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FINAL COURSE STUDY MATERIAL

PAPER 8

INDIRECT TAX LAWS [Relevant for May, 2015 and November, 2015 Examinations]

As amended by the Finance (No.2) Act, 2014

MODULE – 1: CENTRAL EXCISE

BOARD OF STUDIES THE INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA

© The Institute of Chartered Accountants of India

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This Study Material has been prepared by the faculty of the Board of Studies. The objective of the Study Material is to provide teaching material to the students to enable them to obtain knowledge and skills in the subject. In case students need any clarifications or have any suggestions to make for further improvement of the material contained herein, they may write to the Director of Studies.

All care has been taken to provide interpretations and discussions in a manner useful for the students. However, the Study Material has not been specifically discussed by the Council of the Institute or any of its Committees and the views expressed herein may not be taken to necessarily represent the views of the Council or any of its Committees.

Permission of the Institute is essential for reproduction of any portion of this material.

© THE INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA

All rights reserved. No part of this book may be reproduced, stored in retrieval system, or transmitted, in any form, or by any means, electronic, mechanical, photocopying, recording, or otherwise, without prior permission in writing from the publisher.

Edition : November, 2014

Website : www.icai.org

Department/ : Board of Studies Committee

E-mail : [email protected]

ISBN No. :

Price :

Published by : The Publication Department on behalf of The Institute of Chartered Accountants of India, ICAI Bhawan, Post Box No. 7100, Indraprastha Marg, New Delhi-110 002, India.

Typeset and designed at Board of Studies.

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SYLLABUS

PAPER 8 : INDIRECT TAX LAWS (One paper – Three hours – 100 marks)

Level of Knowledge: Advanced knowledge

Objectives:

(a) To gain advanced knowledge of the principles of the laws relating to central excise, service tax and customs

(b) To acquire the ability to apply the knowledge of the provisions of the above-mentioned laws to various situations in actual practice

Contents:

Section A: Central Excise (25 marks)

Central Excise Act, 1944 and the Central Excise Tariff Act, 1985

Section B: Service Tax (50 marks)

Law relating to service tax as contained in the Finance Act, 1994 as amended from time to time

Section C: Customs and Foreign Trade Policy (25 marks)

Customs Act, 1962, Customs Tariff Act, 1975 and Foreign Trade Policy to the extent relevant to the Customs Law

Note – If new legislations are enacted in place of the existing legislations relating to central excise, customs and service tax, the syllabus will accordingly include such new legislations in place of the existing legislations with effect from the date to be notified by the Institute.


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A WORD ABOUT STUDY MATERIAL

In the scheme of our national economy, ‘Indirect Taxes’ have gained considerable importance over the years. In the fiscal legislations, augmented weightage is being given to the levy of indirect taxes as it constitutes a major source of revenue. Tax management and planning, especially in the corporate sector, necessarily entails a great degree of indirect taxes management and chartered accountants are expected to advise clients and organizations in this area of tax management. Accordingly, adequate emphasis has been given to this subject in the chartered accountancy curriculum by including a separate paper on indirect tax laws in the syllabus of the Final Course.

Paper 8: Indirect Tax Laws at Final Level has three sections namely, Section A: Central Excise, Section B: Service Tax and Section C: Customs and Foreign Trade Policy. Students are expected to acquire advanced knowledge in these indirect tax laws at Final Level.

The Study Material on Indirect Tax Laws includes laws relating to central excise, service tax and customs and provisions of foreign trade policy, to the extent relevant to customs law. For ease of handling and increased portability, this year the Study Material has been prepared in three modules. Module 1 on Central Excise has 18 Chapters; Module 2 on Service Tax has 8 Chapters and Module 3 on Customs and Foreign Trade Policy has 16 Chapters. The subject matter of the Study Material is based on the law as amended by the Finance (No. 2) Act, 2014 and notifications/circulars issued till 30.04.2014 as also the Budget Notifications.

Though the law is vast, an attempt has been made to make the Study Material simple yet comprehensive. The Chapters have been organized in a logical sequence so as to facilitate easy understanding of the law. Students may keep in mind that though the Study Material covers the entire syllabus, it is of utmost importance to refer to the Bare Acts and related Rules in addition to this Study Material. This would be helpful for solving problems, answering a variety of questions and remembering sections and rules.

The main features of this edition of the Study Material are -

• The amendments made by the Finance (No.2) Act, 2014, which have been incorporated in the Study Material are tabulated chapter-wise with the corresponding section/rule reference and given as “Significant Additions/Amendments in this Edition” in each of the three Modules.

• In the Study Material, the latest amendments i.e., the amendments made by the Finance (No.2) Act, 2014 and notifications and circulars issued between 1.5.2013 and 30.4.2014 as also the Budget Notifications are given in bold and italics.


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• To enable the students to effectively prepare this paper and face the examination with confidence, an Eight Step Study Plan is included in the Study Material.

• Certain provisions of the Central Excise, Customs and Service Tax laws contain references to specific provisions of the Companies Act, 1956. The corresponding sections under the Companies Act, 2013 have been given as a footnote at the relevant places in this Study Material solely for the information of the students, since the said indirect tax laws are yet to be amended to incorporate references to the sections under the Companies Act, 2013.

• Feedback form is given in the Study Material. Students are encouraged to give their feedback/suggestions.

