1) DISTINCTION BETWEEN DIRECT TAX AND INDIRECT TAX 1 2 3 It is directly levied The burden can be shifted There is no cascading

or snowballing effect 4 Following canons of taxation. Discriminates between rich and poor 5 Cost of collection is high 6 Price of the product do not reflect direct taxes 7 There may be slab rate of taxes 8 Quantum of tax determined on the basis of net income or profit or wealth or capital gains 9 It is payable before end of the financial year on earning income or profit etc. 10 Examples of Direct Taxes Income tax, Corporate Tax, Wealth Tax, Capital Gains Tax etc. It is indirectly levied Tax burden can be shifted There can be cascading or snowballing effect No Discrimination between rich and poor. Cost of collection is very low (1%) Price of the Product reflects taxes. There is no slab rate Quantum of tax is determined on the basis of sale price or assessable value or quantity cleared It is payable on sale or clearance or on import or export Examples of Indirect Tax: Excise Duty, Customs, Sales Tax, Octroi Entry Tax etc.

Article 265 of the constitution provides that no tax shall be levied without any authority of law. Entry No.84 of the Union list provides that the Central Government can enact a law to impose tax on all goods manufactured on produced in India including tobacco, except the following goods: 1) Alcoholic Liquor 2) Opium 3) Indian Hemp and Narcotic drugs Entry No.51 of the State list provides that a state government can impose tax on alcoholic liquor, opium, Indian Hemp and other Narcotic Drugs. Where any medicinal or toilet preparations contains alcoholic liquor or opium or Indian Hemp or Narcotic Drugs then the Central Government can impose tax on such goods. Accordingly, the Central Government has introduced an Act called Medicinal and Toilet Preparation Act. Under this act excise duty is levied by State Government and retained by State Government even though the tax is imposed by Central Government.

Charging Section (Sec.3): Levy of Excise Duty: Excise Duty is levied u/s-3 of the Central Excise Act, Sec.3 says excise duty can be imposed on all goods manufactured or produced in India. If we analyse Sec.3, it requires three important conditions to be satisfied to impose excise duty: I. It must be goods: The Central Excise Act has not defined goods. Therefore, we can refer the constitution and other laws to understand the meaning for goods: Ultimately, the dispute regarding what is meant by goods was decided by the Supreme Court in the case of DCM Ltd. Vs. UOI. In this case the Supreme Court held that anything to be called as goods requires 2 conditions to be satisfied: a) It must be movable b) It must be Marketable Marketability means the goods are either sold in the market or they are capable of being sold. Capable of being sold means whether the goods can be carried to the market for sale. II. It must be Excisable Goods: (Sec.2( ): Sec.2(d) of Central Excise Act defines excisable goods as those goods that are specified in the CETA, 1985.

III. There must be manufacture or production: There were several disputes between manufacturers and excise department regarding what amounts to manufacture. Finally the Supreme Court in the case of DCM Ltd held that manufacture or production requires 2 conditions to be satisfied: 1) There must be a change 2) The change must result in a new product. Every new product involves a change but every change need not result in a new product.

Definition of Manufacture:
Sec.2(f) of Central Excise Act defines manufacture that includes:

i) ii)

iii)

Any ancillary or incidental activity to manufacture. Any packing or repacking or labelling or re-labelling or changing the container or conversion of powder into tablets or capsules will amount to manufacture, provided it is specified in the section notes or chapter notes of CETA, 1985. Any activity of labelling or relabelling or packing or repacking or affixing MRP or altering the MRP of specified goods will amount to manufacture. However, it is applicable only to the goods specified under the schedule given in the tariff. (Finance Act, 2003).

Recent Case Laws on Manufacture:

1) Collector of Central Excise vs. Technowell Industries (Supreme Court) In this case the Supreme Court held that the process of drawing wires from wire rods does not amount to manufacture, since both products being wires. Further, product not to be considered excisable merely because wires and wire rods covered by 2 separate entries. 1) Dolson Container Pvt.Ltd. Vs. CCE(Comm) (Delhi Tribunal) Conversion of corrugation gum powder into liquid gum by adding & mixing without any chemical does not amount to manufacture. 2) Preparation of Purified mineral water from potable water fit for human consumption will amount to manufacture? However, mere treating of the water and bottling will not amount to manufacture. Silver Springs Pvt. Ltd. Vs. CCE (Bangalore Tribunal) 3) Powdering of tobacco leaves does not amount to manufacture. Pramila Gudakhu Factory Vs. CCE (Calcutta Tribunal) 4) Paper cutting waste generated during the manufacture of corrugated boxes does not amount to manufacture since the company is not engaged in the manufacture of waste. 5) Carbon Paper: Cutting of larger dimensions i.e. from royal or brief size into fullscape will not amount to manufacture since the basic product remains same. Kores(I) Ltd. Vs. CCE (Chennai Tribunal) 6) Process of cutting steel sheets into specific size and punching holes to obtain required design of fabric amounts to manufacture. Since a different article namely DOBBY CARD, having distinct name, character and use having emerged. BIRLA VXL Ltd. Vs. CCE (Delhi Tribunal)

7) Upgradation of a lower capacity transformer into a transformer of higher capacity does not bring into existence any new & distinct product to the market. Therefore no manufacture. CCE Vs. USHA (I) Ltd. (Delhi Tribunal) 8) Refilling of empty cylinders in the fire extinguishers with carbon dioxide does not amount to manufacture as no new product emerges. CCE Vs. Safex Fire Systems Ltd. (Bombay Tribunal) 9) Washing of Coal or reducing the ash content of Coal would not amount to manufacture. CCE Vs. TISCO (Delhi Tribunal) 11) Mixing of raw rice, dehydrated vegetables and spices in predetermined proportion and blending them together in a mixed form, then heating, sterilising and packing the product in pouches with nitrogen flushing for a longer shelf life amounts to manufacture as a new product commercially known to the market has emerged. TEST FOR MOVABLE OR IMMOVABLE GOODS: 1) Quality Steels Pvt. Ltd. Vs. Collector of Central Excise (Supreme Court) In this case the assessee had put up a plant in two phases to manufacture steel tubes of various specifications. The assessee procured certain components from the market, fabricated certain components within the factory and erected a tube mill inside the factory. The Excise Department issued a notice to the assessee demanding duty on the tube mill for the reason that they are goods, movable and marketable. Upto the stage of Tribunal the demand was confirmed. The Supreme Court held that when any goods are embedded to earth and identity arises after attaching to earth, it is an immovable property. The tube mill will lose its identity the moment it is dismantled. Further tubemill as such is not marketable. Therefore it is not excisable. 2) Triveni Eng. Ltd. Vs. CCE (Supreme Court) In this case the company was engaged in the manufacture and assembling of a product known as Turbo alternator. It involves assembly of Steel Turbine, Alternator, Motor and a coupling and aligning them in a specified manner. The Excise Department demanded duty on the Turbo alternator. The Supreme Court held that by assembling turbine, alternator etc. a new product namely, Turbo alternator has emerged and hence it amounts to manufacture. However, by embedding the goods on earth it has become an immovable property. Therefore, it is not excisable.

3) Sirpur Paper Mills Ltd. Vs. Collector of CE (Supreme Court) In this case a product was assembled and erected on earth. The Excise department claimed that it is an immovable property. The Supreme Court gave the following decision: The purpose behind attaching the machine to a concrete base was to prevent wobbling of the machine and to secure maximum operational efficiency and safety. It is not something attached to earth like a building or a tree. The test would be whether the paper making machinery could be sold in the market? In this case it can be sold in the market. Therefore it is excisable.

LATEST CIRCULARS
Due to contradictory decisions in various cases, the CBEC has issued a circular clarifying that any goods may become movable or immovable on the basis of following tests: 1. Whether it is attached to earth? 2. Whether the goods are marketable as such? 3. Whether the goods could be dismantled without substantial damage to the property? While dismantling if the goods get damaged, it has to be treated as an immovable property. the Board Circular has cited few examples: 1) Any Cement Plant, Steel Plant, Sugar Plant, Paper Plant etc. are immovable properties attached to earth and hence not excisable. 2) Storage Tanks: Any storage tank that are ready made that are movable and marketable and therefore, excisable. On the other hand huge storage tanks constructed on earth using steel plates and rods are welded together and thereby it is immovable and hence not excisable. Further, such (Plants) tanks cannot be dismantled without damage to the property. 3) Air-conditioning & Refrigeration Plants: Such plants are huge plants erected on earth and assembled to the specification of the customer. They are not marketable as such. Therefore, they are immovable properties and not excisable. However, any parts of Air-conditioning or Refrigeration Plant manufactured and cleared are liable for excise duty. 4) Lifts & Escalators: The erection of lifts involves assembling of several components like motor, body of the lift, ropes, electrical and electronic items. The lift obtains its identity only after erection at the Site. Therefore, it is immovable and not excisable. 5) Weigh Bridges: There were difference of opinion on the question of weigh bridges being movable or immovable. In the case of Narne Tulaman Ltd. and

later cases it was held that weigh bridges are movable, since, it can be dismantled and erected at any other place. TEST FOR MARKETABILITY: A.P.S.E.B Vs. C.C.E (Supreme Court) In this case APSEB engaged contractors and supplied Steel, Cement, Gravel and Sand to manufacture power distribution poles. The contractors were paid job charges. Neither APSEB nor the contractors paid any excise duty on the ground that the poles are not sold in the market. The Supreme Court held that marketability does not mean the goods must be sold in the market Even if there is only one buyer or a seller, it is marketable and it becomes goods, therefore duty is payable. Who has to pay Excise Duty: Excise Duty is paid by the manufacturer or producer of excisable goods. There are 3 categories of manufacturers: I. A person manufactures the goods for himself e.g. an automobile engineer assembles a car for himself. In this case the automobile engineer is the manufacturer. II. A Company or a person hires labourers or employees and obtains the goods manufactured through them. In this case the company or the person is the manufacturer. III. One supplies raw materials and components to another who manufactures goods and receives job charges or conversion cost. In this case there was a dispute on who is the real manufacturer. The Supreme Court held tht in such cases the Job Worker is the manufacturer. Case Laws: UOI Vs. Citabul (I) Ltd. (Supreme Court) Collector Vs. Jay Engineering Ltd. (Supreme Court) Food Specialities Ltd. Vs. UOI (Supreme Court) However, a Job worker should not be dummy or hired labourer of the customer. The Job Worker will be treated as dummy, if there is a common source of funding and financial flow back from one unit to another. Whether goods are excisable if mentioned in the Tariff? In the case of DCM Ltd. Vs. UOI Bhor Industries Ltd. Vs. Collectors Collector Vs. Ambhala Sarabhai Ltd. the Supreme Court held that simply because the tariff heading is there, it is not dutiable unless the goods are marketable.

Definition of Factory Sec.2(e)

Factory means any place or premises where excisable goods are manufactured or produced that includes any other place or premises where any activity is carried in or in relation to manufacture or production.

Sec-3
Excise Duty shall be levied on all excisable goods manufactured or produced in India on the basis of the following: a) A Duty called CENVAT under First Schedule to CETA, 1985. b) A Duty called Special Excise Duty under II Schedule to CETA, 1985.

MODE OF IMPOSING EXCISE DUTY:

1) Specific Rate: It is based on quantity cleared. For example, Rs.5 per litre or Rs.10 per Kg or Rs.15 per metre or Rs.20 per piece etc. 2) Advalorem Rate Duty: It is percentage imposed on the value of the goods that takes into account the total quantity cleared and assessable value per unit. 3) Combined Rate: It is a combination of a specific rate and advalorem rate. E.g. 16% + Rs.500 per metric tonne.

CHAPTER II
CLASSIFICATION The purpose of classification is two fold. 1) 2) To know whether the goods are excisable or not To know the quantum of duty payable.

The Excise Tariff has been designed under a 8 Digit Coding System on the basis of HSN or HCDCS (Harmonised Commodity Description Coding System) The purpose of HSN is to have a uniform classification of goods imported among the member countries of WTO under GATT. The 6 Digit coding system follows the following principles: 1) First two digits indicate Chapter Number. 2) Next two digits indicate Heading Number. 3) The Last 4 digits after decimal point indicate Subheading or Sub classification of goods.

Example: Chapter-90: Optical, Photographic, testing and Surgical instrument. Heading 9004: Spectacles, Goggles and like. Sub Heading 9004-1010: Sunglasses .16 % Sub Heading 9004-1090: OthersNil. The Central Excise Tariff has 20 sections and 96 Chapters. The 20 sections are as follows:

Guidelines to Classification:
1) Notification: The Tariff must be read with notifications which may reduce the rate of duty or it may make the rate nil subject to conditions or without any conditions. 2) Interpretative Rules: Interpretative rules are available in the tariff itself to assist classification. These interpretative rules are as follows: a) Any unfinished or incomplete goods are classifiable under the main heading, provided it has attained all the essential characteristics. Also any goods cleared in parts are in disassembled condition classifiable under the heading meant for complete goods. b) Any material or substance which is a mixture or combination is classified under the heading for mixture if there is a separate heading, otherwise it is classifiable on the basis of predominance. For example, If copper and zinc is mixed it brings Brass. If there is a heading for Brass, it is classifiable there. If there is no heading for brass, if copper is more it is classifiable under copper. On the other hand if zinc is more it is classifiable as Zinc. c) A specific heading must be preferred to general heading. e.g. Tyres & Tubes meant for motor car is not classifiable as parts of motor car under chapter-87. It is classifiable under chapter-40, as there is a specific heading for Tyres & Tubes. d) Where any goods are put in sets or combination of features, it is classifiable on the basis of the main character. e.g. A 3-in-1 product with CTV(Main Feature) /DVD/Digital Timer is classifiable as CTV. e) Where any goods are classifiable equally under 2 or more headings, the later one must be preferred. 3) Any Dictionary or Scientific or Technical meaning cannot decide the classification, it can only guide classification. 4) Results of chemical examination cannot be taken as

conclusive proof for classification. 5) Products may have end use and predominant use. However, classification depends upon the primary use of the goods. In other words, the main character or use alone can determine the classification of goods. 6) Section Notes: Every Section of the Tariff may contain section notes. These notes specifies inclusion or exclusion of certain chapters or headings under a particular section. 7) Chapter Notes: Chapter Notes also specifies inclusion or exclusion of certain goods under a heading or subheading. Further it defines meaning for certain terms like 'smoke point' or 'boiling point' etc. It also says whether packing or repacking or labelling or relabelling or any other activity will amount to manufacture. 8) Sec.37-B Circular: Under Sec.37-B of CE Act, the Ministry of Finance or CBEC is empowered to issue circulars on the matters relating to classification, valuation etc. Such circulars may classify where the goods are exactly classifiable. However, such circulars are binding only departmental officers and not the assesses. 9) HSN Harmonised System of Nomenclature : The HSN published by Government of India contains details of various group of commodities that may fall under a heading or subheading which may help to decide the classification. 10) Case Laws: Any decisions made by Tribunals or High Court or Supreme Court may assist to determine the classification. Explanatory Notes: The Tariff headings and subheadings are preceded by either single dash (-) or double dash (--). Where any heading is preceded by '---', it indicates it is a classification of the main heading. Where any heading or subheading is preceded by '----', it indicates the sub classification of the immediately preceding heading.

CHAPTER - III
VALUATION Till 30-6-2000, excise duty was payable on the basis of normal price. The concept of normal price was litigated before the court of law for more than a period of 25 years. Since 1-7-2000, the concept of normal price was replaced by transaction value. Under Sec-4, excise duty is payable on the transaction value. Under Sub-clause-a of clause-1 of sec-4, a transaction value requires following conditions to be satisfied: 1) There must be a sale

2) The value is to be determined at the 'place of removal', since any change in the place of removal for sale may affect the transaction value. 3) Transaction value is to be determined 'at the time of removal'. Any change in the time of removal involves interest element that may affect the transaction value. 4) Buyer and Seller not to be related. It does not mean goods cannot be sold to related person. It actually means transaction value is not acceptable if the goods are sold to related person. 5) Price must be the sole consideration of sale. In other words, other than the invoice amount nothing is to be collected in cash or kind. Sec.4(1)(b): Where there is no sale or any one of the conditions of Sec.4(1)(a) is not satisfied, the transaction value is to be determined on the basis of Valuation Rules, 2000. Sec.4(2): The provisions of Sec.4 is not applicable where the Central Government has fixed Tariff Value for any excisable goods under sec.3 of the Central Excise Act. Tariff Value means value notified by the Central Government through official Gazette. For any excisable goods, in such cases, duty is payable only on that value irrespective of the sale price. Sec.4(3): a) Definition for Assessee: Assessee means any person who is liable to Pay Excise Duty under the Central Excise Act, that includes a consignment agent. b) Related person: Related person means: 1)
2)

An Inter connected undertaking.

A relative as defined in Sec.2(41) of Companies Act, 1956.

3) distributor. 4)

A relative and a distributor or sub distributor of such The buyer and seller are interested on each other either directly or indirectly (in other words, there is a mutuality of interest between the buyer and the seller). Place of Removal: Place of removal means: 1) 2) A Factory or any other premises where excisable goods are manufactured or produced. Any warehouse or premises where excisable goods are permitted for storage without payment of excise duty (applicable to petroleum products like LPG, Petrol, Kerosine & Diesel).

c)

d) Transaction Value: Transaction value means the price paid/payable in connection with or in relation to sale by the buyer to the seller. It shall include all costs like administrative expenditure, selling and distribution, outward handling, after sales

warranty costs, cost of distribution etc. but excluding taxes and duties actually paid or payable. Even though value of excisable goods is determined on the basis of transaction value, excise duty is payable only on assessable value. Therefore, it is necessary to work back from transaction value to assessable value by including or excluding certain elements which are discussed below: 1) Cost of packing: Generally, Consumer goods involves 3 types of packing namely, primary packing, secondary packing and special secondary packing. Further cost of packing includes the value of packing material and also the labour & overheads incurred to pack the goods. With effect from 1-7-2000, all cost of packing are includable in the Transaction Value or A.V. 2) Cost of Distribution: It is an expenditure incurred by the manufacturer to distribute the goods to dealers, agents etc. It shall form part of the Transaction Value and A.V. 3) Interest on Finished goods: When stock of finished goods are carried at the depot or branch or godown etc. it blocks working capital that results in additional interest liability which is known as interest on finished goods. It is includable in the Transaction Value or A.V. 4) Interest on Receivables: It means the interest payable on the amount due from the customer where the goods are sold on credit basis. The Supreme Court in the case of MRF Ltd. held that interest on receivable for the period from the date of sales till the date of payment need not form part of the A.V. Under new Sec.4 also, interest on receivables is not includable subject to the following conditions: a) There is a separate financial arrangement between the buyer and seller. b) Interest element is clearly distinguished from the price. c) it relate to the period between date of sale and date of realisation. d) It is known to the buyer at the time of sale. 5) After Sales Warranty Costs: The marketing practices is that for consumer durable goods, a standard warranty period is offered in addition to which an optional warranty is given on payment of a specific amount (extra). Any cost associated with the normal warranty period automatically forms part of the sale price. Hence the question of exclusion or inclusion does not arise. However in the case of optional warranty any amount collected at the time of Sale (or) later is includable in Transaction Value or A.V. 6) Discounts:

a) TAC/Warranty Discount: TAC means Tyre Adjustment Committee formed by MRF and other tyre manufacturer. Any buyer of tyres or

tubes finds any defect can return the goods to the dealer who in turn will forward the goods to TAC. After examination, if TAC finds any manufacturing defect, the buyer is given a specified amount as deduction at the time of purchase of a new tyre or tube. In the case of MRF Ltd. the Supreme Court held that the discount is not deductible since it was not known at the time of removal. Under new Sec.4 also it is not deductible since it is discount for goods purchased in future. However future goods may be entitled for discount or sale. b) Year ending Discount: It is an extra rate of discount given at the end of the financial year to boost the sales. It is deductible on actual basis. c) Prompt Payment Discount: Where sale is effected by Dealers and a payment is made before the expiry of credit period, it is known as prompt payment discount. It is a deductible payment. d) Superlug-piggy-back Campaign Discount: Where the dealer pushes a particular variety of tyre or tube in a market upto a specified quantity, a bonus is given which is known as campaign discount. It is deductible, provided the discount is actually given. e) Cash Discount: Where the buyer needs cash payment or payment through cheque or D.D. an extra payment discount is allowed which is known as cash discount. If it is given actually it is deductible. Even where the discount is given by way of credit note, it is deductible. f) Trade Discount: Actually given is deductible. 7) Interest on Advances: Any interest on advance it includable in the value provided the advance has influenced the price. In the Case of MBIL Vs. ACC, the Supreme Court held that any interest Free advance given by the buyer to the seller can influence the price. But for the advance, the seller would have borrowed money and incurred interest liability. The Sec.4 has inserted an explanation by Finance act 2003, which provided that any advance that has influenced the price, notional interest is includable in the price. However, the burden is on the Department to prove that the interest free advance have influenced the price. 8) Taxes: All types of Indirect Taxes like Sales Tax, Surchrge, additional surcharge, entry tax, octroi, turnover tax and any other local taxes are deductible if it has been actually paid or payable. 9) Excise Duty: Excise Duty actually paid or payable and deductible from the Transaction Value. However, the Supreme Court in the case of MRF Ltd. held that the following formula is to be adopted to determine the A.V.

A.V.=

CDSP(Total Sales Price)- All Permissible Deductions(APD) + Rate of Duty e.g. TSP = Rs.1,300 APD = Rs. 140 Excise Duty Rate = 16% A.V. =

1300 140 =1160 = Rs.1,000 1+ 16/100 116

100

10) Interest on Deposits: A manufacturer or seller of excisable goods may collect deposits from distributors or dealers as Security Deposit or Caution Deposit. In such cases, whether the manufacturer pay interest or not, interest element is not includable in the value. VST Industries Ltd. Vs. UOI ( Supreme Court ) 11) Value of System Software: In the case of PSI Data Systems Ltd., the Supreme Court held that if any software is supplied along with the computer system it is includable in the A.V. However, under new Sec.4, the CBEC has issued a circular which clarifies that any software etched in the Computer System itself (like Calculator), the value of such software is includable in the value. Any other software which is loaded into the computer system to the requirement of the customer, the value is not includable. However, any software exclusively developed to the requirement of the customer shall suffer excise duty independently. 12) Erection & Commissioning Charges: Where Plant and Machineries are supplied it may involve erection and commissioning for which the seller charges the buyer separately. In such cases if the erection and commissioning charges are distinguished from the price of the goods and if there is a separate agreement such charges are not includable in the value. However, the CBEC circular classified that if any goods are cleared as component from the factory to the site and later assembled or erected and the premises of the buyer proportionate erection and commissioning charges are includable. 13) Commission: Where commission is given to a consignment agent, it is a case of selling & distribution expenses, hence includable in the value. 14) Advertisement expenses incurred by the dealer: Any advertisement expenditure incurred by the dealer on his own not includable in the value. In case the expenditure is incurred compulsorily by the dealer on behalf of manufacturer or the expenditure is shared on account of the manufacturer it is includable.

15) Cost of Transportation: Any cost of transportation (Freight & Insurance) from the freight to depot, branch, godown, warehouse & premises of consignment agent is always includable in A.V. However, if the cost of transportation relates to factory to buyer's premises or depot or branch etc to buyer's premises, then it is not includable to the extent of actual cost.

