Chapter 8
COMMON TOPICS Important Case Studies
Advance Ruling Settlement Commission Refund Demand & Appeal
Jyoti Enterprises v. CCEx. & ST 2016 (All.) Essence of case: – The order served on a member of the family of the assessee, is a proper service of order. Santosh Handlooms v. Ccus. 2016 (Del.) Essence of case: – In case of seizure of goods under section 110 of the Customs Act, 1962, show cause notice [required to be issued under section 124(a) within six months of seizure] cannot be issued to the customs house agent [now Custom Broker] of the importer instead of Importer himself CCE v. Vijaya Consultants, Engineers and Consultants 2015 (AP) Essence of case: – Service tax cannot be demanded by a speaking order without issuing a show cause notice but after issuing a letter and giving the assessee an opportunity to represent his case along with personal hearing Sanjay Industrial Corporation v. CCE 2015 (318) ELT 15 (SC) Essence of case: – If revenue authorities themselves have doubts about the dutiability of a product, the extended period ( SCN FOR 5 YEAR) of limitation cannot be invoked alleging that assessee has suppressed the facts Jay Balaji Jyoti Steels Limited v. CESTAT Kolkata 2015 (37) STR 673 (Ori.) Essence of case: – The insertion of words “or by speed post with proof of delivery” in section 37C(1)(a) of the Central Excise Act, 1944 is clarificatory and a procedural amendment and hence, would have retrospective effect. Chakiat Agencies v. UOI 2015 (37) STR 712 (Mad.) Essence of case: – if appeal had been preferred in time, but reached different wing of the same building will not be treated as time barred. Commissioner of Service Tax v. Associated Hotels Ltd. 2015 (37) STR 723 (Guj.) Essence of case: – the Commissioner (Appeals) can remand back a case to the adjudicating authority under section 85 of the Finance Act, 1994 Parimal Ray v. CCus. 2015 (318) ELT 379 (Cal.) Essence of case: – limitation period of one year not applicable for claiming the refund of amount paid on account of wrong classification of the imported goods. CCE v. Honda Siel Power Products Ltd. 2015 (323) E.L.T. 644 (S.C.) Essence of case: – Assessee is required to fulfil the condition in strict sense. The benefit of exemption notification shall not be granted to assessee where one of the conditions to avail the exemption is not strictly followed.
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ADVANCE RULINGS Topic Advance Ruling
Points to Remember 1. Advance Ruling means pronouncement / determination of question of law of fact, regarding the liability to pay duty / tax in relation to any proposed "activity" of an "Applicant". 2. Activity :
Central Excise 1.Production or manufacture Customs
of goods. 1. Import or Export
Service Tax
Regarding liability to pay ST
2. New business of manufacture proposed to be undertaken by existing manufacturer 2. New business of import or export proposed to be undertaken existing importer or exporter
3. Applicant : (a) A Non-Resident setting up a Joint Venture with a Non-Resident or A resident in India. (b) A Resident setting up a Joint Venture with a Non-Resident in india. (c) A wholly owned subsidiary Indian Company of a Foreign Company. (d) A Joint Venture in India. (e) Residents notified by the Central Government
Resident notified by C.G. 1) Public Sector Company 2) Public Limited Company 3) Private Limited Company 4) LLP 5) Partnership Firm 6) Sole Proprietorship 7) One person Company
Powers of AAR
Excise and Customs 1. 2. 3. 4.
Classification of goods and Valuation Applicability of an Exemption Notification Admissibility of CENVAT Credit. Determination of the liability to excise duty. 5. Determination of origin of goods in terms of the rules notified under Customs Tariff Act, 1975 and matters relating thereto. 1. 2. 3. 4. 5.
Procedure for applying to AAR EXCISE REVISION
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1. 2.
Service Tax 1. 2. 3. 4. 5.
or Tribunal in applicants case or any other case
Note : Rejection by AAR is after opportunity of being heard.
Procedure to be adopted by AAR
1. AAR to forward a copy of the application to the Commissioner 2. After examining the application & records, the application may be either allowed or rejected. 3. If the application is allowed, AAR shall examine such further material placed before it or obtained by it, and it shall pronounce its Advance Ruling on the question specified in the application. 4. The Advance Ruling shall be pronounced in writing within90 days from the receipt of application. 5. Copy of the Order / Advance Ruling shall be sent to the Applicant and the Commissioner.
Binding nature of Order
1. 2. 3. 4.
Comment : In Custom & Service Tax Same Applicants Additional Case in Customs Importer proposing to import claiming for assessment under project import
Issues where Advance Ruling can be sought
Rejection of 1. Issue pending with CEO, Appellate Tribunal or any Court. Application 2. Question raised is same as already decided by a Court
Void Rulings
Classification of any service as Taxable Service. Valuation of Taxable Service Principles for determination of value of Taxable Services. Applicability of Notifications. Admissibility of credit of Service Tax paid.
The Advance Ruling shall be binding on the Applicant for the specified matters or theCommissioner and the authorities of the Central Excise subordinate to him with reference to the Applicant. It cannot be treated as a precedent and applied to other cases. It only has a persuasive value. Advance Ruling shall be valid for a period from the date of such Ruling to date of order declaring the ruling void. If there is a change in law or fact, the Advance Ruling will not bind the Applicant and Department.
1. If it is found, either on Commissioner's representation or otherwise, that the ruling has been obtained by Fraud, or Misrepresentation of facts. 2. Consequence : The Act shall apply to the Applicant, as if such Advance Ruling was not made. 3. Not Void : Advance Ruling or any part of its proceedings before the AAR would not be considered invalid on the ground that the AAR was not properly constituted.
To exercise to powers of a Civil Court and to regulate its own procedure To hear and determine all applications and petitions. Pass appropriate orders and Re-open the hearing of any case for sufficient cause, before pronouncement of its Order / Advance Ruling. Give directions for examination of any records and submission of report and conduction of any technical, scientific or market enquiry of any goods or services. Modify and amend the Advance Ruling Application : Form AAR (CE) / AAR (CUS) / AAR (ST) in 4 copies, which can be withdrawn within 30 days from the date of application. Signatory : Application and other relevant documents should be signed by the Applicant.
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SETTLEMENT COMMISSION Topic Case Meaning
Points to Remember 1)
Any proceeding under the act or any other act for the levy, assessment and collection of excise / Customs Duty/Service Tax Pending before a Adjudication authority.
2)
If case is referred back In any appeal, revision or otherwise by court, AT or other authority then it shall be not treated on pending case before Adjudication Authorities.)
When is order void
Ü When it is found out that, order has been obtained by fraud / misrepresentation. Ü Effect of void order : (i) Proceedings revived from application allowed stage, and (iii) Time limit for completion of proceedings 2 years from date of receipt of communication of voidness of order.
Powers
Ü Provisional Attachment, Ü All the powers of CEO/Customs officers, Ü Powers to regulate its own procedure, Furnish copies of any report, Ü Grant immunity from prosecution and penalty and Ü Refer back case to the adjudication authority for non co operation
Note : CESTAT, CBEC, Commissioner (Appeals) are not Adjudication Authorities.)
When application
Ü Case is pending before Adjudication Authority on date of application.
Comment : Proceeding is said to be concluded by AA on the date when demand order is passed by him and not the date when DO received by assessee. Hence if application for settlement cannot be entertained between 22 -01-2016 to 28-01-2016.
S Comm
û Assessee
SCN
ü Case pending before AA
û
DO DO passed on ü dated 22-01-16
Assessee
DO received on dated 28-01-16
Application cannot be made Specified Conditions
Ü Cases pending before Appellate Tribunal or Court. Ü Cases of interpretation of classification of goods. Ü Specified Goods under Customs Act. (Goods u/s 123 e.g. gold watches etc. and any goods for which offence is done under narcotics drugs act. Excise / S.T. 1) Return is filed by the applicant. 2) If return is not given then application will be accepted subject to reasonable cause.
Amount of Settlement should not be > duty liability admitted by applicant. Ü Within 9 months from the last date of the month on which application is made. Ü The Time period can be extended for further 3 Months by the Settlement Commission.
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YES NO NO
Restriction 1) Order pass before F.A.2007 for penalty on the applicant on the ground of on next time concealment of duty application 2) Person convicted any offence in relation to case settle by settlement for commission . settlement 3) Case is sent back to excise officer for non co operation
Course of events before Settlement Commission Application received 7 by Settlement days Commission
Notice to Applicant
14 days
Receipt Settlement Report by 30 15 Commissioner's days Commissioner days Communication
Ü Amount payable should be paid within 30 days from date of receipt of order. Ü Recovery of such sums along with interest as per CEA S.11, CUA S.142 Ü Order is conclusive and shall not be reopened under any law. Ü Order is binding only to the person to whom it is issued and it is not a judicial precedent. Ü Order can be challenge in Writ before High Court.
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Customs The applicant has filed a Ü Bill of entry, or A shipping bill or bill of export or Ü Made a baggage declaration, or Ü A label or declaration in case of Post.
Other Conditions : Ü SCN to be received by applicant (Excise/S.T.)/ issued to the applicant (Customs) Ü Additional Amount of duty payable > ` 3 lakhs Ü Additional duty should be paid with interest u/s 11AB (Excise/S.T.) 28AB (Customs)
Final Order Time for order
Power to 1) Penalty and Fine grant 2) Prosecution immunity by Under Central Excise Act settlement Under Indian Penal Code commission 2) Interest
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Order for rejecting / 7 allowing the days application
Call for Additional Report from Commissioner (Investigation )
90 days
Call for Report from Commissioner
Additional Report by Commissioner (Investigation)
Final Order by Settlement Commission
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REFUND Application for Refund
RELEVANT DATE [CA: N-97]
Ü Prescribed from (R) + Suitable documentary evidences eg. Invoice, PLA Statement, Evidence of Payment etc. Ü Application to be made to AC/DC Ü Refund includes Rebate on Exports and it is granted by AC/DC Ü Where excess duty is refunded, pro-rata interest (if paid) should also be refunded.
ÜTime limit for application of refund is 1 year from relevant date (Ref. Chart below) Time limit for application Ü Duty paid under protest - No time limit Ü No Time Limit for Refund of Wrongly encashed Bank Guarantee / Pre-deposit.
Unjust Enrichment
Consumer Welfare Fund
Ü Sometimes when duty is passed on to Buyer, it is not practically possible to identify individual customers and pay refund to them. Such refund is transferred to Consumer Welfare fund. Ü Fund set up by the CG and utilized by CG for the welfare of the consumers. Ü C shall maintain a seperate set of records in relation to the fund. Ü Every person liable to pay duty is presumed to have passed on the duty to the buyer of such goods. The contrary should be provided by the assessee.