In India, tax legislations undergo frequent amendments, both at the statutory and judicial fronts, every year. Students are advised to update themselves regularly with such amendments. The annual publications brought out by the Board of Studies namely, “Supplementary Study Paper” and “Select Cases in Direct and Indirect Tax Laws” would be helpful in keeping abreast with the statutory and judicial developments respectively. Whereas the “Supplementary Study Paper” contains the amendments made by the annual Finance Act in direct and indirect tax laws, “Select Cases in Direct and Indirect Tax laws” is a compilation of significant judicial rulings of the Supreme Court and High Courts. The October, 2014 editions of these two publications are relevant for students appearing in May, 2015 and November, 2015 examinations.

No efforts have been spared in making this Study Material lucid and student friendly. Nevertheless, students are requested to send their suggestions/feedback on how to make the Study Material more useful to them in the Feedback Form given in the Study Material. They may also write to Faculty, Indirect Taxes at [email protected] and [email protected].

Happy Reading and Best Wishes!


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SIGNIFICANT ADDITIONS/AMENDMENTS IN THIS EDITION

The Study Material has been updated with the amendments made vide the Finance (No.2) Act, 2014 and significant notifications/circulars issued between 01.05.2013 and 30.04.2014 as also the Budget Notifications. Such amendments have been given in bold italics in the respective Chapters for the convenience of students. The following table gives a summary of the various changes/amendments made in different Chapters of this Module of the Study Material:

S.No. Particulars Section/Rule/Notification/Circular

Chapter No.

I. Central Excise Act, 1944 1. Two additional designations introduced in

departmental administration structure Section 2(b)] Chapters 1

& 16 2. Submission of Information Return to prescribed

authority by assessee or specified authorities New section 15A

Chapter 5

3. Penalty for failure to furnish information return New section 15B

4. Customs and Central Excise Settlement Commission rechristened as Customs, Central Excise and Service Tax Settlement Commission

Sections 31(g) and 32(1)

Chapter 18 5. Cases involving non-filing of returns eligible for

settlement Section 32E

6. Concealment under section 32O is the concealment made from Central Excise Officer

Section 32O(1)(i)

7. Discretionary powers of CESTAT to refuse admission of appeals enhanced from ` 50,000 to ` 2,00,000

Section 35B Chapter 10

8. Board empowered to condone delay upto 30 days for review by the Committee of Chief Commissioners/Commissioner

Section 35E

9. Fixed pre-deposit of 7.5%/10% of duty or penalty mandatory for filing appeal before Commissioner (Appeals) and CESTAT

Section 35F

10. Interest on delayed refund of amount deposited under section 35F (pre-deposit)

Section 35FF

11. Determination of taxability or excisability of goods is determination of a question having a relation to rate of duty

Section 35L


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II. Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000

12. Transaction value to be the assessable value when excisable goods are sold at a price below manufacturing cost and profit without any additional consideration

Rule 6 Chapter 3

13. Amendment in rules 8, 9 and 10 of Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000

Rules 8,9,& 10

III. CENVAT Credit Rules, 2004 14. Place of removal defined in the rules Rule 2(qa)

Chapter 4

15. Duty leviable on transaction value to be paid on removal of capital goods as waste and scrap

Rule 3(5A)

16. CENVAT credit taken on input services to be reversed if duty paid on final product remitted

Rule 3(5C)

17. Amount payable under sub-rules (5), (5A), (5B) and (5C) of rule 3 to be paid on or before the 5th day of the following month by utilizing CENVAT credit or otherwise

Explanation 1 to rule 3(5C)

18. Failure to reverse the credit taken on inputs and input services used in goods on which duty is ordered to be remitted also to attract recovery provisions under rule 14 [Explanation 2 to rule 3(5C)]

Explanation 2 to rule 3(5C)

19. Credit on inputs and input services to be availed within 6 months of the date of invoice

Rule 4(1) & Rule 4(7)

20. Payment of value of input service to service provider no more a pre-requisite for availing credit in case of service tax paid under full reverse charge

Rule 4(7)

21. Condition of reversal of credit on failing to pay value of input service and service tax within 3 months of the date of invoice not to apply in case of full reverse charge

Rule 4(7)

22. Procedure, safeguards, conditions and limitations prescribed for refund of CENVAT credit to service providers covered under partial reverse charge

Notification No. 12/2014 CE(NT) dated 03.03.2014

23. Credit reversed on account of non-receipt of export proceeds within the specified or extended period can be re-availed if export proceeds are received

Rule 6(8)


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within one year from the specified or extended period

24. Good cleared against specified duty credit scrips not to be treated as exempted goods

Circular No. 973/07/2013 CX dated 04.09.2013

25. Provisions relating to distribution of credit in case of input service distributor amended

Rule 7

26. Manner of distribution of common input service credit under rule 7(d) of the CENVAT Credit Rules, 2004 clarified

Circular No. 178/04/2014 ST dated 11.07.2014

27. Importer required to file quarterly return Rule 9(8) 28. Inter-unit transfer of CENVAT credit in LTUs

disallowed Rule 12A(4)

29. Rule 12AAA of CENVAT Credit Rules, 2004 substituted with new rule

Rule 12AAA

IV. Central Excise Rules, 2002 30. E-payment of excise duty mandatory for all

assessees irrespective of the duty paid during previous year

New rule 8(1B)

Chapter 5

31. Default in payment of duty to attract a penalty of 1% per month or part thereof on the unpaid duty

Rule 8(3A)