VALUATION RULES 4(1)(b) Rule-1: a) These rules re called Central Excise [Determination of Price of ExcisableGoods]Valuation Rules, 2000. b) It shall come into effect from 1-7-2000. Rule-2: a) 'Act' means Central Excise Act, 1944. b) 'Value' means 'value' as defined in Sec.4 of Central Excise Act. c) Normal transaction value means the price at which majority of the aggregate quantity of the goods sold at a particular time of removal. Rule-3: Where Sec.4(1)(b) followed. is made applicable, the following rules are to be

Rule-4: As per this rule where goods are removed for sale, always there is a transaction value, but when the goods are removed not for sale, there is no transaction value. In such cases the price of excisable goods at the time and place of removal could be price of such goods at the time and place of removal. In simple terms, price of excisable goods could be price of similar goods, In case, there is any difference in time of removal, in time of removal, necessary adjustment could be made. This rule is applied where samples are cleared that are distributed free of cost. Rule-5: Where place of removal is factory gate and place of delivery is buyers premise, actual cost of transportation (freight, insurance etc.) is deductible from the transaction value subject to the condition that the deduction claimed is actual cost of transportation from the place of remove to the place of delivery. As per the amended provisions of Finance Act, 2003 the cost of transportation need not be shown separately on invoice. Further equalised freight is also deductible provided a certificate is issued by a practicing cost accountant to the effect that the manufacturer has incurred a specific amount of cost of transportation actually. Rule-6: If price is not the sole consideration of sale, any other consideration flowing from buyer to the seller is includable in the value. Such indirect considerations would be materials, components, parts, value of tools, dies, moulds, drawings, blue prints,

technical maps, packaging materials, engineering work, development, art works, design work, plans, sketches etc. supplied free of cost. Note: When gas is supplied in the cylinder owned by the seller, a charge called cylinder holding charges or rental is collected depending upon the no. of days the cylinder is held by the buyer. Prior to 1-7-2000 it was not includable in the value, however with effect from 1-7-2000 any cylinder holding charges or rentals or maintenance charges includable in the value.
KOTA GAS LTD. Vs. ACCE (Tribunal)

Rule-7: Where the place of removal or sale is different from the factory i.e. depot or branch or godown or a warehouse or a premises of the consignment agent then the transaction value of excisable goods shall be the normal transaction value at which such goods are sold at the place of removal for sale. e.g. Certain goods are removed to Mumbai Depot from Vijayawada Factory and if the depot price is Rs.100 per unit then duty is payable at Rs.100 per unit. In case there was no sale at the depot on the date of removal from factory, previous day's price will be adopted. Once the goods are removed and if the goods are sold at a higher price from the depot at a later date, there is no question of further payment of duty. Similarly, if the goods are sold actually at a lower price, no question of refund. Where there were different prices on the same day at the Depot normal transaction value is to be adopted. Rule-8: This rule is applicable where goods are captively consumed. There are 3 situations of captive consumption: i) Any Excisable goods manufactured and consumed within the same factory. ii) Excisable goods manufactured in a factory, but consumed in some other factory belonging to the same manufacturer. iii) Excisable goods are consumed by a manufacture behalf of any other person. In all the above cases, the value shall be 110% of cost of production or cost of manufacture. The Board vide circular dated 13.2.2003 has clarified that cost of production is to be determined as per C.A.S.4 evolved by ICWAI. s per C.A.S.-4 Cost of Product(COP) shall include all direct and indirect material, labour and expenses. It shall include Administrative Overhead relatable to factory of production. However, Selling & Distribution expenses, Interest and finance charges need not form part of cost of production. Any miscellaneous income relating to production or scrap

income is to be reduced from COP. It shall include any R & D expenses or packing cost if relatable to captively consumed goods. Rule-9: Where excisable goods are sold only to related persons falling under (ii) or (iii) or (iv) of the definition of a related person, then the value shall be the normal transaction value at which the related person has sold the goods to an unrelated buyer. e.g. If A has sold goods to B at Rs.10 per unit and B has sold goods to C at Rs.20 per unit, then the transaction value shall be Rs.20 per unit in case A & B are related to each other. In case the related person has not sold the goods but captively consumed the goods, then Rule-8 is to be applied. Rule-10:Where the goods are sold only to inter connected undertaking and if the buyer happen to be a related person within the definition of ii, iii or iv of related person or holding or subsidiary company, then the value shall be determined as per Rule-9. If the buyer and seller are only interconnected undertaking, it has no implication on the Transaction Value. Rule: 10 A Where goods are manufactured on job work basis the goods are to be valued at the price at which the principal sells the goods. If the goods are sent to depots or any other place of removal of the principal the price at which the goods are sold at Depot is the basis for payment of duty. Rule-11: Where the value of any excisable goods could not be determined by any of the foregoing rules, it is left to the proper officer of Central Excise to determine the value consistent with Sec.4 and the above rules.

Sec - 4A: Initially excise duty was payable only on wholesale price. Since there was a large gap between wholesale price and retail price, the government wanted to impose excise duty on the basis of retail price. Accordingly, a new Sec-4A was introduced in the Central Excise Act. The salient features of Sec-4A are as follows: 1. It is applicable only to those excisable goods notified by the Central Government (so far around 101 goods are covered by Sec.4A) 2. It is applicable only where the goods are sold in a packed condition. 3. It is applicable only where the packaged commodity requires affixation of MRP. under Standards of Weights & Measures Act read with packaged commodity rules, 1976.

4. Excise Duty is payable on MRP(-) a permissible deduction notified by the Central Government for every commodity. 5. If more than one MRP is printed on a package, then maximum MRP will be valued under Sec.4A. 6. In case, a manufacturer adopts different MRP for different regions or states each such MRP will be the value u/s-4A. 7. Once a MRP is affixed, the goods must be actually sold at that price, where a manufacturer clears goods under any of these provisions and the price is altered or obliterated at a later date, the goods are liable for confiscation. Further the Excise Department can ascertain the maximum MRP of such goods and demand excise goods. 8. MRP means price inclusive of all duties and taxes and other element. 9. The percentage of deduction takes into account all taxes and duties, discounts, commission etc. 10. Where a commodity is covered by Sec-4A but cleared on bulk quantity, then excise duty is payable only under Sec-4 and not under Sec.4A. 11. If any goods are distributed free of cost, MRP need not be affixed, since MRP is required only when the goods are meant for retail sale. In such cases goods must be valued under Sec.4. 12. Where goods are covered by Sec.4A, but consumed captively such quantity must be valued u/s-4 and not under Sec-4A. 13. If buyer and seller are related goods can be valued under Sec.4A on the basis of MRP, provided the related person sells the goods at MRP or below MRP. 14. If any extra consideration flows from the buyer to the seller generally, it cannot have any implication under Sec.4A, since the value is based on MRP. However if the buyer charges beyond MRP on customers and part of the amount flows back to the manufacturer, then the same is includable in the value at the hands of manufacturer. 15. New Valuation are Rules are introduced. Where any MRP is altered or obliterated the department can ascertain the price at such goods were sold in the market and levy duty on such price.

Chapter 4 : CENVAT
Primarily it was introduced as MODVAT in 1986. Even before this, we had a similar provision viz., Proforma Credit. Now it is CENVAT.

SCHEME:1
R.M. 1,000 LEOH 800 SP 200 1000 value addition 10% of 1000 =100 -----2,000 R.M.
2,000

------- LAB & O.H .1,000 PROFIT 500

1,500 value addition

------- 10% OF 1500 = 150

3,500

-------

SCHEME:2 CREDIT SYSTEM ON C.V. 10% of 2,000 10% of 3,500 = 200 = 350 ----150
--------

Already paid on the R.M.

A&Co. ( MC LAB 10,000 10,000 -------20,000

Tax @ 16%

B&Co. (Ingot) 23,200 6,800 -------30,000

C&Co. ( 34,800 5,200 -------40,000 6,400 -------46,400 6,400 4,800 -------1,600

3,200 -------23,200

ED Payable (Cash)

4,800 -------34,800 4,800 3,200 -------1,600 Cash ED

CENVAT means Central Value Added Tax. It was earlier known as MODVAT, MODVAT was introduced in the year 1986. But even before 1986, such a scheme was in existence and was known as Proforma Credit. CENVAT was introduced in the year 2000. The basic concept of the scheme is that the duty paid on the inputs or allowed for adjustment against duty payable on the final products manufactured by the assessee. A manufacturer or Service provider can avail this facility if he complies with the following CENVAT Credit Rules:
16 Rules to be complied to avail CENVAT:

Rule 1: a) These Rules are called CENVAT Credit Rules 2004. b) It is applicable to whole of India.

c) It is not applicable to Jammu & Kashmir State in the case of Service Provider. d) It has come into effect from 10/9/2004. Rule 2: (Deals with Definitions) a) Capital goods means i) ii) iii) iv) v) vi) vii) viii) All goods falling under chapter 82, 84, 85, 90 and chapter subheading 6801.10 and chapter heading no.68.02. Pollution Control equipments Spares, Components and Accessories meant for goods falling under (i) and (ii) Moulds and Dies Tubes, Pipes and Fittings thereof Jigs & Fixtures Refractory/Refractory materials Storage Tanks

Chapter 87 Motor Vehicles and Parts 1) Courier Service 2) Rent a Cab Service Operator 3) Tour Operator 4) GTA (Goods Transport Agent) 5) Pandhal & Shamiana Service 6) Cargo Handling Services 7) Outdoor Caterer The Capital goods must be used in the Factory of production No CENVAT is available for any equipment / appliance used in a office (not a factory)

CENVAT is available on capital goods used for providing outdoor services. CENVAT is available for Motor Vehicles falling under chapter 87 to the following Service Providers. If the Motor Vehicle is registered in the name of service provider: 1. 3. 5. 6. Courier Service 2) Rent a Cab Operator Service Tour Operator 4) Goods Transport Agency Pandhal & Shamiana Contract Service Cargo Handling Services 7) Outdoor Catering Services.

*Only this service providers can take credit on Motor Vehicles.

b) Central Excise Tariff Act 1985 Central Excise Tariff Act means Central Tariff Act, 1985. c) Customs Tariff Act, 1975 Customs Tariff Act means Customs Tariff Act, 1975 d) Exempted Goods Exempted Goods means exempted from payment of duty which includes Nil Rate Goods. e) Exempted Service (At present 81 & 18 to be added) Exempted Service means any taxable service exempted from payment of service tax or any service on which no service tax is payable. f) Final Products All goods specified in Central Excise Tariff Act, 1985 g) Inputs Inputs means 1) an all goods other than HSDO, MS & LDO specified in the Excise Tariff Act used in or in relation to manufacture of the Final Product, whether used directly or indirectly whether contain in the final product or not. It includes Paints, Packing Materials, Accessories cleared along with the final product, goods used as fuel, grease, lubricating oil, cutting oil, coolants and goods used for generation of electricity or steam, used within the factory of production. (In the case of electricity, steam the same have to be used within the factory of production for any purpose to avail the credit) 2) Inputs used for providing output services are also entitled for CENVAT credit (Credit is available if inputs are necessary and used for providing output services) e.g. Construction Service requires input like Cement, Steel rods etc., Repairs and Maintenance Service.

Input Service

Input service means any service taken by a manufacturer of the final product used in or in relation to manufacture of the final product. It includes Advertisement service, Auditing & Accounting Service, Credit Rating Service, Management Consultancy Service, Consulting Engineering Service, Insurance Service, Cargo Handling Service, Storage and Warehousing Service etc. It also includes Goods Transport Agency Service to bring the inputs or Capital goods to the place of removal and outward transportation upto the place of removal (It is to be noted that any service tax paid on GTA from place of removal to place of Delivery is not permissible). Input service means any service used for providing any output service by an output service provider. Input Service Distributor: Input Service Distributor means any manufacturer or service provider who distributes the input service credit among various factories belonging to the manufacturer or premises belonging to the service provider. Output Service: Output Service means any service other than GTA provided by a Taxable Service Provider to a customer or client or policy holder or any other person where service tax is payable by a person other than the service provider. The person who taxes the service shall be deemed as taxable service provider who is liable for payment of service tax. e.g. Where a Technology Service is provided by a Foreign Company in India, the Indian Company that takes the Input Service will be deemed as Output Service Provider liable for payment of Service Tax. Rule 3:

CENVAT CREDIT
Following types of Duties and Taxes paid on Imports or Capital Goods or Input Service are entitled for CENVAT Credit.

i) BED (Basic Excise Duty) specified under I Schedule to

CETA, 1985 ii) SED (Special Excise Duty) specified under II Schedule to CETA, 1985. iii)ADE (Add Duty of Excise) (T&T) Textile levied under Add Duty of Excise (T & F, 1978) iv)GSI (Goods under Special Import) levied under ADE(GSI) Act, 1957 v) NCCD levied under Fin Act, 2001 (National Calamity Contingency Duty) vi) Addition Customs Duty (CVD) / ED. Cess paid under Customs Tariff Act, 1975 (Countervailing Duty) vii) Special Additional Duty levied under Section 3(5) of Customs Tariff Act, 1975 viii) Additional Duty of Excise levied under Section 157 of the Fin Act, 2004 (Tea & Tea Waste) ix) Additional Duty of Excise levied under section 185 of the Fin Act, 2004 (Pan Masala) x) Service Tax levied under Fin Act, 1994 xi) Education Cess levied u/s 91 & 97 of Fin Bill 2004 xii) Education Cess on Service Tax levied u/s 92 & 95 of Fin Bill, 2004 Note: SAD levied under Customs Tariff Act,1975 is available CENVAT Credit only to a manufacturer and not to any service provider - where any puts or capital goods purchased from a 100% EOU or EPZ or FTZ or EHTP or STP the CENVAT is admissible as per the following formula: (X) 1+BCD 200 CVD 100

X = Assessable value of the goods supplied BCD = Basic Customs Duty CVD = Additional Customs Duty / Countervailing Duty Where goods are purchased from SEZ it is treated like import and hence the entire ACD and SAD is entitled for CENVAT period. Where any inputs on which CENVAT Credit has been taken is cleared as such to any other factory or to any other buyer proportionate. CENVAT Credit must be reversed in the CENVAT Account. Where any Capital goods on which CENVAT has been taken is cleared as such the credit taken must be reversed however, where capital goods is scrapped, duty is payable on the scrap value.

An Output Service Provider can clear the input as such to provide the Output Service without reversal of Credit. e.g. Repairs and Maintenance Provider, Construction Service Provider. A Service Provider can take the Capital Goods outside his Premises without reversal of CENVAT Credit subject to the condition the capital goods must be brought back to the premises within 180 days from the date of removal, which is extendable for a period not exceeding 180 days by Deputy Commissioner/Assistant Commissioner of Central Excise. - CENVAT Credit taken on the inputs or capital goods or input services may be utilized for the following purposes: i) To pay Excise Duty on Final Product ii) To pay duty on inputs cleared as such iii) To pay duty on Capital Cleared Goods as such iv) To pay Service Tax on output service v) To pay duty when goods or removed under Rule 16 or Central Excise Rules, 2002 Note: CENVAT Credit cannot be utilized for payment of Interest, penalty and Cost Recovery Charges. Note: Where any inputs or Capital goods, clear as such the receiver of input of capital goods can take CENVAT Credit. The following types of Duties could be used only for payment of similar types of duties: i) AED (T & T) Textiles and Articles of Textiles. ii) NCCD iii) Education CESS iv) Additional Customs Duty equivalent to NCCD (or) AED (T&T) (or) Education Cess levied under Customs Tariff Act. Note: CENVAT Credit taken during first day to the last day of the month alone shall be utilized for payment of duty by 5th of following month ( e..g. CENVAT from 1st May to 31st May shall be alone utilized for payment of duty on 5th June). v) Additional Duty of Excise levied u/s 187 of Fin Act. vi) Additional Duty of Excise levied u/s 85 of Fin Act. However, Education Cess may be used interchangeably i.e. Education Cess paid on input goods/capital goods may be used on payment of education cess on service tax (or) education cess paid on services may be used for payment of education cess or excise duty on final products.

In case of Project Imports 100% of the Addl. Customs Duty paid is available as CENVAT Credit Ref Rule 11 Starting. Rule 4: CONDITIONS: 1. CENVAT on inputs can be taken immediately on receipt of the inputs into the factory gate (before such entry we cannot take on the fact that it was in the course of transport) 2. CENVAT on capital goods shall be taken at 50% of the excise duty paid in the financial year in which the capital goods are received into the factory or premises of the service provider, the balance of 50% of the ED may be taken CENVAT Credit in any of the following financial year. 3. Where any Capital goods are removed as such, balance 50% CENVAT Credit may be taken in the same financial year. The balance 50% CENVAT is admissible in the following year, provided the capital goods are in possession of the manufacturer or service provider. However, the case of spares, components, accessories, moulds, dies, refractory materials, goods falling under 68.0110 and 68.02. - They need not be in possession in the following year we can take CENVAT Credit (like Screw Drivers, Spanners etc.) which has short useful life. - Where a manufacturer or service provider opts for CENVAT Credit on capital goods shall not claim depreciation on that part of the value of capital goods representing as excise duty u/s 32 of Income Tax Act, 1961. In simple terms, Depreciation not to be claimed on the CENVAT Credit amount. It is to be noted that where any capital goods is treated as Revenue Expenditure the value inclusive of CENVAT Credit may be written off in the P & L A/c. as Expenditure subject to the restrictions under I.T. Act. CENVAT is available even the capital goods are procured on lease or Hire Purchase or installment or any other financial arrangement (such document must be available). A manufacturer can remove inputs or partially processed inputs after taking CENVAT Credit to a Job worker for the purposes of further processing or repairs or reconditioning or any purpose whatsoever subject to the following conditions: 1. The inputs or partially processed inputs must be cleared under a challan or any other document.

2. After processing the input must be received back within 180 days from the date of removal. 3. If the goods are not received in 180 days the CENVAT Credit taken is to be reversed. In case part quantity is received proportionate credit on the quantity not received is to be reversed. 4. Suppose, if the input are received after 180 days, the credit can be taken in the CENVAT Account. The above provision are applicable to Capital Goods, moulds, dies, Jigs sent to a Job worker for dues in the manufacturing. Where any inputs or partially processed inputs are sent to a job worker for further processing, after processing, the goods may be cleared from the premises of job worker to any other place subject to the following conditions: a. A prior permission is to be obtained from Commissioner of Central Excise. b. An undertaking what goods will be cleared from job worker. Premises on payment of appropriate duty is to be given. CENVAT on input service can be taken as credit on payment of service charges based on will or any other document that indicates the Service Tax amount.

Rule: 5 REFUND OF CENVAT CREDIT: Refund of Cenvat is allowed subject to following conditions: Where a manufacturer has used any inputs or inputs service in the manufacture of excisable goods that are exported without payment of duty can claim refund subject to the following provisions:.The CENVAT Credit on the input / input service contained in the exported goods may be used for payment of excise duty on clearance of excisable goods in India. In case the credit could not be utilized refund is admissible as per the relevant notification issued in this regard. A service provider who exports service without payment of service tax can also claim refund if he is unable to utilize credit on services provided in India. No refund is admissible under this rule if the applicant has claimed duty draw back / rebate.

Rule: 6

OBLIGATIONS: 1. No CENVAT Credit shall be taken on any inputs used in exempted goods or Nil Rate goods. 2. Where inputs are common or input service is common for both exempted goods and dutiable goods, the following options are available: Option 1: The manufacturer shall maintain the inventory separately and not to take any CENVAT Credit on that quantity of inputs which are likely to be used in the exempted goods / Nil Rate goods. (OR) Option 2: A manufacturer shall pay 10% on the value of the exempted goods / Nil Rate goods. Option:3 To debit provisionally on monthly basis an amount as per the formula and after the financial year final figure is to be arrived at and the difference is to be paid and refund may be taken on or before 30th June. In the case of service provide he has to be 8% on exempted service or he can opt for the said formula. Note: It is to be noted that the buyer of the exempted / Nil Rate Goods is not entitled for CENVAT Credit of 10% payment, since it is not excise duty.

Nothing contained in this Rule is applicable where goods are manufactured and supplied by the following units without payment of Excise Duty:

1. A 100% EOU 2. An unit in SEZ 3. An unit in EPZ/FTZ 4. An unit in EHTP 5. An unit in STP 6.Any supplier to UN or any international organizations for products funded by international organizations approved by Govt. of India.

7. Export under Bond 8.Gold/Silvers manufactured by Copper/Zinc Smelters Where CENVAT is taken on any input service commonly used for providing exempted services and taxable service or dutiable product or exempted products with reference to 16 services, credit is admissible even though they are use to provide exempted service or in exempted goods.. In the case of following output services is admissible unless the input services are exclusively used for manufacture of exempted goods or Nil Rate goods. - Where Capital goods are commonly used to manufacture exempted goods as well as dutiable goods, CENVAT is admissible unless the capital goods are exclusively used in the manufacture of exempted goods.

Rule: 7
Distribution of Input Service Credit: A manufacturer or an output service provider can distribute the input service credit various units / premises subject to the following provisions: 1. A Registration from Service Tax is to be obtained. 2. The tax is to be distributed through a proper document name, challan prepared under Rule 4(a) of Service Tax Rules. 3. No distribution shall be made beyond the service tax amount. 4. No credit shall be distributed to any unit / or premises. Which manufactures exempted goods or services which are exempted. Rule 8: Storage of Input outside the Factory: A manufacturer may be permitted to store the goods outside the factory premises if the following requirements are satisfied: 1. There is shortage of space in the factory or the goods are dangerous in nature. 2. A prior permission is to be obtained from DC or AC of Central Excise.

3. An undertaking is to be given to reverse the CENVAT Credit if the inputs are clear without use in the manufacture of final product.

Rule 9: Documents & Returns: CENVAT Credit can be taken on any of the following documents: 1. An Invoice issued by the manufacturing of inputs / capital goods from his factory / warehouse / branch / godown / depot / premises of a consignment agent. 2. An invoice issued by the importer. 3. An invoice issued by the importer from his branch /depot / warehouse / godown registered with Central Excise. 4. A Bill of Entry 5. An invoice issued by first stage dealer registered with Central Excise. 6. An invoice issued by 2nd stage dealer registered with Central Excise. 7. A supplementary invoice 8. A certificate issued by appraiser of Customs where goods are imported by post. 9. A bill / challan issued by a Service provider under Service Tax Rules. It is the responsibility of the person taking CENVAT Credit to ensure that the supplier of inputs on capital goods on input service provider has paid the appropriate excise duty / service tax. One can ensure the duty payment by following methods: 1.From his personal knowledge 2.A certificate issued by the supplier whose signature is familiar. 3.A certificate issued by Superintendent of Central Excise at the suppliers end. 4.CENVAT is admissible if the following information are available on the documents. a. Name and Address of the Supplier b. Description of goods c. Value of goods. d. Amount of Duty on Tax e. Duty or Tax payment particulars If any information is not available on the document it can be condoned by AC/DC by passing an order if he is satisfied that the input or capital goods where actually received into the factory used in the manufacture of final product. Every person who takes CENVAT Credit has to maintain proper records to show the description of the inputs / capital goods / input service, document no., quantity received, quantity issued and closing balance. Also a proper register or account is to be maintained to show opening balance, date, document no., CENVAT Credit taken, CENVAT Credit utilized and closing balance. The CENVAT Register as and when inputs /Input Service / Capital goods received, the duty paid will be entered in the credit column, as and when ED is paid on

final product or Service Tax is paid on Output Service entry will be made in Debtor Column. If CENVAT account is maintained in the Ledger Entry will appear in the opposite column. Every manufacturer who takes CENVAT Credit must file a Monthly Return by 10th of following month indicating the Opening Balance, Credit taken during the month, Credit utilized during the month and closing balance. A SSI Unit shall file a Quarterly Return by 20th of a following Quarter: A registered dealer shall file a return in prescribed format indicating Opening Balance, Quantity received Quantity sold, Closing Balance, Excise Duty paid, Excise Duty Credit passed on etc. This Return is to be filled quarterly basis by 20 th of the month following the quarter. Every Service Provider shall file a Half yearly Return by end of the month following the half year. Rule 9A: Declaration of Inputs: Every manufacturer who pays duty not less than 100 lacs in previous financial year shall file a declaration in prescribed format by 30th April every year. In case of any change, a fresh declaration is to be filed within 15 days from the date of charge. Manufacturers of Excisable goods falling under certain chapters are exempted from filing this Return. This declaration shall consists of the following particulars: a. Serial Number b. Description of the inputs c. Chapter Subheading no. d. Unit of Measurement e. Quantity f. Final product description g. CSH no. of final product h. Quantity of Waste and Scrap Generator i. Input, Output Ratio This declaration is to be filed only for principle raw materials. Principle Raw Materials means any raw material which constitutes 10% or more of the Total Raw Materials cost. Rule 10: Transfer of Credit:

Each unit if separately recognized CENVAT Credit of 1 unit cannot be transferred to other unit to the same company even though they are considered as same under the Companies Act. We have to pay the CENVAT in cash only. Normally, one manufacturing unit cannot transfer the CENVAT Credit to another unit. However, if a factory is shifted to another site or 2 or more units or companies or amalgamated or merged or 1 unit is taken over are absorbed by another company. The CENVAT Credit lying as balance may be transferred if the following conditions are satisfied: 1. A permission is to be obtained from DC/AC of Central Excise 2. The company or unit taking over the other unit must take over the liabilities. 3. All the inputs, WIP and Capital goods lying in stock if the unit which is to be shifted must be transferred to the other unit. A Service Provider who is shifting the premises or two or more companies amalgamated, merged, the unutilized CENVAT Credit may be transferred by satisfying the above three conditions. Rule 11: Where a manufacturer has not opted for exemption in a financial year, but opts for exemption in the following year, he shall pay / proportionate CENVAT Credit on inputs, WIP and Finished Goods lying in stock as on the date of commencement of the following year. After debiting the proportionate credit in the CENVAT Account, if there is any balance it shall lapse. Rule 12: Omitted: Deals with special provisions given to the North Eastern States. No Imp for exam. Rule 13: Deemed Credit: It is the facility extended by the Government to specified manufacturer on specified goods to enable the manufacturers to avail CENVAT Credit. This Credit facility is extended even though a manufacturer may not have duty paid document for inputs to take the credit. The specific amount is allowed as CENVAT Credit under the scheme. It is to be noted that very rarely this credit facility is provided by government. Rule 14: Recovery of Wrong Credit:

Where any CENVAT Credit has been taken wrongly or utilized wrongly by any person, it shall be recovered along with interest u/s 11A and 11AB of Central Excise Act. Rule 15: Confiscation and Penalty: 1. Where any CENVAT Credit has been taken wrongly without ascertaining the fact that appropriate duty has been paid by the supplier of input/Capital goods/service or contravening any of the provisions of these Rules or goods are liable for confiscation and a penalty not exceeding the duty on excisable goods or Rs.2,000 whichever is great shall be imposed. 2. Where CENVAT Credit has been taken wrongly / utilized wrongly by reason of fraud, collusion or suppression of facts or willful misstatement or contravention of any of the provisions of these rules with the intention to evade duty, penalty u/s.11 AC of the act(equivalent to the duty amount) shall be imposed. 3. Where a Service Provider has taken any CENVAT Credit wrongly or without ascertaining the fact that appropriate service tax has been paid or in contravention of these rules, a penalty shall be imposed which may extend to Rs.2,000 4. Where a Service Provider has taken any CENVAT credit wrongly or utilized the credit wrongly by reason of fraud, collusion or suppression of facts or willful statement or contravention of any of these rules if the intention to evade payment of duty a penalty u/s 78 of the Finance Act shall be imposed (not less than) service tax amount but not exceeding twice the service tax amount. Rule 16: Supplementary Provisions: (To avoid doubts clarification, orders, circulars etc. will be given) The CBEC (Central Board of Excise and Customs) the Chief Commissioner and Commissioner of Central Excise are empowered to issue circulars, instructions, standing orders and clarifications consistent with these rules. Any action taken under CENVAT credit Rule, 2002 is valid under the new provisions. CENTRAL EXCISE RULES, 2002 Rule-4: Duty payable on removal:

Excise duty is payable on removal by every person who manufactures or produces or stores excisable goods subject to the provisions of Rule-8. However, in the case of the manufacturers of molasses from khandasari sugar, excise duty is payable on receipt of the goods by the buyer when he receives the goods into his factory. In the case of goods falling under chapter 62 (Ready made garments) excise duty is payable on removal either by the principal who supplied the raw material or by the job worker. If the job worker undertakes to pay excise duty removal he shall pay on removal. If the principal undertakes to pay duty he shall pay excise duty, on removal of goods from his premises. Excisable goods manufactured in a factory may be stored outside the factory premises after executing a bond and obtaining permission from Commissioner. Such permission will be granted only in exceptional circumstances depending upon the nature of goods and shortage of space in the factory. (Finance Act, 2003) Rule-5: Relevant date for determination of Rate of Duty and Tariff Value. In the case of all excisable goods the relevant date will be the date on which the goods are manufactured. However, for administrative convenience relevant date is taken as date of removal of such goods from the factory or any other premises of the manufacturer. In the case of khandasari sugar molasses, the relevant date shall be the date on which molasses is received into the buyers premises. In the case of goods falling under Chapter 62 the relevant date shall be the date on which the principal removes such goods from his premises or from the premises of the job worker depending upon who undertakes to pay duty. Rule-6: Assessment of Duty: Basically there are 3 systems of Control: 1) Physical Control system: Under the physical control, a Central Excise Officer is posted to every factory to supervise the clearance of the goods. Usually an advance intimation (24 hrs. in advance) is to be given by the manufacture to a Range Superintendent, the range officer will inspect the goods, verify the correctness of value, tariff classification, rate of duty, amount of duty etc. and if satisfies permits clearance on payment of duty. Physical control is not applicable to all types of goods. It is presently applicable only to Cigarettes. 2) Compounded Levy Scheme: Under this system excise duty is imposed on the basis of capacity of production as a lump sum amount. This is applicable to products like stainless steel patties or pattas or

embroideries and marble slabs. A similar scheme was existing under Sec.3A for steel rolling mill, (Ingot manufacturers, manufacturers of aluminium circles and independent textile process). However, Sec.3A was abolished in the year 2000. Under CLS, capacity of production is determined on the basis of size of the machinery or power consumption or no. of employees etc. 3) Self Removal Procedure (SRP): It is applicable to all excisable goods except those covered by physical control or CLS. Under this scheme there is no intervention of any excise offices on day t day clearance of any goods. The manufacturer himself determines the value, duty etc. and clears goods on payment of duty. There is no need of any assessment of duty by the Departmental officers under this rule. The assessment by range officer was replaced by self assessment system under which assessment is carried out by the assessee himself. However, in the case of cigarettes assessment is to be done by Range Officer before clearance of the goods. Rule-7: Provisional Assessment: Where a manufacturer or producer of excisable goods is not in a position to ascertain the value or rate of duty of excisable goods, he may request DC or AC of the Division for provisional assessment. For this purpose a letter is to be given in writing specifying the reasons for opting provisional assessment. On receipt of the letter, the DC or AC will grant permission to pay duty on provisional basis. The assessee must forward the proposals for final assessment at the earliest not exceeding 6 months to finalise the assessment. The DC or AC must pass a final order of assessment immediately on receipt of particular from the assessee.. If the assessment could not be completed within 6 months from the date of the order, permission is to be obtained from Commissioner for extending another 6 months and for any further extension permission is necessary from Chief Commissioner. On finalisation if any duty is payable further, it must be paid with the interest at 13% p.a. from the first day of the following month for which assessment is completed till the date of payment. Where any amount is refundable C.G. shall pay interest @ 6% p.a. from the first day of the following month for which assessment was completed. The new provisions are applicable only for those provisional assessment orders passed on or after 1-7-2001. Where any amount is refundable it will be credited to Consumer Welfare Fund unless the requirements of Sec.11-B is satisfied. Rule-8: Manner of Payment of Duty:

Every manufacturer of excisable goods shall pay excise duty on monthly basis. For the clearances effected during a month, the duty shall be paid by 5 th of the following month. However SSI units shall pay by 15 th of the following months for the clearances effected during a month. For the month of March all assesses including SSI units must pay duty by 31 st March. Even though under Rule 4 duty is payable on removal, a facility has been introduced that provides for payment of duty on monthly basis. Every assessee other than a SSI manufacturer availing exemption, shall pay duty on or before 5th of the following month for the clearances effected during the month. The SSI units may pay the duty on or before 15th of the following month. If an assessee fails to pay the duty on the specified date, he shall pay interest @ 2% p.m. of default or R.1000 per day whichever is greater. However, the interest shall not exceed the duty payable (Finance Act, 2003) The buyer of the goods can take Cenvat on the basis of invoice as if duty has been paid already on such goods. Excise Duty cannot be paid by Cash or Cheque directly at excise department. It has to be paid through a nominated bank by depositing cash or cheque using TR-6 challan. TR-6 challans are to be prepared in quadruplicate under the signature and seal of the person who remits the duty. It shall give information regarding name and address of the manufacture, registration number, name of the nominated bank with code number, type of duty and its code number, amount of duty etc. When the amount is remitted to the bank, the banker returns triplicate and quadruplicate copies of the challan to the remitter. Using the quadruplicate copy, the assessee shall make entry in credit column of P.L.A. where any deposit is paid by cheque, the date of payment will be taken as date of presentation of the cheque at the bank. However, if the cheque is not realised and bounces, it will be treated as clearance without payment of duty. Any payment of penalty or interest or any other charges cannot be paid through Cenvat A/c. such payments are to be made only through a TR-6 challan by cash or cheque or a separate P.L.A. is to be maintained for such payments.

Rule-9: Registration: ECC No.:

Earlier Excise Department used to give a registration number for every manufacturer or producer or dealer of excisable goods. Presently they are allotted ECC No. in the place of registration number. The expansion for ECC is Excise Control Code. It is a combination of PAN and a alphabetical prefix and a serial number allotted by excise department. Where the application is for manufacture of excisable goods the letter XM are attached to PAN No. If the applicant is a dealer the letters XD is a attached to PAN No. where the manufacturer is having more than one unit, the letter XM is followed by no.1 or no.2 or.. E.g. ABCDE 1234 H + XM 001 002 ABCDE 1234 H + XD 001 002 Registration is necessary for every manufacturer or producer of excisable goods. It is also necessary for a dealer or a person who store excisable goods. To obtain registration an application is to be made in Form A1 in duplicate to DC/AC furnishing the following information: a) b) c) d) e) f) g) h) i) j) k) l) m) n) Name and Address of the factory Location Name of the excisable goods C S H no. of the goods. Rate of duties Notification number (if any) Estimated quantity of production Name and address of the proprietor or partners or directors of the company. PAN no. of the company Date of application An undertaking to abide by all the terms and conditions of the registration An undertaking to comply with all the provisions of Central Excise Act & Rules. A Declaration to the effect the information given are true and correct. Signature of the applicant with data.

The application is to be submitted to the DC or AC of the Division who will grant registration on the same day after feeding the particulars into the computer system. If any application is incomplete, it is to be rectified by the applicant. Since ECC No. is granted, no separate registration no is allotted to an applicant. Central Excise Registration is not for the company, it is only for the premises where excisable goods are manufactured or sold. Therefore, separate registration is necessary for every factory or premises. On receipt of the application registration will be granted in Form-RC.

If any new product is introduced for manufacture or storage, it is necessary to obtain an endorsement on the registration certificate from DC/AC. Any change in the constitution of the firm must be intimated to AC/DC. The RC must be exhibited in a conspicuous place at the factory. If the manufacturing activity is discontinued or factory is closed, the RC must be surrendered before AC/DC. The RC may be suspended or reverted if the person fails to comply with any conditions of registration or provisions of excise act & rules or is punished for any offence under CPC of IPC [u/s.109, 116 and 161]. If one or more factories are amalgamated or merged or taken over, the RC must be surrendered and the transferee must obtain a fresh certificate. Who need not take Registration? 1) Any person who manufactures excisable goods that are exempted from payment of duty or attracts nil rate of duty. However, such person must file a declaration to proper officer of excise. In the case of SSI units availing exemption from paying whole of duty, declaration is not necessary, but immediately after exceeding(crossing) 90 lacs value of clearance, the declaration must be filed. 2) Where excise goods are manufactured under customs warehousing procedures, registration is not necessary. 3) Where goods are manufactured through Job worker and if the Job worker is not clearing goods on payment of duty, he need not take a registration. 4) Where a principal supplied raw material to a job worker and obtains the goods manufactured through job worker, he need not take registration, provided he undertakes that the job worker will pay appropriate duty. 5) Any dealer of excisable goods who is not FSD/SSD need not take registration. 6) An 100% EOU or a unit in FTZ or EPZ or SEZ or EHTP or STP need not take a registration as such units come under customs control.

Rule-10: Daily Stock account: Every manufacturer or producer or the assessee must maintain a daily stock account indicating date, quantity produced, quantity cleared, O.B., C.B., value of the goods cleared, rate of duty and amount of duty. This register must be maintained on day

to day basis. The daily stock account must be pre-authenticated by the assessee himself or by the authorised person on first and last page of the register. Rule-11: Removal under Invoice: All excisable goods must be removed from factory or warehouse only under a document namely invoice or invoice cum delivery challan to be prepared in triplicate. The original must indicate in bold capital letters. ORIGINAL FOR BUYER, DUPLICATE must indicate FOR TRANSPORTER and TRIPLICATE must indicate FOR ASSESSEE. Each foil must be self authenticated by the proprietor / MD / Mang.Partner / CS or any of the authorised employee of the company. It must contain the seal and designation of the person who authenticated the invoice. An invoice shall contain the following particulars: 1) Pre printed Serial number. 2) Date 3) Name and address of the manufacturer 4) Name and address of the consignee 5) ECC No. or Registration No. 6) CSH (Chapter Sub-heading) No. of the excisable goods 7) Notification number (if any) 8) Division and Range 9) Description of the goods 10) Number of Packages 11) Quantity 12) Unit of Measurement 13) Unit Rate 14) Value under Sec.4 or 4A 15) Rate of excise duty 16) Amount of duty 17) Trade Discount, Cash discount etc. 18) Any other consideration 19) Total transaction value 20) Date and Time of removal 21) Vehicle No. 22) A declaration by the manufacturer stating that other than the transaction value no other amount was charged on the buyer. Rule-12: Filing of Return: Every assessee shall submit to the range superintendent a monthly return in specified form indicating the Opening Balance, Quantity produced, quantity cleared, closing balance, value under Sec.4 or 4A, quantity cleared without payment of duty and its value, duty payable, invoice number under which the goods were cleared, an extract of

CENVAT, an extract of PLA etc. The assessee must indicate whether the return was assessed provisionally or finally. Every assessee must file a return on or before 10th of the following month. However, SSI units shall file the return on quarterly basis, by 20 th of the following quarter. Note to Rule-6 and 12: Eventhough no assessment is done by the Excise officer and the assesses are working under self assessment system, as per the supplementary instructions, the returns are to be scrutinised by the Range Superintendent. Rule-13: Duty on Matches Rule-14: Procedure for Production and Removal. Prior to Finance Act, 2003, excise duty on matches was payable in advance and every match box required a stamp to be affixed on the match box that was issued by Treasury. By Finance Act, 2003, this procedure has been abolished. Now there is no necessity to affix any stamp on match boxes. Rule-15: Special Procedures for excisable goods:(payment of duty) The Central Government may prescribe special procedure for payment of duty on the basis of capacity of production or units covered by Special Status like 100% EOU, FTZ, SEZ etc. Rule-16: Return of Duty paid goods: Any duty paid goods may be returned to the factory for the purposes of testing or repairs or reconditioning or reprocessing or for any other purposes subject to the following conditions: 1) Immediately on the return of goods duty paid may be taken credit in the Cenvat Credit. 2) After completion of the activities, when the goods are cleared, the CENVAT A/c. must be debited equivalent to the CENVAT credit taken provided there is no manufacturing activity. 3) In the case of manufacturing activity duty is payable u/s.4 or 4A as the case may be. Rule-17: Removal by 100% EOUs FTZ etc. Where any goods are removed by EOUs, FTZ to DTA, it must be removed under proper invoice and on payment of duty through P.L.A. or Account current. Such units must maintain proper records in prescribed format.

Rule-18: Export under Rebate: Where any gods are exported on payment or excise duty, the C.G. can grant rebate to the extent of: 1) Excise duty paid on the final product. 2) Excise duty paid on the inputs contained in the final products. The rebate is subject to certain rules and regulation provided under notification no.41/2001. Where any goods are supplied as stores to a foreign going vessel or aircrafts, rebate is admissible. Rule-19: Export under Bond: A manufacturer of excisable goods can export goods without payment of excise duty under bond. However, presently the bond has been replaced by LUT (Letter of Undertaking). The LUT is given in a plain white paper or in a letter head that gives an undertaking to pay the excise duty in case the goods are not exported and diverted in the home consumption market. A merchant exporter cannot give a LUT. On the other hand, he must execute a bond. An exporter can either opt for Rule-18 or Rule-19. Rule-19 is subject to the conditions given under notification 43/2001. Rule-20: Warehousing Provisions: The Central Government has issued notifications prescribing procedures for clearance of goods from factory to warehouse or Warehouse to Warehouse for petroleum products and any other excisable goods. Under these provisions goods are cleared from factory to warehouse under a prescribed document namely AR-3A in triplicate without payment of excise duty. After deposit of goods in the warehouse the duplicate copy of AR-3A must be received back by the original manufacturer and to be submitted to Range Officer. If the warehousing certificate is not received with in 90 days excise duty must be paid immediately by the manufacturer. However, the responsibility on the payment of excise duty is on the consignee if the goods are received at the warehouse. Rule-21: Remission of Duty: Where any goods are lost or destroyed by natural causes or by unavoidable accident or goods are unfit for consumption or for marketing, an assessee may request for remission from Commissioner of Central Excise. The power to remit has monetary limits as per the following table:

Designation of the Officer Commissioner ADC/JC DC / AC Superintendent Inspector

Power to Remit Goods on which Duty exceeding Rs.5,00,000 > 1lac but nor more than 5 lac > 10000 > 100000 < Rs.10000 Nil

An application for destruction must be disposed off by the R.O. within 15 days from the date of receipt. He must forward the request to AC/DC. AC/DC has to grant remission within 3 days. Where necessary, DC/AC may forward the request to the higher officer. The date of destruction is to be decided according to the mutual convenience of the assessee and the Range Officer. The destruction of the goods must take place under the supervision of excise officer but within the factory premises as far as possible. Where goods to destructed or like paper or cloth or fabric etc. the destruction may be carried out by setting fire. If the goods are like petrol or diesel or vegetable oils, it has to be mixed with sand and destroyed. Rule-22: Access to Registered Premises: Any officer of Central Excise empowered by Commissioner can visit a factory or registered premises for the purpose of carrying out any scrutiny or verification of any records. Every assessee is bound to maintain proper records relating to production, storage and disposal of excisable goods. All business records and private records including invoices, delivery challans, purchase documents, debit notes, credit notes, ledger accounts, vouchers etc. are also Central Excise records for the purpose of verification. All records must be preserved at least for 5 years after completion of a financial year. Every assessee must file a list in duplicate indicating all the records and documents maintained by him to the range officer. Any change in the list must be intimated immediately.

Where an assessee maintains records in a computer system, he must intimate the software used and must furnish audit trials, inter linkages, data codes, directory etc. to the Central Excise Officer. A hard copy must be maintained in a bound form for every records where the entries are made in computer system. The records can be produced in the form of floppies or CDs or hard copies as required by the Excise officer. Also proper back up records must be maintained by the assessee. Where any officer is deputed by the Commissioner of Offices of the Internal Audit Department of Excise or Audi party deputed by CBAG, every assessee shall furnish: 1) All accounts and returns maintained by him 2) A Cost Audit report u/s.233B under Companies Act, 1956. 3) A Tax Audit Report prepared u/s. 44AB of IT Act, 1961. Where a company is having more than one factory of production, the P&L A/c. and Balance Sheet of the individual Factory has to be submitted for verification. Rule-23: Power to Stop & Search: Any Central Excise Officer may search any conveyance carrying excisable goods where he suspects the goods are carried with the intention to evade duty. The said power is exercised usually by Preventive Officers of Central Excise. Rule-24: Power to detain and Seize the goods: If a Central Excise Officer has reason to believe that any goods are liable to duty, but no duty has been paid or goods were removed with the intention to evade duty, the officer may detain and seize such goods. Rule-25: Confiscation & Penalty: 1. Where a manufacturer / producer of excisable good or a person storing the goods without payment of excise duty -a.Removes any excisable goods in contravention of any of the provisions of the CE Rules and notifications issued there under 2. Fails to account any excisable goods produced/manufactured/stored. 3. Engages in production or manufacture or storage without making an application for registration. 4. Contravention of any of the provisions of these rules or notifications with the intention to evade payment of duty. The goods are liable for confiscation and the manufacturer or the producer or the person who stores the goods shall be liable for the penalty not exceeding duty on excisable goods or Rs.10000 whichever is greater.

Before confiscating the goods and imposing penalty, a notice must be issued to the party. Rule-26: Penalty for Certain offences: Any person who transports or removes or deposits or keeps or conceals or sells or purchases any excisable goods which he knows or has reason to believe that the goods are liable for confiscation, shall be punishable with a penalty not exceeding the exceeding the excise duty on the goods or Rs.10000 whichever is greater. *Rule-25 applicable to manufacture/warehouse/prod etc. Rule-26 applicable to every person not registered. Rule-27: General Penalty: A breach of any of the Central Excise Rules where no other penalty provided in the rules or act, be punishable with a penalty which may extend to Rs.5000 and the goods are liable for confiscation. Rule-28: Confiscated property to rest with the government. Any confiscated property shall rest with the Government. Every Police Officer must assist the Central Excise Officer to take possession of goods confiscated.

Rule-29: Disposal of Confiscated goods: Any confiscated goods can be disposed by way of sale or destruction. However an assessee or the party can pay a fine in lieu of confiscation so that the goods may be released. Rule-30: Storage charges to be recovered on confiscation. The owner of the goods may be required to pay storage charges determined by the excise officer on confiscation of the goods. Rule-31: Power to Issue Supplementary Instructions: The CBEC or CC or Commissioner may issue written instructions consistent with the CE Act and rules for the purposes of regulation. Rule-32: Restriction on Removal of goods:

No excisable goods shall be removed from a factory/warehouse between the appointed time for presentation of the annual budget a supplementary budget of the CG in the parliament. However, goods may be permitted for clearance during the said time subject to the following conditions: i. ii. iii. The assessee has to obtain a permission from the Commissioner. An application for such removal is to be presented by the assessee to Excise Officer before 17:00 hrs. immediately preceding the budget day. The assessee must give an undertaking in writing to pay the duty at enhanced rate in case the budget provisions increases the rate of duty.

Rule-33: Transitional Provisions: Any notification, circular, instruction, standing order, trade notice etc. issued under Central Excise rules by the Board or CC or Commissioner shall be deemed to be valid under the provisions of new rules. Note: Payment of duty under protest: The supplementary instructions of excise provides for payment of duty under protest where an assessee disagrees with the views of the excise department on certain issues. In such cases the assessee must file a protest letter before AC or DC explaining why he disagrees with the views of excise department and state his intention to pay the duty under protest. The assessee must indicate on all the clearances documents, PLA, on Cenvat that the duty has been paid under protest. Later once a decision is taken by the Excise Officer, assessee can claim refund if the decision is in his favour.

BENEFITS TO SSI UNITS

SSI units are considered to be backbone of the economy as it provides self employment opportunity to the people and also the cost of production is comparatively lower than large scale manufacturers. Therefore, the Central Excise Tariff grants certain concession to SSI units. The tariff has two important notifications namely 8/2002 and 9/2002. The salient features of 8/2002 are detailed below: 8/2002: The notification in the interest of the public grants exemption to SSI units from payment of whole of the excise duty or the specified goods manufactured or produced. The exemption is available only to the specified goods and not to all the goods. The table attached to 8/2002 provides that the exemption is available to all goods falling under Central Excise Tariff Act except certain goods.(For e.g. Exemption is not available to Tobacco Products,Aluminium, Stainless patties & pattas, certain textile products etc.) The concession is as per the following table: Sl.No Value of Clearances Exemption/

1 2 3

Aggregate value of clearances not exceeding Rs.150 lakhs in a financial year commencing from 1st April to 31st March Aggregate value of clearance of exceeding Rs.150 lakhs following first 150 lakhs All clearances of specified goods used as inputs for further manufacture in the same factory.

Nil Normal rate of duty Nil

The exemption is only for duties leviable under first schedule and second schedule of CETA (Only BED & SED). Conditions: 1) The exemption is optional to the SSI unit. A manufacturer may opt for payment of duty without availing exemption if he opts for exemption he must inform in writing to AC/DC giving the following particulars: a) b) c) d) e) His name and address Location of the factory Description of specified goods. Date from which option is exercised. Aggregate date value of clearances till the date of exercising option.

If the manufacturer opts to not to avail the exemption he cannot withdraw the option during the middle of the year. 2) No Cenvat credit on inputs is allowed. Until the manufacturer crosses or value of clearances of Rs.150 lakhs but after crossing 100 lakhs Cenvat is available on inputs. 3) Cenvat on capital goods may be taken but to be utilised but after crossing Rs.150 lakhs value of clearances. 4) No exemption is available if the aggregate value of clearances of all excisable goods in the home consumption market during the preceding financial year has exceeded Rs.400 lakhs. 5) The exemption from payment of duty up to a value of Rs.150 lakhs is limited to all the factories belonging to a manufacturer. In other words, if the company is having one or more factories the aggregate value of clearances of all the factories during a year shall not exceed Rs.150 lakhs to claim exemption. 6) Where goods are cleared by one or more manufacturer from a factory, the aggregate value of clearance during a year shall not exceed Rs.150 lakhs to claim exemption.

For the purposes of calculating aggregate value of clearances for home consumption the following value of clearances shall not be taken. 1. 2. 3. Value of goods that are exempted from payment of duty or goods attracting nil rate. Any inputs cleared within the factory for further manufacture. Where any goods carry brand name or trade name of any other manufacturer.

Where a SSI unit, manufactures parts/components of any machinery or equipment or appliance that are cleared for use as original equipment by the buyer, the SSI unit can affix the brand name or trade name of the buyer provided chapter X procedure is followed or a declaration filed to the AC/DC of Central excise. 4. Where the specified goods bearing a brand name a trade name a) b) c) d) KVIC Khadi Village Industries Commission KVIB Khadi Village Industries Board NSIC SSIDC

Such units can avail the exemption where a SSI unit is established in a rural exemption is available even if the goods carrying brand name or trade name of any other person. Brand name or Trade name means a brand name or trade name whether registered or not. It can be a mark or symbol or name or monogram or label or signature or invented word that are used in relation to the specified goods to indicate a connection between the goods and the owner of brand name or trade name. Value means: 1. Where the goods are covered by Sec.4, transaction value or assessable value u/s.4 2. Where the goods are covered by Sec.4A, value as determined u/s.4A. 3. Where Tariff value is fixed on any goods that Tariff value. Clearance of goods for home consumption means goods sold in India include clearance to Nepal & Bhutan. Rural Area: means the area comprised in a village as defined in the land revenue records excluding 1. Area under any Municipal Corporation or town area or Cantonment Board. 2. Area notified as Urban area by the Central Govt. or State Govt.