Refund to Claimant
Ü
Interest on Refund
Ü Refund not made within 3 months from the date of receipt of application for refund, interest shall be paid to the Applicant from the date of expiry of 3 months. Ü Interest is payable at the rate of 6% p.a. by the CG.
Claimant has to prove with documentary evidence that he has not passed on the incidence of duty to buyer.
Unjust Excise Enrichment is 1) Rebate of duty of excise not applicable or refund direct available 2) PLA unspent balance 3) Refund of CENVAT Credit under Rule 5. 4) Duty burden not passed on by manufacturer. 5) Duty borne by buyer 6) Notified person by C.G. 7) Duty paid as pre-deposit 8) Refund of Penalty
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Custom 1) Duty and interest paid by importer or exporter and burden not passed on. 2) Imports made by an individual for his personal use. 3) Duty and interest borne by the buyer. 4) Export Duty 5) Drawback of duty U/S 74 or 75 6) Notified person by C.G.
If duty provisionally assessed under Rule 7 of Central Excise Rule
In normal case
If assessee is manufacturer
If assessee is buyer of goods
Relevant date is date of payment of duty
Relevant date is date of purchase of goods
Ü No person shall be allowed to enrich himself at the expense or cost of another. Ü It implies that the benefit of refund shall be allowed to the person who ultimately bears the burden of tax. Ü If such person is not identified then amount is transferable to consumer welfare fund
Presumptions
EXCISE REVISION
RELEVANT DATE FOR REFUND UNDER SERVICE TAX / EXCISE
If goods are exported
Relevant date is date of final assessment
Goods are exported by vessel or aircraft
If goods are exported by land route
If goods is exported by post
Relevant date is date on which vessel or aircraft leaves India
Relevant date is date on which goods passes customs frontiers
Relevant date is date on which goods are dispatched by postal authority
RELEVANT DATE FOR REFUND UNDER CUSTOMS Normally, the relevant date is date of payment of customs duty & interest if any, but if
Duty is provisionally assessed u/s 180 of Customs Act. Relevant date is date of final assessment
If duty is paid by buyer
Relevant date is date of purchase of goods
PAYMENT OF DUTY UNDER PROTEST Meaning: In taxation matters where a demand is raised by department, but assessee is unwilling to pay the same on legal grounds or otherwise. However, the litigation process in law is a time consuming and there is no assured guarantee of matter coming to an end within fixed time frame. So many assessees have to decide to pay duty demanded, but UNDER PROTEST and may or may not pass the duty burden to the customers and continue to fight the case with the department Benefit: 1. The major relaxation of payment of duty under protest is that time limit for filing the refund claim is not applicable and assessee can avoid interest and penalty on late payment. 2. If the case is decided in favour of assessee, the duty paid under protest can be obtained as refund subject to not having passed on the same to the buyers [doctrine of unjust enrichment is applicable
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SL - Short Levy NL - Non Levy SP - Short Payment NP- Non Payment ER - Erroneous Refund
APPLICABILITY OF SEC 28, 28AA & 114A OF CUSTOMS ACT
DEMAND AND SHOW CAUSE NOTICE
Sec11A(1) If SL/ NL/ SP/ NP/ ER by reason of fraud
Sec11A(1) If SL/NL/SP/NP/ER other than by reason fraud... Amendment
1) SCN shall be served within 2 year (30 months in Service Tax from relevant date.) 2) SCN shall not be served if valuntary payment is done before SCN. 3) D.O. Shall be determined within 6 month from SCN [If SCN is served to assessee] 4) nterest is payable @ 15% p.a [Sec. 11 AA] 5) Penalty (Sec 11AC) = 10% duty evaded or ` 5,000 wihichever is higher. Amendment a) If duty and interest is paid Ü before issue of SCN or Ü within 30 days from Issue of show cause notice No penalty is payable b) If duty & interest is paid within 30 days of communication of D.O. - Penalty payable is 25% of the penalty imposed (i.e. 10% of duty)
1) SCN shall be served within 5 years from relevant date. 2) D.O. Shall be determined within 1 year from SCN 3) Interest is payable @ 15% p.a [Sec. 11 AA] 4) Penalty (Sec 11AC) = 100% of duty or Interest a) If duty and interest is paid Amendment Ü within 30 days from Issue of show cause notice Penalty payable is 15% of duty demanded b) If duty & interest is paid within 30 days of communication of D.O. - Penalty payable is 25% of duty demanded. MEANING OF RELEVANT DATE 1) Relevant date under Central Excise/Service Tax Situations Amendment
Important Point to be Remember Requirements as to SCN
Types of service of SCN Effect of voluntary payment of Duty
1. Excisable goods on which excise duty SL/ NL/ SP/ NP return has been filed after due date. 2. Where no periodical return as aforesaid is filed. 3. If no return is required to be filed 4. Duty is provisionally assessed 5. Erroneously refund of duty, Amendment 6. Where only interest is to be recovered
Ü No demand without SCN. Ü The grounds should be mentioned. Ü Mention nature of contravention .
Ü Penalty must be mentioned. Ü it must be served. Ü SCN required even for
Ü Serving in person Ü Affixing a copy in conspicuous place at place of business / residence.
ÜSending via Register Post or Courier ÜAffixing a copy thereof on the Notice Board of the Authority (only in customs).
l Inform the Officer in writing. l SCN will not be served, except for short payment. The time limit for such SCN IS from the date of receipt of such information of payment.
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If SL/ NL/ ER by reason of collusion SL/NL/ER/ other than collusion Amendment 1) SCN – Sec. 28(4) 1) SCN – Sec. 28(1) 2) Period of SCN within 5 years from relevant date 2) Period of SCN within 2 year from relevant date If duty interest & penalty is paid If duty, interest & penalty is not 3) Demand order u/s 28(8) within 6 within 30 days from the date of paid within 30 days of SCN months from SCN notice 4) Interest u/s 28AA 15% p.a. 5) Voluntary payment allowed. 1) Demand order u/s 6) No penalty is payable 28(8) within one year U/s 28(5) penalty from SCN. payable = 15% of 2) Interest u/s 28AA – duty Relevant date under Customs 15% p.a. Comment: If proper Relevant Date Situations officer is of opinion 3) Penalty u/s 114A – 100% duty or interest 1. Where the duty is not levied Date on which the proper officer makes that duty interest & Comment: If importer or an order for the clearance of goods. or interest is not charged. reduce penalty has The date of adjustment of duty been paid in full, then exporter pays duty, 2. Duty of customs is provisionally assessed. p r o c e e d i n g i n interest and penalty after the final assessment thereof; r e s p e c t o f s u c h within 30 days f r o m t h 3. Duty of customs has been The date of such refund person to whom the e d a t e o f communicaerroneously refunded notice is served shall tion of order by proper 4.In any other case Date of payment of duty or interest be deemed to be officer, then penalty is conclusive as to payable equal to 25% of m a t t e r s t a t e d duty or interest (instead of 100%) therein.
Relevant Date
The date on which such return is so filed. The last date on which such return is to be filed under the said rules. The date on which the duty is to be paid under this Act The date of adjustment of duty after the final assessment. The date of such refund date of payment of duty to which such interest relates.
Other Important Sections
=Where excess duty is collected assessee deposit excess duty immediately. Deposition of =Duty is collected for NIL rated / Exempt goods, then such amount whould be immediately paid to CG. Excess Duty Collected (Sec 11D) = If amount not paid then SCN can be issued and demand order will be finalized. = If excess duty collected and not deposited then interest is payable @ 15% P.A. Interest Payment (Sec 11DD) = Starting time limit = Duty - 1st of Month that succeeds due date. = No interest if paid under a Board Instruction, within 45 days + and no right to appeal. a) Adjustment against amounts due to assessee. Modes of b) By sell of goods detained Recovery (Sec 11) c) Prepare certificate and send it to the collector of district for collection of due amount as arrears of Land Revenue. d) Detention of Assets e) Recovery from Successor f) Dues from others who is holding the money or deposit accused person.
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APPEAL Adjudication by officer below the rank of Principle Comm. or Comm Appeal against above order by assessee
Orders to be
APPEAL TO COMM(APPEAL) EXCISE S.T. CUSTOMS Order below the same same
Form
E.A.-1
appealed.
Adjudication by P.Comm./ Comm.
rank of Principle Comm. or Comm
S.T.-4 3 month ( extension 3 months ) from order
C.A.-1
Time Limit for 60 days (extension Filing appeal 30 days)from order
same
Production of Additional Evidence- Allowed subject to following Condition[CA: M-05, – 03] 1) When AA has refused to admit evidence which ought to have been admitted. 2) Where the appellant was not able to produce evidence due to sufficient reasons. 3) When su cient opportunity was not given to produce relevant evidence.
Appeal against the order comm. by assessee C ustom E xcise S ervice T ax A ppellate T ribunal
Appeal against the order comm.(A) by assessee or Dept.
APPEAL TO CESTAT
CASES NOT APPELABLE TO CESTAT
CUSTOMS
EXCISE
Ü Loss of goods in transit from factory to warehouse or from warehouse to warehouse Ü Rebate of duty of excise of goods exported. Ü Goods exported outside India, except Bhutan, without payment of duty Ü Credit of duty allowed to be utilized towards payment of excise duty on final products
Ü Goods imported or exported as baggage. Ü Short landing or not landing goods in customs area. Ü Payment of drawback
Note: in the above said cases where revision application has to be made to the central government RIVISION BY C.G.
FORM Ground Fees Time limit for appl. for Order
E.A.-8 in duplicate accompanied by order of Comm(A) Grounds of revision Rs. 1000 3 months from order of Comm(A)(extention 3 months) the C.G. shall pass the order on its own motion, annul or modify the order of commissioner (appeals).
