons who use excisa le goods for any purpose other than for processing or manufacture of goods availing enefit of concessional duty exemption notification.

5I/I*&,D TI%% &,7, ;@.AB.AC

"pplication for registration is given in prescri ed format to the "ssistant Commissioner or )eputy Commissioner in duplicate. (5orm " D ; for all persona except certain textile processors1 Cheroot manufacturers) Separate 5rom " D < is prescri ed for registration of power loom weavers13and (rocessors1 dealers of yarns and fa ric and manufacturer of readymade garments. 5rom " D 9 is the application for the registration

specified for manufactureLr of hand2rolled cheroots of to acco "pplication should e accompanied y : 2

" self2attested copy of (ermanent "ccount num er (("<) allotted y income tax department Copy of the registration Certificate o tained under local Sales Tax (#.g. In 'aharashtra '="T -egistration Certificate )

Copy of the registration certificate o tained under interstate sales tax (vi5. Central Sales Tax -egistration <um er)

Copy of the Shop "ct license 1 <OC from the Grampanchayat or from competent local authority

Copy of the 9actory -egistration certificate under factory "ct.

,alance Sheet of last three years (not applica le In Case of assesses starting new usiness

Statement Of turnover for current financial year till date of registration

The applicant or y his authorised agent having general ?-ower of "ttorney )-4"+?. The -ange Officer shall have power to call the original documents to verify Dpower of attorneyC. Such document shall not e retained y the -ange Officer ut e returned immediately after verification

'emorandum of association and article of association in case of company 1 in case of partnership @(artnership deedB 1 in case of co operative society y laws etc.

Copy of registration num er o tained under Customs (=i5. Customs -egistration <o. (,I< <o.)) G If "pplica le

Import #xport Code -egistration <um er copy o tained from )irectorate General 9oreign TradeCs G If "pplica le

The details of the three maAor excisa le goods 1 inputs li$ely to e manufactured 1 used 1 traded should e mentioned

One Cancelled che&ue along with the letter from the an$er verifying account details

Current 1 Saving ,an$ "ccount statements of last few months of company and directors respectively

" copy of the Ground plan

9low chart showing exact process of manufacturing (In case of manufacturer)

Copy of the oard resolution in favor of registration under central excise G in case of company

Two address proof of applicant who want to get register ;+ In Case of let out property a+ Copy of valid registered rent agreement.

b+ Copy #lectricity ,ill 1Telephone ill 1 (roperty Tax assessment order or rent receipt of the owner. ("ny Two) G )ate of the document should not e older that E month c+ <o O Aection Certificate from the owner of the property as to registration under Central #xcise "ct. <+ In Case of property owned y applicant

Copy #lectricity ,ill 1Telephone ill 1 (roperty Tax assessment order or rent receipt ("ny Two) G <ame shown on the a ovementioned document should e matched with the name of the applicant mentioned in the application form 2 )ate of the document should not e older that E month

"ddress F identity proof of directors in case of company ()ocuments must e given of the director who is signing the application (Two documents for "ddress proof F One for Identity (roof (3aving (hoto Identity)) 1 the word director to e changed to the partner in case of partnership firm.

identity card 1 -ation Card 1 'aintenance ,ill 1 #lectricity ,ill 2 for -esidence (roof <ame shown on the a ove mentioned document should e matched with the name shown of the director in the application form 2 )ate

a) Copy photocopy of (assport 1 )riving %icense 1 ,an$ "ccount 1 =oters

of the document should not e older that E month

b) Self "ttested (an Card Copy of the director 1 (artner

"ll other <OCCs F documents according to the nature of the usiness.

The registration certificate mentions the #xcise Control Code (#CC)! the #CC is a 6/ digit num er which has first 60 digits of ("<! next two digits are either D+'C for manufacturer or D+)C for dealer and the last three digits are num er li$e 006!00; etc.

Jhen a manufacturer who is exempt from the registration is re&uired to file a declaration! the same will e filed with the "ssistant Commissioner of the Aurisdictional Central #xcise )ivision.

The (erification #y department: The verification shall e made y the Inspector or Superintendent of Central #xcise having Aurisdiction over the premises (-ange Officer) in respect of which the applicant has sought registration! within / wor$ing days of the receipt of application. "s per the rules1notification! the registration certificate shall e issued within K wor$ing days. The -ange Officer (Superintendent) either himself or through the Sector Officer (Inspector) shall verify whether the declared address and operations (intended) are genuine and the declarations made in the application are correct. If found in order! he will endorse the correctness of the same and append his dated signature on the office copies of the -egistration application and the copy of the application with the registrant. If any deviations or variations are noticed during the verification! the same should e got corrected. "ny maAor discrepancy! such as fa$e address! non2 existence of any factory etc. shall e reported in writing to the )ivisional Officer within > wor$ing days and the -ange Officer shall initiate action to safeguard revenue.

Issue of 7e'istration $ertificate: "ll -egistrations of each type should e num ered in a single series for the -ange as a whole! commencing with serial no. 6 for each calendar year. The issuing authority should ma$e every effort to complete all formalities and grant the -egistration Certificate within K days of receipt of application in his office. #very -egistration Certificate granted 1 issued y the registering authority shall e under his signature. 3e should also countersign the ground plan accompanying the -egistration Certificate. The -egistration Certificate and the duplicate copy of the plan should e returned to the registered person who shall exhi it his -egistration Certificate or a certified copy thereof in a conspicuous part of the registered premises. The -egistering authority in a permanent file shall $eep the application as well as the ground plan

-egistration is not transfera le.

