guidance note on excise
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1
Guidance Note on Excise
2
Index
S. No. Contents Page
No.
1. Objective 5-
6
2. Claim of Cenvat on Input 7-11
3. Payment of Excise Duty 12-15
On Dispatches
Personal Ledger Account
4. Maintenance of Records 16-
21
Daily Stock Register (R.G.-1)
Sample Issued
3
Index
S. No. Contents Page No.
Goods Received as Sales Return
5. Job Work 22-26
Goods Sent for job work
Goods received for Job Work
4
Index
S. No. Contents Page
No.
6. Reconciliation between Accounts 27-27
& Excise
7. Export & Deemed Export Sales 28-28
8. Statutory Requirements 29-41
9. Flow Charts 42-44
5
1. Objective
1.1 Ensure that
• Proper records are maintained and
systems & procedures are being followed in
accordance with the provisions of The
Excise Act, 1944 & Rules there under.
• Funds are not blocked in the Personal
Ledger Account and proper claim has been
made for CENVAT.
6
1.2 Identify the bottlenecks in the above
procedure & analyze the reasons
there of.
7
2. Claim of CENVAT on Input
2.1 Ensure that
• All the Excisable materials received in the factory
premises have been entered in the CENVAT
register.
• Proper CENVAT have been claimed on the same
day of preparation of Goods Inward Note.
• CENVAT is claimed for correct value.
• CENVAT is claimed on the Original CENVAT
Document.
8
• Credit is not taken twice on same invoice.
• Credit is not taken without receipt of
material.
• Credit is not taken on forged and fake
documents.
2.2 Verify
• CENVAT documents i.e. transporter copy of
invoice, Bill of Entry etc. with RG 23A and C
Part-II.
2.3 Ensure that
• CENVAT credit has been reversed for
Rejection/shortage of raw material received.
9
• CENVAT credit on capital goods has
been taken upto 50% in current financial year in
which Capital goods are received and balance
50% in any subsequent financial year.
• Upto 100% CENVAT credit has been
availed on capital goods purchased & sold in the
same year of receipt .
• 100% CENVAT credit on the additional
duty leviable under Section 3(5) of the Customs
Tariff Act in respect of Capital Goods has been
availed on receipt of such Capital Goods in the
factory,
10
• Credit of CENVAT has been claimed by the
assessee properly on input directly obtained
by the job worker instead of assessee.
• There is proper control over pending 50 %
CENVAT credit on capital goods.
• Credit of CENVAT has been claimed
correctly on input received as captive
consumption.
• CENVAT credit has been taken on all inputs
including samples / free of cost material
received.
11
2.4 Credit on Service Tax
• Ensure that
• After utilizing credit of Service tax for payment of Service tax
liability, unutilized credit of Service tax should be utilized for
payment of Excise Duty on monthly basis.
• A proper detail of Service tax payable, paid & credit utilized
thereof has been prepared to keep control over service tax
credit
• Payment of education cess is made by utilization of education
cess only.
12
3. Payment of Excise Duty
3.1 On dispatches
3.1.1 Two types of excise duty is liable on the
material to be dispatched-
• Basic duty.
• Special Excise Duty.
13
3.1.2 Ensure that
• Amount payable for duty have been
adjusted
against available CENVAT credit and not
debited to Personal Ledger Account if
CENVAT credit is available.
• Valuation of material dispatched for captive
consumption has been done at current
market price or price for which material is
being sold to other customers .(As per
Notification 64/95 C.E. dated 16.03.1995)
14
3.2 Personal Ledger Account
3.2.1 Verify the
• Details of payment made in Personal Ledger
Account from Accounts Departments.
• Justification for depositing amount in Personal
Ledger Account.
3.2.2 Ensure that
• Amount has been deposited in Personal
Ledger Account on or before due dates, if
required.
15
• Payment through PLA for one calendar
month is 5th of the following month, if
payment is made by electronic mode then
6th of the following month. For month of
March duty is payable by 31st March.
3.2.3 Verify the
• Date of deposit of cheque on Treasury – 6
challan.
• If the Excise Duty is not paid by the due
date, interest is payable along with the outstanding
amount at the rate of 13% p.a. till the date of
actual payment.
16
4. Maintenance ofRecords
4.1 R.G.I- Daily stock register for finished
goods
4.1.1 Ensure that
• All finished goods have been entered in
Daily Stock Register on daily basis,with
quantity mentioned in column 3 of Daily
Stock Register with daily production
report.
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• All material dispatched have been entered
in Daily Stock Register. Verify the total of
quantity and value for a day with the
concern column of Daily Stock Register.
• A separate Daily Stock Statement is
maintained for each item.
• Goods should leave the factory after Tax
invoice is prepared.
• Tax Invoice should be prepare accordance to
Rule 11of Central Excise Rules 2002.
• Finished Goods dispatched as per Daily
Stock Register reconcile with the Gate
Records.