Time order
No time limit No , only writ petition in HC or SC
Appeal against order EXCISE REVISION
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CESTAT HAVE DISCRITIONARY POWER TO ADMIT THE CASE EXCISE CUSTOM 1) Duty on account other than Tariff 1) Confiscation of goods without rate or valuation is 2,00,000 or less option of redemption fine u/s 125 2) Fine or Penalty 200000 or less 2) Duty on account other than Tariff rate or valuation is 2,00,000 or less 3) Fine or Penalty 200000 or less Explanation : The determination of any question having a relation to the rate of duty shall include the determination of taxability or excisability of goods for the purpose of assessment. CESTAT COMPULSORILY ADMIT THE CASE 1) Duty on account of Tariff rate or valuation (even value of Rs. 1) 2) Duty on account other is more than 200000 3) Fine or Penalty more than 200000
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PROCEDURE FOR APPEAL TO CESTAT IMPORTANT POINTS S.T. EXCISE CUSTOMS Ü Production of additional evidence allowed Ü order of Prin. comm. or Comm same same Orders to be appealed. (Under same circumstances as explane Ü order of comm(A) above for Comm. (A) ) C.A.-3 Form E.A.-3 Ü Time limt of decision —3 years (if possible) 3 months (extension no time Ü Order may be remanded to AA or comm(A) same same Time Limit for Filing appeal time)from order Ü Communication of order to appellant & comm. Memo. Of cross objection E.A.-4 C.A.-4 REVIEW OR AMENDMENT OF ITS ORDER CESTAT cannot review its own order Ü Fees amount of duty, interest and penalty levied Ü CESTAT can amend its order with a view less than or equal to ` 5 lakhs ` 1000 to rectify the mistake apparent from record. ` 5000 between ` 5 lakhs to ` 50 lakhs Ü Sue moto-within 6 months ` 10000 exceeds ` 50 lakhs Ü on the application of Comm. Or Assesseeno time period specified
Monetary limits for filing appeals by the Department before CESTAT and High Courts revised The CBEC has fixed the following menetary limits below which appeals shall not be filed in the Tribunal, High Court and the Supreme Court. S.No. Appellate Forum 1. 2. 3.
CESTAT High Courts Supreme Courts
New Monetary Limit ` 10,00,000/` 15,00,000 ` 25,00,000
Appeal against the order of CESTAT by assessee or Dept.
If order of CESTAT related to Tariff rate or valuation
If order of CESTAT on account of other matter
Direct appeal to S.C. APPEAL TO S.C.
Appeal against the order of H.C. if certfy fit for S.C.
APPEAL TO SUPREME COURT order of CESTAT related to tariff rate & Orders to be value order of H.C. appealed. Time Limit 60 days for Filing appeal filing of application for appeal Ü Appeal should be filed along with its 7 copies. Ü Appeal should state all relevant facts, objections and ground of appeal. Ü An authenticated copy of order appealed against should be attached with the appeal
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APPEAL TO H.C. if question of law is involved
APPEAL TO HIGH COURT Orders to be Order of CESTAT, if appealed. question of law involved Form E.A.-6/C.A.-6 Time Limit for 180 days from order Filing appeal Memo. Of cross E.A.-7/C.A.-7 objection Fees Rs. 200 Procedure after application is filed Ü If the high court is satisfied that substantial question of law is involved, it will formulate the question. Ü It is not necessary to hear the other party when appeal is admitted on a question of law. Ü The high court will deliver the judgment on the substantial question of law either formulated by it or even if not formulated by it, if it is satisfied that the case involves such substantial question of law
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Mandatory Fixed pre-deposit for filing appeal before Comm(A) and CESTAT Stage of Appellate Quantum of pre-deposit appeal Authority First Appeal
Commissioner 7.5% of the duty where (Appeals) only duty or both duty and or CESTAT penalty are in dispute OR 7.5% of the penalty where only penalty is in dispute
Second CESTAT Appeal
10% of the duty where only duty or both duty and penalty are in dispute OR 10% of the penalty where only penalty is in dispute
Comments : 1) Pre-deposit of 7.5%/10% would exclude interest, if any, payable on the duty demanded. 2. 10% of the duty or penalty is to be paid at the time of filing second appeal before CESTAT.
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Excise Duty liability in case of Article of Jwellery (In Simplified Manner) LEVY OF EXCISE DUTY Excise Duty has been imposed on articles of jewellery [excluding silver jewellery, but includes silver jewellery studded with diamonds or other precious stones] w.e.f March 01, 2016. under following options. Option 1: Nominal excise duty of 1% without CENVAT Credit on Capital Goods and Inputs but manufacturers are allowed to take credit of Input Services, which can be utilised for payment of excise duty on jewellery. OR Option 2 : Full Excise Duty @12.5% with CENVAT Credit on Capital Goods and Inputs and Input Services. For Example: If a jeweller purchases inputs of INR 1,00,000/- and excise duty has been paid at the rate of 12.5% which is INR 12,500/- and jewellery has been manufactured and valued at INR 1,20,000/- on the date of clearance from place of manufacture and excise duty has been charged at 12.5% which is INR 15,000/-, then he needs to pay the duty of INR 2,500/- (15,000-12,500) to the credit of the Central Government or he can pay INR 1,200/- [at the rate of one per cent] without availing CENVAT Credit and further he is not required to keep any document for credit. However, if the said input is not purchased from excise dealer or manufacturer, then he has no other option except paying duty at 12.5% i.e. INR 15,000/-. Special Note : However, the duty on manufacture of jewellery would apply not only to new articles but also to those that are made by exchanging or melting old jewellery. When customer gives old gold and wants to make jewellery out of it then the jewellery manufacturer should be treated as jobworker and SSI exemption will be available to customer and not the job-worker. SSI Exemption There is higher threshold exemption for SSI [Small Scale Industries] up to INR 6 Crores in a year [as against normal SSI exemption limit of INR 1.5 Crores] and eligibility limit of INR 12 Crores [as against normal SSI exemption limit of INR 4 Crores]. Thus, a jewellery manufacturer can claim exemption from excise duty on first clearances up to INR 6 Crores, if his aggregate domestic clearances during preceding year were less than INR 12 Crores. Further, CENVAT Credit on Inputs and Capital Goods should not be availed up to INR 6 Crores. To determine eligibility for the SSI exemption for the Financial Year 2016-17, a certificate from a Chartered Accountant, based on books of accounts for FY 2015-16 would suffice. Registration Rule 12AA of the Central Excise Rules, 2002 provides that in case of goods falling under chapter heading 7113, every person [not being an EOU or SEZ unit] who [the principal manufacture] gets jewellery made on job-work basis are required to get registration under the Central Excise and not the job-worker.
A notification issued under Rule 9(2) of the Central Excise Rules, 2002 provides for an optional centralized central excise registration for jewellery manufacturers with centralized billing or accounting system so that jewellery manufacturers do not have to take separate registration for all the units. Registration will be granted within two working days of submission of the online [https://www.aces.gov.in/] registration application without any post registration physical verification of the premises. The time limit for taking Central Excise Registration of an establishment by a jeweller has been extended up to July 01, 2016 vide Circular No. 1026/14/2016-CX dated April 23, 2016. However, the jewellers may pay excise duty for the months of March, April, May along with duty for the month of June 2016. Valuation In this regard, Circular No. 1021/9/2016-CX dated March 21, 2016 inter alia clarifies that payment of excise duty shall be based on first sale invoice value. However, the meaning of the term ‘first sale invoice value’ is still not clear. Neither any suitable amendment has yet been, in this regard. Applying the valuation methods as per the statutory provisions, ‘ Transaction Value’ under Section 4 of the Central Excise Act, 1944 seems to be the most appropriate in case of jewellery. However, there could be other possibilities, where special provisions of valuation may need to be applied depending on the purpose for which it has been removed. Valuation is one of the most crucial aspects for a jewellery manufacturer considering the high value transactions and frequent fluctuation in prices. This ensures that the valuation method used for duty purpose is properly documented with supporting evidences to ensure that the valuation is not questioned by departmental authorities at the time of enquiries, audits or investigation proceedings.
Records Jewellers’ private records or records for State VAT or records for Bureau of Indian Standards [in case of hallmarked jewellery] will be accepted for all Central Excise purposes. Also there is no requirement to file a stock declaration to the Jurisdictional Central Excise Authorities. Return and Payment Option 1 : If payment of Excise Duty @ 1% Form of Return : ER-8, Frequency : Quarterly , Due Date : 10th following month Option 2 : If payment of Excise Duty @ 12.5% Asseessee is SSI Asseessee other than SSI Form of Return : ER-3 Form of Return : ER-1 Frequency : Quarterly Frequency : Monthly Due Date : 10th following month Due Date : 10th following month
This ensures that small artisans or goldsmiths who only manufacture jewellery on job-work basis are not required to register with the Central Excise, pay duty and file returns, as all these obligations will be on the principal manufacturers. EXCISE REVISION
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Chapter 9
CENVAT CREDIT RULES 2004 Important Definition
Conditions for availment of CENVAT Credit CCE v. Haryana Sheet Glass Ltd. 2015 (39) STR 0392 (P&H) Essence of case: – assessee entitled to avail CENVAT credit of service tax paid on outward transportation of goods cleared from factory
Rule 2(a)
Capital Goods
Rule 4(1)
Conditions for credit on inputs
Rule 2(d)
Exempted goods
Rule 4(2)
Conditions for credit on capital goods
Rule 2(e)
Exempted Service
Rule 4(3)
Eligibility of credit if capital goods purchased on lease
Rule 2(h)
Final Product
Rule 4(4)
No credit if deprecation is claimed on capital goods
Rule 2(i,J)
1st Stage dealer
Rule 4(5)
Input/Capital Goods sent to Job worker
Rule 2 (k)
Inputs
Rule 2(l)
Input Service
Rule 4(7)
Conditions for credit on input services
Rule 2(m)
Input service distributor
Rule 2(n)
Job Work
Rule 2(p)
Output Service
Rule 2(s)
Second Stage Dealer
Commr. v/s. Rane TRW Steering Systems Ltd. 2015 (039) STR 13 (Mad.) Essence of case: – Housekeeping and gardening services would fall within the ambit of input services and the assessee is entitled to claim the benefit of CENVAT credit on the same.
Refund of CENVAT Credit Rule 5
Refund of CENVAT credit
Rule 5(B)
Refund of cenvat credit in case of Partial RCM
Non eligibility of CENVAT Credit if final product is exempted Rule 6
Eligibility & Utilization of CENVAT Credit
Other procedure Under CENVAT Credit rules
Eligible duties & taxes for Cenvat Credit
Rule 7
Manner of distribution of credit by ISD
Rule 3(2)
Eligibility of credit if Exemption withdrawn and goods become dutiable
Rule 8
Storage of inputs outside the factory
Rule 9
Documents & Accounts
Rule 3(3)
Eligibility of credit if Exemption withdrawn and services become taxable
Rule 9(A)
Annual Return
Utilization of credit
Rule 10
Transfer of cenvat credit
Rule 10(A)
Transfer of cenvat credit of ACD 3(5)
Payment or Reversal of CENVAT Credit
Rule 11
Transitional provision
Rule 3(5)
Removal of inputs & capital goods as such
Rule 12
Special dispention to certain regions
Rule 3(5A)
Removal of capital goods after use
Rule 12(AAA) Restriction on cenvat credit on certain units
Rule 3(5B)
Value of inputs & capital goods written off
Rule 13
Deemed cenvat credit
Rule 3(5C)
Reversal of credit if duty remitted on final product
Rule 14
Recovery of cenvat credit wrongly taken or utilized
Rule 15
Confiscation & Penalty
CA VISHAL BHATTAD
09850850800
CCEx. & S.T. v. Tamil Nadu Petro Products Ltd. 2015 (Mad.) Essence of case: – In case the assessee pays the service tax that he was not liable to pay, can it claim the CENVAT credit of such service tax.