If manufacturer cease to produce i.e.! stops the production permanently then he should apply for de2registration. *-,$IM,/ 45 3746/D -%"/

PROFARMA OR SPECIMEN REGISTRATION FROM UNDER CENTRAL EXCISE

#xcise duty is levied on production of goods ut the lia ility of excise duty arises only on removal of goods from the place of storage! i.e.! factory (where any part of the excisa le goods other than salt are manufactured or any manufacturing process is carried out.) or warehouse (the place at which the goods are stored after their production in factory) #xcise duty is levied if goods are mar$eta le. "ctual sale is not relevant. Therefore! goods! which are given for free replacement during warranty period! are also lia le for excise duty. "s #xcise duty is levied at the time of removal of goods. 3ence the date of its actual production is not relevant. The date of removal is relevant and the rate of excise duty applica le on the date of removal shall e actual rate of excise duty to e paid. Clearance means ta$ing goods out of factory. Thus! finished goods can e stored not removed in the place of manufacture (factory) without payment of duty. There is no time limit for removal of gods from place of manufacture i.e.! factory. The records have to e maintained y manufacturer indicating particulars regarding:

1. )escription of goods manufactured or produced 2. Opening ,alance of goods manufactured or produced 3. Muantity produced or manufactured 4. Stoc$ of goods 5. Muantity of goods removed

H. "ssessa le =alue I. "mount of duty paya le4 and <. "mount of duty actually paid
The record should e preserved for / years. If the records are not maintained then penalty up to duty paya le can e imposed and goods can e confiscated. If goods are stored at any other place other than factory! then goods can e cleared from factory without payment of duty! if commissioner permits. Goods can e cleared out of factory without payment of duty for carrying out tests and omission per unit. 7"T,* 45 ,8$I*, D6TY The asic rate of excise duty is 68N while in some cases there is a special duty if .N which ma$es the excise duty in those cases at ;;N. There is at present a cess for education called education cess! which is ;N of the excise duty4 therefore! the effective excise duty comes out as 68.8;N or ;;.EEN. D6TI,* 6/D,7 $,/T7"% ,8$I*, "$T ,asic duty and special duty of excise are levied under Central #xcise "ct. ,"SIC #+CIS# )HTO TO ,# T#-'#) "S C#<="T 2 ,asic excise duty (also termed as Cenvat as per section ;" of C#" added w.e.f. 6;2/2;000) is levied at the rates specified in 9irst Schedule to Central #xcise Tariff "ct! read with exemption notification! if any. G Psection >(6)(a) of C#"Q. The present general rate is 68N w.e.f. 62>.;00.. There is partial exemption to a few products. S(#CI"% )HTO O9 #+CIS# G It is levia le under second schedule to the C#T"! 67./. "t present! all excisa le goods are exempt from this duty

#)HC"TIO< C#SS O< #+CIS# )HTO 2 In case of excise duty! calculation of cess is easy. If excise duty rate is 68N! education cess will e 0.;.N. it is levied as a duty of excise under section 76 read with Section 7> of 9inance (<o. ;) "ct! ;008 states that education cess is Dduty of exciseC! to e calculated on aggregate of all duties of excise including special excise duty or any other duty of excise! ut excluding education cess on excisa le goods). "s per section 7>(>) of 9inance (<o. ;) "ct! ;008! all provisions of Central #xcise "ct! including those relating to refunds! exemptions and penalties will apply to education cess.

S#CO<)"-O "<) 3IG3#- #)HC"TIO< C#SS G It is levied under section 6>E read with section 6>. of the finance "ct! ;0K as a duty of excise R6N on aggregate of all the duties of excise (#xcluding education cess and secondary F higher education cess)

#+CIS# )HTO I< C"S# O9 C%#"-"<C#S ,O #OH G The #OH units are expected to export all their production. 3owever! if they clear their final product in )T" (domestic tariff area)! the rate of excise duty will e e&ual to customs duty on li$e article if imported in India. P(roviso to section >(6)Q. <ote that even if rate of customs duty is considered for payment of duty! actually the duty paid y them is Central #xcise )uty. The rate of customs duty is ta$en only as a measure. The #OH units can sale part of their final products in India at /0N of customs duty or normal excise duty in certain cases.

<"TIO<"% C"%"'ITO CO<TI<G#<T )HTO G " D<ational Calamity Contingent )utyC (<CC)) has een imposed vide section 6>E of 9inance "ct! ;006 Pclause 6;7 of 9inance ,ill! ;006! w.e.f. 6.>.;006Q. This duty is imposed on pan masala! chewing to acco and cigarettes. It varies from 60N to 8/N.

)HTI#S H<)#- OT3#- "CTS 2 Some duties and cesses are levied on manufactured products under other "cts. The administrative machinery of central excise is used to collect those taxes. (rovisions of Central #xcise "ct and -ules have een made applica le for levy and collection of these duties 1 cesses.

"))ITIO<"% )HTO O< GOO)S O9 S(#CI"% I'(O-T"<C# 2 Some goods of special importance are levied "dditional #xcise under "dditional )uties of #xcise (Goods of Special Importance) "ct! 67/K.

)HTO O< '#)IC"% "<) TOI%#T (-#("-"TIO<S 2 " duty of excise is imposed on medical preparations under 'edical and Toilet (reparations (#xcise )uties) "ct! 67//.

"))ITIO<"% )HTO O< 'I<#-"% (-O)HCTS 2 "dditional duty on mineral products (li$e motor spirit! $erosene! diesel and furnace oil) is paya le under 'ineral (roducts ("dditional )uties of #xcise and Customs) "ct! 67/..

,xcise duty is payab e on the basis of: 6. Specific duty ased on measurement li$e weight! volume! length etc. ;. (ercentage of Tariff value. >. 'aximum -etail (rice. 8. Compounded levy Scheme /. (ercentage of "ssessa le =alue ("d2velour duty) The entire concept of #asis of (a uation can be exp ained with the he p of the fo owin' f ow dia'ram.

+6,2)1),5 ,!2)+, 50$/ )+ $*, 50$/ F- 0-)$+ ")J, &,)4*$, ",-4$*, EF"0M,, ,$2
Items Cigarettes 'atches Sugar 'ar le sla F Tiles Color T= Cement #asic of specific ,xcise Duty %ength of Cigarette (er 600 ,oxes (er Muintal S&uare meter Screen si5e in cm (er Tonne

)llustration
Items Cement #asic ,xcise Duty If retail price is up to -s.670 per /0 Sg then G C#) is -s.>/0 per 'T If retail sale price is a ove -s.670 ut up to -s.;/0! per /0 Sg then G C#) is 6; N of retail sale price In other cases G C#) is -s.E00 per 'T -s. >/0 per metric tonne

Cement Clin$er

$ariff Ealue is the =alue fixed by go=ernment from time to time. 4o=ernment can fix

different tariff =alue for different classes. $ariff Ealue is fixed for 6an Masala, 3eady Made 4arments. )llustration
-an Masa a in retai pacEa'esFD "mount )7s.+

