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WHAT IS EXCISE? HISTORY Central Excise levy was existing for years. But in 1944, 11 different Acts were combined into one Act and this was then named as "The Central Excise and Salt Act, 1944". In 1996 it was renamed as "The Central Excise Act, 1944". This Act is the original Act for excise, which contains the Tariff Items 1 to 67. In 1975 the Tariff Item 68 was introduced with the description "all other goods not elsewhere specified". The Industry started describing it as "Terror Items". In 1985 the controversial Tariff Item 68 was abolished and a new Tariff Act known as "THE CENTRAL EXCISE TARIFF ACT, 1985" (CETA) was introduced. This new act replaced the first schedule to the original Act. "THE ART OF TAXATION LIES IN SO PLUCKING THE GOOSE AS TO OBTAIN THE LARGEST AMOUNT OF FEATHERS WITH THE SMALLEST POSSIBLE AMOUNT OF HISSING" - JEAN BAPTISTE COLBERT Excise is one of the important indirect taxes which is based on this principle. To simply state Excise is a tax levied on goods manufactured or produced in India. Central Excise duties are the single largest source of Revenue for the Central Government of India. On an average, out of every one Rupee Government earns, 19 paise is contributed by Excise. Apart from the Basic Excise duty, the following types of duties are also levied : i. ii. iii. Special duty of excise specified in the Second Schedule to the Central Excise Tariff Act, 1985 leviable under the Central Excise Act, 1944. Additional duty of excise under the Additional Duties of Excise (Textiles & Textile Articles) Act, 1978. Additional duty of excise under section 3 of the Additional Duties of Excise (Goods of Special Importance) Act, 1957.

WHO COLLECTS IT ? They are levied and collected by Central Excise Department under the authority of the Central Excise Act, 1944 and Central Excise Rules, 1944. Section 3 is the charging section which in turn derives the power to impose this tax from the Entry 84 of the Union list under the Seventh Schedule read with Article 246 of the Constitution of India. The Entry empowers the Central Government to levy Duty on all articles produced or manufactured in India (including tobacco) except Alcohol and Opium. The power to collect Excise duty on Alcohol and Opium has been assigned to States and it is known as State Excise duty. Back

CONCEPT OF MANUFACTURE AND MANUFACTURER Manufacture Manufacture not only includes any process incidental or ancillary to the completion of manufactured product but also what is stated to be amounting to manufacture as per section notes or chapter notes of the Central Excise Tariff Act, 1985. The following four aspects must exist to attract the definition of manufacturing as given in central excise law : 1. A process to be carried out. 2. The process carried out must result in the manufacture of a new product than what was originally before. 3. The product so produced must have a marketability and commercially known and sold as such. 4. The product must be movable in nature. Back

REGISTRATION Background Rule 174 was amended vide Notification No. 11/92 CE (NT) dated 14-5-1992. This rule consist of 11 sub-rules which incorporates all the provisions regarding registration. Applicability Section 6 of the Central Excise Act, 1944, a person who is engaged in production or manufacture or any process of production or manufacture of any specified goods included in Central Excise Tariff Act, 1985 shall get himself registered with the proper officer as per the procedure / documentation laid down in Rule 174 of the Central Excise Rules, 1944. The Registration is applicable to the following category of persons as per Rule 174 and as per Notification No. 33/94 CE (NT) dated 4-7-1994. 1. 2. 3. 4. 5. 6. Manufacturer. Curer. Producer. Broker/Commission Agent dealing in any excisable goods. Owner of private showroom or warehouse of excisable goods. Dealer/Importer who issues invoices under Rule 57G or Rule 57T (for purposes of MODVAT credit).

HOW TO OBTAIN REGISTRATION (BY MANUFACTURERS) To apply to Range Superintendent in the prescribed Form R-1. Since the application is common for all category of persons, only relevant portion of the application form is to be filled in by the manufacturers. Similar application for registration should be made by other categories also.

ENCLOSURES TO THE APPLICATION FORM 1. The ground plan of the manufacturing premises as the case may be with specific reference to store room of finished goods indicated clearly. 2. The details of products manufactured or stored in case of other categories (other than manufacturer) with their chapter heading, sub-heading as per Central Excise Tariff Act, 1985. HOW ISSUED The Superintendent of Central Excise after verifying the application and all the relevant enclosures may visit the factory to verify whether all the particulars specified in the application and the enclosures are correct and thereafter Superintendent will affix the words "VERIFIED" and "APPROVED" and put his dated signature. The relevant portion of the Registration Certificate (R2) will be filled and signed by the Superintendent and a copy of the same sent to the manufacturer along with one copy of the approved ground plan. It is to be noted SSI units are permitted to declare the entire factory as store room which is procedural relaxation announced by CBEC. ONE UNIT ONE REGISTRATION Under the Excise Rules each and every factory engaged in the manufacture of Excisable goods, is required to obtain registration and will be an assessee for the purpose of levy and collection of excise duty. Therefore, if a company has got 3 or 4 factories located at different places, each of the factory will obtain Registration though it may belong to one company only.