Ristriction on cenvat credit if final product is exempted
Rule 3(1)
Rule 3(4)
Bansal Classes v. CCE & ST 2015 (039) STR 0967 (Raj.) Essence of case: – the assessee is not eligible for CENVAT credit of the service tax paid on catering, photography and tent services, maintenance and repair of its motor vehicle and travelling expenses. assesse is eligible for CENVAT credit in respect of service tax paid on renting of immovable property service of hiring of examination hall,
www.vsmartacademy.com
Bharti Airtel Ltd. v. CCEx. Pune III 2014 (35) STR 865 (Bom.) Essence of case: – cellular mobile service provider is not entitled to avail CENVAT credit on tower parts pre-fabricated buildings (PFB). UOI v Hindustan Zinc Limited. 2014 (303) E.L.T. 321 (S.C.) Essence of case: – Rule 6 of CCR (payment 6% of value of exempted goods) would not apply when manufacture of dutiable final product results in emergence of exempt by-product on account of inevitable technological necessity.
Amendment
CCE v. Fenner India Limited 2014 (307) E.L.T.516 (Mad.) Essence of case: – CENVAT credit availed on inputs (contained in the work-in-progress destroyed on account of fire) cannot be reversed under rule 3(5C) of the CENVAT Credit Rules, 2004 Commissioner v. Dynamic Industries Limited 2014 (35) S.T.R. 674 (Guj.) Essence of case: –1) CENVAT credit can be availed of service tax paid on customs house agents’ (CHA) services, shipping agents’ and container services as it directly or indirectly in relation to manufacture of final products and clearing of final products upto the place of removal. 2) Services of overseas commission agent have not been used directly or indirectly in the manufacture or clearance of final product. Hence not eligible for Cenvat credit.
V’Smart Academy
EXCISE REVISION
41
Rules 2(a) Capital Goods - Means (A) The following goods, namely:-
v)Refractories and refractory materials;
i) All goods falling under Chapter 82, Chapter 84, Chapter 85, Chapter 90,
(Tools, Implements, ) (Nuclear Reactors, Boilers, Machinery and Mechanical appliances, ) (Electrical Machinery and equipment, )
(Optical, photographic, cinematographic, measuring, surgical instruments and apparatus, ) heading 6805, (grinding wheels and the like, and parts)
heading 6804 ( Natural or artificial abrasive powder, ) & Wagons of Sub-Heading 860692 Newly Inserted by F.A.2016 Railway or Tramway goods Open with nonremovable sides of a height exceeding 60 cms:
of the First Schedule to the Excise Tariff Act. ii)Pollution control equipment;
(B) The following goods, namely:Motor vehicle designed for transportation of goods including their chassis registered in the name of the service provider, when used for i) Providing an output service of renting of such motor vehicle; or
vi)Tubes and pipes and fittings thereof;
Renting
vii)Storage tank
viii)Motor vehicles other than those falling under tariff headings 8702, 8703, 8704, 8711 and their chassis but includes dumpers or tippers.
iii)Components, spares and accessories of the goods specified at (i) and (ii);
Eligible Motor Vehicle for Credit Non Eligible Motor Vehicle for Credit
(C) Motor vehicle designed to carry passengers including their chassis, registered in the name of the provider of service, when used for providing output service of I Transportation of passengers; or
ii) Transportation of inputs and capital goods used for providing an output service; or
ii) Renting of such motor vehicle; or
iii) Providing an output service of courier agency.
iii)Imparting motor driving skills
(D) Components, spares and accessories of motor vehicles which are capital goods for the assessee
Renting
iv)Moulds and dies, jigs and fixtures;
Note : Refer Comment 2
Fixtures
Jigs
Dies,
Manufacturer
OSP
(1) USED in the factory of the manufacturer of the final products, but does not include any equipment or appliance used in an office.
(Refer comment 1)
Deleted by F.A.2016
Power Generation Plant
Ex.Duty on C.G. = 10 lacs.
Comment 1
EXCISE REVISION
42
Water Pumping Plant
V’Smart Academy
Pro Dep ductio n t.
87 02
87 04
87 03
87 11
Invoice 45:30
45:30
45:30
45:30
45:30
45:30
Office
(2) For providing output service
Comment 2 : Credit of following motor vehicle
Stores Parking Shade
Ex.Duty on C.G. = 5 lacs.
(1A) USED outside the factory of the manufacturer of the final products for generation of electricity or for PUMPING OF WATER for captive use within the factory. Inserted by F.A.2016
Scope of definition of Capital Goods is increased by F.A.2016. Now Cenvat Credit of capital goods used in Factory Office is allowed. BIG and Appreciable Move. Now credit of printers, air conditioner used in office will be allowed.
Price 150 lacs Ex.duty 15 lacs @ 10% 165 lacs
www.vsmartacademy.com
Normal Service Provider- Credit not available Service Provider providing specified services under clause (B) and (C) of Rule 2(a)- Credit available Service Provider providing specified services under clause (B) and (C) of Rule 2(a)- Credit available
CA VISHAL BHATTAD
09850850800
RULE 2(k) INPUTS MEANS (ii) Any goods including accessories, cleared along with the final product, the value of which is included in the value of the final product & (refer comment 1) Goods used for providing free warranty for final products; or (refer comment 2) Explanation: For the purpose of this clause, “free warranty” means a warranty provided by the manufacturer, the value of which is included in the price of the final product and is not charged separately from the customer.
(i) All goods used in the factory by the manufacturer of the final product
(iii)
(iv)
(v)
All goods used for generation of electricity or steam or pumping of water for captive use; or
All goods used for providing any output service;
all capital goods which have a value upto ten thousand rupees per piece Inserted by F.A.2016
BUT INPUTS EXCLUDES (A) Light diesel oil, high speed diesel oil or motor spirit, commonly known as petrol. (i.e. LDO, HSD & petrol)
(B) Any goods used fora) Construction or execution of works contract of building or a civil structure or a part thereof; or b) Laying of foundation or making of structure for support of capital goods. Except: for the provision of service portion in the execution of a works contract or Construction service as listed under clause (b) of section 66E of the Act. (refer comment 3)
Comment 1
Any goods, such as food items, goods used in a guesthouse, residential colony, vehicles club or a recreation facility and clinical establishment, when such goods are used primarily for personal use or consumption of any employee and
Labour + Material = Works Contract
Invoice Television Remote, cable etc.
50,000 3,000
Total E.D. @10%
53,000 5,300
C.G.
Capital Goods- Generator Contractor
Spares of Generator
Chandulal Builders
Finished Goods
Washing Machine 40,000 Including Warranty
Credit available as Inputs
40,000 4,000
Replace under warranty
- Material used in service
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b) Laying of foundation or making of structure for support of capital goods.
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(50%)
c) Inputs Service
Tally
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b) Capital goods
û û ü ü
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- Material used in service
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Used for Civil Structure
û ü ü ü
Total value of contract xxxxx Apply specific % 40% / 70% Service portion in Works Contract xxx Service Tax @ 14% xxx Less: CENVAT credit a) Inputs - Material Sold on which VAT paid
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OSP
(50%)
xxxxx (xxxx) xxx xxx
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c) Inputs Service
Comment 3
Deemed Basis
Total value of contract Less : ‘Value of material on which vat paid Service portion in Works Contract Service Tax @ 14% Less: CENVAT credit a) Inputs - Material Sold on which VAT paid
b) Capital goods
Used for Civil Structure
Service tax treatment
Service tax treatment (a) Actual Basis
Inputs Components
Manufacturer
Any goods which have no relationship whatsoever with the manufacture of a final product
Any goods used for the provision of service portion in the execution of a works contract or Construction service.
Invoice Total E.D. @10%
(F)
Motor
Raw Materials
Comment 2
(E)
(D)
Comment 4
Accessories of Television
Manufacturer
(c)) Capital goods Except (refer comment 4) (i) used as parts or components in the manufacture of a final product; or (ii) the value of such capital goods is upto ten thousand rupees per piece
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09850850800
Used for building
www.vsmartacademy.com
V’Smart Academy
EXCISE REVISION
43
RULE 2(l) INPUT SERVICE INCLUDES SERVICES USED IN RELATION TO
MEANS ANY SERVICES
Used by provider of taxable service for providing an output service
For OSP
Supplier
Used by manufacturer whether directly or indirectly In or in relation to Ü Manufacture of final product or Ü Clearance of FP upto place of removal
Ü Modernisation Ü Renovation or Ü Repairs of a factory, premises of provider of output service or any office relating to such factory or premises
ÜAdvertisement or sales promotion, ÜMarket research, ÜStorage upto the place of removal, Ü Procurement of inputs,
Tran
spo
Case-1
rter
Manufacturer
Ü Accounting, Ü Auditing, Ü Financing, Ü Credit rating, Ü Recruitment and quality control, Ü Coaching and training, Ü Computer networking, Ü Share registry, and security, Ü Business exhibition, Ü Legal services, Ü inward transportation of inputs or capital goods and Ü Outward transportation upto the place of removal
Case-3
Case-2
Buyer Place
Case-4
BUT EXCLUDES SERVICES
(A) (B) Service portion in the execution of a Services works contract and construction provided by services including service listed under s e c t i o n 6 6 E ( b ) ( s e r v i c e o f a way of renting construction by builder to buyer) of the of a motor Finance Act in so far as they are used vehicle, in so forfar as they a) Construction or execution of works relate to a contract of a building or a civil structure or a part thereof; or motor vehicle b) Laying of foundation or making of which is not a structures for support of capital capital goods; goods, Except for the provision of one or more of the above specified services;
(BA) Service of general insurance business, servicing, repair and maintenance, in so far as they relate to a motor vehicle which is not a capital goods, except when used bya) a manufacturer of a motor vehicle in respect of a motor vehicle manufactured by such person; or b) an insurance company in respect of a motor vehicle insured or reinsured by such person;
(c) Such as those provided in relation to Ü outdoor catering, Ü beauty treatment, Ü health services, Ü cosmetic & plastic surgery Ü membership of a club, Ü health & fitness centre, Ü life insurance, Ühealth insurance and travel benefits extended to employees on vacation such as Leave or Home Travel Concession, When such services are used primarily for personal use or consumption of any employee
Explanation - For the purpose of this clause, sales promotion includes services by way of sale of dutiable goods on commission basis Renting
Manufacturer
maerceci
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Credit available Insurance
maerceci
Credit available
maerceci
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maerceci
maerceci
maerceci
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maerceci
Motor vehicle used by manufacturer for transportation of goods or employee
No Credit Servicing
Final Product If motor vehicle is the final product of manufacturer then he can take Cenvat credit of Service Tax paid on Insurance and servicing on such motor vehicle
Labour & Material
20 lacs.