RECOVERY, DEMAND, REFUND, INTEREST ETC.

Sec.5A Power to Grant exemption:

There are Two important provisions u/s.5A to grant exemption: 1. Under Sec.5A(1) the CG has power to grant exemption from payment of duty on excisable goods in the interest of the public by way of a notification. 2. Under Sec.5A(2) an exemption may be granted by a special order in the interest of the public of the goods are of in a secret nature or meant for strategic purposes or charitable purposes. Finance Act, 2003 has amended 5A(2) which provides that for the words Secret or strategic or charitable purposes the words 'Exceptional Nature' has been substituted. Any notification granting exemption must obtain the approval of the Parliament if it is in sitting, otherwise within 7 days from the date of sitting of the parliament, the notification must be placed before the Parliament and to be approved within 15 days from the date of presentation of the bill. If the bill is not approved it shall lapse, however, any exemption granted already will be valid prior to the date of expiry of bill. Sec.11 : Recovery of the sum due to the Government: Where any sum (duty or interest or penalty or fine or any other charges) due to the government, the commissioner of Central Excise can attach all the excisable goods and recover the dues. In case the excisable gods are insufficient to recover the dues he can go for certificate action. Certificate action means the Commissioner will draw a list of properties belonging to the assessee and sum due to the government which is forwarded to the District Collector who will attach all the movable and immovable properties of the assessee to recover the dues. Sec.11A: Demand: Where any duty was not levied or short levied or not paid or short paid or erroneously refunded, a notice shall be issued within 1 year from the relevant date asking why duty cannot be demanded. Where the duty was not levied or short levied or not paid or short paid or erroneously refunded by reason of fraud/collusion/suppression of facts/wilful misstatements/contravention of any of the provisions of the act or rules with the intention to evade payment of duty, the duty can be demanded upto 5 years from the relevant date. If any omission is found by the assessee or pointed out by departmental officer, the duty and interest can be paid voluntarily so that no notice shall be issued. However this provision is not applicable if there is fraud, suppression of facts are involved. Where suppression of facts or wilful misstatement is involved, duty + interest and 25% of the duty as penalty may be paid so that the adjudication is treated as completed

Any notice issued under suppression of facts etc. it must be decided within a year from the date of issue of notice and in all other cases it must be decided within 6 months from the date of issue, if possible to do so. Where an assessee make any payment of duty voluntarily after detecting any irregularity on his own or by the Central Excise Officer, notice need not be issued, subject to the following provision. 1) The duty amount must be paid along with the interest. 2) The irregularity is not on account of fraud, suppression of facts etc. Relevant date means a) Date of filing of the return where a return has been filed. b) Where a return was not filed the date on which the return ought to have been filed. c) In any other case, the date of payment of duty. d) Where erroneous refund, the date of refund. e) Where the assessment was provisional, the date of adjustment after final assessment. The period of One year or 5 years may be worked back to limit the demand and work forward to demand within the specified period. Sec.11AB: Interest on Demand: Where any duty was demanded interest is payable from the 1 st day of the following month the duty ought to have been paid till the date of payment. The interest is to be determined by Central Government but not less than 10% but not more than 36% (Now-13%). Presently, there is no distinction between 11AA & 11AB with reference to interest calculation. There is no time limit to demand interest u/s.11AA & 11AB. Sec.11B Refunds: Where any person who has incurred any duty liability more than what is payable, he can file a refund application in prescribed form namely form R to ACCE/DCCE along with the documentary evidences to prove that the duty burden was not passed on to any other person. The Time limit to claim refund is one year from the relevant date. However, where any duty has been paid under protest, there is no time limit (decision of Supremes Court in the case of Mafatlal Industries Ltd.)

On the receipt of the application, if the AC/DC is satisfied that the applicant is entitled for refund, he may pass an order and credit the amount with CWF (Consumer Welfare Funds) except in the following cases: 1) Excise Duty paid on the final product or excise duty paid on the inputs used in the final products and exported. 2) Unspent advance deposit in P.L.A. 3) Refund of Cenvat Credit under Rule-6 of Cenvat Credit rules. 4) Where the claim is made by the buyer, if he has not passed on the duty burden to any other person. 5) Where duty is paid by the manufacturer if he has not passed on duty burden to any other person. 6) Any class of person notified by CG in official Gazette. Relevant Date: means 1) Where the refund relate to excise duty paid on exported goods or excise duty paid on inputs used in exported goods. a) Where the goods are exported by a vessel the date on which the vessel leaves India. b) Where the goods are exported by an aircraft the date on which the aircraft leaves India. c) Where the goods are exported by a vehicle the date on which the vehicle crosses customs frontier of India d) Where, by Post, the date on which the foreign Post office submits the goods for appraisal by Customs & Despatch to foreign country. 2) Where the goods are returned to Factory for repairs, reconditioning etc. the date of receipt of goods in to the Factory, 3) Where the duty is paid as a lump sum amount but reduced later the date of communication of the order. 4) In the case of any person other than the manufacturer, date of purchase. 5) In the case of provisional assessment, the date of final adjustment 6) In the case of erroneous refund the date of refund. 7) Where duty has been granted exemption by a Special Order under Sec.5A(2), the date on which the order was notified in the official Gazette. 8) In any other case, the date of payment of duty. Case laws: With reference to refunds: 1. Jain Spinners Ltd. (Decided by Supreme Court) 2. Mafatlal Industries Ltd. (Supreme Court) 3. Solar Pesticide Ltd. ( ) 4. Mahaveer Aluminium Ltd. (Delhi High Court) 5. Titgarh Paper Mills Ltd. (Supreme Court)

6. Addison Paints Ltd. (Madras High Court) 1. It was held that unjust enrichment is applicable even for predeposits (Appen) 2. It was held that Sec.11B has retrospective effect and applicable to all claims pending refund. 3. It was held that time limit of 1 year not applicable to predeposits but un just enrichment is applicable for provisional assessments and deposits. 4. It was held that unjust enrichment not applicable to pre deposits mde after clearance of goods. 5. Unjust enrichment is applicable where goods are captively consumed. 6. In this case the issue was whether refund could be granted if a credit note is given to the buyer. The Southern Regional Bench of the Tribunal held that more issue of credit note was not passed on to any other person. However, the Madras High Court interpreted that any other person means only the first buyer of the seller and it need not be tracked till the goods reaches the final consumer. But, the CG has preferred an appeal before Supreme Court against this decision.

Sec.11BB: Interest on Refunds: Where any refund claim is not disposed or refund not granted within 3 months from the date of receipt of application, interest is payable at the rate fixed by C.G. not less than 5% and not less than 30% (Now 6% p.a.) till the date of refund. Note: Since interest is simple interest there is no question of payment of interest on interest. Sec.11C: Power not to recover duty: Where any duty was not levied as a general practice prevailing in the trade, the Central Government has powers not to recover duty to the interest of the public, In such cases a notification is issued in the official Gazette. In case any manufacturer or person has paid any duty already he is entitled for refund subject to the provisions of Sec.11B. Sec.11AC: Mandatory Penalty: Where any duty was not levied or short levied or short paid or not paid or erroneously refunded by reason of fraud, collusion or wilful misstatement or suppression of facts or contravention of any of the provisions of the excise act or rules, a penalty equivalent to the duty amount shall be imposed. Sec.11D: Any amount collected representing as duty payable to Central Government

Where any person who is liable to pay excise duty collects any amount representing as excise duty more than what he has paid, the difference is payable to the C.G.

Important Points:
i. ii. iii. As per amended provision it is applicable only to a manufacturer or producer of excisable goods or a warehouse keeper who stores the goods without payment of excise duty. It is applicable only where any amount is collected in the name of excise duty. As per the amended provision if the person fails to pay the amount it can be demanded by excise department by issuing a notice.

Where any demand arises on account of finalisation of assessment or for any other reason on such goods, it is adjustable against the amount payable to the Central Government. Interest is payable if the amount is not paid on recovery. Further the properties may be provisionally attached by Commissioner of central excise for a period of 6 months which is extendable by 2 years. Sec.:12: Certain provisions of Customs Act applicable to excise law: Certain provisions of Customs Act with reference to levy, exemption, assessment, duty drawback, warehouse pending, offences may be made applicable to excise law. Sec.12A: Price of the goods to indicate duty: On all clearance documents like invoices, the price of the goods must indicate separately the excise duty amount. Sec.12B: Presumption: Where any application has been made for refund, the proper officer of Central Excise can presume the duty burden has been passed on to any other person. In other words it is for the applicant to prove that the duty burden was not passed on with proper documentary evidences.

Sec.12C: CWF (Consumer Welfare Fund)

A fund has been created by the Central Government having members from Finance Ministry, Ministry of Food & Supplies, Ministry of Industries, a person from the public. Any amount collected u/s. 11B or 11D is deposited with CWF. Sec.12D: Utilisation of Fund: Any amount deposited with CWF could be used for any purposes under CWF rules and as per the decision of the committee. Sec.12E: Excise Officer can exercise the power of the subordinate officers. Where necessary any excise officer can exercise the powers of the subordinate officer in the interest of the revenue. Sec.13: Power to Arrest: Any person who is liable to pay duty or commits any offence may be arrested by the proper officer of Central Excise. The powers can be exercised by the officer not below the rank of Inspector. However it requires an arrest warrant which can be issued by an officer not below the rank of AC/DC. Further prior permission of Commissioner is necessary to arrest any person. Sec.14: Power to Summon: An officer not below the rank of Superintendent has power to summon any person in connection with any offence to appeal before him or produce specified document on specified date and time. The person who has been summoned must appear before the officer without fail and not to leave the premises without his permission. The person appearing must give true and correct statement and produce required records failing which he is punishable under C.P.C. of I.P.C. Sec.14A & 14AA: Special order for valuation and Cenvat: Sec.22: Vexatious Search, Seizure etc. Any Central Excise Officer a) Carries out any search or causes any search of any premises or place or boat without valid reasons b) Vexatiously searches any person c) Vexatiously detains any person without valid reason d) Vexatiously detains any movable property e) Causes any injury to the person without any reason for such act. He is punishable with a penalty which may extend up to Rs.2000.

Any person who gives false information and the causes such search or seizure he is liable for imprisonment which may extend to 2 years or fine which may extend to Rs.2000 or both.

MISCELLANEOUS
1) Samples: Under Central Excise Law samples are drawn for various purposes like determination of Tariff Heading, excitability, eligibility of exemption etc. A sample is to be drawn in 4 parts and to be sealed in separate covers. Such samples are to be signed by the excise officer and the assessee with date and relevant particulars. On drawing samples test memo is to be prepared in triplicate. After drawl of the sample, one part is to be sent to chemical examiners with a copy of test memo. One part is to be handed over to AC/DC, one part to be delivered to the assessee and the last part is to be retained by Range Officer. After testing the sample, a copy of the report given by chemical examiner is to be given by the assessee. If the assessee disagrees with the test report one more test may be carried out using the remaining quantity of the sample where necessary test may be carried out by specialised institutions like IIT, CIPET, Technical Institutions etc. Advance Rulings: 1. Advance Rulings means determination of question of law or fact regarding duty liability by the authority on an application by a person. 2. Advance ruling may be requested by a non resident who is starting a joint venture along with a non resident/resident or a resident starting a joint venture along with a non resident in India to Produce excisable goods. 3. The advance Rulings authority has a chair person who is a retired Supreme Court Judge. It has a member from Indian Customs and Excise Service in the rank of member and a member from Indian Legal Service in the rank of additional secretary. Procedures: a. An application in prescribed form triplicate to be submitted by the applicant at New Delhi. b. An application may be withdrawn within 30 days from the date of application c. A demand draft for Rs.2500 in favour of Advance Ruling Authority is to be enclosed. d. Application may with reference to: a) determination of classification b) eligibility of a notification

c) determination of value e. No application shall be made except in the case of resident if the issue is pending before Tribunal or Court or decided by Tribunal or Court. f. On receipt of application a notice is issued by the authority to the Commissioner of Excise or Customs to offer his views. g. The authority may accept or reject the application h. If the application is accepted ruling will be given within 90 days from the date of receipt of application. i. The ruling will be binding on the applicant and Commissioner of Excise and Customs. j. If any ruling is obtained by fraud or misstatement it shall be invalid. k. The ruling is applicable only to the person who has made the application. Settlement Commission: 1. To settle the disputes between the department and the assessee in an amicable manner, the CG has created Settlement Commissions. It has a Principal Bench at New Delhi and the Regional Benches of Mumbai, Kolkata and Chennai. It has a Chairman, one or more Vice Chairman, members and a Commission (Investigation) from Indian Customs & Excise Services. An application may lie before the Commission only where: a. a return indicating production clearance etc. has been filed. b. A notice has been issued demanding duty, penalty etc. and c. Minimum differential duty liability of 3 lakhs has been accepted by the affidavit. d. Only once in a life time an assessee can apply to settlement commission. e. Duty and interest must be paid while making application Where any seizure of records or documents have been effected no application shall be accepted until expiry of 180 days. No application shall be made if the applicant has preferred an appeal before Commissioner(Appeal) or Tribunal unless it is withdrawn. No application shall be made if the issue relates to interpretation on classification. Procedures: 1. An application is to be made in prescribed form in triplicate. 2. A crossed demand draft for Rs.1000 in favour of Settlement Commission is to be enclosed towards filing fee. 3. Once an application is made it cannot be withdrawn 4. On receipt of the application, a notice will be issued to Commissioner of Excise or Customs and necessary documents may be called for 5. If the application is accepted the applicant must pay the differential duty liability with 30 days from the date of receipt of the communication. 6. The time limit may be extended with interest liability. 7. Where an appeal was withdrawn but the Commission refused to accept the application the appeal will get revived automatically.

Advantage in moving an application before Settlement Commission: 1. Waiver of penalty fully or partly 2. Immunity from prosecution. The Settlement Commission may rectify an order if any error is found at a later date. If an order is obtained fraudulently or suppression of facts by an applicant, the Commission can reopen the order and take necessary action. Excise Audit, 2000: In the year 2000 the Central Excise Law introduced a new auditing technique called FA,2000 (CIDA Audit) in collaboration with CANADA Revenue. The new audit system has the following salient features: 1. Selection of the unit 2. Trend analysis 3. Collection of information from internal and external sources 4. Desk Review 5. Prioritizing the audit. 6. Assessment of Manpower and Workload 7. Preparation of an audit plan 8. Visit of the unit 9. Interviewing the Key Personnel 10. Review organisation 11. Verification of Process flow charts 12. Understanding the process of manufacture 13. Touring the factory premises 14. Preparation of Internal Control Questionnaire 15. Examining the level of Internal Check and Internal Control and efficacy of Internal audit system. 16. ABC analysis 17. Calculation of Input Output rates 18. Application of Sampling techniques 19. Doing Risks-Loss Analysis a reasonableness test 20. Preparation of an individual audit plan 21. Walk through 22. Conducting the Audit 23. Preparation of Audit Report 24. Discussing the audit paras with assesses with ADC/JC Audit, DC/AC Audit and DC/AC of the division 25. Submitting the auditing report before Audit Committee 26. Forwarding copies of audit report to division and ranges.

EXIM POLICY

What is project import? CH No.98.01 covers project imports and goods imported under this head attracts concessional rate of duty. It covers the following: ALL ITEMS OF MACHINERY INCLUDING PRIME MOVERS, INSTRUMENTS, APPARATUS AND APPLIANCES, CONTROL GEAR AND TRANSMISSION EQUIPMENT, AUXILIARY EQUIPMENT (INCLUDING THOSE REQUIRED FOR RESEARCH AND DEVELOPMENT PURPOSES, TESTING AND QUALITY CONTROL), AS EWELL AS ALL COMPONENTS (WHETHER FINISHED OR NOT) OR RAW MATERIALS FOR THE MANUFACTURE OF THE AFORESAID ITEMS AND THEIR COMPONENTS, REQUIRED FOR THE INITIAL SETTING UP OF A UNIT, OR THE SUBSTANTIAL EXPANSION OF AN EXISTING UNIT, OF A SPECIFIED : (1) INDUSTRIAL PLANT, (2) IRRIGATION PROJECT, (3) POWER PROJECT, (4) MINING PROJECT, (5) PROJECT FOR THE EXPLORATION FOR OIL OR OTHER MINERALS, AND (6) SUCH OTHER PROJECTS AS THE CENTRAL GOVERNMENT MAY, HAVING REGARD TO THE ECONOMIC DEVELOPMENT OF THE COUNTRY NOTIFY IN THE OFFICIAL GAZETTE IN THIS BEHALF; AND SPARE PARTS, OTHER RAW MATERIALS (INCLUDING SEMI-FINISHED MATERIAL) OR CONSUMABLE STORES NOT EXCEEDING 10% OF THE VALUE OF THE GOODS SPECIFIED ABOVE PROVIDED THAT SUCH SPARE PARTS, RAW MATERIALS OR CONSUMABLE STORES ARE ESSENTIAL FOR THE MAINTENANCE OF TH PLANT OR PROJECT MENTIONED IN (1) TO (6) ABOVE However Hotels, Laundry, Photographic studios, Garages, Photocopying industries are not eligible for concession under 98.01.

Definitions:

1. Actual user means an actual user who may be either industrial or non-industrial. Industrial is a case where a unit manufactures for his own unit or a jobbing unit. Non Industrial means any commercial establishment, trade or profession or a lab or a R&D, University or a hospital or any service industry.

2. Counter Trade means any arrangement under which exports or imports are balanced with by direct import or export or through a third country under a trade agreement or otherwise. The Counter trade is carried out through escrow account, by back

arrangements, barter trade or any similar arrangement.

3. Manufacturer Exporter means a person who export goods manufactured by them or intends to export such goods.

4. Merchant Exporter means a person engaged in trading activities and exporting or intending to export goods.

5. RCMC means a registration cum Membership Certificate granted by an Export Promotion Council or other competent authority.

6. Third Party Export means exports made by an exporter or manufacturer on behalf of a third party. In such cases Shipping bills shall indicate the name of both the exporter/manufacturer and third party.

7. Restricted Goods: Any goods the export or import of which is restricted under ITC classification of export and import items may be exported or imported only in accordance with a licence issue.

8. Green Card: All manufacturers exporting more than 50% of their production subject to a minimum export of Rs.1 crore in the preceding year, shall be issued a green card by DGFT. This card will entitle the holder to such facilities as may be specified from time to time.

9. CCP: Import of gifts shall be allowed in accordance with baggage goods without a CCP if such goods are freely importable under EXIM policy. In other cases CCP shall be required and may be issued by the licensing authority on imports.

10. Duty Exemption Scheme: The duty exemption scheme consists of duty free licence Annual Advance Licence and Duty Entitlement Pass Book.

11. Duty Free Licence includes Advance Licence, Advance intermediate Licence and

Special Imprest License.

12. AIL: AIL is granted to a manufacturer exporter for the import of inputs required in the manufacture of goods to be supplied to the ultimate exporter holding an advance licence or Special Imprest Licence.

13. SIL: SIL is granted to the main contractor for the import of inputs required in the manufacture of goods to be supplied to the categories mentioned in the list.

14. Value addition: Unless otherwise specified in a standard input-output norms, a duty free licence shall have a minimum value addition of 33%. The advance Licence Committee may consider requests on merits for grant of a Duty Free Licence at a lower value upto 25% and in exceptional cases even below 25%.

15. Advance Release Orders: A Duty free licence holder except AIL holder intending to source an inputs from indigenous sources or canalising agencies/EOU/EPZ/EHTP/STP Units in lieu of direct import has the option to source them against Advance release orders denominated in foreign exchange or Indian Rupees. In such a case the licence shall be invalidated for direct import and ARO shall be issued which will entitle the supplier for the benefits of deemed export.

16. Transferability of Licence: A duty free licence except SIL and materials imported against it is transferable after completion of export obligation. However, AIL issued with actual user condition and material imported against it shall not be transferable or sold or disposed under any circumstances.

17. Prohibited Items: Prohibited items of Imports mentioned in ITC classifications of exports and imports shall not be imported under the licence issued under the scheme.

18. DEPB: DEPB may be issued at post export basis and pre export basis. The validity period is 12 months from the date of issue. Merchant exporter and manufacturer exporter are eligible for DEPB. On post export basis. The DEPB on post export basis or the items imported against it is freely transferable. Manufacturer exporter and Merchant exporter tied with the supporting manufacturer having export performance in the preceding 3 licensing years are eligible to claim DEPB on re export basis. The credit of DEPB or pre export basis

shall be granted at the rate of 10% of the average export performance during the preceding three licensing years.

19. Replenishment Licences: The exporters of Gem and Jewellery products listed in hand book shall be eligible for replenishment licenses.

20. DTA Sales: DTA sales upto 50% of the FOB value of exports may be made subject to payment of applicable duties and fulfilment of minimum NFPB prescribed in the policy. In the case of EOU or EPZ used toys, Electronic hardware, Agriculture, Agro processing, aquaculture, animal husbandry, bio-technology, horticulture, sericulture etc., such sales may be subject to NFPB only. No DTA sale shall be permissible in respect of motor cars, alcoholic liquor and other items stipulated by DGAT.

21. Deemed Exports refers to those transactions in which the goods supplied do not leave the country. The categories are:

a. Supply of goods against duty free licensee and AIL b. Supplies to EOU, EPZ, STP and ETP c. Supply of capital goods to licence holders of EPCG scheme d. Supply of goods to projects financed by multilateral or bilateral agencies notified by MO/f under global tender. e. Supply of goods to Power, Oil and Gas sectors including refineries. f. Supply of Marine Freight containers by 100% EOU to Shipping Companies.

Benefits for Deemed Exports:

a. b.

SIL/AIL Deemed Export Drawback scheme

c. d.

Refund of terminal excise duty SIL at the rate of 6% of FOR

22. Free Exports: All goods may be exported without any restriction except to the extent such exports are regulated by ITC classifications.

23. Export of Gifts: Gifts including eatable items of value not exceeding Rupees one lakh in a licensing year may be exported as a gift without a licence except in the case of eatable items. 24. Golden Status Certificate: Exporters Exporters should have attained EH/TH/STH/SSTH status for three successive terms or more shall be eligible for golden status certificate. This will enable them to enjoy the benefits of EH/TH/STH/SSTH irrespective of their actual performance.

25. Status for Exporters: (2000-2001)

Status

FOB value of Exports in the current yr. + pr. 3 years. 20 Crores 100 500 2500 10000

Export House Star Export House Trading House Star Trading House Premier Trading House

26. EPCG Scheme: Export Promotion Capital Goods Scheme entitles to import capital at 0% duty or concessional duty subject to Export obligations.

EPCG

EXPORT OBLIGATION

PERIOD

3% BCD

8 times duty saved

8 years

SSI units to export 6times duty saved in 8 years Cottage or tiny sector units to export 6times duty saved in 12 years.

The Major Functions of the EPCs are:

a. To provide commercially useful information and assistance to their members in developing and increasing their exports.

b. To offer professional advice to their members in areas such as technology up gradation, quality and design improvement, standards and specifications, product development, innovation, etc.

c. To organise visits of delegations of its members abroad to explore overseas market opportunities.

d. To organise participation in trade fairs, exhibitions and buyer-seller meets in India and abroad.

e. To promote interaction between the exporting community and the Government both at the Central and State levels; and

f. To build a statistical base and provide data on the exports and imports of the country, exports and imports of their members, as well as other relevant international trade date.

Validity of Import Licenses / CCPs:

a. The validity of an Import Licence shall be as follows:

i. Duty free licence s per chapter 7 and replenishment

Licence for Gem & Jewellery as per chapter 8 of the Policy 18 months

ii. EPCG Licence

24 months

iii. Others including CCP and DEPB, unless otherwise specified

12 months

iv. Advance Licence/Special imprest Licence 18 months of Conterminous with Project/Turnkey Project the contracted duration of execution of the Project, whichever is later.

b. Where the date of expiry of the licence falls before the last day of the , the licence shall be deemed to be valid until the last day of the month.

c. The period of validity means the period for shipment/despatch of goods covered under the licence. The validity of an import licence is decided with reference to the date of shipment/despatch of the goods from the supplying country as given in paragraph 15:15 of this Hand book and not the date of arrival of the goods at an Indian Port.

CUSTOMS ACT

Chapter:1 Definitions 1. Conveyance: It includes a Vessel, and Aircraft and a Vehicle

2. Customs Are means any area of a customs station and includes any area in which imported goods or export goods re ordinarily kept before clearance by Customs authorities.

3.

Customs port means any port appointed under the customs Which includes an ICD.

4.