32. Importer issuing CENVATable invoices now required to obtain registration

Rule 9

33. Rule 12CCC of Central Excise Rules 2002 substituted with new rule-restriction to be imposed, facilities to be withdrawn and procedure for the same amended

Rule 12CCC

V. Others 34. Benefit of advance ruling extended to resident

private limited companies Notification No. 18/2014 CE(NT) dated 11.07.2014

Chapter 15

35. Clarification regarding levy of Education Cess and Secondary and Higher Education Cess on other cesses


Chapter 1


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36. Unregistered premises used solely for affixing lower ceiling prices on pharmaceutical products to comply with DPCO, 2013 exempted from obtaining central excise registration


Chapter 5

37. Facility of removal without payment of duty extended to excisable goods stored and sold from Duty Free Shops at International Airports


Chapter 12

38. Extension of warehousing and acceptance of Letter of undertaking in place of Bank Guarantee for export warehousing



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STUDY PLAN – KEY TO EFFECTIVE LEARNING

In the scheme of our national economy, ‘Indirect Taxes’ have gained considerable importance over the years. Tax management and planning, especially in the corporate sector, necessarily entails a great degree of indirect taxes management and Chartered Accountants are expected to advise clients and organizations in this area of tax management. Considering the significance of the indirect taxes, a complete paper on indirect tax laws is included in the Chartered Accountancy curriculum at the Final Level. Indirect Tax laws are amended by annual Finance Acts as also with the numerous notifications issued frequently. Further, decisions on indirect tax issues are pronounced by Supreme Court and High Court interpreting the various provisions of law. In addition, various circulars are also issued to clarify the position of law. All this makes Indirect Tax Laws as one of the most dynamic subject of the CA curriculum. Therefore, it becomes imperative for you to prepare this paper in a methodical manner by chalking out a detailed Study Plan. You should try your level best to stick to the Study Plan as that will help you achieve the desired goals. An Eight Step Study Plan is suggested hereunder for the preparation of Paper 8: Indirect Tax Laws (IDTL):- Step – 1: Know your syllabus (i) First and the foremost, you should go through the syllabus of the paper carefully. The objective of the paper is to test whether students have acquired an advanced knowledge of the principles of the laws governing central excise, service tax and customs and the ability to apply such knowledge to various situations in actual practice. The syllabus is divided into three sections namely, Section A: Central Excise, Section B: Service Tax and Section C: Customs and Foreign Trade Policy. (ii) The division of marks is 25 for Central Excise, 50 for Service Tax and 25 for Customs and Foreign Trade Policy. The individual weightage of each of the three sections should be kept in mind while allocating the total earmarked time for the preparation of IDTL between its three sections - Central Excise, Service Tax and Customs and Foreign Trade Policy. (iii) While entire legislations relating to central excise duty, service tax and customs duty have been covered in the syllabus, Foreign Trade Policy only to the extent relevant to the Customs Law has been included in the syllabus.

Step - 2: Get familiar with the knowledge inputs provided by the Board of Studies (BoS) After going through the syllabus of the paper, the next step is to get familiar with the various publications/knowledge inputs provided by the Board of Studies with respect to IDTL. The following publications of the BoS need to be referred to while studying for this paper: (i) Study materials are the basic knowledge material provided with an aim to build a strong

conceptual base by explaining the complex tax laws in a lucid manner. The Study


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Materials are updated every year with the provisions of the relevant Finance Act and the relevant notifications and circulars.

Practice Manual contains a variety of questions and problems in each topic for the better understanding and application of the concepts explained in the Study Material. The Practice Manual is also updated regularly with the provisions of the relevant Finance Act and the relevant notifications and circulars.

(ii) Supplementary Study Paper explains the amendments made by the annual Finance Act in IDTL as well as the significant circulars and notifications issued during last year. It is divided into chapters so that you can co-relate the same with the Study Material. Amendments are explained with the help of illustrations, wherever possible. It is especially relevant in case you have the earlier edition of the IDTL Study Material. However, even if you have the latest edition of the IDTL Study Material you are still advised to read the Supplementary Study Paper for a better understanding of the statutory amendments.

(iii) Select Cases in Direct and Indirect Tax Laws is a compilation of significant recent judicial decisions of Supreme Court and High Courts which, when read in conjunction with the Study Material, will enable you to appreciate the significant issues involved in interpretation and application of tax laws. This is also an annual publication.

(iv) The Chartered Accountant Student is the monthly Students’ Journal which contains regular academic updates on indirect taxes.

(v) Revision Test Paper helps the students to assess their preparation for the examination as also updates them with the latest statutory and judicial developments (which are applicable for the examination) in the area of central indirect tax legislations.

(vi) Suggested Answers contain the questions set at the CA examination, as well as the suggested answers to such questions. The answers are prepared with a view to assist the students in their education and generally represent the ideal manner in which questions should be answered. However, since they are prepared as per the provisions of law applicable for the respective examination, subsequent amendments made in the law should also be taken into consideration, while referring to the said answers.

(vii) Mock Test Papers are prepared to help the students assess their preparation under examination conditions. The pattern of setting the questions in the Mock Test Paper is the same as that of the CA Final Examination.

Step - 3: Find out about the applicability of the Finance Act relevant for your examination The Finance Act of a particular year would be applicable for the May and November examination of the next year. For instance, the amendments made by the Finance (No. 2) Act, 2014 would be applicable for May, 2015 and November, 2015 examinations.