Motor vehicle used by manufacturer for transportation of goods or employee
www.vsmartacademy.com
No Cenvat Credit
8 lacs 1.12 lacs 0.04 lacs
Manufacturer building
Main Contractor
SubContractor
works contract
Final Product
works contract
IBM
Servicing
V’Smart Academy
Invoice Value of 50 lacs. service S.T@14% 7 lacs. SBC 0.25 lacs @0.5%
Cenvat Credit is available if works contract service or construction service (input service) is used for providing works contract or construction service (output service) to another person.
DRIVING SCHOOL
Servicing
44
V’Smart Academy providing commercial coaching service
Service provider building
OSP
Insurance
EXCISE REVISION
Cenvat credit of outward transportation from place of removal to purchaser door step is not available.
1. Gross amount charged 2.Value of works contract service@40% Service Tax @14%
[email protected]%
Renting
Insurance
2) If ownership is transfer by seller at place of removal and transportation arrangement is made at request of purchaser.
Invoice-works contract
Servicing
TATA
maerceci
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Cenvat credit of outward transportation from place of removal to purchaser door step is available.
V’Smart Academy
maerceci
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1) If ownership is with seller till door step purchaser.
Execution of works contract
Amendment
maerceci maerceci
Outward Transportation upto buyers place [CBEC clarification : Circular No 988/122014]
Specifically included in the definition of Input service
Yes
Works Contractor
maerceci maerceci
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Outward Transportation upto place of removal (factory to depot or warehouse)
Labour & Material
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Reason Credit available or not? Yes included in the definition
OSP
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Renting
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Case2
Renting
Insurance
maerceci maerceci
maerceci
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Detail Inward Transportation of Inputs or C.G.
No Credit
maerceci
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Cases Case1
Case4
No Credit
Insurance
Servicing
Analysis- Credit of transportation service
Invoice-works contract 2
Invoice-works contract 1 1. Gross amount charged 2.Value of works contract service@40% Service Tax @14%
[email protected]%
20 lacs. 8 lacs 1.12 lacs 0.04 lacs
Cenvat credit available
1. Gross amount charged 2.Value of works contract service@40% Service Tax @14%
[email protected]%
Invoice
20 lacs. 8 lacs 1.12 lacs 0.04 lacs
CA VISHAL BHATTAD
No Cenvat Credit
Price Ex.Duty @ 10%
50 lacs. 5 lacs. 55 lacs.
09850850800
RULE 2(n): JOB WORK
Means : processing or working upon of raw material orsemi-finished goods supplied to the job worker, so as to complete a part or whole of the process resulting in the manufacture or finishing of an article or any operation which is essential for aforesaid process and the expression "job worker" shall be construed accordingly;
RULE 2(p): Output Service
MEANS : any service provided by a provider of service located in the taxable territory but shall not include a service, (1) specified in section 66D of the Finance Act (i.e. services covered in Negative list) or (2) where the whole of service tax is liable to be paid by the recipient of service.
RULE 2(d): Exempted Goods
1) Excisable goods wholly exempted 2) Excisable goods under Nil Rate 3) Goods for which concessional rate of 1% is being availed as per notification No. 1/2011 or Notification 12/2012)
RULE 2(h): Final Products
MEANS : Excisable goods manufactured or produced from input, or using input service;
RULE 2(e): Exempted Services
1) Service wholly exempted 2) Service , on which no service tax is leviable under section 66B of the Finance Act, or 3) Taxable Service whose part of value is exempted on the condition that no credit of inputs and input services, used for providing such taxable service, shall be taken, 4) Trading of goods. Exempted Service shall not include : (a) which is exported in terms of rule 6A of the Service Tax Rules, 1994; or (b) by way of transportation of goods by a vessel from customs station of clearance in India to a place outside India. Inserted by F.A.2016
RULE 2(ij): First Stage Dealer
Purchases goods directly from manufacturer or importer or their consignment agent or Depot.
Special Discussion
MEANS : A dealer who purchases the goods from a first stage dealer RULE 2(s): Second Stage Dealer
RULE 2(qa): Place of Removal
“Service by way of transportation of goods by a vessel from customs station of clearance in India to a place outside India.” Inserted by F.A.2016
Logic of Amendment 1)
Rule 3(1) : Duty eligible as CENVAT Credit
As per Rule 10 of POPS Rules 2012 Service of transportation of goods [which includes transportation of goods by vessels]
POPS is place of destination of goods.
3)
As per Rule 6A of Service Tax Rule 1994 if service is provided by person located in India to service recipient located outside India where POPS is outside India & amount is received in convertible foreign exchange then such service is treated as export service. Shipping company most the time getting consideration in Indian rupees for transportation of goods outside India. Consequently they were not getting the benefit of export service & also there credit would be denied because their service is non taxable [because POP is outside India]. Hence this amendment is done & now shipping company can take CENVAT Credit I/C.G./ IS such service as excluded from exempted service.
CA VISHAL BHATTAD
09850850800
(1) BED, (2)SED, (3)AED (GSI), (6) AED (T & P), (7) NCCD, (8) Ed. Cession Input/CG, (10) ACD 3(1), (11) Service Tax on IS (12) Ed. Cess on IS & Note : SBC is not eligible for Cenvat Credit
Thus if vessels is transporting the goods from Custom station in India to a place outside India then Place of provision is a place outside India & Service is not Taxable. 2)
MEANS (I) a factory or any other place or premises of production or manufacture of the excisable goods; (ii)a warehouse or any other place or premises wherein the excisable goods have been permitted to be deposited without payment of duty; (iii) a depot, premises of a consignment agent or any other place or premises from where the excisable goods are to be sold after their clearance from the factory, from where such goods are removed;
Non Eligible Duties for Credit Manufacture OSP 1) BCD 1) BCD 2) ACD 3(5) Comment : Credit of ACD 3(5) paid on capital goods by manufacturer is available 100% in 1st financial year.
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(4) AED (TTA), (9) SHEC on Input/CG, (13) SHEC on IS.
(5) AED (TTW), (14) ACD 3(5)
Amendment
Restriction on Utilisation BED/ SED on Inputs S.T. on Input Service
No Restriction ( can be utilised against all duties on F.P. or Service Tax on output service)
All ACD’s / NCCD/ ed. Cess/ SHEC
Should be utilised only for payment of respective duty on removal of goods/ providing output service.
CENVAT Credit shall not be utilised for payment of Infrastructure Cess leviable u/s 159 of F.A.2006 Amendment
V’Smart Academy
EXCISE REVISION
45
TEST- II: RULE-4 CONDITIONS FOR AVAILMENT OF CENVAT CREDIT ( FOR MANUFACTURER Rule 4(1)
Rule 4(2)
Rule 4(7)
INPUTS
CAPITAL GOODS
INPUTS SERVICE
Credit available: 1) Immediately receipt of inputs in factory 2) If directly sent to Job worker premise Time Limit : 3) Credit within 1 Yr. from date of Invoice
The CENVAT credit shall be taken in respect of capital goods ►received in a factory or ►outside the factory for generation of electricity for captive use or ►If directly sent to Job worker premise within the factory at any point of time in a given financial year
1) Credit available on or after the date of Invoice. 2) Credit within 1 Yr. from date of Invoice 3) Amount not paid within 3 months then credit to be reversed and take the credit on the date of payment to SP and Time limit of 1 year not applicable for such credit eligibility.
NORMAL CHARGE
REVERSE CHARGE
100% Credit available on or after the date when payment of ST RCM to CG
Invoice of S.P. (Partial) - Same as Normal Charge PRCM
1) Upto 50% of duty paid - At the time of receipt of goods in the premises of manufacturer Exceptions : 100% Credit available in 1st year (a) ACD 3(5) Paid on C.G. (b) C.G. purchase by SSI 2) Balance in subsequent financial year if CG in possession The Condition of possession not applicable to a) Components, spares & accessories b) Refractories & refractories material c) Moulds and Dies. d) Goods under heading 6805 & 6804. 3) Credit is available 100% of duty paid -CG received and cleared in the same financial year. (50% on receipt + 50% on removal). 4) Credit available even though CG purchase on Lease, HP/ Loan agreement. (Rule 4(3)) 5) If depreciation is claimed on excise duty of CG - No Cenvat credit. (Rule 4(4))
Partial payment under RCM by Manufacturer- Credit available on or after the date when payment of ST to CG
Comment : Payment or reversal of CENVAT Credit if amount is refunded for input service in case of cancellation of contract
TEST- II: RULE-4 CONDITIONS FOR AVAILMENT OF CENVAT CREDIT (FOR OSP) Rule 4(1)
Rule 4(2)
Rule 4(7)
INPUTS
CAPITAL GOODS
INPUTS SERVICE
Credit available: 1) Immediately receipt of inputs in premises of OSP. 2) If directly sent to Job worker premise 3) If inputs directly sent to location of SP Time Limit : 4) Within 1 Yr. from date of Invoice
The CENVAT credit shall be taken in respect of capital goods ► received in a premises of OSP ► If directly sent to Job worker premise ► If inputs directly sent to location of SP at any point of time in a given financial year
1) Upto 50% of duty paid - At the time of receipt of goods in the premises of Service Provider. 2) Balance in subsequent financial year if CG in possession The Condition of possession not applicable to a) Components, spares & accessories b) Refractories & refractories material c) Moulds and Dies. d) Goods under heading 6805 & 6804. 3) Credit is available 100% of duty paid -CG received and cleared in the same financial year. (50% on receipt + 50% on removal). 4) Credit available even though CG purchase on Lease, HP/ Loan agreement. (Rule 4(3)) 5) If depreciation is claimed on excise duty of CG - No Cenvat credit. (Rule 4(4))
EXCISE REVISION
46
V’Smart Academy
Amendment Provided also that CENVAT Credit of Service Tax paid in a financial year, Ü on the one-time charges payable in full upfront or in instalments, Ü for the service of assignment of the right to use any natural resource by the Government, local authority or any other person, shall be spread evenly over a period of three years: Provided also that where the manufacturer of goods or provider of output service, as the case may be, Ü further assigns such right assigned to him by the Government or any other person, in any financial year, Ü to another person against consideration, such amount of balance CENVAT credit as does not exceed the service tax payable on the consideration charged by him for such further assignment, shall be allowed in the same financial year.