18
4.2 R.G.23 A & C Part II – Cenvat Register
4.2.1 Ensure that
• All the excisable Material received in the
factory premises has been entered in the
CENVAT register.
• CENVAT credit on inputs is recorded in
R.G.23A Part II on the same day of
preparation of Goods Inward Note.
• CENVAT credit on capital goods is recorded
in R.G. 23C Part II
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4.3 Preparation of INVOICES:
1. All columns with respect to sale tax particulars,
destination, mode of transport etc. should be
clearly mentioned on invoices.
2. Any alteration should be duly authorized.
3. Matching of time of removal as per invoice with
actual time as per gate records.
4. Vehicle number should be same on invoice &
gate.
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4.4 Audit of Sample Issued
4.4.1 Verify the
Record of accounts department with
records of Excise department.
4.4.2 Ensure that
• Material sent as sample is duly
approved.
• Excise duty on sample sales has
been paid.
21
4.5 Goods Received as Sales Return/
Rejection.
4.5.1 Verify
• Goods Inward Note summary for
receipt of material for rectification .
• Goods Inward Notes summary with
CENVAT register maintained by
Excise Department.
22
5. Job work5.1 Goods Sent for Job Work
5.1.1 Ensure that
Proper records have been maintained i.e.
challans under rule 4(5) (a) of The Cenvat
Credit rules, 2004 for goods sent for job
work.
5.1.2 Verify
• Excise records with store records and gate
records on sample basis.
5.1.3 Ensure that
• CENVAT credit has been the reversed if
goods are
23
5.1.4 Verify the
Quantity produced after Job work with
Returnable Gatepass Register
not received back within 180 days.
• CENVAT credit has been availed when
above said goods are received after 180
days.
• All challans for sending material have
been entered into control register.
24
• Quantity and description of material to
be send for job work has been
mentioned properly on challans
/registers
• List of material not yet received after
job work and check for delay.
• Store records for excisable material
send for job work with excise records
on sample basis.
25
5.2 Material Received for Job Work
5.2.1 Ensure
• There is proper control over material
received for job work.
5.2.2 Verify the
• Excise records with store records/ gate
records on sample basis.
5.2.3 Ensure that
• Entries for job charges receivable/
received have been passed in accounts.
26
5.2.4 Verify the
• Job work done as per Excise Department with
Accounts department.
5.2.5 Ensure that
• Amount has been debited / recovered for own
material used in job work done.
• CENVAT credit has been availed at the time of
receipt of material.
• Excise duty is paid for material removed after
job work same as final product is removed.
27
6 Reconciliation between
Accounts and Excise
Department.
6.1 Verify that
• Monthly amount of CENVAT as per Accounts
Department with Excise Department .
• Monthly reconciliation and check pending
entries.
28
7. Export & Deemed Export Sales
7.1 Ensure that
• Export sale is being made either under
rebate of duty or under bond.
• Form CT – 3 certificate has been collected
from the exporter for the deemed Export sale.
• Timely submission of ARE – 1 return as
evidence of export dispatch for each
consignment.
29
8. Statutory Requirements Obligation and Form Number
Type of Assessees Last
Date
Payment of Excise Duty in Challan
Form No.- GAR-7
All assessees (other than SSIs)
5th of every month, 6th of every month for e-payment (except in month of march), for march – By 31st of March
Payment of excise duty in
Form No.- GAR -7
Assessees availing exemption based on value of clearance (SSIs)
15th of every month, 16th of every month for e-payment (except in month of march), for march – By 31st of March
30
Monthly Return
Form No.– ER-1
All assessees(SSIs, Assessees availing area based exemption and assessees manufacturing processed yarn / unprocessed fabrics falling under chapter 50 to 55,58 & 60 of the tariff.)
10th of every month (for removal during the previous month)
Monthly Return
Form No.– ER-2
100% EOU for removals made in DTA
10th of every month (for removal during the previous month)
Quarterly Return
Form No. –ER-3
SSIs, Assessees availing area based exemption and assessees manufacturing processed yarn / unprocessed fabrics falling under chapter 50 to 55,58 & 60 of the tariff.
20th of every month following the particular quarter
31
Annual Financial Information Statement
Form No.- ER-4
All assessees (other than those who had paid less than Rs. 1 crore from PLA for the previous financial year and ordnance factories)
20th November every year (for the previous financial year)
Annual information on Principals Input
Form No.- ER-5
All assessees (other than those who had paid less than Rs. 1 crore from PLA for the previous financial year and those manufactured goods falling under specified headings)
30th April every year (for the previous financial year)
Monthly return on principal inputs
Form No.- ER-6
All assessees (other than those who had paid less than Rs. 1 crore from PLA for the previous financial year and those manufactured goods falling under specified headings)
10th of every month (for the receipts and consumption of principals inputs during the previous month)
32
Quarterly Return
Form No.- Annexure 13B in Part 7 of this Manual
All Registered Dealers 15th of the month following the particular quarter
Declaration form ( for the persons exempted from registration)
Form No.- Annexure 13B in Part 7 of this Manual
All Persons manufacturing goods which are either chargeable to nil rate of duty or fully exempted persons availing SSI exemption – If value of clearances in preceding financial year was more than Rs. 90 lakhs
For the first category, before commencement of manufacture of such goods .