;+ If retai sa e price is not printed on the retai pacEF D

Containing not exceeding tow gram per pac$

-s.6./0 per unit pac$

Containing more than ; grams ut -s.>.00 per unit pac$ not exceeding 8 grams per pac$ -s.>.00 T -s. 6.;/ per gram or part Containing more than 8 grams ut thereof exceeding 8 grams not exceeding 60 grams per pac$ <+If retai sa e price )7*-+ is printed on the retai pacE I+ Goods fall under tariff item ;60E70;02 a) 3aving etel nut content not exceeding 6/ N ) Other than those specified in (a) a ove K. N of printed -S(

/E N of printed -S(

II+ Goods fall under heading ;80> /0 N of printed -S(

Government can specify the goods on which excise duty will e ased on '-(. '-( shall e the maximum price at which excisa le goods shall e sold to the final consumers. It includes taxes! freight and transport charges! commission to dealers etc. In case multiple '-(Cs are printed on product! the maximum '-( among all will e considered for valuation purposes. #xcise duty on '-( is applica le on products on which &uoting of '-( is necessary under the Jeights and 'easurements "ct! e.g.! Chocolates! ,iscuits! Jafers! Ice Creams! Camera! -efrigerators! 9ans! 9ootwear! Toothpaste etc. #.g.: 2 '-( declared on pac$age of shaving cream is -s.600! notified a etment is >0 N and the rate of excise duty is 68.8; N! then ! the assessa le value of such pac$age of shaving cream L 600 2>0 N of 600 L -s.K0 and the excise duty levia le on such pac$age L K0 U68.8;N L -s.60.07. 9ew commodities and their respective a atement notified y the government are as under: 2

Description Shar at Toothpaste Thinners #lectric 9ans "erated waters

"batement as a percenta'e of retai sa e price ;.N >>N >.N >.N 80./0N

$omputer parts G accessoriesF aptops and set top boxes F printersF monitorsF modem have been brou'ht under 7*- based excise duty

Assessable Ealue is the =alue of transaction i.e., the =alue at which transaction ta%es place, in other words it is the price actually paid or payable for the goods on sales. )t is also called transaction =alue. )t includes freight and transportation charges, commissions to dealer etc. ,!2)+, 50$/ )+ 6A)5 F- $3A-+A2$)F- EA"0, F3 A++,++A.", EA"0, )1' 1. 4oods are sold at the time and place of remo=al. 2. .uyer and assessee 7ManufacturerAseller8 are not related. 3. 6rice is the only consideration for sale, i.e., money or some =aluable item is recei=ed on sale. )-2"0+)F-+ A-5 ,!2"0+)F-+ 13FM A++,++A.", EA"0, )-2"0+)F-+ $F A++,++A.", EA"0,' ( 1. 6rimary pac%ing or main pac%ing or necessary pac%ing. 2. 3oyalty charges. 3. 2ommission to sales agent. 4. 6ac%ing charges 7except durable and returnable pac%age8 5. "oading and unloading charges within the factory H. 5esign and ,ngineering 2harges

I. 3oyalty charged in 1ranchise agreement <. Ad=ertising, mar%eting etc incurred by the buyer on behalf of Assessee 7not on principal to principal basis8 ;. 6arts used for repair, replacement during the warranty period 1B. +torage ,!2"0+)F-+ 13FM A++,++A.", EA"0,' ( 1. 5urable and returnable pac%ing. 2. ,xcise 5uty. 3. +ales $ax K +ales tax, turno=er tax, additional sales tax, surcharge on sale tax, Fctroi ,tc. 4. 3eturnable primary pac%ing li%e cold drin%s bottles, "64 cylinders. 5. $rade discount gi=en at the time of sales. H. 1reight and insurance. Assessable Ealue L 7+ales 6rice less 5eductions8A71Mrate of duty8 )llustration 1 2omputation of transaction =alue when sale price includes excise and sales tax' ( $he(cum(duty price of the product is 3+.5, ;4,;<4A(. )t includes sales tax N4O and excise duty N14O 76lus3O education cess and +*,28. 1ind out the assessable =alue and excise duty and sales taxP +olution' ( "et the assessable =alue of the goods be 3s. !# +ince excise duty is14.42 O of !#, the price of the goods for le=y of sales tax is A# M B.1442! L 1.1442! +ales tax N 4O of 3s. 1.1442 ! L 3s. B.B45IH<! $otal 6rice inclusi=e of excise duty and sales tax is eCual to 3s.5,;4,;<4 A( i.e. !M B.1442 ! M B.B45IH<! L 3s.5,;4,;<4 i.e. 1.1<;;H< ! L 3s.5, ;4,;<4 i.e. ! L 3s. 5, ;4,;<4 A 1.1<;;H< $herefore, ! L 3s. 5, BB,BBB i. *ence the assessable =alue of the product is 3s. 5,BB,BBBA( ii. ,xcise duty N 14.42O is 3s.I2, 1BBA( .

iii. +ales $ax N 4O L75,BB,BBBMI2,1BB8 Q4O L 3s. 22,<<4 )llustration 2 2ompute the assessable =alue of the excisable goods, for le=y of duty of excise on the basis of the information gi=en below' (
-articu ars Cum )uty wholesale price including sales tax -s. ;/0012 <ormal secondary pac$ing cost Cost of special secondary pac$ing Cost of dura le ad returna le pac$ing 9reight Insurance on freight Trade )iscount (<ormal (ractice) -ate of central #xcise duty (including #C F S3#C) "muont)7s+ 6/!00012 6!00012 6!/0012 6!/0012 6!;/012 ;0012 6!/0012 68.8;N

+olutions'
-articu ars Cum 2 )uty (rice Deduction: Sales Tax )ura le F -eturna le pac$ing 9reight Insurance Trade )iscount Tota %ess : 2 #xcise duty thereon R 68.8;N (.!0/0 U68.8; 1 668.8; ) ;!/00 6!/00 6!;/0 ;00 6!/00 HFA@A ;FA@A "muont)7s+ "muont)7s+ 6/!000