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You are expected to be updated with the notifications, circulars and other legislative amendments made upto 6 months prior to the examination. For May examination, such amendments made upto 31st October of the previous year would be relevant and for November examination, such amendments made upto 30th April of that year would be relevant. The following table depicts the applicability of the Finance Acts and the notifications/circulars for the May and November, 2015 examination:

May, 2015 Examination Law as amended by the Finance (No. 2) Act, 2014 and Notifications and circulars issued till 31.10.2014

November, 2015 Examination Law as amended by the Finance (No. 2) Act, 2014 and Notifications and circulars issued till 30.04.2015

Step - 4: Make a comprehensive study plan Planning your studies well definitely helps in preparation of any paper. Making a detailed study plan with appropriate time allocation for all the topics will facilitate in completing your studies (along with revision) in time. Your planning for the IDTL should be such that you go through the paper at least thrice before the examination. Since in IDTL, the examination paper has a mix of computational and theoretical questions, you should do written practice of good number of both theory and computational questions on each topic. Therefore, at the time of planning the study for IDTL you should factor in the time for written practice. Considering that advanced knowledge is expected from the students at final level, you should start your studies from the day you receive the course material. Always remember that you will be able to reap the benefits of a study plan only if you stick to your daily targets. Following your daily schedule religiously will lead to completing your studies well in time. You may study at least two hours a day so that you are able to complete first round of entire study and two rounds of revision well before the examination. Your first round of study should be completed well in advance, that is at least 3 months before your exam. This is a broad based planning about how to study but you should also pay attention to specific time planning for each and every chapter in detail - when to start and by what time the chapter should be completed. Keep some extra time as assimilation of the chapters may take more time than expected or planned. Your second round of study i.e., your first revision should be over before one month of your exam. You should revise the second time in the last month before exam so that you are in a position to remember all the concepts. These three rounds of study will help in boosting the confidence level for the subject and will make you mentally prepared to appear in the examination.


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Step - 5: Start the study for each section of Paper 8: Indirect Tax Laws 1. Study from the relevant Study Material for your examination as the Study Material which

would have been given to you at the time of registration for Final Course may not be applicable for your examination. For instance, you should study from November, 2014 Edition of the Study Material which is relevant for May, 2015 and November, 2015 examinations. Also, note that the Study Material relevant for May, 2015 and November, 2015 examinations is updated with the amendments made by notifications/circulars issued till 30.04.2014 as also the budget notifications. However, for May, 2015 examination, amendments made till 31.10.2014 are relevant. Therefore, amendments made between 01.05.2014 and 31.10.2014 will be compiled and given as Statutory Update in the RTP for May, 2015 examination. Similarly for November, 2015 examination, amendments made till 30.04.2015 will be relevant and therefore, the amendments made between 01.05.2014 and 30.04.2015 will be compiled and given as Statutory Update in the Revision Test Paper for the November, 2015 examination.

2. The requirement of advanced knowledge in IDTL implies that you have to be able to perfect your logical and analytical reasoning as also the skills of interpreting intricacies and implications of relevant legal provisions in given problems in a convincing manner. You have to look at the provisions and their application from several angles. You should prepare yourself to attempt complex questions and problems based on recent amendments, case laws and application of provisions of law.

3. To achieve the above, you should go through each chapter meticulously to understand the concepts covered therein. A word of advice - keep the Bare Acts and the Relevant Rules of the relevant statutes by your side when you read the Study Material and Practice Manual. This way you will become conversant with the sections of the Bare Acts and the related Rules, and understand their implications properly.

4. An important thing to remember here is that unlike income-tax, which is governed majorly by the Act, indirect tax laws are Rule based legislations. Therefore, while preparing for IDTL, you should lay adequate emphasis on Rules as well.

5. Prepare short summaries of each chapter and try to include all the key points of the chapter in the said summary. These summaries would be very useful for quick revision at the time of examination.

6. Work out computational problems from the corresponding chapter of Practice Manual after you complete the theory portion of a chapter from the Study Material.

7. Even if you study from the latest Study Material you should go through the Supplementary Study Paper [October, 2014 Edition] to update yourself with the amendments made by the Finance (No. 2) Act, 2014 and the notifications/circulars issued during the last one year as also the Budget notifications. While in the Study Material the amendments are incorporated at the relevant places without any significant


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discussion on the old provisions or the reason of introducing the amendments, the same are dealt in detail in the Supplementary Study Paper. Therefore, in order to get a complete understanding of the amendments, you are advised to go through the Supplementary Study Paper.

8. Go through the publication ‘Select Cases in Direct and Indirect Tax Laws’ [October, 2014 Edition] to apprise yourself with the latest Supreme Court and High Court decisions. You may also regularly consult leading tax journals to get an update of other latest Supreme Court and High Court cases. Further, you should also refer to the case laws reported under Judicial Update in the RTP for the relevant examination.

9. Another thing to be kept in mind while studying for this paper is that indirect tax laws are amended very frequently by notifications and various circulars clarifying the position of law are issued from time to time. Therefore, you must pay due attention to the compilation of amendments given in the Revision Test Paper of your examination.

10. Ensure your preparation is not lopsided and full justice is done to all the laws covered in the paper. You are advised to go for comprehensive study instead of selective study.

11. Every day when you start a new topic, you should first go through the concepts which you have read last day and then start learning new concepts. Remember, out of sight, out of mind.