Customs station means any customs port, customs import or land customs station

5. Dutiable goods means any goods which are chargeable to duty and on which duty has not been paid 6. Export means taking out of India to a place outside India

7. Foreign going Vessel or Aircraft means any vessel or Aircraft for the time being engaged in the carriage of goods or passengers between any port or airport in India and port or airport outside India, whether touching any intermediate port or airport in India or not and includes:

a.

any naval vessel of a foreign government taking part in any naval exercises

b. any vessel engaged in fishing or any other operations outside the territorial waters of India c. any vessel or aircraft proceeding to a place outside India for any purpose whatsoever

8. Goods includes :

a) b) c) d) e) f) g) h)

vessels aircrafts vehicles stores Baggage currency Negotiable instruments Any other kind of movable properties

9.

Import means bringing into India from any place outside India

10. India includes territorial waters of India

11. Indian customs waters means the water extending into sea upto 12 nautical miles under a limit of contiguous zone of India under section:5 of the Territorial waters, continental shelf exclusive economic zone and other maritime zone act. It includes any bay, gulf, harbour, creek or tidal river.

12. Land customs station means any place appointed under the customs area

13. Person in charge means:

a) b)

in relation to a vessel the master of the vessel in relation to an aircraft the commander or pilot in-charge of the aircraft

c) in relation to a railway train the conductor, guard or other person in charge of the vehicle d) in relation to any other conveyance, the driver or other person in-charge of the

conveyance.

14. Stores means goods used in the vessel or aircraft and includes fuel and spare parts and other articles of equipment whether or not for immediate fitting

15. Smuggling in relation to any goods means any ct or omission which will render such goods liable for confiscation under section: 111 & 113 of the customs act.

16. Coastal goods means goods other than imported goods transported in vessel from one port in India to another

17. Notified goods means imported goods notified under section:11-B of the Customs Act that requires a Licence from the Commissioner of Customs to deal.

18. Specified goods are those goods notified for export which requires a licence from Commissioner of customs to deal.

Chapter:2

Prohibition of import/export of goods:

Goods are prohibited for importation or exportations for the following reasons: the maintenance of the security of India

the maintenance of public order and standards of decency or morality the prevention of smuggling the prevention of shortage of goods of any description conservation of foreign exchange and the safeguarding of balance of payments prevention of injury to the economy of the country by the uncontrolled import or export of gold/silver prevention of surplus of any agricultural products or product of fisheries maintenance of standards for the classification , grading or marketing of goods in international trade establishment of any industry prevention of serious injury to domestic production of goods of any description protection of human animal or plant life or health protection of national treasures of artistic, historic or archaeological value conservation of exhaustible natural resources protection of patents, trade marks and copy rights prevention of deceptive trade practices fulfilment of obligations under charter of the UN for maintenance of international peace and security implementation of treaty, agreement or convention with any country prevention of dissemination of documents containing any matter which is likely to affect friendly relations of a foreign state prevention of the contravention of any law for the time being in force any other purpose conducive to the interest of the general public

Chapter: 3

IMPORT PROCEDURES

Placing a purchase order with the foreign supplier Opening L/C in favour of foreign supplier FILING OF Import Manifest: A an import manifest consist of goods carried by vessel or aircraft to be filed by the person-in-charge of the Vessel or Aircraft. Where goods are imported by a vessel it is to be filed within 24 hours from the time of arrival of the vessel and in the case of aircraft, it is to be filed within 12 hours from the time of arrival of aircraft. It is to be filed in duplicate/triplicate. It consists of:

a) b) c) d)

General declaration Cargo declaration Vessels stores list List of private properties of crew members

The Cargo declaration shall consist of: a) b) c) d) Cargo to be landed Unaccompanied baggage Bottom cargo Cargo for transhipment

If any of the following goods re carried the particulars are to be furnished in plain sheet of paper: a) b) c) d) e) Arms Ammunitions Explosives Dangerous drugs Narcotic drugs

f) g)

Gold Silver

Even if the above goods are not carried a Nil declaration has to be filed. Filing of Bill of Entry: It is to be filed with customs for clearances of imported goods. There are 3 types of Bill of entries:

e) f) g)

Bill of entry for home consumption (White) Into bond/warehouse Bill of entry (Yellow) Ex-bond/Ex-warehouse Bill of entry (Green)

A Bill of entry shows the particulars of gods imported, quantity, CIF value, CSH no. rate of duty, amount of customs duty etc., It is to be filed with the import department of Customs. It is filed after arrival of the vessel .However; Bill of entry could be filed even before arrival of the vessel or aircraft. It is to be filed in Quadruplicate.

Documents to be submitted along with a Bill of entry:

a) b) c) d) e) f) g) h) i)

Import Invoice Purchase order Bill of Lading L/C or Bill of Exchange Insurance policy Import Licence SSI certificate, if necessary Product catalogue/Drawing Packing slips

j) k) l)

Chemical test report Import licence Any other relevant documents

On filing of the BE with import department of customs, it is dated and noted, then returned to the importer.

The importer has to submit the BE to Appraiser of customs who verifies the correctness of CIF value, CSH No., rate of duty, whether the goods are prohibited for import, whether the import contravenes any of the provisions of the Customs Act. It is signed by the Appraiser and by the AC/DC of the group.

The importer has to now pay the duty by using TR-6 challan in a nominated bank and submit the same to customs.

The Licence section verifies whether proper import licence is available and whether the licence is within the validity period?

The import department detaches the Original copy of BE and other documents which is retained by customs. The importer is returned with other three copies of BE.

The importer has to submit the duplicate copy of BE to AC/DC- docks who will carry out physical examination of goods and if satisfied will issue out of charge order.

On payment of port dues, the Port authorities will permit clearance of goods. Now the port authorities will forward the duplicate copy of BE to Customs who will match with original BE

Chapter:4

Export procedures

Receiving purchase orders from the foreign buyer Receipt of confirmed L/C Filing of Export manifest. It consists of

a)

all the goods carried in vessel or aircraft

It is to be filed in duplicate by the person-in-charge of the vessel or aircraft. It includes: a) a general declaration b) c) d) a passenger manifest cargo manifest a list of private properties of crew members

The Cargo manifest shall indicate; a) Cargo shipped b) Cargo transhipped c) Bottom cargo

d) Cargo under drawback claim

Filing of shipping Bill or Bill of export: A shipping Bill or Bill of export is of the following types:

a)

Shipping Bill or Bill of export under claim of drawback

b) c) d)

SB for export of dutiable goods SB for free goods SB for ex-bond export

The SB is to be filed with Export documentation centre enclosing the following documents:

a) b) c) d) e) f) g) h) i) j)

Export Invoice Bill of lading Copy of L/C Packing slip Chemical test report Certificate of origin ARE-1 GR Forms Export Licence Any other relevant documents

On filing the documents with SB it is verified by the Customs appraiser, if satisfied the original SB is detached and retained at customs. The duplicate is returned to exporter who has to deliver the export goods and duplicate of SB to AC/DC docks who will verify the seal. If the seal is in tact, he will permit export by endorsing Let export.

Chapter:5

DUTY DRAWBCK

Duty drawback is n incentive given to exporters under Customs Act. It is a refund of Customs duty paid on imported goods or excise duty paid on indigenous goods. It is covered by Section: 74, 75, 75-A & 76 of the Customs Act.

Drawback allowable on re-export of duty paid goods as such

Drawback is allowable on goods exported as such subject to the following conditions:

a) b)

the goods must have been previously imported import duty must have been paid on the goods when imported

c) the goods must be exported within 2 years from the date of payment of duty. It is extendable by the CBEC, if sufficient cause is shown. d) e) f) g) The goods must be identified to the satisfaction of AC/DC customs The goods must be capable of being identified The goods must be actually exported to a place outside India The market price of the goods shall not be less than the amount of drawback claimed.

In the above cases, the drawback is allowable to the extent of 98% of the duty paid.

Drawback where goods are exported after use:

a) goods imported by person for his personal and private use and Motor cars: In this case the DBK allowable is as per the following table:

Period of usage Up to one year

Drawback allowable CD paid less 4% per quarter or part thereof CD paid less 3% per quarter or part thereof CD paid less 2.5% per quarter or part thereof CD paid less 2% per quarter or part thereof

Up to two years

Up to three years

Up to four years

If export takes place beyond 2 years, permission is to be obtained from Commissioner of Customs.

b)

Other goods: The drawback allowable is as follows:

Period of usage For use upto 3 months For use > 3 - 6 months For use > 6 - 9 months For use > 9 - 12 months For use >12 - 15 month For use > 15 -18 month For use > 18 months

Drawback allowable 95% of CD paid 85% of CD paid 75% of CD paid 70% of CD paid 65% of CD paid 60% of CD paid NIL

No drawback is admissible on the following goods exported after use:

Wearing apparel Tea chests of plywood Exposed cinematographic films passed by Board of Film Censors of India Unexposed photographic films paper, x -ray films and plates.

Where imported goods or indigenous goods are used in the exported goods the drawback is allowable under the following schemes:

ALL INDUSTRY RATE:

Under this scheme the rte is fixed for a specific product exported which is applicable to all industries engaged in export of the specified goods. This rate is determined by the Drawback directorate, New Delhi periodically. It is revised periodically. It is fixed based on Input/output ratio of the exported goods, CD rate and Excise duty rates & servicetax rates. This rate is not applicable to an exporter who has availed duty free licences. BRAND RATE:

This rate is applicable to those exporters who export goods for which no AIR has been fixed or the exporter has availed duty free licences.

SPECIAL BRAND RATE:

Where the AIR fixed by the government is less than 4/5 th of the actual duty paid by the exporter, he can claim SBR.

Procedures for fixation of DBK rate:

DBK-I statement indicating input/output ratio certified by a Chartered Engineer is to be enclosed. DBK-II/IIA statements indicating the sources of inputs and DBK-III/III-A statements indicating the duty payments certified by a CA or Cost Accountant are to be

submitted at Excise department for fixation of rate. It is fixed for a specific consignment or for a period.

Claim of DBK:

The drawback is allowed by customs immediately on filing of Shipping Bill.

Interest on drawback:

Where drawback is not allowed within 2 months from the date of filing interest is payable by the Central Govt at the rate prescribed. If any erroneous drawback was taken by an exporter, it must be paid within 2 months, otherwise interest is payable by the exporter at the prescribed rate.

Provisional DBK rate:

An exporter can request for fixation of provisional DB rate for which application has to be made in the prescribed forms and a bond has to be executed with surety/security or both. After finalisation of the rate if the DBK allowed is excess the exporter has to pay the excess. If the DBK allowed was less difference is to be paid by the government to the exporter.

Supplementary DB Claim: If the drawback allowed is less than the actual duty / tax suffered by the exporter, supplementary DBK is allowable. The application is to be made within 3 months which is extendable for further period upto 9 months from the relevant date. Special Economic Zones

The Government of India had announced a SEZ scheme in April, 2000 with a view to provide an internationally competitive environment for exports. The objectives of SEZs include making available goods and services free of taxes and duties supported by integrated infrastructure for export production, expeditious and single window approval mechanism and a package of incentives to attract foreign and domestic investments for

promoting export-led growth. In order to give a long term and stable policy framework with minimum regulatory regime and to provide expeditious and single window clearance mechanism, the Special Economic Zones Act, 2005 has been brought into effect along with the Special Economic Zones Rules, 2006 from 10 February 2006. The Act and the Rules together aim to provide a single self contained legislation governing the operations of SEZs and replaces the hitherto applicable legislations and rules governing the operations of SEZ in India . Under the Act, SEZ could be set up either jointly or severally by the Central Government, State Government, or any person (including a private or public limited company, partnership or proprietorship): for manufacture of goods; or for rendering services; or for both manufacturing of goods and for rendering services; or as a Free Trade and Warehousing Zone.

Developer and the SEZ unit shall be entitled to the following exemptions, drawbacks and concessions: exemption from customs duty on goods imported into the SEZ by the Developer or SEZ Unit to carry on the authorised operations; exemption from customs duty on goods exported from the SEZ by the Developer or SEZ Unit to any place outside India ; exemption from excise duty on goods brought from Domestic Tariff Area ("DTA") to the SEZ by the Developer or SEZ unit to carry on the authorized operations; drawback or such other benefits (as may be admissible from time to time) on goods brought from the DTA into a SEZ by the Developer or Unit to carry on the authorized operations; exemption from service tax on taxable services provided to a Developer or Unit to carry on the authorized operations in a SEZ. However, please note that there is no specific service tax exemption on services provided by a Developer of an SEZ or a SEZ Unit. Exemption, if any, would be as per the service tax legislation; exemption from the securities transaction tax in case the taxable securities transactions are entered into by a non-resident through the International Financial Services Centre ("IFSC"); exemption from levy of Central Sales Tax on the sale or purchase of goods by the Developer or SEZ unit if such goods are meant to carry on the authorized operations;

Local sales tax/ VAT exemption or concession on supply of goods to an SEZ Developer or Unit or sale of goods by an SEZ Developer or Unit is subject to the respective sales tax/ VAT legislation of the state in which the SEZ is set up. The Central government has prescribed the manner, terms and conditions subject to which above exemptions/ concessions would be available. Removal of goods into DTA is subject to prescribed conditions and on payment of applicable customs duties as levied on importation of such goods into India . Fiscal incentives - Income Tax incentives for SEZ units 1. Tax Holiday for SEZ units engaged in manufacture or providing services A new section 10AA has been inserted in the IT Act by SEZ Act, 2005 which provides that the units in SEZ which start manufacturing or producing articles/ things or which start providing services on or after April 1, 2005 will be eligible for a deduction of 100 percent of export profits for the first five years from the year in which such manufacture/ provision of services commences and 50 percent of the export profits for the next five years. Further, for the next five years a deduction shall be allowed of upto 50 percent of the profit as is debited to the profit and loss account and credited to the Special Economic Zone Reinvestment Reserve Account (subject to conditions). 2. Tax Holiday for Offshore Banking units in SEZ A deduction in respect of certain incomes would be allowed under the new section 80LA, to scheduled banks or foreign banks having an Offshore Banking unit in SEZ or to a unit of IFSC. The deduction shall be for 100 percent of income for five consecutive years beginning from the year in which permission/ registration has been obtained under the Banking Regulation Act or the SEBI Act or any other relevant law and 50 percent of income for next five years. 3. Interest received by non-residents and not ordinary residents on deposits made with an Offshore Banking Unit on or after April 1, 2005 shall be exempt from tax. 4. Exemption from Minimum Alternate Tax ("MAT") Income arising or accruing on or after April 1, 2005 from any business carried on, or services rendered by SEZ unit would be exempt from MAT under section 115JB. 5. Exemption from Capital Gains Capital gains arising on transfer of assets (machinery, plant, building, land or any rights in buildings or land) on shifting of the industrial undertaking from an urban area to any SEZ would be exempt from capital gains tax. The exemption would be allowable if within one year before or three years after such transfer: machinery or plant is purchased for the purposes of business of industrial undertaking in SEZ by the assessee; assessee has acquired land or building or has constructed building for the purposes of business in SEZ; the original assets are shifted and establishment of the industrial undertaking is transferred

to SEZ; and other specified expenses are incurred. The amount of exemption for capital gains would be restricted to the costs and expenses incurred in relation to all or any of the purposes mentioned above.

WAREHOUSING SECTION 57.Appointing of public warehouses. At any warehousing station, the [Assistant Commissioner of Customs or Deputy Commissioner of Customs] may appoint public warehouses wherein dutiable goods may be deposited SECTION 58.Licensing of private warehouses. (1) At any warehousing station, the [Assistant Commissioner of Customs or Deputy Commissioner of Customs] may license private warehouses wherein dutiable goods imported by or on behalf of the licensee, or any other imported goods in respect of which facilities for deposit in a public warehouse are not available, may be deposited. (2)The [Assistant Commissioner of Customs or Deputy Commissioner of Customs] may cancel a licence granted under sub-section (1) (a)by giving one months notice in writing to the licensee; or (b)if the licensee has contravened any provision of this Act or the rules or regulations or committed breach of any of the conditions of the licence : Provided that before any licence is cancelled under clause (b), the licensee shall be given a reasonable opportunity of being heard. (3)Pending an enquiry whether a licence granted under sub-section (1) should be cancelled under clause (b) of sub-section (2), the [Assistant Commissioner of Customs or Deputy Commissioner of Customs] may suspend the licence. SECTION 59.Warehousing bond. - [(1)The importer of any goods specified in [* **] sub-section (1) of section 61, which have been entered for warehousing and assessed to duty under section 17 or section 18 shall execute a bond binding himself in a sum equal to twice the amount of the duty assessed on such goods (a)to observe all the provisions of this Act and the rules and regulations in respect of such goods; (b)to pay on or before a date specified in a notice of demand, (i)all duties, and interest, if any, payable under sub-section (2) of section 61;

(ii)rent and charges claimable on account of such goods under this Act, together with interest on the same from the date so specified [at such rate not below eighteen per cent. and not exceeding thirty-six per cent. per annum, as is for the time being fixed by the Central Government, by notification in the Official Gazette]; and (c)to discharge all penalties incurred for violation of the provisions of this Act and the rules and regulations in respect of such goods.] (2)For the purposes of sub-section (1), the [Assistant Commissioner of Customs or Deputy Commissioner of Customs] may permit an importer to enter into a general bond in such amount as the [Assistant Commissioner of Customs or Deputy Commissioner of Customs] may approve in respect of the warehousing of goods to be imported by him within a specified period. (3)A bond executed under this section by an importer in respect of any goods shall continue in force notwithstanding the transfer of the goods to any other person or the removal of the goods to another warehouse : Provided that where the whole of the goods or any part thereof are transferred to another person, the proper officer may accept a fresh bond from the transferee in a sum equal to twice the amount of duty assessed on the goods transferred and thereupon the bond executed by the transferor shall be enforceable only for a sum mentioned therein less the amount for which a fresh bond is accepted from the transferee. SECTION 60.Permission for deposit of goods in a warehouse. When the provisions of [section 59 [***]] have been complied with in respect of any goods, the proper officer may make an order permitting the deposit of the goods in a warehouse SECTION 61. Period for which goods may remain warehoused. (1) Any warehoused goods may be left in the warehouse in which they are deposited or in any warehouse to which they may be removed, (a) in the case of capital goods intended for use in any hundred per cent export oriented undertaking, till the expiry of five years; [(aa) in the case of goods other than capital goods intended for use in any hundred per cent. export-oriented undertaking, till the expiry of three years; and] (b) in the case of any other goods, till the expiry of one year, after the date on which the proper officer has made an order under section 60 permitting the deposit of the goods in a warehouse : Provided that [(i) in the case of any goods which are not likely to deteriorate, the period specified in [clause (a) or clause (aa) or clause (b)] may, on sufficient cause being shown, be extended (A) in the case of such goods intended for use in any hundred per cent. export-oriented undertaking, by the Commissioner of Customs, for such period as he may deem fit; and

(B) in any other case, by the Commissioner of Customs, for a period not exceeding six months and by the Chief Commissioner of Customs for such further period as he may deem fit;] (ii) in the case of any goods referred to in clause (b), if they are likely to deteriorate, the aforesaid period of one year may be reduced by the [Commissioner of Customs] to such shorter period as he may deem fit : Provided further that when the licence for any private warehouse is cancelled, the owner of any goods warehoused therein shall, within seven days from the date on which notice of such cancellation is given or within such extended period as the proper officer may allow, remove the goods from such warehouse to another warehouse or clear them for home consumption or exportation. [(2) Where any warehoused goods (i) specified in [sub-clause (a) or sub-clause (aa)] of sub-section (1), remain in a warehouse beyond the period specified in that sub-section by reason of extension of the aforesaid period or otherwise, interest at such rate as is specified in section 47 shall be payable, on the amount of duty payable at the time of clearance of the goods in accordance with the provisions of section 15 on the warehoused goods, for the period from the expiry of the said warehousing period till the date of payment of duty on the warehoused goods; (ii) specified in sub-clause (b) of sub-section (1), remain in a warehouse beyond a period of [ninety days], interest shall be payable at such rate or rates not exceeding the rate specified in section 47, as may be fixed by the Board, on the amount of duty payable at the time of clearance of the goods in accordance with the provisions of section 15 on the warehoused goods, for the period from the expiry of the said [ninety days] till the date of payment of duty on the warehoused goods :] Provided that the Board may, if it considers it necessary so to do in the public interest, by order and under circumstances of an exceptional nature, to be specified in such order, waive the whole or part of any interest payable under this section in respect of any warehoused goods : Provided further that the Board may, if it is satisfied that it is necessary so to do in the public interest, by notification in the Official Gazette, specify the class of goods in respect of which no interest shall be charged under this section. Explanation. For the purposes of this section, hundred per cent export oriented undertaking has the same meaning as in Explanation 2 to sub-section (1) of section 3 of the Central Excises and Salt Act, 1944 (1 of 1944).] SECTION 62.Control over warehoused goods. (1) All warehoused goods shall be subject to the control of the proper officer. (2)No person shall enter a warehouse or remove any goods therefrom without the permission of the proper officer. (3)The proper officer may cause any warehouse to be locked with the lock of the Customs Department and no person shall remove or break such lock.

(4)The proper officer shall have access to every part of a warehouse and power to examine the goods therein. SECTION 63.Payment of rent and warehouse charges. (1) The owner of any warehoused goods shall pay to the warehouse-keeper rent and warehouse charges at the rates fixed under any law for the time being in force or where no rates are so fixed, at such rates as may be fixed by the [Commissioner of Customs]. (2)If any rent or warehouse charges are not paid within ten days from the date when they became due, the warehouse-keeper may, after notice to the owner of the warehoused goods and with the permission of the proper officer cause to be sold (any transfer of the warehoused goods notwithstanding) such sufficient portion of the goods as the warehousekeeper may select. SECTION 64.Owners right to deal with warehoused goods. With the sanction of the proper officer and on payment of the prescribed fees, the owner of any goods may either before or after warehousing the same (a)inspect the goods; (b)separate damaged or deteriorated goods from the rest; (c)sort the goods or change their containers for the purpose of preservation, sale, export or disposal of the goods; (d)deal with the goods and their containers in such manner as may be necessary to prevent loss or deterioration or damage to the goods; (e)show the goods for sale; or (f)take samples of goods without entry for home consumption, and if the proper officer so permits, without payment of duty on such samples. SECTION 65. Manufacture and other operations in relation to goods in a warehouse. (1) With the sanction of the [Assistant Commissioner of Customs or Deputy Commissioner of Customs] and subject to such conditions and on payment of such fees as may be prescribed, the owner of any warehoused goods may carry on any manufacturing process or other operations in the warehouse in relation to such goods. (2)Where in the course of any operations permissible in relation to any warehoused goods under sub-section (1), there is any waste or refuse, the following provisions shall apply : (a)if the whole or any part of the goods resulting from such operations are exported, import duty shall be remitted on the quantity of the warehoused goods contained in so much of the waste or refuse as has arisen from the operations carried on in relation to the goods exported : Provided that such waste or refuse is either destroyed or duty is paid on such waste or refuse as if it had been imported into India in that form;

(b)if the whole or any part of the goods resulting from such operations are cleared from the warehouse for home consumption, import duty shall be charged on the quantity of the warehoused goods contained in so much of the waste or refuse as has arisen from the operations carried on in relation to the goods cleared for home consumption. SECTION 66. Power to exempt imported materials used in the manufacture of goods in warehouse. If any imported materials are used in accordance with the provisions of section 65 for the manufacture of any goods and the rate of duty leviable on the imported materials exceeds the rate of duty leviable on such goods, the Central Government, if satisfied that in the interests of the establishment or development of any domestic industry it is necessary so to do, may, by notification in the Official Gazette, exempt the imported materials from the whole or part of the excess rate of duty. SECTION 67.Removal of goods from one warehouse to another. The owner of any warehoused goods may, with the permission of the proper officer, remove them from one warehouse to another, [***], subject to such conditions as may be prescribed for the due arrival of the warehoused goods at the warehouse to which removal is permitted. SECTION 68.Clearance of warehoused goods for home consumption. The importer of any warehoused goods may clear them for home consumption, if (a)a bill of entry for home consumption in respect of such goods has been presented in the prescribed form; (b)the import duty leviable on such goods and all penalties, rent, interest and other charges payable in respect of such goods have been paid; and (c)an order for clearance of such goods for home consumption has been made by the proper officer. [Provided that the owner of any warehoused goods may, at any time before an order for clearance of goods for home consumption has been made in respect of such goods, relinquish his title to the goods upon payment of rent, interest, other charges and penalties that may be payable in respect of the goods and upon such relinquishment, he shall not be liable to pay duty thereon.] [Provided further that the owner of any such warehoused goods shall not be allowed to relinquish his title to such goods regarding which an offence appears to have been committed under this Act or any other law for the time being in force.] SECTION 69. Clearance of warehoused goods for exportation. (1) Any warehoused goods may be exported to a place outside India without payment of import duty if (a)a shipping bill or a bill of export has been presented in respect of such goods in the prescribed form; (b)the export duty, penalties, rent, interest and other charges payable in respect of such goods have been paid; and (c)an order for clearance of such goods for exportation has been made by the proper

officer. (2)Notwithstanding anything contained in sub-section (1), if the Central Government is of opinion that warehoused goods of any specified description are likely to be smuggled back into India, it may, by notification in the Official Gazette, direct that such goods shall not be exported to any place outside India without payment of duty or may be allowed to be so exported subject to such restrictions and conditions as may be specified in the notification. SECTION 70.Allowance in case of volatile goods. (1) When any warehoused goods to which this section applies are at the time of delivery from a warehouse found to be deficient in quantity on account of natural loss, the [Assistant Commissioner of Customs or Deputy Commissioner of Customs] may remit the duty on such deficiency. (2)This section applies to such warehoused goods as the Central Government, having regard to the volatility of the goods and the manner of their storage, may, by notification in the Official Gazette, specify. SECTION 71.Goods not to be taken out of warehouse except as provided by this Act. No warehoused goods shall be taken out of a warehouse except on clearance for home consumption or re-exportation, or for removal to another warehouse, or as otherwise provided by this Act. SECTION 72.Goods improperly removed from warehouse, etc. (1) In any of the following cases, that is to say, (a)where any warehoused goods are removed from a warehouse in contravention of section 71; (b)where any warehoused goods have not been removed from a warehouse at the expiration of the period during which such goods are permitted under section 61 to remain in a warehouse; (c)where any warehoused goods have been taken under section 64 as samples without payment of duty; (d)where any goods in respect of which a bond has been executed under [section 59 [* **]] and which have not been cleared for home consumption or exportation are not duly accounted for to the satisfaction of the proper officer, the proper officer may demand, and the owner of such goods shall forthwith pay, the full amount of duty chargeable on account of such goods together with all penalties, rent, interest and other charges payable in respect of such goods (2)If any owner fails to pay any amount demanded under sub-section (1), the proper officer may, without prejudice to any other remedy, cause to be detained and sold, after notice to the owner (any transfer of the goods notwithstanding) such sufficient portion of his goods, if any, in the warehouse, as the said officer may select. SECTION 73.Cancellation and return of warehousing bond. When the whole of the goods covered by any bond executed under [section 59 [* *]] have been cleared for home consumption or exported or are otherwise duly accounted for, and when all amounts due

on account of such goods have been paid, the proper officer shall cancel the bond as discharged in full, and shall on demand deliver it, so cancelled, to the person who has executed or is entitled to receive it.