1. Time-limit for issue of R-2 : Time limit for issuance of Registration

Certificate R-2 is within 30 days from the date of receipt of the application form. If the Registration Certificate is not issued within 30 days then the registration applied shall be deemed to be granted. Display of Registration Certificate : Every Registration Certificate (original or certified copy) must be exhibited in a conspicuous part of the registered premises. Validity : Indefinite. Introduction of new products : If the new product suppose to be introduced falls under different sub-heading then it is essential to send the Registration Certificate for the incorporation of the new product in the Registration Certificate. Back

2. 3. 4.

EXCISABLE GOODS Excisable goods refer to those Goods which are mentioned in the Central Excise Tariff Act, 1944. Goods as per this Act must possess the following characteristics. These are the 4 Ms The goods should be MOVABLE. (no duty on immovable goods). The goods should be MARKETABLE (capable of being bought and sold).

The goods should arise out of MANUFACTURING process. The goods should be MENTIONED in the Central Excise Tariff Act. (if one of the criteria mentioned above is absent, the item cannot be described as goods to attract Excise levy, even if there is entry in the tariff).

Excisable Goods are of two kinds: 1. 2. 3. 4. 5. Unmanufactured Goods (Coffee, Tobacco). Manufactured Goods. Rates of duty are of three kinds: Specific; i.e., per kg. Ad valorem; i.e., on the value of goods expressed in terms of % of the value. Duty on production capacity : On certain Notified Goods under section 3A. Back

ASSESSMENT "It refers to official determination of the liability of a person to pay a particular Tax". Assessee "Person who is liable to pay duty assessed on the Goods manufactured or produced by him." Assessable Value "It refers to the price at which the Excisable Goods are sold by the assessee." TYPES OF EXCISE CONTROL 1. Physical Control : Applicable to manufactured tobacco and mainly to cigarettes. Assessment is done by Excise Officer and thereafter the goods are removed under his supervision. 2. Self Assessment Procedure : This self removal procedure requires the assessee to file a classification declaration for his goods in quadruplicate under rule 173B to inform the department of the claimed rate of duty applicable to his Goods. 3. Compounded Levy Scheme : It is meant for small-scale decentralised sector like embroidery, marble slabs etc. 4. Collection of Central Excise Duty at the point of consumption : It is confined to Khandsari Molasses going for manufacture of alcohol. 5. Levy of Excise Duty on the basis of capacity of production : This is a New Weapon in the Government's armoury. A new section 3A has been introduced to fight evasion. EXEMPTION FROM DUTY 1. Under section 5A, the Central Government has the power to grant exemption, full or partial, from payment of duty. 2. Also section 11C contains a provision for waiver of duty in cases where there was a general practice of non-levy which later on was found erroneous. 3. Burden to establish his eligibility rests on the claimant.

4. Also it is open to Government to grant different levels Exemption to different classes of manufacturers. 5. Exemption is granted from 'duty of excise' means exemption only from Basic Excise Duty. REMISSION OF DUTY Rules 49(1), 147 and 196 provide for remission of duty if the assessee can prove to the satisfaction of the proper officer that the final goods are unfit for consumption or for marketing were lost or destroyed by natural causes or by unavoidable accident before their clearance from the factory or warehouse. Back

VALUATION OF GOODS FOR THE PURPOSE OF EXCISE DUTY 1. Where the rates of duty are on ad valorem basis, assessable value of the final Goods are unfit for consumption or for marketing has to be found out before the amount of duty leviable thereon is determined and paid. 2. Though the value of goods is required to be declared in assessee's invoice, the invoice value is not necessarily the acceptable value under section 4. 3. The most authoritative exposition of section 4 is contained in Union of India vs. Bombay Tyres International Ltd. - 1983 (14) E. L. T 1986 (SC) Case. In this case, the Hon'ble Supreme Court had drawn the line at the factory gate up to which all costs incurred to make the Goods complete and marketable had to be included in the price. Costs incurred beyond the factory gate were not includable. Warranty service and advertisement costs are, however an exception to this rule because they make the goods marketable at the factory gate. EXCEPTIONS 1. If the goods are sold at different wholesale prices to different classes of buyers, each such wholesale price is deemed to be an "assessable value". Thus excisable goods can have more than one "assessable value", with regard to class of buyer. 2. If the goods are sold at different wholesale prices at different places of removal, each such wholesale price is deemed to be an "assessable value". 3. If the goods are sold in the course of wholesale trade for delivery at the time and place of removal at a price fixed under any law for the time being in force, or at a price being maximum, fixed under any such law, then such price or maximum price so fixed shall be deemed to be the normal price; viz., "assessable value". 4. If the assessee arranges to sale goods in the course of wholesale trade only through a "related person", the price at which goods are sold by such related person is taken as "assessable value". Back

RELATED PERSONS

The next requirement of normal price is that it should not pertain to sales to related persons. "A person who is so associated with the assessee that they have interest, directly and indirectly, in the business of each other". WHO ARE THE RELATED PERSONS The term RELATED PERSON has been defined under section 4(4)(c) as "A person who is so associated with the assessee that they have interest, directly and indirectly, in the business of each other". The term includes the following : i. ii. iii. iv. Holding Company. Subsidiary Company. A relative who is a distributor. A sub-distributor of such distributor. Back