"ssessab e (a ue

BFA9@

Jhen duty of central excise or customs is levied y applying the given percentage of value of the goods! then! it is $nown as ")2="%O-#' rate. In other words! ad2 valorem rates are ased on value of goods. "d2valorem rates have in uilt elasticity and &uantum of duty levied automatically varies as the value of the goods vary #.g. : 2 If #xcise duty rate is 68.8;N and ad2valorem and the assessa le value of the goods is -s. 6!00!000 then! the excise duty wor$s out to e -s.688;0 The C#<="T Credit system is ased on the =alue "dded Tax concept to reduce the cascading effect hence we will first understand the concept of the value added tax F cascading effect. "nd then we will move to C#<="T credit system. =alue "dded Tax means on tax on value addition. =alue addition means the value of output as reduced y value of inputs. Hnder value added tax all taxes orne in respect of inputs is allowed to e set off against the taxes paid on final product in order to su Aect only value addition! at each stage to taxation. The system of ="T avoids the cascading effect $ascadin' effect: D The literal meaning of cascade is overlapping. Cascading effect in Taxation! in simple terms means Tax on Tax. It is the fundamental of any Tax structure in India that! no tax should e charged on the Tax. Jhen a raw material passes through various stages of manufacture! efore it is made availa le to the ultimate consumers as finished good! the manufacturing cost of the finished good includes raw material cost and Tax on the same. Jhen consumer uys these finished goods the tax is levied on a ove mentioned cost of manufacture which results in cascading effect of the tax. The following example ela orates this in simple way: 9or simplifying the tax calculation we will assume! rate applica le is 60N Transaction without ("T Type of the Dea er Tax "mount Tax Invoice va ue I ;AJ -ayab e

$ost

7emarEs

5or 7aw materia supp ier Tax To ,e paid y -aw 'artial Supplier! 6!000 which will e collected from 'anufacturer

Sales for -' supplier

60!000

6!000

66!000

5or Manufacturer (urchase 60!000 6!000 66!000 Jhile Selling goods manufacturer ;!600 has added (rofit T Cost of -s.60!000 9F;AA

Sales

;6!000 ;!600 ;>!600 (60000T6000T60000) (;6!000U60N) (;6!000T;600)

Tota ,xcise Duty -aid

*ummary: D Cost of the product in hands of final consumer : 2 -s. ;>600 Total Tax (aid to the government : 2 -s. >!600 (6!000T;!600) Tax to e paid y manufacturer : 2 -s. ;!600 Transaction with ("T Type of the Dea er Tax "mount Tax Invoice va ue I ;AJ -ayab e

$ost

7emarEs

5or 7aw materia supp ier Tax To ,e paid y -aw 'artial Supplier! 6!000 which will e collected from 'anufacturer

Sales for -' supplier

60!000

6!000

66!000

5or Manufacturer (urchase 60!000 6!000 66!000 Jhile Selling goods manufacturer 6!000 has added (rofit T Cost of -s.60!000 <FAAA

Sales

;0!000 ;!000 ;;.000 (60000T60000) (;0!000U60N) (;0!000T;000)

Tota ,xcise Duty -aid

*ummary: D Cost of the product in hands of final consumer : 2 -s. ;;000 Total Tax (aid to the government : 2 -s. ;!000 (6!000T6!000) Tax to e paid y manufacturer : 2 -s. 6!000 "na ysis of the "bove $omputation -articu ars Cost of the product in hands of final consumer Total Tax paid to the government Tax to e paid y manufacturer without $,/("T ;>!600 with $,/("T Diff 7easons for Diff.

;;!000

>!600

;!000

;!600

6!000

The cascading 6!600 effect i.e. Tax on Tax is resulted in to this difference. 6!600 (The same point is ela orated 6!600 elow)

;+ Transaction without ("T Supplier supplies his output to manufacturer at -s. 60!000. Thus! manufacturer gets the material at -s. 66!000 inclusive of tax R 60N. 3e carries out further processing and sells his output at -s. ;>!600. Jhile calculating his cost! manufacturer has considered his purchase cost of materials as -s. 66!000 and added -s. 60!000 as his conversion charges plus profit. Jhile selling product! manufacturer will charge tax again R 60N. Thus final consumer 1 customer will get the item at -s. ;>!600 (;6!000T60N tax). "s stages of production and1or sales continue! each su se&uent purchaser has to pay tax again and again on the material which has already suffered tax. This is called cascading effect. <+ Transaction with ("T ="T was developed to avoid cascading effect of taxes. In the aforesaid example! Dvalue addedC y manufacturer is only -s. 60!000 (;0!000G60!000)! tax on which would have een only -s. 6!000! while the tax paid was -s. ;!000. In ="T! the idea is that manufacturer will pay tax on only -s 60!000 i.e. value added y him. Then! it ma$es no difference whether a product passes through / or 60 stages or even 600 stages! as every person will pay tax only on Dvalue addedC y him to the product and not on total selling price. C#<="T Credit scheme efore 6.8.;000 was $nown as 'O)="T credit scheme. 'O)="T means modified value added Tax now it has een changed to C#<="T. C#<="T stands for ?Central =alue "dded Tax?. This scheme is introduced with a

view to remove the effect of the dou le taxation how this is eing achieved can e understood with the help of the following example ",C %td is a manufacturer and it purchases certain components from (M- %td for use in manufacturing. (M- %td has to pay excise duty on components manufactured y it and it would have een recovered from ",C %td. <ow! ",C %td has to pay excise duty on toys manufactured y it as well as ear the excise duty paid y its supplier! (M- %td. This results in multiple taxation. C#<="T is a scheme where ",C %td can ta$e credit for excise duty paid y (M- %td so that lower excise duty is paya le y ",C %td. Hnder this scheme! a manufacturer can ta$e credit of excise duty paid on raw materials and components used y him in his manufacture. "ccordingly! every intermediate manufacturer can ta$e credit for the excise element on raw materials and components used y him in his manufacture. Since it amounts to excise duty only on additions in value y each manufacturer at each stage! it is called value2 added2tax (="T) The C#<="T credit can e utili5ed towards payment of excise duty on the final product. "dvanta'es of $,/("T V It reduces the effects of taxation at multiple stages of manufacture. V It facilitates duty free exports. V It increases the tax ase. Disadvanta'es of $,/("T V It increases paper wor$ and leads to multiplicity of records. V It leads to corruption. V It leads to litigation.