Step - 6: Revision before examination and assessment of your preparation As discussed earlier, you should complete two rounds of revision before your examination. You should go through the entire curriculum again during your first revision. This will facilitate the strengthening of concepts and will also lead to better retention of the various provisions. After you complete your first revision, you should go through the Statutory and Judicial Updates given in the RTP relevant for your examination. For assessing your preparation status after first revision, you should attempt solving the questions given in Revision Test Papers (RTP) on your own and then compare your answers with the answers given therein. The questions are an appropriate mix of case studies based on recent judicial pronouncements; amendments based questions, computational problems and theoretical questions involving application of provisions. Needless to say, after identifying the mistakes made by you while solving the questions of the RTP, you should adjust your second revision plan appropriately to make time for strengthening those gray areas. Your second round of revision should ideally start in the last month of the examination. After you finish the revision of the entire curriculum second time, you should once again check your preparation status with the help of Mock Test Paper of the IDTL. You should attempt the Mock Test Paper with sincerity as your performance in the Mock Test Paper will actually give you an insight of your preparation level. Step - 7: The day before examination On the day before examination, you should not go into much detail due to time constraints. Just go through:- • Summary of each chapter.


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• Gist of important/latest Supreme Court decisions laying down important principles of law or High Court rulings in each chapter.

• Select computational questions and the treatment of significant issues. • Do not burn the midnight oil. Have adequate sleep. Step - 8: Facing the examination a) Answer the questions with due emphasis on provisions of the law - Support your

answers/conclusions with proper reasoning. Answers should be based on relevant legal provisions or judicial decisions rather than a mere common sense and/or guess work.

b) Quote relevant section numbers/case laws – Quoting section numbers would definitely add value to your answers. However, it is better not to quote than to misquote a section number/case law.

c) Give clear assumptions - Since the provisions of tax laws are subject to different interpretations by various courts, there are possibility of alternate views on the same issue. Sometimes, there may be different points of view even on procedural law based provisions. As a student, you should state your view/assumption clearly and proceed to answer the question on that basis.

d) Answer in commensuration with the marks carried by the question - You should determine the length of your answer having regard to the marks allotted to the question. Do not have the misconception that lengthy answers fetch more marks.

e) Do not use short forms – Use of short forms like CEO, CCR, AC, DC should be avoided. Write the full names of the statutes, like, ‘Central Excise Act, 1944’ or ‘Finance Act, 1994’.

f) First attempt the question which you know best – This will boost your confidence while attempting the remaining questions and create a positive impression of your level of knowledge on the examiner.

g) Present your answers well - Underline important points, case laws and section references as and when you answer each question. Also, make sure that your handwriting is neat and legible. Answer all parts of a question one after the other. Do not answer different parts of the same question at different places.

h) Follow instructions given on the cover page of answer paper - Pay heed to the instructions given on the cover page of the answer paper.

To conclude Last but not the least remember that studies will not be an arduous task if they are approached with a positive attitude and pursued with interest. If you enjoy your study, your learning will be permanent and profound. A word of caution – do not try to mug up the provisions but understand the underlying concepts. Remember, strong conceptual clarity is the foundation for building a potent knowledge base. Always bear in mind that your own resolution to succeed is more important than any other. Therefore, give your hundred percent and there will be no looking back. The above steps have been presented in a figure at the next page.


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CONTENTS

MODULE – 1: CENTRAL EXCISE Chapter 1 – Basic Concepts Chapter 2 – Classification of Excisable Goods Chapter 3 – Valuation of Excisable Goods Chapter 4 – CENVAT Credit Chapter 5 – General Procedures under Central Excise Chapter 6 – Export Procedures Chapter 7 – Bonds Chapter 8 – Demand, Adjudication and Offences Chapter 9 – Refund Chapter 10 – Appeals Chapter 11 – Remission of Duty and Destruction of Goods Chapter 12 – Warehousing Chapter 13 – Exemption Based on Value of Clearances (SSI) Chapter 14 – Notifications, Departmental Clarifications and Trade Notices Chapter 15 – Advance Ruling Chapter 16 – Organisation Structure of the Excise Department Chapter 17 – Excise Audit Chapter 18 – Settlement Commission

MODULE – 2 : SERVICE TAX Chapter 1 – Basic Concepts of Service Tax Chapter 2 – Place of Provision of Service Chapter 3 – Point of Taxation Chapter 4 – Valuation of Taxable Service Chapter 5 – Exemptions and Abatements Chapter 6 – Service Tax Procedures Chapter 7 – Demand, Adjudication and Offences Chapter 8 – Other Provisions


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MODULE – 3: CUSTOMS AND FOREIGN TRADE POLICY Chapter 1 - Basic Concepts Chapter 2 - Levy of and Exemptions from Customs Duty Chapter 3 - Types of Duty Chapter 4 - Classification of Goods Chapter 5 - Valuation under The Customs Act, 1962 Chapter 6 - Administrative Aspects of Customs Act, 1962 Chapter 7 - Importation, Exportation and Transportation of Goods Chapter 8 - Warehousing Chapter 9 - Demand and Appeals Chapter 10 - Refund Chapter 11 - Duty Drawback Chapter 12 - Provisions Relating To Illegal Import, Illegal Export, Confiscation,Penalty &

Allied Provisions Chapter 13 - Settlement Commission Chapter 14 - Advance Ruling Chapter 15 – Miscellaneous Provisions Chapter 16 – Foreign Trade Policy