For the second category , once value of clearances reaches Rs.90 lakhs
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•Penal Provisions
Grounds Provision / rules
Quantum of interest/ Penalty/ Other
• Contravention of Sec. 8 (Restriction on possession of maximum amount of excisable goods as stipulated by notification) or rule made to prohibit transit of excisable goods or specification of persons requiring registration (incl. attempt to commit / abetment)
• Evasion of duty payment (incl. attempt to commit/ abetment)
Section 9 • Imprisonment upto 7 years and fine if duty involved exceeds Rs.1 lakh
• Imprisonment for not less than 6 months when special and adequate reasons absent
• Other cases: Imprisonment upto
34
• Removal of excisable goods violating Act/ rules
• Possession, transport, deposit, concealment, sale, etc of goods liable to confiscation
• Contravention of provisions in relation to Cenvat credit
• Failure to give required information or supply of false information
3 years or fine or both• Second/ subsequent conviction under this section – Imprisonment upto 7 years and fine imprisonment for not less than 6 months when special and adequate reasons absent.
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Duty not paid, short paid, not-levied, short levied or erroneously refunded
Section 11A
• Penalty of 25% of duty if duty paid in full or in part with interest within 30 days of receipt of Show Cause Notice.
Delay in payment of duty – after expiry of 3 months from passing order demanding duty
Section 11AA
• Interest @ 15%
Delay in payment of duty Section 11AB
• Interest @ 13%
• No Interest if duty
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paid in full foregoing right t appeal when duty becomes due on issue of Order under section 37B
Duty not paid , not levied, short paid, short levied, or erroneously refunded due to fraud, collusion, willful misstatement or suppression or facts with intent to evade duty payment.
Section 11AC
• Penalty equal to duty
• 25% penalty if duty and interest within 30 days from communication of adjudication order
Interest on delayed refund
Section 11BB
• Interest @ 6% payable by Department if amount not refunded within 3 months from receipt of refunded claim
37
Interest on amounts collected in excess of duty.
Section 11DD
• Interest @ 15%
Publication of names and particulars of persons relating to nay proceedings or prosections under Central Excise Tax in public interest.
Section 37E
• No publication relating to penalty till appeal is filed/ disposed.
Failure to pay duty by due date
Rule 8
Of Central Excise Rules 2002
• Interest from first day after due date till payment of dues
• Default more than 30 days – Consignment wise payment of duty without utilizing
38
Cenvat Credit till payment of dues with interest.
• Removal of goods in contravention of Central Excise Rules / Notifications issued under such rules. • Non – accountal of excisable goods• Manufacture without applying for registration Certificate.• Contravention of any provision under Central Excise Rules / notifications issued under such rules
Rule 25
Of Central Excise Rules 2002
• Confiscation of goods
• Penalty upto duty amount or Rs. 2,000 whichever is greater
39
Possession, transport , deposit, keeping, concealing, etc of confiscable goods
Rule 26
Of Central Excise Rules 2002
• Penalty upto duty amount or Rs. 2,000 whichever is greater
Issue of excise invoice without delivery of goods or abetment in making such invoice or issue of (incl. abetment) such document by which ineligible benefit like Cenvat credit is likely to be taken or has been taken
Rule 26
Of Central Excise Rules 2002
• penalty upto such ineligible benefit or Rs. 5,000 whichever is greater
Breach of rules for which no penalty is separately provided
Rule 27
Of Central Excise Rules 2002
• Penalty upto Rs. 5,000 and confiscation of goods.
40
Recovery of Cenvat credit taken wrongly or erroneously refunded
Rule 14
Of Central Credit Rules 2004
• Interest payable along with such credit amount and provisions of section 11A and section 11AB applicable
Cenvat credit wrongly availed or in contravention of Cenvat Credit Rules, 2004 in case of inputs and capital goods
Rule 15
Of Cenvat Credit Rules 2004
• Penalty of Rs. 2,000 or upto duty amount whichever is greater and confiscation of goods
• Penalty under Section 11AC also payable if credit availed due to fraud, collusion, suppression, etc with intent to duty payment.
41
Cenvat credit wrongly availed or in contravention of Cenvat Credit rules, 2004 in case of input services
Rule 15
Of Cenvat Credit Rules 2004
• Penalty upto Rs.2,000• Penalty as per Section 78 of Finance Act,1994 also payable if credit availed due to fraud, collusion, suppression, etc with intent to evade tax payment
Breach of Rules for which no penalty is separately provided
Rule 15A
Of Cenvat Credit Rules 2004
• Penalty upto Rs. 5,000
42
Flow Charts
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