PERMISSIBLE DEDUCTIONS 1. Normal Trade Discount and Cash Discount. 2. Durable and Returnable Packing and Cost of Packing not required to sell the product at the factory gate. 3. Equalised Freight from depot to customer's premises. 4. Statutory levies like Excise duty, Sales Tax, Octroi etc. OTHER DEDUCTIONS 1. Installation/Erection/Commission Charges. 2. Technical Consultancy Charges for operation of the machine. 3. Inspection Charges at Customer's premises. Back

MODVAT : MODIFIED VALUE ADDED TAX BACKGROUND Prior to the introduction of MODVAT, the Proforma Credit scheme as specified under Rule 56A of the Central Excise Act, 1944 was in operation. The scheme was narrow in scope and only applied to specific situation. INTRODUCTION In the Union Budget of 1986 introduced the new system of MODVAT. It is a tax on the VALUE ADDITION. VALUE ADDITION means the value of the output as reduced by the total cost of bought out inputs. The Modvat scheme at present allows a set off of the

excise duties and additional duties of custom on inputs against the duty liability on final product and capital goods. PURPOSE It was introduced in order to avoid Double Taxation on Inputs as well as on finished goods. MODVAT CREDIT (RULE 57A)

1. On Inputs
It is governed in terms of Rules 57A to 57J of Central Excise Rules. The manufacturer of the final products shall be allowed to take the Credit of the Specified duty paid on the Goods, used in or in relation to the manufacture of the final products, whether directly or indirectly and whether contained in the product or not. Therefore the inputs should be such that they participate in the process of manufacture without which the end product cannot be manufactured. Also it covers not only the goods which are used in the manufacture but which are also used in the stages once removed from the process.

2. MODVAT credit on consumable stores

In general, it is to be noted that which are in the nature of consumables are eligible for MODVAT Credits as their usage would qualify them as inputs, as per the broad definition of Rule 57A of the Central Excise Rules.

3. MODVAT credit on packing material

MODVAT Credit is available on packing material used to pack finished products chargeable to specific rates of duty. 4. MODVAT credit on inputs used as fuels. 5. MODVAT credit on accessories if the cost of accessories is included in assessable value. 6. MODVAT credit on capital goods New set of Rules 57Q to 57U have been inserted in Chapter V of the Central Excise Rules for granting Modvat Credit on Capital goods. These provisions where inserted with effect from 1-3-1994. PRE CONDITIONS TO BE FULFILLED 1. Final Product must be Dutiable 2. Both Final product and capital goods must be specified for eligibility under the table of Rule 57Q. 3. Capital Goods should be duty paid with evidence of payment. SALIENT FEATURES OF MODVAT

 No prior permission is required, but 57G declaration. No need of filing form D-3 for intimation of receipt of input. It is available for both Basic Excise duty and special excise duty. Removal of inputs for Home consumption or Export under Rule 57F(3). Also the adjustment of credit is allowed; i.e., for obtaining refund on credit if goods exported and credit could not be adjusted in Domestic Sale. Manufacturer availing Modvat facility should maintain the following register apart from filing the return. a. RG-23A PART I to show input received/used/lying as stock. b. RG-23A PART II to show details of credit availed/utilised/balance. MONEY CREDIT SCHEME This is a scheme which governs grant of Credit of Money in respect of specified raw materials used in manufacture of specified excisable goods. Here there is no credit of duties but credit of Money. The provisions are contained in Rules 57K to 57T of the Central Excise Rules. DOCTRINE OF UNJUST ENRICHMENT The law relating to refund of excise duty contained in section 11B of the Central Excise Act, 1944 was amended drastically by the Central Excise and Custom Law (Amendment) Act, 1991 coming into force w. e. f. 20-9-1991. The amending Act made significant changes in sections 11B and 11C and introduced new sections 12A, 12B, 12C and 12D in chapter IIA and section 11D in chapter II, to curb the alleged unjust enrichment of the manufacturer on account of refund allowed under the then existing law. The preamended section 11B permitted refund claims under Central Excise only to the assessee; i. e., one who paid the duty and not to others; i. e., consumers etc. who might have borne the same. The law in fact was to the effect that, if a refund was claimed by the assessee and that was found to be in order, the Assistant Commissioner of Central Excise was bound to pay it. Such refunds though part of law, and had been going on since long, drew lot of criticism in the Parliament in the year 1990-91 on account of resultant unjust enrichment of the manufacturers. "Unjust" means what is "not just or right" that is "unfair." Hence, the words "unjust enrichment appear" to mean "making rich or richer in an unfair way." "Unjust enrichment" is the theory pressed into services by Department whenever claims for refund is made by the assessee. It is argued that when the burden of impose is passed on to consumers, why should not relief of Indirect Tax like Central Excise or Customs duty be passed on to the consumer. The underlying assumption is that the person who pays it to the Government, passes it on to his customers by including it in his sale price and so effectively he loses nothing. Later on, if a part of the tax is refunded to him, on the ground that it was not payable by him the refund would be an undeserving benefit to him. This has been termed as "unjust enrichment" of the manufacturer or the "Doctrine of Unjust Enrichment". Back

APPEALS "When an order is passed by an Adjudicating authority against the assessee, aggrieved by this decision the assessee is given an opportunity to file an appeal to the higher authority as per the provisions of the law". APPEALS TO APPELLATE TRIBUNAL Appeals to Appellate Tribunal can be filed in respect of the following, i. ii. A decision or order passed by the Commissioner of Central Excise as an adjudicating authority; An order passed by the Commissioner (Appeals) under section 35A.