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DETAILED CONTENTS: MODULE – 1

CENTRAL EXCISE

CHAPTER 1 – BASIC CONCEPTS

1.1 Constitution of India ................................................................................................ 1.1 1.2 Direct and Indirect taxes ......................................................................................... 1.2 1.3 What is excise duty ................................................................................................. 1.2 1.4 History of Central Excise Law ................................................................................. 1.4 1.5 Body of Central Excise Law .................................................................................... 1.4 1.6 Definitions under Excise Law .................................................................................. 1.6 1.7 Levy and collection of duty ...................................................................................... 1.7 1.8 Goods and Excisable goods .................................................................................... 1.8 1.9 Manufacture .......................................................................................................... 1.12 1.10 Dutiability of intermediate products and captive consumption ................................ 1.20 1.11 Dutiability of site related activities and immovable property ................................... 1.21 1.12 Whether assembly amounts to manufacture? ........................................................ 1.26 1.13 Dutiability of waste and scrap................................................................................ 1.27 1.14 Packing, labelling and branding activities .............................................................. 1.27 1.15 Can the test of change in tariff heading/sub-headings be adopted for

identifying whether a process amounts to manufacture? ....................................... 1.29 1.16 Determination of taxable event for charge of duty ................................................. 1.30

CHAPTER 2 – CLASSIFICATION OF EXCISABLE GOODS

2.1 Introduction ............................................................................................................. 2.1 2.2 Central Excise Tariff ................................................................................................ 2.1 2.3 Explanatory Notes to the HSN ................................................................................. 2.2 2.4 Interpretative Rules to First Schedule of the Central Excise Tariff ........................... 2.3 2.5 General Explanatory Notes ..................................................................................... 2.9 2.6 Additional Notes… .................................................................................................. 2.9


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2.7 Rules for Interpretation - Non Statutory Principles ................................................ 2.10 2.8 Power of Central Government to amend First and Second Schedules

of the Tariff… ........................................................................................................ 2.13 2.9 Clarifications. ........................................................................................................ 2.13

CHAPTER 3 – VALUATION OF EXCISABLE GOODS

3.1 Basis of computing duty payable ............................................................................. 3.1 3.2 Valuation under section 4 ........................................................................................ 3.4 3.3 Related persons ...................................................................................................... 3.9 3.4 Place of removal ................................................................................................... 3.12 3.5 Price is the sole consideration............................................................................... 3.13 3.6 Ingredients of transaction value ............................................................................ 3.13 3.7 Situations where transaction value does not apply ................................................ 3.15 3.8 Central Excise Valuation (Determination of Price of

Excisable Goods) Rules, 2000 .............................................................................. 3.16 3.9 Analysis of the Valuation Rules ............................................................................. 3.19 3.10 Valuation under different circumstances ................................................................ 3.28 3.11 Maximum Retail Price (MRP) based valuation [Section 4A] ................................... 3.31

CHAPTER 4 – CENVAT CREDIT

4.1 Introduction ............................................................................................................. 4.1 4.2 Rule 2 - Definitions ................................................................................................. 4.1 4.3 Rule 3 - CENVAT Credit .......................................................................................... 4.7 4.4 Rule 4 – Conditions for allowing CENVAT credit ................................................... 4.14 4.5 Job Work provisions [Rules 4(5) and 4(6)]............................................................. 4.17 4.6 Rule 5 - Refund of CENVAT credit ........................................................................ 4.18 4.7 Rule 5A – Refund of CENVAT credit to units in specified areas ............................ 4.20 4.8 Rule 5B - Refund of CENVAT credit to service providers providing

services taxed on reverse charge basis ................................................................ 4.21 4.9 Rule 6 – Obligation of manufacturer or producer of final products and

a provider of output service ................................................................................... 4.22 4.10 Rule 7 – Manner of distribution of credit by input service distributor ...................... 4.31 4.11 Rule 7A – Distribution of credit on inputs by the office or any other

premises of output service provider ....................................................................... 4.34


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4.12 Rule 8 – Storage of inputs outside the factory of the manufacturer ........................ 4.34 4.13 Rule 9 - Documents and accounts ......................................................................... 4.34 4.14 Rule 9A - Information relating to principal inputs ................................................... 4.38 4.15 Rule 10 - Transfer of credit ................................................................................... 4.38 4.16 Rule 10A - Transfer of CENVAT credit of SAD from one factory to another ........... 4.39 4.17 Rule 11 - Transitional provisions ........................................................................... 4.39 4.18 Rule 12 - Special dispensation in respect of inputs manufactured in factories

located in specified areas of North East region, Kutch District of Gujarat, State of Jammu & Kashmir and State of Sikkim .................................................... 4.40

4.19 Rule 12A - Procedures and facilities for the Large Tax Payer ................................ 4.41 4.20 Rule 12AAA – Power to impose restrictions in certain types of cases .................... 4.43 4.21 Rule 13 – Power of Central Government to notify goods for

deemed CENVAT credit ........................................................................................ 4.43 4.22 Rule 14 – Recovery of CENVAT credit wrongly taken

and utilised or erroneously refunded ..................................................................... 4.43 4.23 Rule 15 - Confiscation and Penalty ....................................................................... 4.44 4.24 Rule 15A – General Penalty .................................................................................. 4.44 4.25 CENVAT credit need not be reversed where the manufacturing

process is held as not chargeable to excise duty by the Courts [Section 5B] ........ 4.44