$redit of inputs

Input may be used direct y or Indirect y: D The input may e used directly or indirectly in or in relation to manufacture. The input need not e present in the final product. Inputs e i'ib e for $envat to service provider G Manufacturer. /o input credit if fina productGoutput service exempt from dutyG service tax: $redit on basis of specified documents: D Credit is to e availed only on the asis of specified documents as proof of payment of duty on inputs or tax on input services. $envat on inputs )$apita 3oods+:D Credit of duty paid on machinery! plant! spare parts of machinery! tools!

dies! etc.! is availa le. 3owever! up to /0N credit is availa le in current year and alance in su se&uent financial year or years The new terms used in the a ove highlights are $,/("T"#%, I/-6T* I/$%6D,* 54%%4=I/3 6. Input credit on -aw 'aterials ;. Input credit on Consuma les Stores >. Input credit on Capital goods 8. Input credit on services

;. I/-6T $7,DIT )$,/("T+ 4/ 344D*1 $4/*6M"#%,*:D "ll goods! used in or in relation to the manufacture of final products whether directly or indirectly and whether contained in the final product or not *Input* includes lu ricating oils! greases! cutting oils! coolants! accessories of the final products cleared along with the final product! goods used as paint! or as pac$ing material! or as fuel! or for generation of electricity or steam used in or in relation to manufacture of final products or for any other purpose! within the factory of production Input also includes goods used in manufacture of capital goods which are further used in the factory of manufacturer Inputs used for test &uality control chec$

"n input ecomes a waste and is sold as scrap Inputs contained in waste

9inal product cleared in dura le and returna le pac$ing

<. I/-6T $7,DIT )$,/("T+ 4/ $"-IT"% 344D*: D Tools! hand tools! $nives etc. falling under chapter .; U 'achinery covered under chapter .8 U #lectrical machinery under chapter ./ U 'easuring! chec$ing and testing machines etc. falling under chapter 70 U Grinding wheels and the li$e goods falling under su 2heading <o E.06.60 U " rasive powder or grain on a ase of textile material! falling under chapter heading E..0;. (ollution control e&uipment. Components! spares and accessories of the goods specified a ove. 'oulds and dies.

-efractories and refractory material.

Tu es! pipes and fittings thereof! used in the factory. Storage Tan$.

"ir2 Conditioners! refrigerating e&uipments and computers would e eligi le to C#<="T credit as capital goods (Should not e used in the offices) If the truc$ purchased y the assessee in relation to ring the raw material! consuma le F capital goods at premises then C#<="T credit in respect of duty paid on purchases of truc$ will e allowed as input credit on capital goods. The C#<="T scheme can e explained in short with the help of the following example. 9. I/-6T $7,DIT )$,/("T+ 4/ *,7(I$,*

"ny Service used y a provider of taxa le service for providing an output service4 or "ny Service used y the manufacturer! whether directly or indirectly! in or in relation to the manufacture of final products and clearance of final products from the place of removal4 "nd includes services used in relation to setting up! moderni5ation! renovation or repairs of a factory! premises of provider of output service or an office relating to such factory or premises! advertisement or sales promotion! mar$et research! storage up to the place of removal! procurement of inputs! activities relating to usiness! such as accounting! auditing! financing! recruitment and &uality control! coaching and training! computer networ$ing! credit rating! share registry and security! inward transportation of inputs or capital goods and outward

transportation up to the place of removal C#<="T credit in respect of service tax paid on mo ile phones (If used in relation to output service or in relation final manufacturing of the finished goods)

Y46 $"/ /4T T"2, $,/("T G I/-6T $7,DIT 4/ T&, 54%%4=I/3 )*-,$I5I$"%%Y DI*"%%4=,D+ %ight diesel oil! high speed diesel oil and motor spirit! commonly $nown as petrol. Inputs destroyed efore use 1 pilfered from store room "ir2 Conditioners! refrigerating e&uipments and computers would not e eligi le to C#<="T credit as capital goods if it is used in the offices "nything which is not used in the factory of the manufacturer will not e eligi le for the C#<="T credit The inputs used for construction and foundation of the machinery are not &ualify for input credit. Similarly material used for maintaining factory uilding are not DinputsC (#xcept in case of Storage tan$ as it is specifically included in the capital goods) 6) The foundation made of cement! eing immova le property is not Dcapital goodsC4 and ;) Cement was not used directly or indirectly in the manufacture of the final product Inputs used in generation of the electricity! which is consumed y residential colony of the factory wor$ersC families! schools! etc will not e eligi le for the C#<="T credit 'aterial used for repair do not &ualify as DinputsC ecause repairs of final product or of the final goods does not amount to manufacturer If the truc$ is purchased for delivery of the finished product then the excise duty paid on such truc$ will not e allowed as C#<="T credit The C#<="T credit shall not e allowed on such &uantity of inputs1 input service that are used in the manufacture of exempted goods 1 exempted services $7,DIT 4/ #"*I* 45 *-,$I5I,D D4$6M,/T* Invoice of manufacturer from factory Invoice of manufacturer from his depot or premises of consignment agent Invoice issued y registered importer

Invoice issued y importer from his premises or consignment registered with Central #xcise Invoice issued y registered first stage or second stage dealer Supplementary Invoice ,ill of #ntry

Certificate issued y an appraiser of customs in respect of goods imported through foreign post office Challan of payment of tax where service tax is paya le y other than input service provider

Invoice! ill or Challan issued y provider of input service on or after 602 72;008 M,"/I/3 45 $,/("T $7,DIT It means aggregation of following duties and taxes: 2 ,asic excise duty on indigenous inputs. Special excise duty.

"dditional Customs )uty paid u1s >(/) of Customs Tariff "ct w.e.f. 62>2 ;00/. This credit will not e availa le to service providers "dditional #xcise )uty paid under "dditional )uties of #xcise (Goods of Special Importance) "ct P"#)(GSI)Q. #ducation cess on manufactured excisa le goods. This credit can e utilised only for payment of education cess on final product or output services. <ational Calamity Contingent )uty (<CC)) levia le under section 6>E of 9inance "ct! ;006 and corresponding C=) paid on imported goods. This credit can e used for payment of <C) on outputs only and not for any other duty. Service tax on input services.

#ducation cess paid on service tax. This credit can e utilised only for payment of education cess on final product or output services. If all the a ove duties F cesses paid in case of imported inputs F capital goods ! corresponding C=) paid is also eligi le for C#<="T credit.

Illustration 6 : 2 "mount of the C#<="T Credit admissi le ,ased on the following information! determine the C#<="T Credit availa le for use in the current year under C#<="T Credit -ules! ;008. 3oods (ollution Control #&uipments Spares for pollution Control #&uipments #&uipments used in office Storage Tan$ (aints used for painting machinery used (ac$aging 'aterial %u ricating oils 3igh Speed )iesel oil ,xcise Duty paid at the time of purchases of the 'oods )7s.+ ;/!000 /!000 6;!000 60!000 E!000 8!000 .!000 K!000

*o utions: 7easons for admissibi ity G in admissibi ity It is capital goods G /0 N credit in current year. It is capital goods G /0 N credit in current year.