According to the section 35B(2) the Commissioner of Central Excise may direct a central excise officer to appeal on his behalf to the Appellate Tribunal. It is possible only if he is of the opinion that an order passed by the Appellate Commissioner of Central Excise under section 35 as it stood immediately before the appointed day, or the Commissioner (Appeals) under section 35A, is not legal or proper. SECTION 35L : APPEALS TO THE SUPREME COURT Appeal to the Supreme Court shall lie only in the following cases, 1. a judgement of the High Court delivered on a point of reference made under section 35G, in case the High Court, either on its own motion or on the basis of an application, certifies the matter as fit for appeal to the Supreme Court. 2. any order of the Tribunal pertaining to value of goods or the rate of duty of excise. Back

CENTRAL EXCISE AND GOLD APPELLATE TRIBUNAL (CEGAT) RULES The CEGAT Rules lay down procedure to be followed by both assessee and by the department for filing of appeals and stay applications in the Tribunal. The Rules were brought into force with effect from October, 1982. The various Rules under it state the procedures to be followed. They are as follows : 1. It states that the Bench shall hear and decide all appeals and applications as may be directed by the President. (Rule 4). 2. It requires the Appeal Memorandum to be in the relevant form and permits filing of the appeal either in person or by an agent or through registered post. (Rule 6). 3. It states that Memorandum of Appeal must be filed in the form of the paper book and must contain the statement of facts and the grounds of appeal. (Rule 8). 4. It requires the Appeal Memorandum to be accompanied by five copies of the order appealed against, one of which shall be certified copy, and in case an

appeal is against an order in appeal, five copies of the order in original are also required to be filed. (Rule 9). 5. It authorises the Tribunal either to reject or to require modifications of appeals which are defective in nature and which don't contain all the required documents. (Rule 11). 6. It governs the preparation of paper book and permits the applicants to file the paper book either with the appeal or within one month of the date of filing appeal. (Rule 16). 7. It authorises the Tribunal to dismiss the appeal for default, due to non appearance of the appellants on the date of hearing. (Rule 20 and Rule 21). Back

SMALL SCALE AND COTTAGE INDUSTRIES SECTOR Rationale of small scale and cottage industries 1. 2. 3. 4. 5. 6. 7. Labour intensive. Broad-based and dispersed. Facilitate the creation of wider entrepreneurial base. Effective mobilisation of the available resources. Development of small towns and cities. Modest capital resources. Substantial overall contribution.

Small Scale industries are actually the backbone of a developing country. NEW EXEMPTION SCHEME FOR S. S. I. UNITS

1. Notification 8/99
Effective from : 1-4-1999 Eligibility To Manufacturer whose valued clearance has not exceeded Rs. 3 crores in the previous financial year. No need to have Registration Certificate of Directorate of Industries. Applicability Only on goods mentioned in the Annexure to the Notification. Turnover Rate of limit Duty 10-50 Lacs NIL Remarks

(Subject to not availing -MODVAT which can be 50-100 5% ADV availed after Rs. 100 Lacs) Lacs 100-300 Normal Lacs Duty

Conditions While availing exemption upto Rs. 50 lacs and concessional rate of duty between 50-100 lacs, the manufacturer cannot avail Modvat facility on inputs upto Rs. 100 lacs. 1. Exemption shall not apply to NAMES of another person. 2. Exemption shall not apply to goods to Nepal and Bhutan. 3. Exemption shall not apply to 4. Exemption shall not apply to nil rate of duty. Restrictions 5. Exemption shall be after taking into account clearances from all factories together and not separately for each factory. 6. Exemption shall be after taking into account total clearances by all manufacturers in the same units. The Brand name condition is not applicable in the following situations. 7. Where the goods are parts or component of any machinery cleared for use as original equipment under Chapter X procedure. 8. If the goods bear brand name of the followings: 9. Khadi and Village Industries Commission, 10. State Khadi and Village Industries Board, 11. National Small Scale Industries Corporation Ltd., 12. State Small Industries Development Corporation Ltd., 13. State Small Industries Corporations. goods bearing BRAND NAMES or TRADE goods exported but will apply to export of clearance under Chapter X procedure. the exempted goods or goods attracting

2. Notification 9/99
Effective from : 1-4-1999 Background Notification 9/99 dated 1-4-1999 imposes condition on availment of Modvat by SSI units in the sense that if a SSI unit wants to avail Modvat they have to necessarily pay the full rate of duty right from the beginning and that the option once exercised cannot be changed during the FINANCIAL YEAR. This new notification 9/99 dated 1-4-1999 contains procedural relaxations/concessions for the unit wishing to avail Modvat facility. However notification 8/99 remains untouched. Salient features