1. THE CUSTOMS TARIFF ACT, 1975

(1) This Act may be called the Customs Tariff Act, 1975. (2) It extends to the whole of India. (3) It shall come into force on such date as the Central Government may, by notification in the Official Gazette,

2. The rates at which duties of customs shall be levied under the Customs Act, 1962, are specified in the First and Second Schedules,

3, Levy of additional duty equal to excise duty, sales tax, local taxes and other charges. (1) Any article which is imported into India shall, in addition, be liable to a duty (hereafter in this section referred to as the additional duty) equal to the excise duty for the time being leviable on a like article if produced or manufactured in India and if such excise duty on a like article is leviable at any percentage of its value, the additional duty to which the imported article shall be so liable shall be calculated at that percentage of the value of the imported article: Provided that in case of any alcoholic liquor for human consumption imported into India, the Central Government may, by notification in the Official Gazette, specify the rate of additional duty having regard to the excise duty for the time being leviable on a like alcoholic liquor produced or manufactured in different States or, if a like alcoholic liquor is not produced or manufactured in any State, then, having regard to the excise duty which would be leviable for the time being in different States on the class or description of alcoholic liquor to which such imported alcoholic liquor belongs. Explanation. In this sub-section, the expression "the excise duty for the time being leviable on a like article if produced or manufactured in India" means the excise duty for the time being inforce which would be leviable on a like article if produced or manufactured in India or, if a like article is not so produced or manufactured, which would be leviable on the class or description of articles to which the imported article belongs, and where such duty is leviable at different rates,the highest duty.

(2) For the purpose of calculating under sub-sections (1) and (3), the additional duty on any imported article, where such duty is leviable at any percentage of its value, the value of the imported article shall, notwithstanding anything contained in section 14 of the Customs Act, 1962, be the aggregate of (i) the value of the imported article determined under sub-section (1) of section 14 of the Customs Act,1962 or the tariff value of such article fixed under sub-section ( 2) of that section, as the case may be; and. (ii) any duty of customs chargeable on that article under section 12 of the Customs Act, 1962, and any sum chargeable on that article under any law for the time being in force as an addition to, and in the same manner as, a duty of customs, but does not include ( (b) (c) (d) a) the the the the that duty referred duty to in referred duty duty of sub-sections to in to ( 1), ( 3) 8B 9; section into and and and 9A: India, (5); 8C;

safeguard countervailing

sections in to section in imported

referred

anti-dumping in case

referred an article

Provided

(a) in relation to which it is required, under the provisions of the Standards of Weights and Measures Act, 1976 or the rules made thereunder or under any other law for the time being inforce, to declare on the package thereof the retail sale price of such article; and (b) where the like article produced or manufactured in India, or in case where such like article is not so produced or manufactured, then, the class or description of articles to which the imported article belongs, is the goods specified by notification in the Official Gazette under sub-section (1) of section 4A of the Central Excise Act, 1944, the value of the imported article shall be deemed to be the retail sale price declared on the imported article less such amount of abatement, if any, from such retail sale price as the Central Government may, by notification in the Official Gazette, allow in respect of such like article under sub-section (2) of section 4A of the Central Excise Act, 1944. Explanation.Where on any imported article more than one retail sale price is declared, the maximum of such retail sale price shall be deemed to be the retail sale price for the purposes of this section. Provided further that in the case of an article imported into India, where the Central Government has fixed a tariff value for the like article produced or manufactured in India under sub-section (2) of section 3 of the Central Excise Act, 1944, the value of the imported article shall be deemed to be such tariff value. (3) If the Central Government is satisfied that it is necessary in the public interest to levy on any imported article [whether on such article duty is leviable under sub-section (1) or not] such additional duty as would counter-balance the excise duty leviable on any raw materials, components and ingredients of the same nature as, or similar to those, used in the production or manufacture of such article, it may, by notification in the Official Gazette, direct that such imported article shall, in addition,be liable to an additional duty representing such portion of the excise duty leviable on such raw materials, components and ingredients

as, in either case, may be determined by rules made by the Central Government in this behalf. (4) In making any rules for the purposes of sub-section (3), the Central Government shall have regard to the average quantum of the excise duty payable on the raw materials, components or ingredients used in the production or manufacture of such like article. (5) If the Central Government is satisfied that it is necessary in the public interest to levy on any imported article [whether on such article duty is leviable under sub-section (1) or, as the case maybe, sub-section (3) or not] such additional duty as would counter-balance the sales tax, value added tax, local tax or any other charges for the time being leviable on a like article on its sale, purchase or transportation in India, it may, by notification in the Official Gazette, direct that such imported article shall, in addition, be liable to an additional duty at a rate not exceeding four per cent.of the value of the imported article as specified in that notification. Explanation.In this sub-section, the expression " sales tax, value added tax, local tax or any other charges for the time being leviable on a like article on its sale, purchase or transportation in India" means the sales tax, value added tax, local tax or other charges for the time being in force,which would be leviable on a like article if sold, purchased or transported in India or, if a like article is not so sold, purchased or transported, which would be leviable on the class or description of articles to which the imported article belongs, and where such taxes, or, as the case may be, such charges are leviable at different rates, the highest such tax or, as the case may be, such charge. (6) For the purpose of calculating under sub-section (5), the additional duty on any imported article, the value of the imported article shall, notwithstanding anything contained in sub-section (2),or section 14 of the Customs Act, 1962, be the aggregate of (i) the value of the imported article determined under sub-section (1) of section 14 of the Customs Act, 1962 or the tariff value of such article fixed under sub-section (2) of that section, as the case may be; and (ii) any duty of customs chargeable on that article under section 12 of the Customs Act, 1962, and any sum chargeable on that article under any law for the time being in force as an addition to, and in the same manner as, a duty of customs, but does not include (a) (b) (c) (d) the the the the duty safeguard referred duty referred duty duty to to in in to to sub-section sections in 8B section in ( and 9; 5); 8C; and 9A.

countervailing anti-dumping

referred referred

section

(7) The duty chargeable under this section shall be in addition to any other duty imposed under this Act or under any other law for the time being in force. (8) The provisions of the Customs Act, 1962 and the rules and regulations made thereunder,including those relating to drawbacks, refunds and exemption from duties shall, so far as may be, apply to the duty chargeable under this section as they apply in relation to the duties leviable under that Act.

4.

Levy of duty where standard rate and preferential rate are specified.

(1) Where in respect of any article a preferential rate of revenue duty is specified in the First Schedule, or is admissible by virtue of a notification under section 25 of the Customs Act, 1962 (52 of 1962), the duty to be levied and collected shall be at the standard rate, unless the owner of the article claims at the time of importation that it is chargeable with a preferential rate of duty, being the produce or manufacture of such preferential area as is notified under subsection (3) and the article is determined, in accordance with the rules made under subsection (2), to be such produce or manufacture. (2) The Central Government may, by notification in the Official Gazette, make rules for determining if any article is the produce or manufacture of any preferential area. (3) For the purposes of this section and the First Schedule, preferential area means any country or territory which the Central Government may, by notification in the Official Gazette, declare to be such area. (4) Notwithstanding anything contained in subsection (1), where the Central Government is satisfied that, in the interests of trade including promotion of exports, it is necessary to take immediate action for discontinuing the preferential rate, or increasing the preferential rate to a rate not exceeding the standard rate, or decreasing the preferential rate, in respect of an article specified in the First Schedule, the Central Government may, by notification in the Official Gazette, direct an amendment of the said Schedule to be made so as to provide for such discontinuance of, or increase or decrease, as the case may be, in, the preferential rate. (5) Every notification issued under subsection (3) or subsection (4) shall, as soon as may be after it is issued, be laid before each House of Parliament.

SECTION:8B. Power of Central Government to impose safeguard duty.

(1) If the Central Government, after conducting such enquiry as it deems fit, is satisfied that any article is imported into India in such increased quantities and under such conditions so as to cause or threatening to cause serious injury to domestic industry, then, it may, by

notification in the Official Gazette, impose a safeguard duty on that article: Provided that no such duty shall be imposed on an article originating from a developing country so long as the share of imports of that article from that country does not exceed three per cent. or where the article is originating from more that one developing countries, then, so long as the aggregate of the imports from all such countries taken together does not exceed nine per cent. of the total imports of that article into India. Provided further that the Central Government may, by notification in the Official Gazette, exempt such quantity of any article as it may specify in the notification, when imported from any country or territory into India, from payment of the whole or part of the safeguard duty leviable thereon. (2) The Central Government may, pending the determination under sub-section (1), impose a provisional safeguard duty under this sub-section on the basis of a preliminary determination that increased imports have caused or threatened to cause serious injury to a domestic industry: Provided that where, on final determination, the Central Government is of the opinion that increased imports have not caused or threatened to cause serious injury to a domestic industry, it shall refund the duty so collected: Provided further that the provisional safeguard duty shall not remain in force for more that two hundred days from the date on which it was imposed. (2A) Notwithstanding anything contained in sub-section (1) and sub-section (2), a notification issued under sub-section (1) or any safeguard duty imposed under sub-section (2), unless specifically made applicable in such notification or such imposition, as the case may be, shall not apply to articles imported by a hundred per cent. export-oriented undertaking or a unit in a free trade zone or in a special economic zone. Explanation.-For the purposes of this section, the expressions "hundred per cent. exportoriented undertaking", "free trade zone" and "special economic zone" shall have the meanings assigned to them in Explanation 2 to sub-section (1) of section 3 of Central Excise Act, 1944. (3) The duty chargeable under this section shall be in addition to any other duty imposed under this Act or under any other law for the time being in force. (4) The duty imposed under this section shall, unless revoked earlier, cease to have effect on the expiry of four years from the date of such imposition: Provided that if the Central Government is of the opinion that the domestic industry has taken measures to adjust to such injury or threat thereof and it is necessary that the safeguard duty should continue to be imposed, it may extend the period of such imposition: Provided further that in no case the safeguard duty shall continue to be imposed beyond a period of ten years from the date on which such duty was first imposed. (4A) The provisions of the Customs Act, 1962 and the rules and regulations made thereunder, including those relating to the date for determination of rate of duty, assessment, non-levy, short levy, refunds, interest, appeals, offences and penalties shall,

as far as may be, apply to the duty chargeable under this section as they apply in relation to duties leviable under that Act. (5) The Central Government may, by notification in the Official Gazette, make rules for the purposes of this section, and without prejudice to the generality of the foregoing, such rules may provide for the manner in which articles liable for safeguard duty may be identified and for the manner in which the causes of serious injury or causes of threat of serious injury in relation to such articles may be determined and for the assessment and collection of such safeguard duty. (6) For the purposes of this section,

(a) "developing country" means a country notified by the Central Government in the Official Gazette for the purposes of this section; (b) "domestic industry" means the producers

(i) as a whole of the like article or a directly competitive article in India; or (ii) whose collective output of the like article or a directly competitive article in India constitutes a major share of the total production of the said article in India; (c) "serious injury" means an injury causing significant overall impairment in the position of a domestic industry; (d) "threat of serious injury" means a clear and imminent danger of serious injury. (7) Every notification issued under this section shall, as soon as may be after it is issued, be laid before each House of Parliament.

8C. Power of Central Government to impose transitional product specific safeguard duty on imports from the People's Republic of China. (1) Notwithstanding anything contained in section 8B, if the Central Government, after conducting such enquiry as it deems fit, is satisfied that any article is imported into India, from the People's Republic of China, in such increased quantities and under such conditions so as to cause or threatening to cause market disruption to domestic industry, then, it may, by notification in the Official Gazette, impose a safeguard duty on that article: Provided that the Central Government may, by notification in the Official Gazette, exempt such quantity of any article as it may specify in the notification, when imported from People's Republic of China into India, from payment of the whole or part of the safeguard duty leviable thereon. (2) The Central Government may, pending the determination under sub-section (1), impose a provisional safeguard duty under this sub-section on the basis of a preliminary

determination that increased imports have caused or threatened to cause market disruption to a domestic industry: Provided that where, on final determination, the Central Government is of the opinion that increased imports have not caused or threatened to cause market disruption to a domestic industry, it shall refund the duty so collected: Provided further that the provisional safeguard duty shall not remain in force for more than two hundred days from the date on which it was imposed. (3) Notwithstanding anything contained in sub-sections (1) and (2), a notification issued under sub-section (1) or any safeguard duty imposed under sub-section (2), unless specifically made applicable in such notification or such imposition, as the case may be, shall not apply to articles imported by a hundred per cent. export-oriented undertaking or a unit in a free trade zone or in a special economic zone. Explanation. For the purposes of this section, the expressions "hundred per cent. exportoriented undertaking", "free trade zone" and "special economic zone" shall have the meanings respectively assigned to them in Explanation 2 to sub-section (1) of section 3 of the Central 1 of 1944. Excise Act, 1944. (4) The duty chargeable under this section shall be in addition to any other duty imposed under this Act or under any other law for the time being in force. (5) The duty imposed under this section shall, unless revoked earlier, cease to have effect on the expiry of four years from the date of such imposition: Provided that if the Central Government is of the opinion that such article continues to be imported into India, from People's Republic of China, in such increased quantities so as to cause or threatening to cause market disruption to domestic industry and the safeguard duty should continue to be imposed, it may extend the period of such imposition for a period not beyond the period of ten years from the date on which the safeguard duty was first imposed. (5A) The provisions of the Customs Act, 1962 and the rules and regulations made thereunder, including those relating to the date for determination of rate of duty, assessment, non-levy, short levy, refunds, interest, appeals, offences and penalties shall, as far as may be, apply to the duty chargeable under this section as they apply in relation to duties leviable under that Act. (6) The Central Government may, by notification in the Official Gazette, make rules for the purposes of this section, and without prejudice to the generality of the foregoing, such rules may provide for the manner in which articles liable for safeguard duty may be identified and for the manner in which the causes of market disruption or causes of threat of market disruption in relation to such articles may be determined and for the assessment and collection of such safeguard duty. (7) (a) For "domestic the purposes industry" means of this the section, producers

(i ) as a whole of a like article or a directly competitive article in India; or (ii) whose collective output of a like article or a directly competitive article in India constitutes a major share of the total production of the said article in India;

(b) "market disruption" shall be caused whenever imports of a like article or a directly competitive article produced by the domestic industry, increase rapidly, either absolutely or relatively, so as to be a significant cause of material injury, or threat of material injury, to the domestic industry; (c ) "threat of market disruption" means a clear and imminent danger of market disruption. (8) Every notification issued under this section shall, as soon as may be after it is issued, be laid before each House of Parliament.

SECTION:9A. Anti-dumping duty on dumped articles.

(1) Where any article is exported by an exporter or producer [OLD any article is exported ] from any country or territory (hereinafter in this section referred to as the exporting country or territory) to India at less than its normal value, then, upon the importation of such article into India, the Central Government may, by notification in the Official Gazette, impose an anti-dumping duty not exceeding the margin of dumping in relation to such article. Explanation:For the purposes of this section,

(a) "margin of dumping", in relation to an article, means the difference between its export price and its normal value; (b) "export price", in relation to an article, means the price of the article exported from the exporting country or territory and in cases where there is no export price or where the export price is unreliable because of association or a compensatory arrangement between the exporter and the importer or a third party, the export price may be constructed on the basis of the price at which the imported articles are first resold to an independent buyer or if the article is not resold to an independent buyer, or not resold in the condition as imported, on such reasonable basis as may be determined in accordance with the rules made under sub-section (6); (c) "normal value", in relation to an article, means

(i) the comparable price, in the ordinary course of trade, for the like article when destined for consumption in the exporting country or territory as determined in accordance with the rules made under sub-section (6); or (In sub-clause (i), the words "destined for consumption" has been substituted vide Union Budget 2006-2007 -Finance Bill) (ii) when there are no sales of the like article in the ordinary course of trade in the domestic market of the exporting country or territory, or when because of the particular market situation or low volume of the sales in the domestic market of the exporting country or territory, such sales do not permit a proper comparison, the normal value shall be either (a) comparable representative price of the like article when exported from the exporting country or territory to an appropriate third country as determined in accordance with the rules made under sub-section (6); or

(b) the cost of production of the said article in the country of origin along with reasonable addition for administrative, selling and general costs and for profits, as determined in accordance with the rules made under sub-section (6): Provided that in the case of import of the article from a country other than the country of origin and where the article has been merely transhipped through the country of export or such article is not produced in the country of export or there is no comparable price in the country of export, the normal value shall be determined with reference to its price in the country of origin. (2) The Central Government may, pending the determination in accordance with the provisions of this section and the rules made thereunder of the normal value and the margin of dumping in relation to any article, impose on the importation of such article into India an anti-dumping duty on the basis of a provisional estimate of such value and margin and if such anti-dumping duty exceeds the margin as so determined, (a) the Central Government shall, having regard to such determination and as soon as may be after such determination, reduce such anti-dumping duty; and (b) refund shall be made of so much of the anti-dumping duty which has been collected as is in excess of the anti-dumping duty as so reduced. (2A) Notwithstanding anything contained in sub-section (1) and sub-section (2), a notification issued under sub-section (1) or any anti-dumping duty imposed under subsection (2), unless specifically made applicable in such notification or such imposition, as the case may be, shall not apply to articles imported by a hundred per cent. export-oriented undertaking or a unit in a free trade zone or in a special economic zone. Explanation.-For the purposes of this section, the expressions "hundred per cent. exportoriented undertaking", "free trade zone" and "special economic zone" shall have the meanings assigned to them in Explanation 2 to sub-section (1) of section 3 of the Central Excise Act, 1944. (3) If the Central Government, in respect of the dumped article under inquiry, is of the opinion that (i) there is a history of dumping which caused injury or that the importer was, or should have been, aware that the exporter practices dumping and that such dumping would cause injury; and (ii) the injury is caused by massive dumping of an article imported in a relatively short time which in the light of the timing and the volume of imported article dumped and other circumstances is likely to seriously undermine the remedial effect of the anti-dumping duty liable to be levied, the Central Government may, by notification in the Official Gazette, levy anti-dumping duty retrospectively from a date prior to the date of imposition of anti-dumping duty under subsection (2) but not beyond ninety days from the date of notification under that sub-section, and notwithstanding anything contained in any law for the time being in force, such duty shall be payable at such rate and from such date as may be specified in the notification. (4) The anti-dumping duty chargeable under this section shall be in addition to any other duty imposed under this Act or any other law for the time being in force. (5) The anti-dumping duty imposed under this section shall, unless revoked earlier, cease to have effect on the expiry of five years from the date of such imposition:

Provided that if the Central Government, in a review, is of the opinion that the cessation of such duty is likely to lead to continuation or recurrence of dumping and injury, it may, from time to time, extend the period of such imposition for a further period of five years and such further period shall commence from the date of order of such extension: Provided further that where a review initiated before the expiry of the aforesaid period of five years has not come to a conclusion before such expiry, the anti-dumping duty may continue to remain in force pending the outcome of such a review for a further period not exceeding one year. (6) The margin of dumping as referred to in sub-section (1) or sub-section (2) shall, from time to time, be ascertained and determined by the Central Government after such inquiry as it may consider necessary and the Central Government may, by notification in the Official Gazette, make rules for the purposes of this section, and without prejudice to the generality of the foregoing, such rules may provide for the manner in which articles liable for any anti-dumping duty under this section may be identified, and for the manner in which the export price and the normal value of, and the margin of dumping in relation to, such articles may be determined and for the assessment and collection of such anti-dumping duty. (6A) The margin of dumping in relation to an article, exported by an exporter or producer, under inquiry under sub-section (6) shall be determined on the basis of records concerning normal value and export price maintained, and information provided, by such exporter or producer: Provided that where an exporter or producer fails to provide such records or information, the margin of dumping for such exporter or producer shall be determined on the basis of facts available. (7) Every notification issued under this section shall, as soon as may be after it is issued, be laid before each House of Parliament. (8) The provisions of the Customs Act, 1962 and the rules and regulations made thereunder, including those relating to the date for determination of rate of duty, assessment, non-levy, short levy, refunds, interest, appeals, offences and penalties shall, as far as may be, apply to the duty chargeable under this section as they apply in relation to duties leviable under that Act.