CHAPTER 5 – GENERAL PROCEDURES UNDER CENTRAL EXCISE

5.1 Introduction ............................................................................................................. 5.1 5.2 Removal of excisable goods [Rule 4] ...................................................................... 5.2 5.3 Date for determination of duty and tariff valuation [Rule 5] ...................................... 5.5 5.4 Assessment [Rules 6 & 7] ....................................................................................... 5.5 5.5 Manner of payment [Rule 8] ............................................................................... ...5.10 5.6 Registration [Rule 9] ............................................................................................. 5.20 5.7 Records ................................................................................................................ 5.24 5.8 Electronic maintenance of records and preparation

of returns and documents...................................................................................... 5.26 5.9 Invoicing [Rule 11] ................................................................................................ 5.27 5.10 Returns ................................................................................................................. 5.30 5.11 Job work in article of jewellery [Rule 12AA] ........................................................... 5.36


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5.12 Maintenance of records & payment of duty by the independent weaver of unprocessed fabrics [Rule 12C] ........................................ 5.39

5.13 Power to impose restrictions in certain types of cases [Rule 12CCC] .................... 5.39 5.14 Liability of the merchant manufacturer to comply with the

central excise procedures [Rule 12D] .................................................................... 5.42 5.15 Special procedure for payment of duty [Rule 15] ................................................... 5.42 5.16 Return of duty paid goods to the factory [Rule 16] ................................................. 5.42 5.17 Removal of goods for job work etc. [Rule 16A] ...................................................... 5.43 5.18 Special procedure for removal of semi-finished goods for certain

purposes [Rule 16B] ............................................................................................. 5.43 5.19 Special procedure for removal of excisable goods for carrying out

certain processes [Rule 16C] ................................................................................ 5.44 5.20 Removal of goods by a 100% Export Oriented Undertaking for Domestic

Tariff Area [Rule 17] .............................................................................................. 5.44 5.21 Powers of Central Excise Officers ......................................................................... 5.45 5.22 Samples ................................................................................................................ 5.47 5.23 Large Tax Payer Units .......................................................................................... 5.47

CHAPTER 6 – EXPORT PROCEDURES

6.1 Introduction ............................................................................................................. 6.1 6.2 Export without payment of duty [Rule 19] ................................................................ 6.1 6.3 Export to Bhutan without payment of duty ............................................................. 6.11 6.4 Export procedure .................................................................................................. 6.15 6.5 Procedure for discharge of bond or the duty liability .............................................. 6.16 6.6 Cancellation of export documents ......................................................................... 6.17 6.7 Re-entry of the goods cleared for export under bond but not actually

exported, in the factory of manufacture ................................................................. 6.18 6.8 Re-import of exported goods for repairs etc. and subsequent re-export ................ 6.18 6.9 Entry of goods in another factory of the same manufacturer for

consolidation and loading of consignment for export ............................................. 6.18 6.10 Samples of export goods....................................................................................... 6.19 6.11 Export under claim for rebate [Rule 18] ................................................................. 6.19 6.12 Miscellaneous matters .......................................................................................... 6.27


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CHAPTER 7 – BONDS

7.1 Bond ....................................................................................................................... 7.1 7.2 Types of bonds ....................................................................................................... 7.1 7.3 Guidelines for executing bonds ............................................................................... 7.2 7.4 Bonds for provisional assessment ........................................................................... 7.2 7.5 Stamps on bond ...................................................................................................... 7.3 7.6 Execution of Bond by Government Undertakings or Autonomous

Corporations ........................................................................................................... 7.3 7.7 Security................................................................................................................... 7.4 7.8 Surety ..................................................................................................................... 7.4 7.9 Guarantee bond executed by bank .......................................................................... 7.5 7.10 Preservation of bond and retention of securities ...................................................... 7.5 7.11 Verification of sureties ............................................................................................. 7.5 7.12 Bond Accepting Authority ........................................................................................ 7.6

CHAPTER 8 – DEMAND, ADJUDICATION AND OFFENCES

8.1 Demand .................................................................................................................. 8.1 8.2 Adjudication ......................................................................................................... 8.10 8.3 Provisional attachment of property pending adjudication [Section 11DDA] ............ 8.11 8.4 Penalty and Confiscation ...................................................................................... 8.12 8.5 Enforcement ........................................................................................................ 8.16 8.6 Offences and Prosecution ..................................................................................... 8.19 8.7 Civil and Criminal Proceedings ............................................................................. 8.27 8.8 Recovery of sums due to Government ................................................................. 8.30 8.9 Miscellaneous ...................................................................................................... 8.32

CHAPTER 9 – REFUND

9.1 Refund of duty ........................................................................................................ 9.1 9.2 Interest on delayed refund ...................................................................................... 9.1 9.3 Theory of unjust enrichment .................................................................................... 9.2 9.4 Assessment documents to show duty payment particulars ...................................... 9.4 9.5 Time-limit for making the application for refund of duty ........................................... 9.4


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9.6 Presentation of refund claim.................................................................................... 9.5 9.7 Payment of refund ................................................................................................... 9.6 9.8 Post Audit ............................................................................................................... 9.7 9.9 Monitoring and control for timely disposal of refunds ............................................... 9.7 9.10 Provisions relating to interest on delayed refunds [Section 11BB] ........................... 9.7