1. Clearances upto 50 lacs : For those SSI units under the above category, they can avail Modvat facility subject to payment of 60% of the normal duty applicable to the final products. 2. Clearances between Rs. 50 lacs and 100 lacs. In the above situation, the SSI units will be required to pay 80% of the normal rate of duty applicable to the final product. Conditions to avail benefit under Notification 9/99 3. The Manufacturer must exercise his option in writing at the beginning of the financial year, and once exercised it shall be effective throughout the year. 4. While exercising his option the manufacturer has to file a declaration in writing to the Asst. Commissioner with a copy to the Superintendent having the following details, Name & Address, a. Location of factories, b. Description of the product, c. Aggregate value of clearances of the specified goods. 5. Value of clearances is already effected from the commencement of the financial year till the date exercising the option if opted for 8/99 only shall be taken into account for computing the value of eligible clearances specified in the notification for the purpose of payment of 60% or 80% of the effective rate. 6. Also Exemption shall not apply to goods bearing BRAND NAMES or TRADE NAMES of another person. Restrictions 7. Exemption shall be after taking into account clearances from all factories together and not separately for each factory. 8. Exemption shall be after taking into account total clearances by all Manufacturers in the same factory. Back

PROCEDURAL RELAXATIONS RELATING TO FILING DECLARATION 1. The SSI unit need not file a declaration till their value of clearance crosses Rs. 40 lacs. 2. No officer to visit any small scale factory without a written authorisation of the Assistant Commissioner. 3. Special cell created in each commissionerate to assist and advise SSI units 4. No need for separate Excise records. Private records showing date-wise production, sales and bills or invoices. 5. Option to pay normal excise duty in place of concessional duty. 6. Job worker of the SSI unit not required to pay any Excise duty on the job work though he is a manufacturer.

7. Modvat credit of duty paid on the capital goods can be availed but cannot be utilised till the unit crosses 1 crore value of clearance even if presently the clearances of the SSI unit is exempted. Back

MOVEMENT OF GOODS BY SSI UNITS AVAILING EXEMPTION/CONCESSIONAL DUTY UNDER NOTIFICATION NOS. 8/99 In order to facilitate the SSI units availing exemption/concession under notification no. 8\99 and also in order to ensure that the job workers receiving goods from such SSI units are not made liable to pay excise duty on processed goods, two NOTIFICATIONS are being issued; viz., 83/94 dated 11-4-1994 and 84/94 dated 11-41994. Particulars Notification 83/94 11-41994 as amended Applicabilit To units y working under 8/99 & 9/99. Coverage Notification 84/94 11-4-1994 as amended To units working under 8/99 & 9/99.

To exempt To exempt Excisable goods excisable goods manufactured cleared by a in a factory as a manufacturer to job work. a place outside for job work. Excisable goods Raw material or manufactured semi-finished and cleared by goods. SSI unit. To manufacture For getting job excisable goods work done on job work. outside with SSI. Excisable goods to be received back by supplier for use in or in relation to the manufacture of goods wholly exempt. To use goods returned after job work in or in relation to the manufacture of goods which are wholly or partly exempt.

Type of goods

Purpose

Condition

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SMALL SCALE INDUSTRIES ALLOWED TO PAY DUTY ON MONTHLY BASIS

The finance minister in his Budget speech for the fiscal year 1999-2000 has announced a scheme of allowing SSI units to pay duty on a monthly basis with a view to give incentive to them in the form of ease of Liquidity and simplification of procedure. Notification No. 36/99-C. E. (N. T.) dated 26-5-1999 has been issued for this purpose, whereby new Rule 173GG has been inserted. Interest rate of thirty per cent per annum will be payable if the manufacturer fails to pay the amount of duty payable for a calendar month by fifteenth of the next month. Apart from the interest, a mandatory penalty of Rs. 500 per day is also payable for the period of delay, starting from 16th day of the succeeding month till the date of actual payment alongwith the outstanding amount. However the total amount of the duty payable for the calendar month together with the interest and penalty shall not exceed the value of clearances during that calendar month. Sub-rule (4) says that if the manufacturer fails to discharge the duty liability in the specified time period for the second time in a financial year, he shall not be allowed to pay the excise duty on monthly basis under this scheme for the remaining part of the financial year. Manufacturer falling in the small scale category by virtue of his 'turnover in the preceding financial year' criterion, if does not avail exemption under Notification No. 8/99-C. E. or 9/99-C. E., and avails paying duty at normal rate, is not eligible for this scheme. STATEMENT SHOWING MONTH WISE DUTY PAYMENT FOR THE QUARTER ENDING

Sr. Invoice Name of No. No. the and Consignee Date (1) (2) (3)

ECC No. Assessable Duty Details of Value paid of duty Consignee debited (4) (5) (6) (7)