Q. XYZ Ltd. Co has taken a right fro use of natural resources from government for ` 10 cr for 20 years. Subsequently in 2nd year company has transferred the right to PQR Ltd. for ` 9 Cr. Explain cenvat credit eligibility. would your answer differ if subsequent rights given to PQR Ltd to ` 3 Cr. Ans. CENVAT credit available to XYZ Ltd. 10 Cr. x 14.5% = 1.45 Cr. Credit is available over 3 F.Y. (0.4833 Cr. yearly credit) subsequent transfer of rights to PQR Ltd. Credit is available a) For ` 9 Cr. – S.T. = 1.305 Cr. b) For ` 3 Cr. – S.T. = 0.435 Cr. only to the extent of S . T. p a y a b l e & payable 9 Cr x 14.5 % payable 3 Cr x 14.5 % balance credit 0.5317 Less Cenvat Credit (bal.) = 0.9667 Cr. Less Cenvat Credit (bal.) = 0.435 Cr. Cr.(0.9667Cr - 0.435 Net Service Tax payable = 0.3383 Cr. Cr.) lapsed Net Service Tax payable = Nil (0.4833 x 2 years)
RULE 3(4) UTILISATION OF CENVAT CREDIT
1) Credit available on or after the date of Invoice. 2) Credit within 1 Yr. from date of Invoice 3) Amount not paid within 3 months then credit to be reversed and take the credit on the date of payment to SP and Time limit of 1 year not applicable for such credit eligibility.
NORMAL CHARGE
REVERSE CHARGE
CENVAT CREDIT ELIGIBILITY ON ASSIGNMENT OF THE RIGHT TO USE NATURAL RESOURCES
100% Credit available on or after the date when RCM payment of ST to CG
PRCM
The CENVAT credit may be utilized for payment of Duty of excise on any final product
Service taxon any output service
Invoice of S.P. (Partial) - Same as Normal Charge Partial payment under RCM by OSPCredit available on or after the date when payment of ST to CG
Comment : Payment or reversal of CENVAT Credit if amount is refunded for input service in case of cancellation of contract
An amount equal to CENVAT credit taken on inputs / Capital goods if such inputs/Capital goods are removed as such (Rule 3(5))
An amount under sub-rule (2) of rule 16 of Central Excise Rules, 2002.
1) Thus for utilization of CENVAT credit against final product one to one corelation is not necessary. 2) There is no time limit for utilization of CENVAT credit Provided that while paying duty of excise or service tax, as the case may be, the CENVAT credit shall be utilized only to the extent such credit is available on the last day of the month or quarter, as the case may be, for payment of duty or tax relating to that month or the quarter, as the case may be.
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Rule 3(5A) Capital Goods removed after usage
Payment or Reversal of CENVAT Credit 1. Under these rules amount is Removal of inputs & capital goods as such payable on monthly/quarterly Removal of capital goods after use basis. Value of inputs & capital goods written off 2. Payment can be made by Reversal of credit if duty remitted on final product ÜUtilization of CENVAT Credit or Üthrough PLA Sending Input / CG for Job-work
Rule 3(5) Rule 3(5A) Rule 3(5B) Rule 3(5C) Rule 4(5) & (6)
Rule 3(5) : Input or capital Good Removed as Such When Input / Capital Goods are removed as such from premises. Manufacturer or OSP Shall pay an amount = Credit availed in respect of such Input / Capital Goods such payment shall not be required to be made Any inputs are removed outside the factory for providing free warranty for final products. Where any input or Capital Goods are removed outside the premises of the provider of Output Service for providing the output services.
Removal of Inputs
Invoice Case 1 Price- 1,00,000 (Qty 1000)
Manufacture / OSP
Buyer
Price- 1,00,000 (Qty 1000)
Invoice
Excise - 10,000 @ 10%
Case 2 Price- 80,000 (Qty 1000)
1000 qty.
If buyer is manufacturer or OSP then he can take Cenvat Credit of Payment under Rule 3(5) (i.e.` 10,000)
Payment under rule 3(5)= 10,000
Invoice
Input purchased
Case 3 Price- 1,50,000 (Qty 1000)
Input removed as such - Sale [Without use]
Payment under rule 3(5) = 10,000
Buyer Invoice
Price- 1,00,000 (Qty 1000)
Price- 1,00,000 (Qty 1000)
Excise - 10,000 @ 10%
Payment under rule 3(5) = 10,000
CCR (C.G.)
10-4-16 To supplier 5000 If C.G. is removed in same F.Y. take remaining credit immediately before removal
Example : An assessee had procured machinery in April 2015 for ` 10 lakhs. Duty paid on the machine was ` 1,64,800.It was commissioned in June 2015.Assesee had availed 50% of CENVAT credit of ` 82,400 on 28-52015 and balance credit ` 82,400 on 30-5-2017.He sold capital goods after use on 11-1-2018 as second hand machinery for ` 4,00,000. How much amount is payable while clearing the machinery if rate applicable to Machinery is 10%? Would your answer differ if a) If value of second hand machinery is ` 15,00,000 b) Capital goods removed without use. Answer : Calculation of payment under Rule 3(5A) at the time of disposal :-
1 st year 2015-16 2 st year 2017-18
Manufacture / OSP
C.G. purchased on 10-4-16
Important Comments : 1) Quarter shall be calculated from the date of taking CENVAT Credit. 2) Deduction is available (as per above %) on straight line method. 3) Any part of the quarter would be treated as full quarter. 4) For 1st 50% credit and balance 50% credit quarter shall be calculated separately.
Year
Removal of C.G. Invoice
C.G. Removed as such on15-12-2016
(50% credit)
15-12-16 To supplier 5000
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Pay an amount = Cenvat Credit taken
Payment 1) Cenvat Credit taken less for each = quarter Ÿ 1st year @ 10% or Reversal Ÿ 2nd year @ 8% Ÿ 3rd year @ 5% Ÿ 4th & 5th year @ 1% 2) Excise Duty on T.V. of C.G. Whichever is higher
If the capital goods are cleared as waste and scrap, the manufacturer shall pay an amount equal to the duty leviable on transaction value.”
Payment under rule 3(5) = 10,000
Invoice
Computer & Computer peripherals
Capital Goods 1) Cenvat Credit taken less Payment = 2.5% or Reversal for each quarter or 2) Excise Duty on T.V. of C.G. Whichever is higher
If buyer is manufacturer or OSP then he can take Cenvat Credit of Payment under Rule 3(5) (i.e.` 10,000)
Date of taking Cenvat Credit
Date of Disposal
No. of Quarters
Credit Taken
28.5.15
11.11.18
11
82,400
30.5.17
11.11.18
3
82,400
Payment under Rule 3(5A) 82,400 - (2.5% x 11 x 82,400) = 59,740 82,400 - (2.5% x 3 x 82,400) = 76,220 Total Payment = 1,35,960
OR Payment on transaction value = 4,00,000 x 10% = 40,000 Hence, amount payable whichever is higher = 1,35,960 a)If value of second hand machinery is ` 15 Lacs then pay = 15,00,000 x 10% = 1,50,000 OR 1,35,960 which ever is higher i.e. 1,50,000
(50% credit)
b) If capital goods removed as such without used then amount payable under Rule 3(5A) is = Cenvat Credit taken = ` 1,64,800 (82,400+82,400)
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Rule 3(5B) Eligibility of Cenvat Credit if value of Inputs / Capital Goods “WRITE OFF”
Input / C.G sent to Job Work
If the value of any - Input Capital Goods before being put to use on which Cenvat Credit has been taken is written off fully or paratially Manufacturer / OSP shall pay on amount equivalents to the Cenvat Credit taken in respect of the said Input / Capital Goods. Provided if the said Input / Capital Goods is subsequently used in manufacture of final product then, Cenvat Credit available subsequently.
Manufacture can take cenvat credit of I/C.G on 4 their receipt in factory Input/C.G. Received
Supplier
Manufacturer
Input/C.G. 2 sent to factory 1
RULE 3(5C): ELIGIBILITY OF CENVAT CREDIT IF REMISSION IS GRANTED ON FINAL PRODUCT If remission is claim on manufacture goods under Rule 21 of C.E. Rules then CENVAT Credit taken on input and inputs services used in such goods shall be reversed.
Input/C.G. directly sent to jobworker
Input/C.G. Received
5 3
RULE 4(5): Inputs or Capital Goods Sent to job Worker (a) CENVAT credit shall be allowed if inputs /C.G are sent to job worker for Ü further processing, Ü testing, Ü repairing, Ü re-conditioning or Ü for the manufacture of intermediate goods necessary for the manufacture of final products or Ü any other purpose.
Such credit will be allowed if it isestablished by record that received back by the manufacturer/ output service provider within
Inputs as such or product therefrom If sent from factory
Within 180 days of their sent from facrory
Manufacture can take cenvat credit of I/C.G on their receipt in factory of jobworker under Rule 4(1) or 4(2)
Capital Goods Within 2 yrs of their sent from facrory
If directly sent Within 180 days from the Within 2 yrs from the date of receipt of such date of receipt of such to job work goods by the job worker goods by the job premise worker Comment: If not received within aforesaid period then pay or reverse the credit attributable to such inputs & C.G. and regain the credit when they received back in factory.
(b) The CENVAT credit shall also be allowed to a manufacturer of final products in respect of jigs, fixtures, moulds and dies or tools sent by such manufacturer to, (i) another manufacturer for the production of goods; or (ii) a job worker for the production of goods on his behalf, according to his specifications.
Removal to jobworker under 4(5) challan without reversal of credit
Job Worker
6
After jobwork I/C.G must be received back I - within 180 days C.G. - within 2 years.
Rule 5 REFUND OF CENVAT CREDIT (1) A manufacturer who clears a final product or an intermediate product for export without payment of duty under bond or letter of undertaking, or (2) A service provider, who provides an output service which is exported without payment of service tax. Shall be allowed refund of CENVAT credit as determined by the following formula subject to procedure, safeguards, conditions and limitations, as may be specified by the Board by notification in the Official Gazette: (Export turnover of goods + Export turnover of services) Refund = x Net Cenvat Amount Total turnover Credit 1
tion
na pla
Ex
Provided that such credit shall also be allowed where jigs, fixtures, moulds and dies or tools are sent by the manufacturer of final products to the premises of another manufacturer or job worker without bringing these to his own premises.
For the purposes of this rule, 1) Export service means a service which is provided as per the provisions of Export of Services Rules, 2005, whether the payment is received or not; 1A) "Export goods" means any goods which are to be taken out of India to a place outside India."