CHAPTER 10 – APPEALS

10.1 Introduction ........................................................................................................... 10.1 10.2 Appellate stages ................................................................................................... 10.2 10.3 Appeals to Commissioner (Appeals) [Section 35] .................................................. 10.3 10.4 Production of additional evidence before Commissioner (Appeals) ....................... 10.4 10.5 Appeals to Appellate Tribunal ............................................................................... 10.5 10.6 Deposit of certain percentage of duty demanded or penalty imposed before filing

appeal [Section 35F] ............................................................................................. 10.9 10.7 Monetary limits for filing of appeals by the Department ....................................... 10.12 10.8 Review by Committee of Chief Commissioners and Principal Commissioner/

Commissioner [Section 35E] ............................................................................... 10.12 10.9 Revision by the Central Government [Section 35EE] ........................................... 10.14 10.10 Appeal to High Court [Section 35G] .................................................................... 10.15 10.11 Appeal to Supreme Court [Section 35L] .............................................................. 10.16 10.12 Power of CBEC to issue instructions regarding

non-filing of appeal in certain cases [Section 35R] .............................................. 10.17 10.13 Summary ............................................................................................................ 10.18

CHAPTER 11 – REMISSION OF DUTY AND DESTRUCTION OF GOODS

11.1 Statutory provisions .............................................................................................. 11.1 11.2 Procedure for destruction of goods and remission of duty ..................................... 11.2 11.3 Manner of destruction ........................................................................................... 11.3 11.4 Case laws pertaining to remission of duty ............................................................. 11.3

CHAPTER 12 – WAREHOUSING

12.1 Introduction ........................................................................................................... 12.1 12.2 Statutory provisions .............................................................................................. 12.1


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12.3 Warehousing ......................................................................................................... 12.2 12.4 Export warehousing .............................................................................................. 12.4

CHAPTER 13 – EXEMPTION BASED ON VALUE OF CLEARANCES (SSI)

13.1 Introduction ........................................................................................................... 13.1 13.2 Meaning of Small Scale Units ............................................................................... 13.1 13.3 Products covered under the SSI exemption notification ......................................... 13.1 13.4 Eligibility ............................................................................................................... 13.2 13.5 Relaxation in the duty ........................................................................................... 13.3 13.6 Availability of CENVAT credit ................................................................................ 13.3 13.7 Value of clearances to be excluded for the calculation of limit of

` 150 lakh and ` 400 lakh ..................................................................................... 13.3 13.8 Important case laws on value of clearances .......................................................... 13.5 13.9 Brand Name .......................................................................................................... 13.5 13.10 Clubbing of clearances .......................................................................................... 13.8 13.11 Case laws relating to clubbing of clearances ......................................................... 13.9

CHAPTER 14 – NOTIFICATIONS, DEPARTMENTAL CLARIFICATIONS AND TRADE NOTICES

14.1 Power of the Central Government to make rules ................................................... 14.1 14.2 Power of the Central Government to empower Central Excise Authorities ............. 14.5 14.3 Emergency power of the Central Government under Central Excise

Tariff Act, 1985 to increase the duty ...................................................................... 14.5 14.4 Exemption notifications in central excise ............................................................... 14.6 14. 5 Publication of rules and notifications and laying of rules before

Parliament [Section 38] ......................................................................................... 14.8 14.6 Effect of amendments, etc., of rules, notifications or orders [Section 38A] ............ 14.8 14.7 Departmental circulars and trade notices in central excise .................................... 14.9 14.8 Binding nature of Board circulars .......................................................................... 14.9 14.9 Can Departmental Authorities of one region refuse to accept

a circular issued by another region? .................................................................... 14.10 14.10 Can Departmental circulars be inconsistent with the law? ................................... 14.10 14.11 Can a Board circular be contrary to a Tribunal decision? .................................... 14.10 14.12 Date from which Board circulars are effective ..................................................... 14.10


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CHAPTER 15 – ADVANCE RULING

15.1 Definitions ............................................................................................................. 15.1 15.2 Procedure for application for Advance Ruling ........................................................ 15.3 15.3 Constitution of Authority for Advance

Ruling (Central Excise, Customs and Service tax) ................................................ 15.4 15.4 Procedure to be followed by Authority for Advance Ruling (Central Excise,

Customs and Service tax) on receipt of application [Section 23D] ......................... 15.4 15.5 Important judgements with regard to Advance Rulings .......................................... 15.5

CHAPTER 16 – ORGANISATION STRUCTURE OF THE EXCISE DEPARTMENT

16.1 Organisation Structure .......................................................................................... 16.1 16.2 Administrative Set Up ........................................................................................... 16.3

CHAPTER 17 – EXCISE AUDIT

17.1 Audit under Central Excise Act, 1944 .................................................................... 17.1 17.2 Audit by the Central Excise Department ................................................................ 17.3 17.3 Excise Audit 2000 ................................................................................................. 17.4 17.4 Central Excise Receipt Audit [CERA] .................................................................... 17.7

CHAPTER 18 – SETTLEMENT COMMISSION

18.1 Introduction ........................................................................................................... 18.1 18.2 Salient features of Settlement Commission ........................................................... 18.1 18.3 Categories of cases that cannot be settled ............................................................ 18.3 18.4 Procedure to be followed by the Settlement Commission [Section 32F] ................ 18.4 18.5 Bar on subsequent application for settlement in

certain cases [section 32-O] ......... ………………………………………………………..18.6 18.6 Important judgements ...... ………………………………………………………………..18.6