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EXCISE SCHEMES ON SMALL SCALE INDUSTRIES SECTOR The objective of Directive Policy is to create a "WELFARE STATE"; i.e., to ensure that the ownership and control of the material resources of the community are so distributed as best to subserve the common good and that the operation of the economic system does not result in the concentration of the wealth and means of the production to the common detriment. The small scale sector helps the government to achieve the above constitutional mandates and in the development of the welfare state. This sector is developed, nurtured and encouraged by the government with a view of ensure that the material resources of the country are as widely distributed as possible and that the wealth and means of production are not concentrated in the few hands creating monopolies. One

of the major fiscal incentives provided by the government to the small scale sector is the exemption from the payment of excise duty on the specified goods manufactured by the small scale units by issuing necessary notifications from time to time. PRESENT SCHEMES OF EXEMPTION RELATING TO SSI SECTOR At present there are two exemption notifications bearing Nos. 8/99-CE & 9/99-CE both dated 1-4-1999 in operation providing the slabwise exemption to the SSI sector in respect of Excisable goods specified therein. Both the above notifications provide different choices to a small scale manufacturer with regard to the availment of the exemption as under : a. To avail total/partial exemption upto the turnover of Rs. 100 lakhs and to avail the benefit of Modvat credit thereafter. (Vide Notification No. 8/99-CE.) b. To avail the benefit of Modvat credit from the beginning simultaneously with the payment of duty at the concessional rate on the first clearances aggregating to Rs. 100 lakhs. (Vide Notification No. 9/99-CE.) c. To pay duty at the full applicable rate from the beginning by forgoing the benefit of the exemption. (Vide Notification No. 8/99-CE.) Different types of Excise Forms & Procedures Application for Registration in Form R1. Registration Certificates in Form R2. Declaration of Goods under Rule 173B. Price Declaration under Rule 173C. Annexure I - Proforma for Declaring Assessable value of Excisable goods sold to or through related persons as defined in section 4 of the Act. Annexure II - Proforma for Declaring the Assessable value of Excisable goods manufactured by an assessee who : i. ii. iii. Uses such goods for manufacture or production of other goods in his factory. Removes such goods for free distribution. Removes such goods in any other manner which does not involve sale. Back

MAINTENANCE OF EXCISE RECORDS Personal Ledger Account (PLA) Rule 173G governs the maintenance of a Personal Ledger Account. Rule 173G requires the assessee to periodically deposit cash payments into the Treasury under TR-6 challan in order to ensure that the balance in the PLA is sufficient to discharge duty which is due on the goods which are intended to be removed at any time. In terms of the provisions of Rule 173G, assessees are required to apply to the excise authorities for allotment of a specific number of the PLA that they intend to maintain. RT-12 RETURNS

The monthly RT-12 returns is to be filed in terms of Rule 173C(3) of the Central Excise Rules. It is to be filed in quintuplicate, showing the following before 5th of next month. i. ii. iii. iv. v. vi. vii. quantity of excisable goods manufactured or received under bond during the month; quantity (if any) used within the factory for the manufacture of another commodity; the quantity removed on payment of duty from the place specified under Rule 9 or from the store room or other place of storage approved by the Commissioner under Rule 47; duty paid on such quantity; particulars of invoices or like documents under which such quantity was removed; quantity removed without payment of duty for export or otherwise; and such other particulars as may be prescribed or as the Commissioner may require.

The RT-12 return is the basic document to be filed with the excise authorities by the assessees on an on-going basis and is intended to enable the excise authorities to obtain complete details of all manufacturing activities carried on by the assessee at the factory of manufacture. The monthly RT-12 return is to be accompanied by the following documents : i. ii. iii. iv. receipted TR-6 challans under cover of which PLA deposits are made by the assessees; original and duplicate copies of the PLA folios; one copy of each of PART-I & II of RG 23(A) & RG 23(C) MODVAT Accounts; Suppliers' invoices on the basis of which MODVAT credit has been availed, in original.

TR-6 CHALLAN The prescribed challan form "TR-6" should be filed in quadruplicate and should contain the following particulars : a. b. c. d. e. f. g. Name, address, and Code No. of manufacturer. Code No. of Excise Commissionerate / Division / Range. PLA No. Account head of duty. Commodity name & Code No. (6 digit code; i.e., tariff item No.). Amount deposited in cash / cheque / D.D. Assessee or his duly authorised agent can sign TR-6 challan for taking credit in PLA, counter signature of authorised officer of bank is essential to prove that amount has been credited to Government Account.

RG 23A REGISTER The manufacturer has to maintain record of each input separately in prescribed register in Form RG 23A Part I. This register is essentially a stock register, which gives quantitative details of each input received (with details of duty paying

documents), quantity issued for production, issued for a clearance as such and quantity lying in stock on any day. RG 23A Part II, which is similar to PLA. It is a current account of MODVAT credit received, credit utilised and credit balance. This gives details of (a) credit availed against each input (b) credit utilised against clearance of final products/waste/inputs as such (c) Balance credit available. The RG 23A Part II register has to be maintained in triplicate using double sided carbon paper and indelible pencil (Practically, use of ball pen is accepted). An extract of RG 23A Part I, II has to be submitted to Range Superintendent every month, within five days of close of the month, along with original duty paying documents. The original duty paying documents will be returned by Excise Superintendent to the year after defacing these with rubber stamp "credit taken under Rule 57A" on the duty paying document, to ensure that these are not misused. These should be returned by Superintendent to user of inputs. Since credit on any input can be availed for payment of duty on any final output, it is not necessary to maintain product wise RG 23A Part II. However, if a manufacturer is also manufacturing some goods which are exempt from duty, he will have to maintain separate register in respect of inputs used in exempt final goods or pay 8% duty reversal on clearance of such exempt final goods and maintain common account availing credit on all the inputs. METHODOLOGY FOR MAINTENANCE OF EXCISE RECORDS Rule 226 of the Central Excise Rules lays down the methodology to be observed for maintenance of excise records. The Rule states that the assessee shall, at the time of making any entry in the excise records, insert the date of making entry. Further, the excise records shall be properly maintained and no cancellation/corrections of any entries are permissible, except for correction of errors duly initiated by authorised person. The assessee who fail to enter the required particulars or make false entries or fraudulently alter any entry shall be liable to penalty extending upon Rs. 2,000 and the goods with regard to which entries have not been made in the excise records shall be liable to confiscation. Back