Refund of CENVAT credit to service providers covered under partial reverse charge [Rule 5B]
EXCISE REVISION
48
It stipulates that a service provider providing services taxed under partial reverse charge mechanism and unable to utilize the CENVAT credit availed on inputs and input services for payment of service tax on such output services, shall be allowed refund of such unutilized CENVAT credit.
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Amendment
Rule 6 :Obligation of manufacturer of dutiable and exempted goods
Manufacturer who exclusively manufactures Exempted goods.
Rule 6(4) C.G.
Rule 6(1) &6(2) Input
Rule 6(1) &6(2) Input Services
1 ) N o C E N VAT Credit of C.G. used exclusively in Exempted goods for a period of 2 years from - D a t e o f Commencement of production - D a t e o f Installation of C.G. If it is received after commencement of production.
No CENVAT Credit of inputs exclusively used in or in relation to exempted goods.
No CENVAT credit of input service used -in or in relation to manufacture of exempted goods & - Clearance upto the place of removal.
Manufacturer who manufacturers two classes of goods namely exempted & non exempted goods
Rule 6(3) Input
C.G Credit of C.G. is available as per Normal provision
Rule 6(3) Input Services
Manufacturer who manufactures dutiable goods.
Cenvat credit is oavailable on C.G., Inputs & Inputs Services used in dutiable goods.
Take full credit of input & Input & Input services & shall follow any one of the following options
Option -1 (i) Pay on amount =6% value of Exempted goods. subject to max Üop. bal Inputs/Inputs Service xxx Ücredit of Inputs/Inputs Service during period xxx
Option -2 (ii) Pay an amount as dtermined under Rule 6(3A)
Refer Pg.no.53
Note CENVAT Credit in case of SSI Credit of C.G. : SSI can avail cenvat c r e d i t o r c a p i t a l goods but it is allowed to be utilized after crossing the limit of A V C 1 5 0 l a h s o f exciasable goods. Credit of Input : SSI cannot avail cenvat credit of Input /Input Service upto AVC Rs. 150 Lakhs of excisable goods.
RULE 6(6) ELIGIBILITY OF CENVAT CREDIT IF EXCISABLE GOODS REMOVED TO 100%EOU,SEZ ETC Following benefits are available if excisable goods removed without payment of duty 100% EOU, SEZ , EHTP, STP, United nation or an international organization and export under bond under rule 19 Ü Cenvat credit is available on Inputs,Capital goods and input service which are exclusively used in excisable goods removed without payment of duty for aforesaid purposes. Ü Whole Cenvat credit is available on inputs or capital goods and input service used commonly in dutiable goods and excisable goods which are removed without payment of duty for aforesaid purposes.
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Payment if goods exempted under composition scheme
Amount payable = 6% - Amount of duty paid under composition scheme
Determination of Value for calculation of 6% under Rule 6(3)(i) Manufacturer Exempted Value shall be determine as per sec 4, sec 4A Goods andsec 3(2) of C.E. Act 1994 NonExcisable Goods
Value of non-excisable goods for the purposes of this rule, shall be the invoice value and where such invoice value is not available, such value shall be determined by using reasonable means consistent with the principles of valuation contained in the Excise Act and the rules made there under.
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Amendment
Rule 6 :Obligation of Service provider of taxable and exempted services
Service Provide who exclusively provide exempted service
Rule 6(4) C.G.
Rule 6(1) &6(2) Input
Rule 6(1) &6(2) Input Services
1 ) N o C E N VAT Credit of C.G. used exclusively in Exempted Service for a period of 2 years from - D a t e o f Commencement of production - D a t e o f Installation of C.G. If it is received after commencement of production.
No CENVAT Credit of inputs exclusively used for provision of exempted service.
No CENVAT credit of input service used for provision of exempted service.
RULE 6 (6A) Any taxable services are provided, without payment of service tax, to a unit in a special economic zone or to a developer of a special economic zone for thier authorised operations then service provider can take full credit of capital goods, inputs & input services exclusively or commonly used in such services.
Rule 6(3) Input
C.G Credit of C.G. is available as per Normal provision
Payment in case of transportation of goods or passengers by rail
Amount payable = 7% Value of Abatement taken.
Option -2 (ii) Pay an amount as dtermined under Rule 6(3A)
OSP Exempted Service
Value shall be as per Sec 67
Composition Scheme
value on which the rate of service tax under section 66B of the Finance Act, read with an exemption notification, if any, relating to such rate, when applied for calculation of service tax results in the same amount of tax as calculated under the option availed
under sub-rules (7),(7A),(7B) or (7C) of rule 6 of the S.T. Rules, 1994,
Amount payable = 2% of value of the exempted services.
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Determination of Value for calculation of 7% under Rule 6(3)(i)
Trading
Activity which is not a Service under Sec 65B(44)
50
Cenvat credit is oavailable on C.G., Inputs & Inputs Services used in dutiable goods.
Take full credit of input & Input & Input services & shall follow any one of the following options
Option -1 (i) Pay on amount =7% value of Exempted Service. subject to max Üop. bal Inputs/Inputs Service xxx Ücredit of Inputs/Inputs Service during period xxx Payment if service is subject to abatement U/n 26/2012 (Service Tax)
Rule 6(3) Input Services
Trading of Securities
EXCISE REVISION
Service Provider provides Taxable Service
Service Provider provides to classes of service namely non Exempted Service & Exempted Service
Value shall be the difference between the sale price and the cost of goods sold (determined as per the generally accepted accounting principles without including the expenses incurred towards their purchase) or10% of the cost of goods sold, whichever is more. Value shall be the difference between the sale price and the purchase price of the securities traded or 1% of the purchase price of the securities traded, whichever is more. Value of such an activity as specified above in Explanation 3, shall be the invoice/agreement/contract value and where such value is not available, such value shall be determined by using reasonable means consistent with the principles of valuation contained in the Finance Act, 1994 and the rules made thereunder.
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Rule 7 - Input Service Distributor / Rule 7A - Input Credit Distributor Meaning
Ü Input Service Distributor : Office of Assessee who receives all invoice for taxable services & makes payment against such invoices. Ü Distribution : It distributes credit of Service Tax paid on input services to various location of same manufacturer or OSP or an Outsource manufacturing Unit Amendment
Manner of Credit Distribution
The input service distributor shall distribute the CENVAT credit in respect of the service tax paid on the input service to its manufacturing units or unit providing output service or an outsourced manufacturing units, as defined in Explanation 4, subject to the following conditions, namely :(a) the credit distributed against a document referred to in rule 9 does not exceed the amount of service tax paid thereon; (b) the credit of service tax attributable as input service to a particular unit shall be distributed only to that unit; (c) the credit of service tax attributable as input service to more than one unit but not to all the units shall be distributed only amongst such units to which the input service is attributable and such distribution shall be pro rata on the basis of the turnover of such units, during the relevant period, to the total turnover of all such units to which such input service is attributable and which are operational in the current year, during the said relevant period; (d) the credit of service tax attributable as input service to all the units shall be distributed to all the units pro rata on the basis of the turnover of such units during the relevant period to the total turnover of all the units, which are operational in the current year, during the said relevant period; (e) outsourced manufacturing unit shall maintain separate account for input service credit received from each of the input service distributors and shall use it only for payment of duty on goods manufactured for the input service distributor concerned; (f) credit of service tax paid on input services, available with the input service distributor, as on the 31st of March, 2016, shall not be transferred to any outsourced manufacturing unit and such credit shall be distributed amongst the units excluding the outsourced manufacturing units. Explanation.-The provision of this clause shall, mutatis-mutandis, apply to any outsourced manufacturer commencing production of goods on or after the 1st of April, 2016; (g) provisions of rule 6 shall apply to the units manufacturing goods or provider of output service and shall not apply to the input service distributor.
Rule 7B Distribution of credit on inputs by warehouse of manufacturer. (1) A manufacturer having one or more factories, shall be allowed to take credit on inputs received under the cover of an invoice issued by a warehouse of the said manufacturer, who receives inputs under cover of 2 documents specified under rule 9,] towards the purchase of such inputs. (2) The provisions of these rules or any other rules made under the Excise Act as applicable to a first stage dealer or a second stage dealer, shall, mutatis mutandis, apply to such warehouse of the manufacturer.
Rule 8 - Storage of goods outside the factory Conditions
Ü AC/DC of Mfr should permit to store duty paid goods (CENVAT claimed) outside the factory. Ü Reason - due to nature of goods / shortage of storage space at the factory. Ü AC/DC may specify conditions & limitations as they deem fit. Ü On non-compliance, pay duty equivalent to CENVAT availed. Amendment
Prescribed Returns
RULE 9A - Annual Return
(1) A manufacturer of final products or provider of output services, shall submit to the Superintendent of Central Excise an annual return for each financial year, by the 30th day of November of the succeeding year, in the form as specified by a notification by the Board. (2) The provisions of rule 12 of the Central Excise Rules, 2002, in so far as they relate to annual return shall, mutatis-mutandis, apply to the annual return required to be filed under this rule.
Rule 3(1): Transition Provision Date Exemption withdrawn
Exemption F.P.
F.P. F.P.
Explanation : For the purposes of this rule, "unit" includes the premises of a provider of output service or the premises of a manufacturer including the factory, whether registered or otherwise or the premises of an outsourced manufacturing unit. Explanation : For the purposes of this rule, the total turnover shall be determined in the same manner as determined under rule 5: Provided that the turnover of an outsourced manufacturing unit shall be the turnover of goods manufactured by such outsourced manufacturing unit for the input service distributor.
I CCR X
Explanation : "For the purposes of this rule, "outsourced manufacturing unit" means a jobworker who is liable to pay duty on the value determined under rule 10A of the Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000 on the goods manufactured for the input service distributor or a manufacturer who manufactures goods, for the input service distributor under a contract, bearing the brand name of such input service distributor and is liable to pay duty on the value determined under section 4A of the Excise Act.
Comment : SSI can take credit of capital goods during exemption
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Dutiable
C.G. CCR X
I.S. CCR X
CCR available Input laying in stock Input in WIP Input Contained F.P. laying in stock
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Rule 11(2): Dutiable
RULE 9(11) REVISED RETURN Exempted
Date of Exemption
F.P.
The provider of output service or the input service distributor as the case may be, may submit a revised return to correct a mistake or omission within a period of sixty days from the date of submission of the return under sub-rule (9) or sub-rule (10), as the case may be.
F.P. F.P.
Rule 10 - Transfer of Credit I CCR
C.G. CCR
Pay or revenue
I.S. CCR
Balance Credit in CCR A/C or
Input laying in stock Input in WIP Input Contained F.P. laying in stock
Input C.G. I.S.