3oods (ollution Control #&uipments Spares for pollution Control #&uipments

"mount )7s.+ 6;!/00 ;!/00

#&uipments used in office Storage Tan$ (aints used for painting machinery used (ac$aging 'aterial %u ricating oils 3igh Speed )iesel oil Tota $,/("T $redit "vai ab e

<I% /!000 E!000 8!000 .!000 <il 9HFAAA

Specifically #xcluded from capital goods. It is capital goods G /0 N credit in current year. It is inputs! 3ence! credit fully admissi le. It is inputs! 3ence! credit fully admissi le. It is inputs! 3ence! credit fully admissi le. Specifically excluded from input.

I ustration <: D "n "ssessee purchased inputs weighing 6!000 Sgs! The duty paid on inputs was -s. 60!000 during transit! and /00 Sg. inputs were destroyed. *o ution: D 3ere! /00 Sg goods were destroyed in transit and thus! they could not e used in or in relation to manufacture of excisa le goods. Thus! the destroyed &uantity of inputs doesnCt &ualify to e DinputsC within meaning of C#<="T Credit rules! ;008. Therefore! the C#<="T Credit admissi le to the assessee will e -s. /!000 (60!000 U/00 Sg 16000 Sg) in respect of the goods received y the assessee and used in or in relation to manufacture or production of excisa le goods ?Wo wor$ means processing or wor$ing on raw materials or semi finished goods supplied to Ao wor$er. So as to complete a part or whole of the process resulting in to manufacture or finishing of an article or any operation4 which is essential for the aforesaid process? %arge industries always get some processing done from outside on Ao wor$ asis. This is called DAo wor$C or su contractingC in engineering industry and DprocessingC in chemical or textile industry 9ollowing are the provision regarding the Ao wor$ under Central #xcise "ct: 2 Jhen Ao wor$ers contri ute his own raw material to articles supplied y customers and manufactures different goods! it does not amount to Ao wor$ ,ut! addition of minor items y Ao wor$er should not distract it eing Ao wor$ If an item is only repaired of reconciled! no duty lia ility arises as no new product emerges If goods are manufactured during Ao wor$! excise lia ility will arise! as duty is on manufacture and who has supplied the raw material is immaterial

The Ao wor$er! who is engaged in manufacturing of readymade garments on Ao wor$ asis! is exempt from duty. #xemption has een made in this case

Goods cleared from factory are cleared under an invoice. )uty is paya le on monthly asis y /th of the next month in which duty payment ecomes due! i.e.! the month in which goods are cleared from the factory. )uty is paid through current account called (%" and 1or Central =alue "dded Tax Credit! i.e.! C#<="T Credit. Small Scale Industry (SSI) is re&uired to pay the duty y 6/th of the next month. 3owever! the duty for the month of 'arch is paid y >6st 'arch itself not on /th of next month i.e.! /th of "pril ecause government accounts closes on >6st 'arch. If the due date is Sunday or holiday! the duty can e paid on next wor$ing day. If duty is not paid then assessee is lia le to pay the interest also on outstanding amount. If duty and interest is not paid for >0 days after due date! then the facility to pay duty on monthly asis will e withdrawn till the time interest and duty is paid or ; months! whichever later. Thus! the facility of monthly payment of excise duty is withdrawn at least for ; months. )uring this period duty will e paid on removal asis. )uty is paid y assessee through current account $nown as -%" )-ersona %ed'er "ccount+. The (%" is credited when duty is paid i.e.! deposited in the an$ y filling a Challan called T-2E on monthly asis. Only excise duty paid comes in (%" the items li$e fine! penalty! interest does not appear in (%". " (%" contains:

1. Serial num er and date 2. )etails of G.".-.2K Challan num er 3. ,alance duty etc.
The (%" is maintained in triplicate using oth sided car on. "CCOH<TI<G #<T-I#S I< C"S# O9 '"<H9"CTH-#- 2 CH' G S#-=IC# (-O=I)O "ccounting groups and accounting heads

The accounting groups and accounting heads are discussed hereunder: )I+ 3746-* 45 "$$46/T* *r. /o. *ides of "ccount -articu ars Sales 7emarEs "ll the sales which is covered under C#<="T to e oo$ed under this group. <et effect of all excise account will e transferred to excise expenses account which will e created under this group F other any other expenses head can e created under this group. "ll heads concerning to excise should e created under this head.

(a) Income side

( )

#xpenses side

#xpenses

(c)

%ia ilities )uties of Taxes side

(d) "sset side (e) 9ixed "sset

Current "ssets! C#<="T Credit which is availa le for %oans and utili5ation in the next year will e oo$ed "dvances under this group. 9ixed "sset "sset purchased has to e recorded under this group.

)II+ "$$46/TI/3 &,"D* *r. /o. "ccountin' &eads 6nder 3roup Sales )uties F Taxes )uties F Taxes )uties F Taxes (urchases )uties F Taxes )uties F Taxes )uties F Taxes 9ixed "ssets )uties F Taxes Current "ssets! %oans F "dvances )uties F Taxes "t the time of goods are entered F received in premises "t the time of remova le of the excisa le goods from the premises 7emarEs

(a) Sales of #xcisa le goods C#<="T paya le C#<="T paya le 2 #C C#<="T paya le 2 S3#C ( ) #xcisa le (urchases G Inputs C#<="T -eceiva le (Inputs ) C#<="T -eceiva le (Inputs ) 2 #C C#<="T -eceiva le (Inputs ) 2 S3#C (c) #xcisa le (urchases G Capital Goods C#<="T -eceiva le (Capital Goods)0K20. C#<="T -eceiva le (Capital Goods)0.207 C#<="T -eceiva le (Capital Goods) G #C 0K2 0. C#<="T -eceiva le (Capital Goods) G #C 0.2 07 C#<="T -eceiva le (Capital Goods) G S3#C 0K20. C#<="T -eceiva le (Capital Goods) 2 S3#C 0.207 (d) Sales of Services Chargea le To ST

"t the time of Capital Goods are entered F received in premises (-espective "sset head need to e given Current instead of this account #.g. "ssets! %oans 'achinery.) F "dvances )uties F Taxes receiva le Current "ssets! %oans F "dvances C#<="T Sales Jhen ill of service is raised

C#<="T (aya le (Output Services) C#<="T (aya le (Output Services) G #C C#<="T (aya le (Output Services) G S3#C (e) C#<="T (aya le (Output Services) G )ue C#<="T (aya le (Output Services) G #C G )ue C#<="T (aya le (Output Services) G S3#C G )ue (f) Service Taxa le #xpenses

)uties F Taxes )uties F Taxes )uties F Taxes )uties F Taxes )uties F Taxes )uties F Taxes #xpenses Jhen payment is received from customer on customer.