ORGANISATION STRUCTURE OF THE EXCISE DEPARTMENT The structure of the Excise Department is largely similar to the structure of the Income Tax Department. Recruitment to the Customs and Excise Department is through the Indian Revenue Service. The successful candidates in the civil service examination are required to choose between the direct or indirect tax streams. The apex body in-charge of administration of the collection of both customs duties and central excise duties is the Central Board of Excise and Customs (CBEC). This is a statutory board, set up under the Central Boards of Revenue Act, 1963. The Board currently consists of a Chairman and five members. The responsibilities are equally divided between the Chairman and the members. The Chairman is the first among equals. The Chairman and the members are currently of the rank of ex-officio Additional Secretaries to the Government of India. Immediately below the CBEC are the Chief Commissioners. These Chief Commissioners are administratively in-charge of several Commissionerates, ranging from two to four, each of which is headed by a Commissioner. Chief Commissioners

are responsible for all matters under their jurisdiction and report to the CBEC as a whole. The Commissionerate, as its name implies, is the main organisational mechanism for the collection of excise duties. The organisation structure of a Commissionerate is as follows : Commissioner Additional Commissioner/Joint Commissioner Deputy Commissioner Assistant Commissioner (Divisions) Superintendent (Ranges) Field Officers (Inspectors) Back

ASSESSMENT AND APPELLATE PROCEDURE Demands (Section 11A) Section 11A(1) states that in cases where excise duty has not been paid or short paid erroneously refunded, the central excise authorities may within 6 months of the relevant date issue a notice on the assessees requiring him to show cause as to why he should not pay the amount specified in the notice. The S.C., in UOI vs. Madhumilan Syntex Pvt. Ltd. (1988) (35) ELT-349, held that the issuance of show cause notice is a condition precedent for demand of duty under the section and in the absence of such a notice, any demand of duty would be contravention of section 11A(1). Refunds (Section 11B) Sub-section (1) states that any person claiming a refund may make an application to the Assistant Commissioner in the prescribed format within 6 months from the relevant date and the application should be accompanied by documentary or other evidence. Sections 11AA, 11AB, 11AC and 11BB Sections 11AA and 11BB provide for charge of interest on delayed payments/refunds of excise duties at the rate of 20%/15% respectively, which will apply to demand/refunds on and from the expiry of 3 months from the date of the order of demand/receipt of refund application. With the insertion of section 11AB, slight changes have been made in the basis for computation of interest, applied to cases where duties have not been paid or refunds granted due to fraud, collusion or any wilful misstatement or suppression of facts etc. The provision regarding charging of interest on confirmed duty demands require the computation of the said interest from the first day of the month succeeding the month in which the duty ought to have been paid. Therefore, the date of adjudication order would not be relevant for the purpose. However, in cases where such charges are not invoked, the date of adjudication order will continue to the basis for computation of interest, as per Rule 11AA.

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PENALTY Section 11AC, regarding imposition of mandatory penalty in cases where excise duties were not levied or excise refunds were granted due to fraud, collusion or wilful misstatement or suppression of facts etc. This penalty will be equivalent to quantum of duty determined to be payable under section 11A. SPECIAL AUDIT New Section 14A has been inserted in the Act governing the provisions pertaining to special audit of assessees. Such audits may be authorised by the Principal Commissioner of Central Excise and may extend to factories, depots and distributors. The special audit would be carried out by a cost accountant to be appointed by the Principal Commissioner and the assessees who are so audited would be required to pay the costs of such an audit. APPEALABLE ORDERS Not all orders or decisions are appealable. The principle is that all judicial or quasijudicial orders are appealable. In the landmark case in Jaswant Sugar Mills (AIR 1963 SC-677), the S.C. held that a decision or order is judicial if certain criteria are met. The criteria are : 1. that the decision is a determination arising out of investigation of a question by the application of objective standards to facts in the light of existing legal rules. 2. the decision or order declares right or imposes obligations upon parties. 3. the decision or order is subject to procedural attributes such as granting the party an opportunity of presenting its case, ascertainment of facts by evidence and the decision results in the disposal of the matter and the findings are based on questions of law and facts. APPEALS TO COMMISSIONER (APPEALS) Section 35(1) states that any person aggrieved by the decision or order of a Central Excise Officer, lower in rank than the Commissioner of Central Excise, may appeal to the Commissioner (Appeals) within 3 months from the date of communication of such decision or order. The proviso to section 35(1) states that the Commissioner (Appeals) may condone the delay in filing the appeal and extend the period for further 3 months, if he is satisfied that there was sufficient cause which prevented the appellants from filing the appeal in time. PROCEDURE FOR FILING APPEALS Appeals are only admissible if they are in the prescribed format and comply with the procedural requirements. Appeals to the Tribunal requires the filing of paper book together with the appeals. The paper book is to contain all copies of documents, statements, correspondence, etc. which are sought to be relied upon. The reason for filing the paper book is that in the normal course, the original records of the Department are not called for and examined by the Department. Appeals to the