Miscellaneous : Customs

LEVY OF, AND EXEMPTION FROM, CUSTOMS DUTIES

SECTION 12.Dutiable goods. (1)Except as otherwise provided in this Act, or any other law for the time being in force, duties of customs shall be levied at such rates as may be specified under [the Customs Tariff Act, 1975 (51 of 1975)], or any other law for the time being in force, on goods imported into, or exported from, India. [(2)The provisions of sub-section (1) shall apply in respect of all goods belonging to

Government as they apply in respect of goods not belonging to Government.] SECTION 13.Duty on pilfered goods. If any imported goods are pilfered after the unloading thereof and before the proper officer has made an order for clearance for home consumption or deposit in a warehouse, the importer shall not be liable to pay the duty leviable on such goods except where such goods are restored to the importer after pilferage. SECTION 14. Valuation of goods. (1)For the purposes of the Customs Tariff Act, 1975 (51 of 1975), or any other law for the time being in force, the value of the imported goods and export goods shall be the transaction value of such goods, that is to say, the price actually paid or payable for the goods when sold for export to India for delivery at the time and place of importation, or as the case may be, for export from India for delivery at the time and place of exportation, where the buyer and seller of the goods are not related and price is the sole consideration for the sale subject to such other conditions as may be specified in the rules made in this behalf : Provided that such transaction value in the case of imported goods shall include, in addition to the price as aforesaid, any amount paid or payable for costs and services, including commissions and brokerage, engineering, design work, royalties and licence fees, costs of transportation to the place of importation, insurance, loading, unloading and handling charges to the extent and in the manner specified in the rules made in this behalf : Provided further that the rules made in this behalf may provide for,(i) the circumstances in which the buyer and the seller shall be deemed to be related;

(ii) the manner of determination of value in respect of goods when there is no sale, or the buyer and the seller are related, or price is not the sole consideration for the sale or in any other case; (iii) the manner of acceptance or rejection of value declared by the importer or exporter, as the case may be, where the proper officer has reason to doubt the truth or accuracy of such value, and determination of value for the purposes of this section : Provided also that such price shall be calculated with reference to the rate of exchange as in force on the date on which a bill of entry is presented under section 46, or a shipping bill of export, as the case may be, is presented under section 50. (2)Notwithstanding anything contained in sub-section (1), if the Board is satisfied that it is necessary or expedient so to do, it may, by notification in the Official Gazette, fix tariff values for any class of imported goods or export goods, having regard to the trend of value of such or like goods, and where any such tariff values are fixed, the duty shall be chargeable with reference to such tariff value. Explanation. For the purposes of this section (a) (i) (ii) rate of exchange means the rate of exchange determined by the Board, or ascertained in such manner as the Board may direct, for the conversion of Indian

currency into foreign currency or foreign currency into Indian currency; (b) foreign currency and Indian currency have the meanings respectively assigned to them in clause (m) and clause (q) of section 2 of the Foreign Exchange Management Act, 1999 (42 of 1999).] SECTION 15.Date for determination of rate of duty and tariff valuation of imported goods. (1) [The rate of duty * * *] and tariff valuation, if any, applicable to any imported goods, shall be the rate and valuation in force, (a)in the case of goods entered for home consumption under section 46, on the date on which a bill of entry in respect of such goods is presented under that section; (b)in the case of goods cleared from a warehouse under section 68, on the date on which [a bill of entry for home consumption in respect of such goods is presented under that section]; (c)in the case of any other goods, on the date of payment of duty : [Provided that if a bill of entry has been presented before the date of entry inwards of the vessel or the arrival of the aircraft by which the goods are imported, the bill of entry shall be deemed to have been presented on the date of such entry inwards or the arrival, as the case may be.] (2)The provisions of this section shall not apply to baggage and goods imported by post. SECTION 16.Date for determination of rate of duty and tariff valuation of export goods. [(1) The rate of duty and tariff valuation, if any, applicable to any export goods, shall be the rate and valuation in force, (a)in the case of goods entered for export under section 50, on the date on which the proper officer makes an order permitting clearance and loading of the goods for exportation under section 51; (b)in the case of any other goods, on the date of payment of duty.] (2)The provisions of this section shall not apply to baggage and goods exported by post. SECTION 17.Assessment of duty. (1) After an importer has entered any imported goods under section 46 or an exporter has entered any export goods under section 50 the imported goods or the export goods, as the case may be, or such part thereof as may be necessary may, without undue delay, be examined and tested by the proper officer. (2)After such examination and testing, the duty, if any, leviable on such goods shall, save as otherwise provided in section 85, be assessed. (3)For the purpose of assessing duty under sub-section (2), the proper officer may require the importer, exporter or any other person to produce any contract, brokers note, policy of insurance, catalogue or other document whereby the duty leviable on the imported goods or export goods, as the case may be, can be ascertained, and to furnish any information required for such ascertainment which it is in his power to produce or furnish,

and thereupon the importer, exporter or such other person shall produce such document and furnish such information. (4)Notwithstanding anything contained in this section, imported goods or export goods may, prior to the examination or testing thereof, be permitted by the proper officer to be assessed to duty on the basis of the statements made in the entry relating thereto and the documents produced and the information furnished under sub-section (3); but if it is found subsequently on examination or testing of the goods or otherwise that any statement in such entry or document or any information so furnished is not true in respect of any matter relevant to the assessment, the goods may, without prejudice to any other action which may be taken under this Act, be re-assessed to duty. [(5) Where any assessment done under sub-section (2) is contrary to the claim of the importer or exporter regarding valuation of goods, classification, exemption or concessions of duty availed consequent to any notification therefor under this Act, and in cases other than those where the importer or the exporter, as the case may be, confirms his acceptance of the said assessment in writing, the proper officer shall pass a speaking order within fifteen days from the date of assessment of the bill of entry or the shipping bill, as the case may be.] SECTION 18.Provisional assessment of duty. (1) Notwithstanding anything contained in this Act but without prejudice to the provisions contained in section 46 (a)where the proper officer is satisfied that an importer or exporter is unable to produce any document or furnish any information necessary for the assessment of duty on the imported goods or the export goods, as the case may be; or (b)where the proper officer deems it necessary to subject any imported goods or export goods to any chemical or other test for the purpose of assessment of duty thereon; or (c)where the importer or the exporter has produced all the necessary documents and furnished full information for the assessment of duty but the proper officer deems it necessary to make further enquiry for assessing the duty, the proper officer may direct that the duty leviable on such goods may, pending the production of such documents or furnishing of such information or completion of such test or enquiry, be assessed provisionally if the importer or the exporter, as the case may be, furnishes such security as the proper officer deems fit for the payment of the deficiency, if any, between the duty finally assessed and the duty provisionally assessed. (2)When the duty leviable on such goods is assessed finally in accordance with the provisions of this Act, then (a)in the case of goods cleared for home consumption or exportation, the amount paid shall be adjusted against the duty finally assessed and if the amount so paid falls short of, or is in excess of [the duty finally assessed], the importer or the exporter of the goods shall pay the deficiency or be entitled to a refund, as the case may be; (b)in the case of warehoused goods, the proper officer may, where the duty finally assessed is in excess of the duty provisionally assessed, require the importer to execute a bond, binding himself in a sum equal to twice the amount of the excess duty.

[(3)The importer or exporter shall be liable to pay interest, on any amount payable to the Central Government, consequent to the final assessment order under sub-section (2), at the rate fixed by the Central Government under section 28AB from the first day of the month in which the duty is provisionally assessed till the date of payment thereof. (4)Subject the sub-section (5), if any refundable amount referred to in clause (a) of subsection (2) is not refunded under that sub-section within three months from the date of assessment of duty finally, there shall be paid an interest on such unrefunded amount at such rate fixed by the Central Government under section 27A till the date of refund of such amount. (5)The amount of duty refundable under sub-section (2) and the interest under subsection (4), if any, shall, instead of being credited to the Fund, be paid to the importer or the exporter, as the case may be, if such amount is relatable to (a) the duty and interest, if any, paid on such duty paid by the importer, or the exporter, as the case may be, if he had not passed on the incidence of such duty and interest, if any, paid on such duty to any other person; (b) the duty and interest, if any, paid on such duty on imports made by an individual for his personal use; (c) the duty and interest, if any, paid on such duty borne by the buyer, if he had not passed on the incidence of such duty and interest, if any, paid on such duty to any other person; (d) (e) the export duty as specified in section 26; drawback of duty payable under sections 74 and 75.]

SECTION 19.Determination of duty where goods consist of articles liable to different rates of duty. Except as otherwise provided in any law for the time being in force, where goods consist of a set of articles, duty shall be calculated as follows :(a)articles liable to duty with reference to quantity shall be chargeable to that duty; (b)articles liable to duty with reference to value shall, if they are liable to duty at the same rate, be chargeable to duty at that rate, and if they are liable to duty at different rates, be chargeable to duty at the highest of such rates; (c)articles not liable to duty shall be chargeable to duty at the rate at which articles liable to duty with reference to value are liable under clause (b) : Provided that, (a)accessories of, and spare parts or maintenance and repairing implements for, any article which satisfy the conditions specified in the rules made in this behalf shall be chargeable at the same rate of duty as that article; (b)if the importer produces evidence to the satisfaction of the proper officer regarding the value of any of the articles liable to different rates of duty, such article shall be chargeable

to duty separately at the rate applicable to it. SECTION 20.Re-importation of goods. If goods are imported into India after exportation therefrom, such goods shall be liable to duty and be subject to all the conditions and restrictions, if any, to which goods of the like kind and value are liable or subject, on the importation thereof.] SECTION 21.Goods derelict, wreck, etc. All goods, derelict, jetsam, flotsam and wreck brought or coming into India, shall be dealt with as if they were imported into India, unless it be shown to the satisfaction of the proper officer that they are entitled to be admitted dutyfree under this Act. SECTION 22.Abatement of duty on damaged or deteriorated goods. (1) Where it is shown to the satisfaction of the [Assistant Commissioner of Customs or Deputy Commissioner of Customs] (a)that any imported goods had been damaged or had deteriorated at any time before or during the unloading of the goods in India; or (b)that any imported goods, other than warehoused goods, had been damaged at any time after the unloading thereof in India but before their examination under section 17, on account of any accident not due to any wilful act, negligence or default of the importer, his employee or agent; or (c) that any warehoused goods had been damaged at any time before clearance for home consumption on account of any accident not due to any wilful act, negligence or default of the owner, his employee or agent, such goods shall be chargeable to duty in accordance with the provisions of sub-section (2). (2)The duty to be charged on the goods referred to in sub-section (1) shall bear the same proportion to the duty chargeable on the goods before the damage or deterioration which the value of the damaged or deteriorated goods bears to the value of the goods before the damage or deterioration. (3)For the purposes of this section, the value of damaged or deteriorated goods may be ascertained by either of the following methods at the option of the owner :(a)the value of such goods may be ascertained by the proper officer, or (b)such goods may be sold by the proper officer by public auction or by tender, or with the consent of the owner in any other manner, and the gross sale proceeds shall be deemed to be the value of such goods. SECTION 23.Remission of duty on lost, destroyed or abandoned goods. (1) [Without prejudice to the provisions of section 13, where it is shown] to the satisfaction of the [Assistant Commissioner of Customs or Deputy Commissioner of Customs] that any imported goods have been lost [(otherwise than as a result of pilferage)] or destroyed, at any time before clearance for home consumption, the [Assistant Commissioner of Customs or Deputy Commissioner of Customs] shall remit the duty on such goods.

[(2)The owner of any imported goods may, at any time before an order for clearance of goods for home consumption under section 47 or an order for permitting the deposit of goods in a warehouse under section 60 has been made, relinquish his title to the goods and thereupon he shall not be liable to pay the duty thereon.] [Provided that the owner of any such imported goods shall not be allowed to relinquish his title to such goods regarding which an offence appears to have been committed under this Act or any other law for the time being in force.] SECTION 24.Power to make rules for denaturing or mutilation of goods. The Central Government may make rules for permitting at the request of the owner the denaturing or mutilation of imported goods which are ordinarily used for more than one purpose so as to render them unfit for one or more of such purposes; and where any goods are so denatured or mutilated they shall be chargeable to duty at such rate as would be applicable if the goods had been imported in the denatured or mutilated form. SECTION 25.Power to grant exemption from duty. (1) If the Central Government is satisfied that it is necessary in the public interest so to do, it may, by notification in the Official Gazette, exempt generally either absolutely or subject to such conditions (to be fulfilled before or after clearance) as may be specified in the notification goods of any specified description from the whole or any part of duty of customs leviable thereon. [(2) If the Central Government is satisfied that it is necessary in the public interest so to do, it may, by special order in each case, exempt from the payment of duty, under circumstances of an exceptional nature to be stated in such order, any goods on which duty is leviable.] [(2A) The Central Government may, if it considers it necessary or expedient so to do for the purpose of clarifying the scope or applicability of any notification issued under sub-section (1) or order issued under sub-section (2), insert an explanation in such notification or order, as the case may be, by notification in the Official Gazette, at any time within one year of issue of the notification under sub-section (1) or order under sub-section (2), and every such explanation shall have effect as if it had always been the part of the first such notification or order, as the case may be.] [(3)An exemption under sub-section (1) or sub-section (2) in respect of any goods from any part of the duty of customs leviable thereon (the duty of customs leviable thereon being hereinafter referred to as the statutory duty) may be granted by providing for the levy of a duty on such goods at a rate expressed in a form or method different from the form or method in which the statutory duty is leviable and any exemption granted in relation to any goods in the manner provided in this sub-section shall have effect subject to the condition that the duty of customs chargeable on such goods shall in no case exceed the statutory duty. Explanation. - Form or method, in relation to a rate of duty of customs, means the basis, namely, valuation, weight, number, length, area, volume or other measure with reference to which the duty is leviable.] SECTION 26.Refund of export duty in certain cases. Where on the exportation of any goods any duty has been paid, such duty shall be refunded to the person by whom or on whose behalf it was paid, if -

(a) (b)

the goods are returned to such person otherwise than by way of re-sale; the goods are re-imported within one year from the date of exportation; and

(c) an application for refund of such duty is made before the expiry of six months from the date on which the proper officer makes an order for the clearance of the goods. SECTION 27.Claim for refund of duty. (1)Any person claiming refund of any [duty and interest, if any, paid on such duty] (i) (ii) paid by him in pursuance of an order of assessment; or borne by him,

may make an application for refund of such [duty and interest, if any, paid on such duty] to the [Assistant Commissioner of Customs or Deputy Commissioner of Customs] (a) in the case of any import made by any individual for his personal use or by Government or by any educational, research or charitable institution or hospital, before the expiry of one year; (b) in any other case, before the expiry of six months,

from the date of payment of [duty and interest, if any, paid on such duty], [in such form and manner] as may be specified in the regulations made in this behalf and the application shall be accompanied by such documentary or other evidence (including the documents referred to in section 28C) as the applicant may furnish to establish that the amount of [duty and interest, if any, paid on such duty] in relation to which such refund is claimed was collected from, or paid by, him and the incidence of such [duty and interest, if any, paid on such duty] had not been passed on by him to any other person : Provided that where an application for refund has been made before the commencement of the Central Excises and Customs Laws (Amendment) Act, 1991, such application shall be deemed to have been made under this sub-section and the same shall be dealt with in accordance with the provisions of sub-section (2) : Provided further that the limitation of one year or six months, as the case may be, shall not apply where any [duty and interest, if any, paid on such duty] has been paid under protest. [Provided also that in the case of goods which are exempt from payment of duty by a special order issued under sub-section (2) of section 25, the limitation of one year or six months, as the case may be, shall be computed from the date of issue of such order.] [Provided also that where the duty becomes refundable as a consequence of judgment, decree, order or direction of the appellate authority, Appellate Tribunal or any court, the limitation of one year or six months, as the case may be, shall be computed from the date of such judgment, decree, order or direction.]. [Explanation I.] - For the purposes of this sub-section, the date of payment of [duty and interest, if any, paid on such duty], in relation to a person, other than the importer, shall be

construed as the date of purchase of goods by such person. [Explanation II. - Where any duty is paid provisionally under section 18, the limitation of one year or six months, as the case may be, shall be computed from the date of adjustment of duty after the final assessment thereof.]. (2)If, on receipt of any such application, the [Assistant Commissioner of Customs or Deputy Commissioner of Customs] is satisfied that the whole or any part of the [duty and interest, if any, paid on such duty] paid by the applicant is refundable, he may make an order accordingly and the amount so determined shall be credited to the Fund : Provided that the amount of [duty and interest, if any, paid on such duty] as determined by the [Assistant Commissioner of Customs or Deputy Commissioner of Customs] under the foregoing provisions of this sub-section shall, instead of being credited to the Fund, be paid to the applicant, if such amount is relatable to (a) the [duty and interest, if any, paid on such duty] paid by the importer, [or the exporter, as the case may be] if he had not passed on the incidence of such [duty and interest, if any, paid on such duty] to any other person; (b) the [duty and interest, if any, paid on such duty] on imports made by an individual for his personal use; (c) the [duty and interest, if any, paid on such duty] borne by the buyer, if he had not passed on the incidence of such [duty and interest, if any, paid on such duty] to any other person; (d) (e) the export duty as specified in section 26; drawback of duty payable under sections 74 and 75;

(f) the [duty and interest, if any, paid on such duty] borne by any other such class of applicants as the Central Government may, by notification in the Official Gazette, specify : Provided further that no notification under clause (f) of the first proviso shall be issued unless in the opinion of the Central Government the incidence of [duty and interest, if any, paid on such duty] has not been passed on by the persons concerned to any other person. (3)Notwithstanding anything to the contrary contained in any judgment, decree, order or direction of the Appellate Tribunal [, National Tax Tribunal] or any Court or in any other provision of this Act or the regulations made thereunder or any other law for the time being in force, no refund shall be made except as provided in sub-section (2). (4)Every notification under clause (f) of the first proviso to sub-section (2) shall be laid before each House of Parliament, if it is sitting, as soon as may be after the issue of the notification, and, if it is not sitting, within seven days of its re-assembly, and the Central Government shall seek the approval of Parliament to the notification by a resolution moved within a period of fifteen days beginning with the day on which the notification is so laid before the House of the People and if Parliament makes any modification in the notification or directs that the notification should cease to have effect, the notification shall thereafter have effect only in such modified form or be of no effect, as the case may be, but without

prejudice to the validity of anything previously done thereunder. (5)For the removal of doubts, it is hereby declared that any notification issued under clause (f) of the first proviso to sub-section (2), including any such notification approved or modified under sub-section (4), may be rescinded by the Central Government at any time by notification in the Official Gazette.] SECTION 27A. Interest on delayed refunds. If any duty ordered to be refunded under sub-section (2) of section 27 to an applicant is not refunded within three months from the date of receipt of application under sub-section (1) of that section, there shall be paid to that applicant interest at such rate, [not below five per cent] and not exceeding thirty per cent per annum as is for the time being fixed [by the Central Government by Notification in the Official Gazette], on such duty from the date immediately after the expiry of three months from the date of receipt of such application till the date of refund of such duty : Provided that where any duty, ordered to be refunded under sub-section (2) of section 27 in respect of an application under sub-section (1) of that section made before the date on which the Finance Bill, 1995 receives the ass- ent of the President, is not refunded within three months from such date, there shall be paid to the applicant interest under this section from the date immediately after three months from such date, till the date of refund of such duty. Explanation. Where any order of refund is made by the Commissioner (Appeals), Appellate Tribunal [, National Tax Tribunal] or any court against an order of the [Assistant Commissioner of Customs or Deputy Commissioner of Customs] under sub-section (2) of section 27, the order passed by the Commissioner (Appeals), Appellate Tribunal or as the case may be, by the court shall be deemed to be an order passed under that sub-section for the purposes of this section.] SECTION 28.Notice for payment of duties, interest etc. (1) When any duty has not been levied or has been short-levied or erroneously refunded, or when any interest payable has not been paid, part paid or erroneously refunded, the proper officer may, (a) in the case of any import made by any individual for his personal use or by Government or by any educational, research or charitable institution or hospital, within one year; (b) in any other case, within six months,

from the relevant date, serve notice on the person chargeable with the duty or interest which has not been levied or charged or which has been so short-levied or part paid or to whom the refund has erroneously been made, requiring him to show cause why he should not pay the amount specified in the notice : Provided that where any duty has not been levied or has been short-levied or the interest has not been charged or has been part paid or the duty or interest has been erroneously refunded by reason of collusion or any wilful mis-statement or suppression of facts by the importer or the exporter or the agent or employee of the importer or exporter, the provisions of this sub-section shall have effect as if for the words one year and six months, the words five years were substituted. Explanation. - Where the service of the notice is stayed by an order of a court, the period of

such stay shall be excluded in computing the aforesaid period of one year or six months or five years, as the case may be. [(1A) When any duty has not been levied or has been short-levied or the interest has not been charged or has been part paid or the duty or interest has been erroneously refunded by reason of collusion or any wilful mis-statement or suppression of facts by the importer or the exporter or the agent or employee of the importer or exporter, to whom a notice is served under the proviso to sub-section (1) by the proper officer, may pay duty in full or in part as may be accepted by him, and the interest payable thereon under section 28AB and penalty equal to twenty-five per cent of the duty specified in the notice or the duty so accepted by such person within thirty days of the receipt of the notice.] (2)The proper officer, after considering the representation, if any, made by the person on whom notice is served under sub-section (1), shall determine the amount of duty or interest due from such person (not being in excess of the amount specified in the notice) and thereupon such person shall pay the amount so determined. [Provided that if such person has paid the duty in full together with interest and penalty under sub-section (1A), the proceedings in respect of such person and other persons to whom notice is served under sub-section (1) shall, without prejudice to the provisions of sections 135, 135A and 140, be deemed to be conclusive as to the matters stated therein : Provided further that, if such person has paid duty in part, interest and penalty under subsection (1A), the proper officer shall determine the amount of duty or interest not being in excess of the amount partly due from such person.] [(2A)Where any notice has been served on a person under sub-section (1), the proper officer, (i) in case any duty has not been levied or has been short-levied, or the interest has not been paid or has been part paid or the duty or interest has been erroneously refunded by reason of collusion or any wilful mis-statement or suppression of facts, where it is possible to do so, shall determine the amount of such duty or the interest, within a period of one year; and (ii) in any other case, where it is possible to do so, shall determine the amount of duty which has not been levied or has been short-levied or erroneously refunded or the interest payable which has not been paid, part paid or erroneously refunded, within a period of six months, from the date of service of the notice on the person under sub-section (1). (2B)Where any duty has not been levied or has been short-levied or erroneously refunded, or any interest payable has not been paid, part paid or erroneously refunded, the person, chargeable with the duty or the interest, may pay the amount of duty or interest before service of notice on him under sub-section (1) in respect of the duty or the interest, as the case may be, and inform the proper officer of such payment in writing, who, on receipt of such information, shall not serve any notice under sub-section (1) in respect of the duty or the interest so paid : Provided that the proper officer may determine the amount of short-payment of duty or interest, if any, which in his opinion has not been paid by such person and, then, the proper

officer shall proceed to recover such amount in the manner specified in this section, and the period of one year or six months as the case may be, referred to in sub-section (1) shall be counted from the date of receipt of such information of payment. Explanation 1. - Nothing contained in this sub-section shall apply in a case where the duty was not levied or was not paid or the interest was not paid or was part paid or the duty or interest was erroneously refunded by reason of collusion or any wilful mis-statement or suppression of facts by the importer or the exporter or the agent or employee of the importer or exporter. Explanation 2. - For the removal of doubts, it is hereby declared that the interest under section 28AB shall be payable on the amount paid by the person under this sub-section and also on the amount of short-payment of duty, if any, as may be determined by the proper officer, but for this sub-section. (2C)The provisions of sub-section (2B) shall not apply to any case where the duty or the interest had become payable or ought to have been paid before the date on which the Finance Bill, 2001 receives the assent of the President.] (3)For the purposes of sub-section (1), the expression relevant date means (a)in a case where duty is not levied, or interest is not charged, the date on which the proper officer makes an order for the clearance of the goods; (b)in a case where duty is provisionally assessed under section 18, the date of adjustment of duty after the final assessment thereof; (c) in a case where duty or interest has been erroneously refunded, the date of refund; (d)in any other case, the date of payment of duty or interest.] SECTION 28A.Power not to recover duties not levied or short-levied as a result of general practice. [(1)]Notwithstanding anything contained in this Act, if the Central Government is satisfied (a)that a practice was, or is, generally prevalent regarding levy of duty (including non-levy thereof) on any goods imported into, or exported from, India; and (b)that such goods were, or are, liable (i)to duty, in cases where according to the said practice the duty was not, or is not being, levied, or (ii)to a higher amount of duty than what was, or is being, levied, according to the said practice, then, the Central Government may, by notification in the Official Gazette, direct that the whole of the duty payable on such goods, or, as the case may be, the duty in excess of that payable on such goods, but for the said practice, shall not be required to be paid in respect of the goods on which the duty was not, or is not being, levied, or was, or is being, short-

levied, in accordance with the said practice.] [(2)Where any notification under sub-section (1) in respect of any goods has been issued, the whole of the duty paid on such goods, or, as the case may be, the duty paid in excess of that payable on such goods, which would not have been paid if the said notification had been in force, shall be dealt with in accordance with the provisions of subsection (2) of section 27: Provided that the person claiming the refund of such duty or, as the case may be, excess duty, makes an application in this behalf to the [Assistant Commissioner of Customs or Deputy Commissioner of Customs], in the form referred to in sub-section (1) of section 27, before the expiry of six months from the date of issue of the said notification]. SECTION 28AA.Interest on delayed payment of duty. [(1)] [Subject to the provisions contained in section 28AB where a person,] chargeable with the duty determined under sub-section (2) of section 28, fails to pay such duty within three months from the date of such determination, he shall pay, in addition to the duty, interest [at such rate not below [ten per cent.] and not exceeding thirty six per cent per annum, as is for the time being fixed by the Central Government, by notification in the Official Gazette], on such duty from the date immediately after the expiry of the said period of three months till the date of payment of such duty : Provided that where a person chargeable with duty determined under sub-section (2) of section 28 before the date on which the Finance Bill, 1995 receives the assent of the President, fails to pay such duty within three months from such date, then, such person shall be liable to pay interest under this section from the date immediately after three months from such date, till the date of payment of such duty. Explanation 1. - Where the duty determined to be payable is reduced by the Commissioner (Appeals), Appellate Tribunal [, National Tax Tribunal] or, as the case may be, the court, the date of such determination shall be the date on which an amount of duty is first determined to be payable. Explanation 2. - Where the duty determined to be payable is increased or further increased by the Commissioner (Appeals), Appellate Tribunal [, National Tax Tribunal] or, as the case may be, the court, the date of such determination shall be, (a) for the amount of duty first determined to be payable, the date on which the duty is so determined; (b) for the amount of increased duty, the date of order by which the increased amount of duty is first determined to be payable; (c) for the amount of further increase of duty, the date of order on which the duty is so further increased.] [(2) The provisions of sub-section (1) shall not apply to cases where the duty or the interest becomes payable or ought to be paid on and after the date on which the Finance Bill, 2001 receives the assent of the President.] SECTION 28AB. Interest on delayed payment of duty in special cases. - [(1) Where any duty has not been levied or paid or has been short-levied or short-paid or erroneously

refunded, the person who is liable to pay the duty as determined under sub-section (2), or has paid the duty under sub-section (2B), of section 28, shall, in addition to the duty, be liable to pay interest at such rate not below [ten per cent.] and not exceeding thirty-six per cent. per annum, as is for the time being fixed by the Central Government, by notification in the Official Gazette, from the first day of the month succeeding the month in which the duty ought to have been paid under this Act, or from the date of such erroneous refund, as the case may be, but for the provisions contained in sub-section (2), or sub-section (2B), of section 28, till the date of payment of such duty : Provided that in such cases where the duty becomes payable consequent to issue of an order, instruction or direction by the Board under section 151A, and such amount of duty payable is voluntarily paid in full, without reserving any right to appeal against such payment at any subsequent stage, within forty-five days from the date of issue of such order, instruction or direction, as the case may be, no interest shall be payable and in other cases the interest shall be payable on the whole of the amount, including the amount already paid.] [(2)The provisions of sub-section (1) shall not apply to cases where the duty or interest had become payable or ought to have been paid before the date on which the Finance Bill, 2001 receives the assent of the President.] Explanation 1. Where the duty determined to be payable is reduced by the Commissioner (Appeals), the Appellate Tribunal [, National Tax Tribunal] or, as the case may be, the court, the interest shall be payable on such reduced amount of duty. Explanation 2. Where the duty determined to be payable is increased or further increased by the Commissioner (Appeals), the Appellate Tribunal [, National Tax Tribunal] or, as the case may be, the court, the interest shall be payable on such increased or further increased amount of duty.] SECTION 28B.Duties collected from the buyer to be deposited with the Central Government. (1)Notwithstanding anything to the contrary contained in any order or direction of the Appellate Tribunal [, National Tax Tribunal] or any Court or in any other provision of this Act or the regulations made thereunder, [every person who is liable to pay duty under this Act and has collected any amount in excess of the duty assessed or determined or paid on any goods under this Act from the buyer of such goods] in any manner as representing duty of customs, shall forthwith pay the amount so collected to the credit of the Central Government. (1A) Every person who has collected any amount in excess of the duty assessed or determined or paid on any goods or has collected any amount as representing duty of customs on any goods which are wholly exempt or are chargeable to nil rate of duty from any person in any manner, shall forthwith pay the amount so collected to the credit of the Central Government.