C#<="T -eceiva le (Input )uties F Taxes Services)

Jhen service taxa le ill is C#<="T -eceiva le (Input )uties F Taxes received from vendor. Services) G #C C#<="T -eceiva le (Input )uties F Taxes Services) G S3#C (g) C#<="T -eceiva le (Input )uties F Taxes Services) G )ue C#<="T -eceiva le (Input Jhen payment is done to )uties F Taxes Services) G #C G )ue vendor C#<="T -eceiva le (Input )uties F Taxes Services)GS3#C G )ue (h) #xcise )uty #xpenses Other accounting heads to e opened as normally (i) opened in oo$s of account. #xpenses <et #ffect of the all excise accounting transferred to this account.

)II+ "$$46/TI/3 ,/T7I,* /4= "$$46/TI/3 ,/T7I,* "7, T4 #, -"**,D I/ 54%%4=I/3 M"//,7: Je will see the accounting entries of the following Illustration: 2 +OI %td. 9urnishes you the following details for the period ending "pril ;00K (lant F 'achinery purchased on 061081;00K (inclusive of excise duty R 68.8;N) from (M- %td. Of -s. 66!88!;0012 -aw material purchased on 061081;00K (inclusive of excise duty R68.8; N) of -s. ;.!E0!/0012

Input Services availed of during the month (Taxa le value) G amount fully paid for (-ate R6;.>EN) -s. 6!00!00012

9inished goods cleared on >01081;00K("ssessa le =alue) (-ate R 68.8;N) of -s. 80!00!00012 Solution with relevant documentation: 2 Invoice Showing (urchase of 9ixed "sset

"ccountin' ,ntry 5or the invoice of 5ixed "sset *r. /o. 6. ;. >. 8. /. E. K. "ccountin' &eads #xcisa le (urchases G Capital Goods 1 (lant and 'achinery "1c )r. C#<="T -eceiva le (Capital Goods) 0K20. )r. C#<="T -eceiva le (Capital Goods)G #C 0K20. )r. C#<="T -eceiva le (Capital Goods)G S3#C 0K20. )r. C#<="T -eceiva le (Capital Goods) 0.207 )r. C#<="T -eceiva le (Capital Goods)G #C 0.207 )r. C#<="T -eceiva le (Capital Goods)G S3#C 0.207 )r. Debit "mount 600.00 K.00 0.68 0.0K K.00 0.68 0.0K 668.8; ,ased On the a ove proportion following entry can e passed. "s capital Goods half credit can e utilised in this year F half credit will e carried forward as it will e availa le in next year. $redit "mount 7emarEs

.. (M- %td. Cr. #xcisa le (urchases G Capital Goods 1 60!00!000 (lant and 'achinery "1c )r. C#<="T -eceiva le (Capital Goods) 0K20. )r. C#<="T -eceiva le (Capital Goods)G #C 0K20. )r. C#<="T -eceiva le (Capital Goods)G S3#C 0K20. )r. C#<="T -eceiva le (Capital Goods) 0.207 )r. K0!000 6!800 K00 K0!000 6!800

7. 60. 66. 6;. 6>.

68. C#<="T -eceiva le (Capital Goods)G #C 0.207 )r.

6/.

C#<="T -eceiva le (Capital Goods)G S3#C 0.207 )r.

K00 6688;00

6E. +OI %td. (Sundry Creditor) Cr.

73<9$ -artDI is re'ister of capita 'oods The from -G ;>C G (art G I is re&uired to e maintained for the purpose recording the )uty credit ta$en on Capital Inputs and su se&uently the credits can e set off against the )uty paya le y the manufacturer. 73<9$ -artDII is re'ister of cenvat credit on capita 'oods. -G;>C (art2II is the register maintained to record Cenvat credit on all Capital Goods and duty from cenvat credit account is de ited. Invoice *howin' -urchase of 7aw Materia

"ccountin' ,ntry 5or the invoice of raw materia purchases *r. /o. "ccountin' &eads Debit "mount 600.00 68.00 0.;. 0.68 668.8; ;/!00!000 >!/0!000 K!000 >!/00 ;.!E0!/00 $redit "mount 7emarEs

6 #xcisa le (urchases G Inputs )r. ; C#<="T -eceiva le (Input) )r. > C#<="T -eceiva le (Input) 2 #C )r. 8 C#<="T -eceiva le (Input)GS3#C )r. / Supplier "1c (Sundry Creditor) Cr. E #xcisa le (urchases Inputs )r. K C#<="T -eceiva le (Input) )r. . C#<="T -eceiva le (Input)G#C )r. 7 C#<="T -eceiva le (Input)GS3#C )r. 60 Supplier "1c (Sundry Creditor) Cr.

"n account in form of 73 <9" D -art I : D This is a record of inputs The from -G ;>" G (art G I is re&uired to e maintained for the purpose recording the )uty credit ta$en on 'aterial Inputs used in manufacturing process and su se&uently the credits can e set off against the )uty paya le y the manufacturer.

"n account in form of 73 <9" D -art II : D This is a record of $,/("T credit on inputs -G;>" (art2II is the register for Cenvat Credit. Cenvat credit on all raw material is ta$en in part 2 II and duty from cenvat credit account is de ited. Invoice *howin' -urchase of *ervices

"ccountin' ,ntry 5or the invoice of purchases of services. *r. /o. "ccountin' &eads Debit "mount 600.00 6;.00 0.;8 0.6; 66;.>E $redit "mount 7emarEs

6. Service Taxa le #xpenses )r. ;. >. 8. /. C#<="T -eceiva le (Input Services) )r. C#<="T -eceiva le (Input Services) G #C )r. C#<="T -eceiva le (Input Services) G S3#C )r. Input Service (rovider (Sundry Creditor) Cr.