Manufacturer
ISD
Ü 1st copyfor buyer Ü 2nd copy of Transporter or Ü 3rd copy Manufacturer
Input Service Provider
Invoice
Bill of Entry or Certificate in case of post
Payment Challan
RCM
Comment : 1) If original copy of invoice is lost then transport copy also eligible for CENVAT Credit. 2) Xerox copy of invoice not eligible for CENVAT Credit. 3) In case of additional payment of duty any supplimentry document (Invoice or Challan) is eligible for CENVAT Credit provided that such additional payment not because of fraud etc. 4) Service Tax Certificate for Transportation of Goods (STTG) along with photocopy of RR is eligible document for CENVAT Credit. C E N VAT R ETU R N Rules Rule 9(7) Rule 9(7)
Person required to file return The manufacturer of final products
SSI A first stage dealer or a second Rule 9(8) stage dealer or a registered importer
52
Period to which return relates
Due date of filing return
Monthly Quarterly
10thof next month th 10 of next month
Quarterly
15thof next month
Quarterly
15 of next month
th
Form ER-1 ER-3 Prescribed format
Rule 9(8)
Registed importer
Rule 9(9)
The provider of output service
Half Yearly
25thof next month
Rule 9(10)
The input service distributor
Half Yearly
End of next month Prescribed format
EXCISE REVISION
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leviable u/s 3(5) of the Customs Tariff Act, lying in balance with one of his registered premises at the end of a quarter, to another registered premises (both having a common PAN) by issuing a Transfer Challan, and such recipient premises may take CENVAT credit on the basis of the transfer challan. 2. Returns : The manufacturer or producer shall submit the monthly returns separately in respect of transferring and recipient registered premises.
Invoice or Challan
Importer Other Documents
Rule 10A- Transfer of Credit of ADC Transfer of 1. Transfer : The above manufacturer may transfer un-utilised Credit of Additional Duty credit
I.S. Invoice
1st Stage & 2nd Stage dealer
the books to the satisfaction of th AC/DC.
Lapsed Lapsed Lapsed
Rule 9 : Documents for taking CENVAT Credit For Input or Capital Goods
Transfer of Unutilised credit can be transferred if the manufacturer or the service provider transfers his credit factory along with the inputs and finished goods. Such transfer should be duly accounted in
Prescribed format
Rule 13 - Deemed CENVAT Credit Deemed CENVAT Credit
=Power of CG to notify goods for which deemed CENVAT Credit allowed. =Credit allowed even if not directly used but contained in Final Products / Output Service subject to conditions specified.
RULE 14: RECOVERY OF CENVAT CREDIT WRONGLY TAKEN OR ERRONEOUSLY REFUNDED
(1) (i) Where the CENVAT credit has been taken wrongly but not utilised, the same shall be recovered from the manufacturer or the provider of output service, as the case may be, and the provisions of section 11A of the Excise Act or section 73 of the Finance Act, 1994 as the case may be, shall apply mutatis mutandis for effecting such recoveries; (ii) Where the CENVAT credit has been taken and utilised wrongly or has been erroneously refunded, the same shall be recovered along with interest from the manufacturer or the provider of output service, as the case may be, and the provisions of sections 11A and 11AA of the Excise Act or sections 73 and 75 of the Finance Act, 1994, as the case may be, shall apply mutatis mutandis for effecting such recoveries. (2) For the purposes of sub-rule (1), all credits taken during a month shall be deemed to have been taken on the last day of the month and the utilisation thereof shall be deemed to have occurred in the following manner, namely: Omitted (i) the opening balance of the month has been utilised first; (ii) credit admissible in terms of these rules taken during the month has been utilised next; (iii) credit inadmissible in terms of these rules taken during the month has been utilised thereafter.".
ST-3
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Rule 15 : Confiscation and Penalty Situations 1) If Credit wrongly taken or utilised without malafied intentions
Penalty & Confiscation 1) Goods liable to consfication 2) Penalty = 100% duty / S.T. or ` 2000 whichever is higher
2) If Credit wrongly taken or utilised by reason of fraud etc. (malafied intention)
1) Goods liable to consfication 2) Penalty = 100% duty / S.T. or ` 2000 whichever is higher 3) Also liable to penalty u/s 11 AC or u/s 78
(iv) The amount of common credit attributable towards exempted goods removed or for provision of exempted services shall be called ineligible common credit, denoted as D and calculated as follows and shall be paid, D = (E/F) x C where E is the sum total of (a) value of exempted services provided; and (b) value of exempted goods removed, during the preceding financial year where F is the sum total of(a) value of non-exempted services provided, (b) value of exempted services provided, (c) value of non-exempted goods removed, and (d) value of exempted goods removed, during the preceding financial year: Provided that where no final products were manufactured or no output service was provided in the preceding financial year, the CENVAT credit attributable to ineligible common credit shall be deemed to be fifty per cent. of the common credit; (v) remainder of the common credit shall be called eligible common credit and denoted as G, where,G = C -D n2
atio
Payment of CENVAT Credit under Rule 6(3A) Rule (3A) For determination of amount required to be paid under clause (ii) of sub-rule (3), the manufacturer of goods or the provider of output service shall follow the following procedure and conditions, namely :(a) the manufacturer of goods or the provider of output service shall intimate in writing to the Superintendent of Central Excise giving the following particulars, namely :(i) name, address and registration number of the manufacturer of goods or provider of output service; (ii) date from which the option under this clause is exercised or proposed to be exercised; (iii) description of inputs and input services used exclusively in or in relation to the manufacture of exempted goods removed or for provision of exempted services and description of such exempted goods removed and such exempted services provided; (iv) description of inputs and input services used exclusively in or in relation to the manufacture of nonexempted goods removed or for the provision of non-exempted services and description of such non exempted goods removed and non-exempted services provided ; (v) CENVAT credit of inputs and input services lying in balance as on the date of exercising the option under this condition; (b) the manufacturer of final products or the provider of output service shall determine the credit required to be paid, out of this total credit of inputs and input services taken during the month, denoted as T, in the following sequential steps and provisionally pay every month, the amounts determined under sub-clauses (i) and (iv), namely:(i) the amount of CENVAT credit attributable to inputs and input services used exclusively in or in relation to the manufacture of exempted goods removed or for provision of exempted services shall be called ineligible credit, denoted as A, and shall be paid; (ii) the amount of CENVAT credit attributable to inputs and input services used exclusively in or in relation to the manufacture of non exempted goods removed or for the provision of non-exempted services shall be called eligible credit, denoted as B, and shall not be required to be paid; (iii) credit left after attribution of credit under sub-clauses (i) and (ii) shall be called common credit, denoted as C and calculated as,n1
atio
an xpl
E
For the removal of doubts, it is hereby declared that out of the total credit T, which is sum total of A, B, D, and G, the manufacturer or the provider of the output service shall be able to attribute provisionally and E retain credit of B and G, namely, eligible credit and eligible common credit and shall provisionally pay the amount of credit of A and D, namely, ineligible credit and ineligible common credit. an xpl
(vi) where manufacturer or the provider of the output service fails to pay the amount determined under sub-clause (i) or sub-clause (iv), he shall be liable to pay the interest from the due date of payment till the date of payment of such amount, at the rate of 15% per annum. (c)
the manufacturer or the provider of output service shall determine the amount of CENVAT credit attributable to exempted goods removed and provision of exempted services for the whole of financial year, out of the total credit denoted as T (Annual) taken during the whole of financial year in the following manner, namely :(i) the CENVAT credit attributable to inputs and input services used exclusively in or in relation to the manufacture of exempted goods removed or for provision of exempted services on the basis of inputs and input services actually so used during the financial year, shall be called Annual ineligible credit and denoted as A(Annual); (ii) the CENVAT credit attributable to inputs and input services used exclusively in or in relation to the manufacture of non-exempted goods removed or for the provision of non-exempted services on the basis of inputs and input services actually so used shall be called Annual eligible credit and denoted as B(Annual); (iii) common credit left for further attribution shall be denoted as
C = T - (A + B)
Where the entire credit has been attributed under subclauses (i) and (ii), namely ineligible credit or eligible credit, there shall be left no common credit for further attribution.
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C(Annual) = T(Annual)- A(Annual) + B(Annual) (iv) common credit attributable towards exempted goods removed or for provision of exempted services shall be called Annual ineligible common credit, denoted by D(Annual) and shall be calculated as, D(Annual) = (H/I) x C(Annual); where H is sum total of(a)value of exempted services provided; and (b) value of exempted goods removed; during the financial year ; where I is sum total of (a) value of non-exempted services provided, (b) value of exempted services provided, (c) value of non-exempted goods removed; and (d) value of exempted goods removed during F.Y. EXCISE REVISION
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(d)
the manufacturer or the provider of output service shall pay on or before the 30th June of the succeeding financial year, an amount equal to difference between the total of the amount of Annual ineligible credit and Annual ineligible common credit and the aggregate amount of ineligible credit and ineligible common credit for the period of whole year, namely, [{A(Annual) + D(Annual)} {(A+D) aggregated for the whole year)}], where the former of the two amounts is greater than the later;
(e)
where the amount under clause (d) is not paid by the 30th June of the succeeding financial year, the manufacturer of goods or the provider of output service, shall, in addition to the amount of credit so paid under clause (d), be liable to pay on such amount an interest at the rate of fifteen per cent. per annum, from the 30th June of the succeeding financial year till the date of payment of such amount;
(f)
the manufacturer or the provider of output service, shall at the end of the financial year, take credit of amount equal to difference between the total of the amount of the aggregate of ineligible credit and ineligible common credit paid during the whole year and the total of the amount of annual ineligible credit and annual ineligible common credit, namely, [{(A+D) aggregated for the whole year)} {A(Annual) + D(Annual)}], where the former of the two amounts is greater than the later;
(g)
the manufacturer of the goods or the provider of output service shall intimate to the jurisdictional Superintendent of Central Excise, within a period of fifteen days from the date of payment or adjustment, as per the provisions of clauses (d), (e) and (f) , the following particulars, namely :(i)
(ii)
(iii) (iv) (v)
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details of credit attributed towards eligible credit, ineligible credit, eligible common credit and ineligible common credit, month-wise, for the whole financial year, determined as per the provisions of clause (b); CENVAT credit annually attributed to eligible credit, ineligible credit, eligible common credit and ineligible common credit for the whole of financial year, determined as per the provisions of clause (c); amount determined and paid as per the provisions of clause (d), if any, with the date of payment of the amount; interest payable and paid, if any, determined as per the provisions of clause (e); and credit determined and taken as per the provisions of clause (f), if any, with the date of taking the credit.]
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CA VISHAL BHATTAD
09850850800
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