[(2)Where any amount is required to be paid to the credit of the Central Government under sub-section (1) or sub-section (1A), as the case may be, and which has not been so paid, the proper officer may serve on the person liable to pay such amount, a notice requiring him to show cause why he should not pay the amount, as specified in the notice to the credit of the Central Government.

(3)The proper officer shall, after considering the representation, if any, made by the person on whom the notice is served under sub-section (2), determine the amount due from such person (not being in excess of the amount specified in the notice) and thereupon such person shall pay the amount so determined.

(4)The amount paid to the credit of the Central Government under sub-section (1) or sub-section (1A) or sub-section (3) as the case may be, shall be adjusted against the duty payable by the person on finalisation of assessment or any other proceeding for determination of the duty relating to the goods referred to in sub-section (1) or sub-section (1A). (5)Where any surplus is left after the adjustment made under sub-section (4), the amount of such surplus shall either be credited to the Fund or, as the case may be, refunded to the person who has borne the incidence of such amount, in accordance with the provisions of section 27 and such person may make an application under that section in such cases within six months from the date of the public notice to be issued by the Assistant Commissioner of Customs for the refund of such surplus amount.] SECTION 28BA.Provisional attachment to protect revenue in certain cases. - (1) Where, during the pendency of any proceeding under section 28 or section 28B, the proper officer is of the opinion that for the purpose of protecting the interests of revenue, it is necessary so to do, he may, with the previous approval of the Commissioner of Customs, by order in writing, attach provisionally any property belonging to the person on whom notice is served under sub-section (1) of section 28 or sub-section (2) of section 28B, as the case may be, in accordance with the rules made in this behalf under section 142. (2)Every such provisional attachment shall cease to have effect after the expiry of a period of six months from the date of the order made under sub-section (1) : Provided that the Chief Commissioner of Customs may, for reasons to be recorded in writing, extend the aforesaid period by such further period or periods as he thinks fit, so, however, that the total period of extension shall not in any case exceed two years : Provided further that where an application for settlement of case under section 127B is made to the Settlement Commission, the period commencing from the date on which such application is made and ending with the date on which an order under sub-section (1) of section 127C is made shall be excluded from the period specified in the preceding proviso

Important changes in Customs:

If any person collects any amount in excess of duty assessed or collects any duty where goods are exempted from payment of duty or the rate of duty is Nil, the amount collected must be deposited with the central government. (Section:28-B of Customs Act)

Where any person contravenes any of the provisions of Customs Act, but no penalty is provided for such contravention, a penalty not exceeding Rs.1 lac may be imposed.

In the case of orders passed by C (A) and the committee of Commissioners differ in their opinion, the issue is to be referred to CC. Where an order has been passed by Commissioner and the committees of CCs differ in their opinion, the issue is to be referred to Board. (Similar provisions are made in Excise). The review is to be completed within 3 months from the date of communication of order passed by Commissioner or C(A).

Where an assessee has deposited an amount as directed by C(A) or Tribunal, but later the decision of the C(A) or Tribunal is in favour of the assessee, refund must be given within 3 months from the date of communication of order, failing which interest is payable by the department. (similar provisions are made in Excise).

Important changes in Service-tax:

INCREASE IN THRESHOLD EXEMPTION LIMIT FOR SMALL SERVICE PROVIDERS The annual threshold limit of service tax exemption for small service providers is being increased from Rs.8 lakh to Rs.10 lakh by amending notification. Amendment shall come into effect from 01.04.2008. Consequent upon the increase in the threshold exemption limit from Rs.8 lakh to Rs.10 lakh, the annual turnover limit for obtaining service tax registration shall also be increased from Rs.7 lakh to Rs.9 lakh. Increased threshold limit of Rs.10 lakh shall be applicable to small service providers for the financial year

2008-09 onwards.

CLASSIFICATION OF TAXABLE SERVICES: Taxable services are defined separately under clause (105) of Section 65 of the Finance Act, 1994. Services are supplied as a single composite service by bundling number of different services or disaggregating a single supply into different components. Tax liability may vary depending upon the treatment of the transaction either as a single composite service or multiple supply of service. For the purpose of levy of service tax, a single composite service is to be classified under any one of the specified taxable services.

For the purpose of classification of a service covering number of separate services, a view has to be taken as to whether an individual service is merely a component of the overall supply or is itself a distinct and independent supply i.e., whether the component is merely ancillary to the principal supply or the component can be considered as separate taxable service in its own right. A service, which does not constitute for a customer an aim in itself but a means of better enjoying the principal supply, is considered as a supply ancillary to the principal supply.

Section 65A states the principles for classification of taxable services. Classification of a composite service is based on that component of the service which gives the essential character. There is a need to determine whether a given transaction is the one containing major and ancillary elements or the one containing multiple and separate major elements. In the case of a transaction containing a major and ancillary elements, classification is to be determined based on the essential features or the dominant element of the transaction. A supply which comprises a single supply from an economic point of view should not be artificially split. The method of charging or invoicing does not in itself determine whether the service provided is a single service or multiple services. Single price normally suggests a single supply though not decisive. The real nature and substance of the transaction and not merely the form of the transaction should be the guiding factor for deciding the classification.

Changes in Central Excise: Section: 2 (d) had been amended whereby an explanation has been added which provides that where any goods are capable of being sold and sold for a consideration, the same are deemed as marketable. The implication is that the decision of Supreme Court in the case of DCM Ltd., that the goods must be known to the market is no longer necessary. In view of the above amendment where any movable goods are manufactured and could be taken to market for sale and sold for a consideration the department need not prove that the goods

are known to the market. A new section: 3A has been introduced, whereby; the Central Government is empowered to levy duty on the basis of capacity of production. But this provision is applicable to notified goods. Recently the government has notified Pan masala for this purpose. If a factory producing notifed goods was in operation during a part of the year only, the annual production thereof shall be calculated on proportionate basis. If any factor determining the capacity is altered the capacity can be re-determined. If the notified goods are not produced for a continuous period of 15 dyas duty proportionately can be reduced subject to conditions. This section is not applicable to EOU when sale is effected in DTA. To claim refund of Interest application is to filed under Section: 11 B of the Excise Act. Unjust enrichment is applicable for refund of interest. Where any person collects any duty on goods that are exempted from duty or attracts Nil rate, he has to deposit the amount collected under Section:11-D of the Excise Act. Further 11-D is applicable to any person whether he is a manufacturer or not. Where a Committee of commissioners differs in their opinion on the order of Commissioner (Appeals), it is to be referred to Chief Commissioner who may direct any Central Excise Officer to file an appeal if order passed was not legal or proper. Where an order has been passed by Commisisoner, the same is reviewed by a Committee of Chief Commissioners. If the Committee of CCs differs on opinion, it is to be referred to the CBEC who will give directions on the order. Where any pre-deposit of duty has been made on the directions of Commissioner (Appeals) or Tribunal and the assessee succeeds in the appeal, interest is to be paid to the assessee, if refund is not granted within 3 months from the date of communication of the order under Section: 11BB of the Act. Input service definition has been amended whereby Cenvat on GTA or any other service towards outward transportation is not admissible beyond place of removal. Also output service definition has been amended to exclude GTA service which makes clear not Cenvat on the said service for transporting goods to buyers premises. NCCD has been imposed on Mobile phones. But the NCCD taken Cenvat can be used only for payment of NCCD and not any other types of duties. Also any other types of duties cannot be sued for payment of NCCD. Where Cenvat is taken on common inputs used in dutiable and exempted goods following options are available to an assessee:

i) to keep the inventory separately for dutiable and exempted goods and to avail Cenvat on those inputs/input services attributable to dutiable goods. (or) ii) To pay 10% on value of the exempted goods / Nil rate goods. (or)

iii) To determine the proportionate cenvat credit on inputs and input service attributable to exempted/nil rate goods provisionally as per the formula given in the Rule

and reverse credit on monthly basis provisionally by 5 th of every month. After completion of F.Y. the actual credit to be reversed is to be arrived at and the differential amount is to be paid on or before 30th June failing which interest is payable at 24% per annum. If any excess reversal was made provisionally, assessee can take refund on his own.

As per Cenvat Rule:7A, an office of the service provider can distribute the Cenvat on inputs to their premises. Similar to rule:7 of Cenvat Credit Rules. As per Cenvat Rule:15-A a general penalty extending upto Rs.5000/- could be imposed, where no specific penalty ahs been provided. New Valuation Rules for Section:4A has been introduced. The important provisions are as follows:

The retail sale price of any excisable goods under sub-section (4) of section 4A of the Act, shall be determined in accordance with these rules.

Where a manufacturer removes the excisable goods specified under sub-section (1) of section 4A of the Act,(a) without declaring the retail sale price on the packages of such goods; or (b) by declaring the retail sale price, which is not the retail sale price as required to be declared under the provisions of the Standards of Weights and Measures Act, 1976 (60 of 1976) or rules made thereunder or any other law for the time being in force ; or (c) by declaring the retail sale price but obliterates the same after their removal from the place of manufacture, then, the retail sale price of such goods shall be ascertained in the following manner, namely:(i) if the manufacturer has manufactured and removed identical goods, within a period of one month, before or after removal of such goods, by declaring the retail sale price, then, the said declared retail sale price shall be taken as the retail sale price of such goods: (ii) if the retail sale price cannot be ascertained in terms of clause (i), the retail sale price of such goods shall be ascertained by conducting the enquiries in the retail market where such goods have normally been sold at or about the same time of the removal of such goods from the place of manufacture: Provided that if more than one retail sale price is ascertained under clause (i) or clause (ii), then, the highest of the retail sale price, so ascertained, shall be taken as the retail sale

price of all such goods. Explanation.- For the purposes of this rule, when retail sale price is required to be ascertained based on market inquiries, the said inquiries shall be carried out on sample basis.

Where a manufacturer alters or tampers the retail sale price declared on the package of goods after their removal from the place of manufacture, resulting into increase in the retail sale price, then such increased retail sale price shall be taken as the retail sale price of all goods removed during a period of one month before and after the date of removal of such goods: Provided that where the manufacturer alters or tampers the declared retail sale price resulting into more than one retail sale price available on such goods, then, the highest of such retail sale price shall be taken as the retail sale price of all such goods.

If the retail sale price of any excisable goods cannot be ascertained under these rules, the retail sale price shall be ascertained in accordance with the principles and the provisions of section 4A of the Act and the rules aforesaid.

Important points relevant to exam:

If Excise duty is paid under protest, time limit of one year to claim refund not applicable, but unjust enrichment is applicable. Unjust enrichment is applicable for provisional assessment cases. No SSI exemption under 8/2006, if a trade mark is registered in assessees name at a later date with retrospective effect Supreme Court. Cenvat is admissible even if capital goods are procured under Leave & lecence agreement. Penalty is leviable even if duty and interest is paid before issue of notice. Ne refund could be claimed without challenging the assessment order. Section:37-B Circulars and other Circulars issued by board binds departmental officers and not assesses. No time limit for taking Cenvat credit.

Section 4 or 4A valuation:

Ice-cream sold in Bulk

: Sec:4

Kit-kat supplied to pepsi for free supply: Sec;4 Telephone Instrument supplied to MTNL on contact basis; Sec:4A Refrigerators sold to bottling cos. Section:4A Electric filament bulbs : Sec:4A Mineral water specially supplied to jet Airways : Section:4A Biscuit packets: more than 1 Kg pack also Section:4A valuation.

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CENTRAL EXCISE

LEGISLATIVE AMENDMENTS 1. Amendments in First Schedule to the Central Excise Act, 1944: (i) Section 9A (2) of the Central Excise Act has been amended so as to exclude following types of offences and circumstances from the purview of the compounding provisions. Consequently, section 37 of the Central excise Act has also been amended.

(a) a person who has been allowed to compound once in respect of any of the offences under the provisions of clause (a), (b), (bb), (bbb), (bbbb) or (c) of sub-section (1) of section 9; (b) a person who has been accused of committing an offence under this Act which is also an offence under the Narcotic Drugs and Psychotropic Substances Act, 1985;

(c) a person who has been allowed to compound once in respect of any offence under this Chapter for goods of value exceeding rupees one crore; (d) a person who has been convicted by the court under this Act on or after the 30th day of December, 2005..

(ii) Sections 14A and 14AA have been amended to provide that the Chief Commissioner may also nominate Chartered Accountants for conducting special audits under these provisions.

(iii) Section 23A has been amended to prescribe that the Authority for Advance Rulings authorised under section 28F of the Customs Act would be competent to deal with cases under the Central Excise Act as well. (iv) Sections 35G and 35H have been amended so as to empower High Courts to condone delay in the filing of appeals, applications as well as the memorandum of cross objections where it is satisfied that there was sufficient cause for delay.

2. Amendments in First Schedule to the Central Excise Tariff Act, 1985: (i) Note 1 of Chapter 8 in the First Schedule to the Central Excise Tariff Act, 1985 has been substituted so as to exclude betel nut product known as supari of tariff item 2106 9030 from its purview. (ii) A note has been inserted in Chapter 21 so as to provide that in relation to product of tariff item 2106 90 30 the process of adding or mixing cardamom, copra, menthol, spices, sweetening agents or any such ingredients, other than lime, katha (catechu) or tobacco to betel nut in any form shall amount to manufacture.

3. Amendments in CENVAT Credit Rules 2004: (i) An explanation has been inserted in Rule 2 of the Cenvat Credit Rules 2004 so as to clarify that inputs which are eligible for availing Cenvat credit shall not include cement,angles, channels, CTD or TMT bar and other items used for construction of shed, building or structure for support of capital goods.

(ii) Rule 6(3) of the Cenvat Credit Rules, 2004 is being amended to prescribe that a manufacturer of both dutiable and exempted goods using common inputs, who does not maintain separate accounts, shall pay an amount equal to 5% of the total price of the exempted goods instead of 10%

4. Amendments in Central Excise Rules, 2002: A new rule has been inserted in the Central Excise Rules 2002 to provide that records seized by the department during an investigation but not relied upon in the Show Cause Notice should be returned to the party within 30 days of the issue of show cause notice or the completion of the period for issue of the show cause notice

MISCELLANEOUS 1. The benefit of SSI exemption is being extended to printed laminated rolls bearing the brand name of another person by adding this item to the list of specified packing materials at para 4(e) of the exemption notification. The exemption for this item would be available for the first clearances for home consumption not exceeding Rs. 150 lakhs during the remaining period of this financial year i.e. 2009-10.

2. Excise duty exemption is being extended to Ethylene Vinyl Acetate (EVA) compound manufactured by a job worker, for further use in the manufacture of exempted foot wear, on par with PVC compound.

3. Excise duty on all goods of cotton, not containing any other textile material which is manufactured wholly out of indigenous raw material and cleared by EOU in domestic tariff area, is being increased from nil to 4%

4. Excise duty on all goods, (other than of cotton), which is manufactured wholly out of indigenous raw material and cleared by EOU in domestic tariff area is being increased from 4% to 8%

5. Consequent to increase in excise duty rates from 4% to 8% on certain items covered under RSP (Retail Sale Price) based assessment, the abatement rates have also been revised

SERVICE TAX A. The following changes are being proposed in the Finance (No.2) Bill, 2009 (I) Section 65 is being amended to : (a) specifically include and define the following services, in the list of taxable services, namely:(i) Service provided in relation to transport of coastal goods and goods through National Waterways and Inland Water, (ii) Service provided in relation to transport of goods by rail, (iii) Cosmetic and plastic surgery service, (iv) Legal consultancy service. (The above changes will come into effect from a date to be notified, after the enactment of the Finance Bill, 2009). (b) extend or modify the scope of certain services, namely:(i) Business auxiliary service, so as to provide that only those processes which result in the manufacture of excisable goods (as defined in the Central Excise Act) are excluded from the purview of Business auxiliary service. (ii) Information technology service [Section 65 (105) (zzzze)], to replace the word, `acquiring, with the word, `providing [appearing in serial number (iv) and (v) of the definition].The amendment is being given retrospective effect from 16.05.2008. (iii) Stock-broker service [Section 65 (101)], to exclude sub-broker from its ambit. As a result subbrokers will be outside the ambit of service tax. (II) Section 66 pertaining to charge of service tax is being amended, to include the services which are individually specified, for inclusion in the list of taxable service. (III) Section 84 is being amended, to abolish the revision procedure prescribed in Section 84. Revision of orders by the Commissioner is being replaced, with the filing of departmental appeals before the Commissioner of Central Excise (Appeals), similar to the Central Excise provisions. Consequential changes are effected in Section 86.

(IV) Section 94 is being amended, to empower the Central Government, to frame rules with respect to the place of supply of taxable services, and the relevant date for determination of service tax.

B. Amendments in the Rules and existing Notifications: (I) The scope of notification No.1/2002-ST dated 01.03.2002 is being enlarged, by extending the applicability of service tax provisions to installations, structures and vessels in the entire Continental Shelf of India and Exclusive Economic Zone of India II) Explanation provided in the Works Contract Rules, 2007 is being modified, so as to allow the benefit of optional composition scheme, only for such works contracts, where the taxpayer declares the entire value of goods (whether supplied under any other contract for a consideration or otherwise) and services used in the execution of the works contract, as the `gross value charged for the works contract. This restriction would not apply to the current works contracts where either the execution has commenced or any payment been made on or before 07.07.2009 (III) Rule 6(3) of the Cenvat Credit Rules, 2004 is being amended, to reduce the amounts to be paid on clearances of exempted goods and on provision of exempted services, from 10% to 5% in case of Central Excise and from 8% to 6% in case of service tax respectively (IV) Rule 3(5B) of the Cenvat Credit Rules, 2004 is being amended, so as to provide that a service provider shall pay back the amount of credit taken on inputs/capital goods fully written off

C. Exemptions: (I). Exemption from service tax is being provided, to inter-state or intra-state transportation of passengers, in a vehicle bearing `contract carriage permit, with specified conditions

(II). Exemption from service tax (leviable under club or association service) is being provided, to the Federation of Indian Export Organizations (FIEO) and specified Export Promotion Councils, on the membership or any other fee collected by them. This exemption is valid up to 31.03.2010

(III). Exemption from service tax (leviable under banking and other financial services or foreign exchange broker services) is being provided, to inter-bank purchase and sale of foreign currency between scheduled banks

(IV). Refund Scheme for Exporters: Notification No.41/2007-ST dated 06.10.2007 provides for refund of service tax paid on services, which though not in the nature of input services, are relatable to export goods. The scheme is being revamped, to ensure speedier grant of refunds, to the exporters. The salient features of the new scheme, being notified under two notifications, No.17/2009-ST and No.18/2009-ST, both dated 07.07.2009, are as follows:

(a) Under notification No.18/2009-ST dated 07.07.2009, two taxable services, namely, `transport of goods by road and `commission paid to foreign agents have been exempted from the levy of service tax, if the exporter is liable to pay service tax on reverse charge basis. The present cap of 10% on commission agency charges has been retained, and the exporter will have to pay service tax on the amount of commission which is in excess of 10%. (b) Superseding notification No.41/2007-ST dated 06.10.2007, a revised refund scheme is being brought into effect under notification No.17/2009-ST dated 07.07.2009.The salient features of this scheme are: Terminal handling charges is being added in the list of eligible services. The time period for filing refund claim is being increased to one year from the date of export. The condition for filing refund claims once in a quarter is also being dispensed with. Now the exporter can file a refund claim anytime after export. A simplified format is being prescribed for filing refund claims. Many of the conditions that were imposed under the previous scheme have been deleted. Self certification is being introduced to ensure speedier sanction and disbursement of refunds. In case, where the total refund claim does not exceed 0.25% of the total f.o.b. value of the exports under a claim, a self-certification by the exporter on the invoice, bill or challan, to the effect that: (a) the eligible services have been received by the exporter; (b) the service tax payable thereon has been reimbursed by the exporter, and (c) such services have been used for the export, would be sufficient. The refunds shall be granted within one month without any pre-audit. In cases, where the amount of refund claim exceeds 0.25% of the f.o.b. value of exports, the invoice, bill or challan submitted by the exporter should be certified by the Chartered Accountant, who audits his annual accounts. On the basis of such certification, the refund claim shall be sanctioned by the department within one month, without any pre-audit. Bottom of Form Top of Form

CUSTOMS)

MISCELLANEOUS AND LEGISLATIVE AMENDMENTS:

A new section 26A has been inserted in Customs Act, 1962 to provide for refund of import duty paid at the time of clearance for home consumption on imported goods found to be defective or otherwise not in accordance with specification agreed upon between the importer and the supplier of goods. Refund under this provision would be available only if the importer either exports the goods or relinquishes title and abandons them to customs or if the goods are destroyed so that they become commercially valueless. There are other conditions prescribed in the provision.

26A. (1) Where on the importation of any goods capable of being easily identified as such imported goods, any duty has been paid on clearance of such goods for home consumption, such duty shall be refunded to the person by whom or on whose behalf it was paid, if (a) the goods are found to be defective or otherwise not in conformity with the specifications agreed upon between the importer and the supplier of goods: Provided that the goods have not been worked, repaired or used after importation except where such use was indispensable to discover the defects or non-conformity with the specifications; (b) the goods are identified to the satisfaction of the Assistant Commissioner of Customs or Deputy Commissioner of Customs as the goods which were imported; (c) the importer does not claim drawback under any other provisions of this Act; and (d) (i) the goods are exported; or (ii) the importer relinquishes his title to the goods and abandons them to customs; or (iii) such goods are destroyed or rendered commercially valueless in the presence of the

Section 28F of the Customs Act has been amended to provide that the Central Government may by notification authorize the Authority for Advance Ruling constituted under Section 245-O of the Income Tax Act to act as an Authority for the purposes of customs, central excise and service tax subject to some modification regarding the

constitution of the Authority. The change will come into effect from a date to be notified.

Sections 130 and 130A of the Customs Act have been amended to empower the High Court to condone the delay in filing of appeals/applications/memorandum of cross objections where it is satisfied that there is sufficient cause for delay

Section 137 of the Customs Act has been amended to exclude certain types of offences and circumstances from the purview of compounding provisions. Consequential amendments have been made in Sections 156 & 157 of the Customs Act respectively.

Notification No. 40/2006-Customs dated 01.05.2006 has been amended retrospectively from its date of issue so as to allow the facility of rebate in respect of locally procured materials used in the manufacture of goods exported under the Duty Free Import Authorisation Scheme and carry out other related changes

Section 3 of the Customs Tariff Act, 1975 has been amended to make provision for cases where the Central Government has fixed a tariff value under sub-section (2) of section 3 of the Central Excise Act, 1944, for the like article produced or manufactured in India for the collection of Central Excise duty. In such cases, it has been prescribed that the value of the imported article shall be deemed to be such tariff value for the purpose of assessment of additional duty of customs (Clause 93 of the Finance (No.2) bill, 2009 refers).