E. Service Taxa le #xpenses )r. K. C#<="T -eceiva le (Input Services) )r.

6!00!000 6;!000 ;800

.. C#<="T -eceiva le (Input Services) G

#C )r. 7. 60. C#<="T -eceiva le (Input Services) G S3#C )r. Input Service (rovider (Sundry Creditor) Cr. 6;00 66;>E0

*a es Invoice rose on account of sa es of finished 'oods.

"ccountin' entry for sa es *r. /o. "ccountin' &eads Debit "mount 668.8; $redit "mount 7emarEs

6. Sundry )e tors (Sundry )e tor) )r. ;. Sales of #xcisa le Goods Cr. >. C#<="T (aya le Cr. 8. C#<="T (aya le G #C Cr. /. C#<="T (aya le G S3#C Cr. E. Sundry )e tors (Sundry )e tor) )r. K. Sales of #xcisa le Goods Cr. .. C#<="T (aya le Cr. 7. C#<="T (aya le G #C Cr. 60. C#<="T (aya le G S3#C Cr.

1BB.BB 14.BB B.2<

0.68 8/!KE!.00

4B,BB,BBB 5,HB,BBB 11,2BB

/!E00

Dai y *tocE "ccount )D.*.".+ #very assessee re&uires maintain records of stoc$ on daily asis $nown as D)aily Stoc$ "ccountC. It was earlier $nown as -G G 6 -egister. The )S" is to e $ept in the factory and should e preserved for period of / years immediately after the financial year to which it pertains. The assessee shall duly authenticate the first F last page of such accounts 1 records. "dKustment G *et off ,ntries ". Towards $,/("T $redit )#asic+ 6. C#<="T (aya le )r. ;. C#<="T -eceiva le (Capital Goods) 0K20. Cr. 8!>;!000

IB,BBB

>. C#<="T -eceiva le (Inputs ) Cr. 8. C#<="T -eceiva le (Input Services) Cr.

3,5B,BBB 12,BBB

#. Towards ,ducation $ess 6. C#<="T (aya le #C )r. ;. C#<="T -eceiva le (Capital Goods)2 #C 0K20. Cr. C#<="T -eceiva le (Input Services)2 #C Cr. .!E80

1,4BB I,BBB 24B

>. C#<="T -eceiva le (Inputs )2#C Cr. 8.

$. Towards *econdary 1 &i'her *econdary ,ducation $ess 6. C#<="T (aya le S3#C )r. ;. C#<="T -eceiva le (Capital Goods)2 #S3C 0K20. Cr. C#<="T -eceiva le (Input Services)2 S3#C Cr. 8!>;0

IBB 3,5BB 12B

>. C#<="T -eceiva le (Inputs )2S3#C Cr. 8.

"ccount $urrent G -ersona %ed'er "ccount The account current! also called (%" i.e. personal ledger account! is an account current with the central government! which is utili5ed for payment of duties of excise. The account current is credited when the sum is deposited into the treasury and de ited on payment of the excise duty. #ach credit and de it entry should e made on separate lines and assigned a running serial num er for the financial year. The (%" must e prepared in triplicate y writing with indeli le pencil and using dou le sided car on. Original and duplicate copies of (%" should e detached y the manufacturer and sent to the central excise officer along with monthly 1 &uarterly periodical return in form #.-. 26 1 #.-.2> -ayment of fina amount Due 6. C#<="T (aya le )r. ;. C#<="T (aya le #C )r. >. C#<="T (aya le S3#C )r. 8. ,an$ "ccount Cr. 6!;.!000

2,5HB 1,2<B 1,31,<4B

-erforma of -ayment $ha an in form /o 3.".7. L B

,xtract of the profit 1 %oss and #a ance sheet after passin' the above mention entries )except 5ina payment ,ntry throu'h 3.".7. D B+ *I/,="(, $4M-6T,7 *,7(I$,* -(T. %TD.)scsp + -rofit 1 %oss account for the period of ;st "pri <AAB to 9Ath "pri <AAB

-articu ars "mount)7s.+ "mount)7s.+ -articu ars "mount)7s.+ "mount)7s.+ -urchase "ccounts #xcise (urchase Inputs Direct expenses Service Taxa le #xpenses 3ross profit cGo 6!00!000 ;MFAAFAAA MAFAAFAAA 3ross profit bGf /et -rofit Tota ;MFAAFAAA ;MFAAFAAATota ;MFAAFAAA.AA MAFAAFAAA.AA ;MFAAFAAA.AA ;/!00!000 ;FAAFAAA <@FAAFAAA *a es "ccounts Sales of #xcisa le goods 80!00!000 MAFAAFAAA.AA

*I/,="(, $4M-6T,7 *,7(I$,* -(T. %TD.)scsp + #a ance *heet as on 9Ath "pri <AAB %iabi ities "mount)7s.+ "mount)7s.+ "ssets $apita "ccounts %oans )%iabi ity+ $urrent %iabi ities )uties F Taxes (see <ote ;) Sundry creditors -rofit 1 %oss "Gc 6>6.80.00 >66K0E0.00 5ixed "ssets $urrent "ssets Closing 9<MHCAA.AA stoc$ %oans F advances ("sset) Sundry )e tors ;MAAAAA.AA (See <ote 6) K;600.00 8/KE.00.00 M:MHCAA.AA "mount)7s.+ "mount)7s.+

Opening ,alance Current (eriod Tota

0 6800000

M:MHCAA.AATota

M:MHCAA.AA

<ote 6 : Closing stoc$ valuation has to e done F re&uired to e shown in the oo$s same adAustment entry not passed in this relevant extract <ote ; : The payment entry against final lia ility of excise is not yet passed as it is re&uired to show where the amount due against the excise lia ility appears in the alance sheet. #very "ssessee shall su mit to the superintendent of central excise a monthly return of production! removal of the goods and other relevant particulars in #.-. G 6 form within 60 days after the close of the month to which it relates. It is to e filed in duplicates The return shall e accompanied y treasury receipted Challan for deposits of duty! original and duplicate copies of the (%" and extracts of C#<="T register and other documents as re&uired y the commissioner it is to e filed in duplicate #xcise return is su mitted to the excise department with the two copies of (%" and G"-2K Challan. The excise return is prepared in form #-26 and #-2>.