Tribunal are to be accompanied by filing fees of Rs. 200 or Rs. 1,000 as the case may be, again depending on the quantum of duty and penalty involved. REMAND ORDERS Both the Commissioner (Appeals) as well as the Tribunal have the power of remand. Remand orders are passed when the appellate authorities are not in a position to finally dispose of a matter due to the fact that not all points either in law or in fact have been argued or have been considered by the lower authorities. Further, the appellate authority may itself be of the view that a remand is required for a proper consideration of all relevant issues which may require an investigation into facts. Remand orders must set out the parameters or the criteria which have to be taken into account by the adjudicating authority in the de novo proceedings. In other words, the de novo proceedings are to be confined to the points expressly mentioned in the remand order of the appellate authority. The adjudicating authority is bound by the directions of the remand order and can't go beyond or ignore the directions. In other words, the lower authorities have no jurisdiction to consider any points which are outside the limits of the remand order. RECTIFICATION OF MISTAKE Section 35C(2) authorises the appellate tribunal to rectify a mistake apparent from the record within a period of four years from the date of the order passed. A mistake on record is something which may be established on a prima facie reading of the order. It is not an error or mistake which may only be established by a long drawn process of reasoning on a point on which there may be two different views. Therefore, an apparent mistake on record must be an obvious and immediate error which would come to light on a bare reading of the order. If the orders are passed on a complete omission of a submission made or by overlooking the relevant provisions of law, such orders are vitiated and suffer from a mistake on record. The Tribunal is required to consider all applications for rectification of mistake apparent from the record and to pass appropriate orders on such applications. SECTION 35D : PROCEDURE OF THE APPELLATE TRIBUNAL This section lays down the jurisdiction of several Benches of the Tribunal. Section 35D(2) states that matters pertaining to valuation and/or classifications can only be heard and disposed of by the Regional Benches with authorisation of President. SECTION 35E : POWERS OF CBEC/COMMISSIONER Section 35E(1) states that the CBEC may, on own motion, call for and examined any order passed by the Commissioner as an adjudicating authority and if it is of the view that such an order is erroneous, it may direct the Commissioner to apply to the Tribunal for a determination of the points arising out of the order. Section 35E(2) authorises the Commissioner on his own motion to examine any orders passed by an adjudicating authority subordinate to him and if he is satisfied that such an order is erroneous in law, he may direct such authority to apply to the Commissioner (Appeals) for a consideration of all such points as the Commissioner may deem fit.

SECTION 35EE : REVISION a. Suo motu exercise of the powers of the Central Government: Section 35EE(4) authorises the Central Government to suo motu pass orders for modifying or annulling orders of the commissioner (Appeals). However, section 35EE(5) lays down restrictions on the suo motu powers. However, suo motu orders of revision can only be passed upon due notice to the assessees issued within the time limit specified under section 11A. b. Revision applications to the Central Government by the aggrieved persons : The revision applications filed by the aggrieved party must pertain to : i. ii. iii. loss of goods in transit. rebate of duty of excise on finished goods or on excisable materials used in the manufacture of finished goods which are exported outside the country. goods exported outside India (Except Nepal or Bhutan) without payment duty. The limitation period for filing of the revision applications is three months from the date of receipt of the impugned order. Back

SECTION 35F : PRE DEPOSIT OF DUTY DEMANDED OR PENALTY LEVIED It states that where the impugned order appeals against pertains to any duty demanded or penalty levied, the person desirous of appealing against such an order shall deposit with the adjudicating authority the duty demanded or penalty levied. The Supreme Court in, Navinchandra Chhotelal vs. CBEC (1981) (8) ELT-679, held that the consequence of a failure to deposit the said amount would be the rejection of the appeal, unless the Tribunal has specifically dispensed with the pre-deposit. Section 35F authorises the Tribunal to dispense with the pre deposit of duty and/penalty imposed if it is satisfied that such a deposit would result in undue hardship. The Tribunal's order under section 35F is final and there is no right of appeal against such an order. However, such an order may be impugned under article 226 of the Constitution of India by filing writ petitions in the High Court. SECTION 35G : STATEMENT OF CASE TO THE HIGH COURT Section 35G(1) states that either the assessee or the Commissioner may, within sixty days of the receipt of the order of the Tribunal under section 35C, apply to the Tribunal in the prescribed format together with filing fees for reference of any question of law arising out of the Tribunal's order to the High Court. The tribunal shall, within 120 days of the receipt of the application, draw up a statement of the case and refer the matter to the High Court. SECTION 35H : STATEMENT OF CASE TO THE SUPREME COURT

This section states that if on application made under section 35G(1), the Tribunal is of the view that on account of conflicting decisions of the High Court in respect of the questions of law, it is expedient to make a direct reference to the Supreme Court, it may draw up a statement of the case and refer the matter through the President direct to the Supreme Court. SECTION 35-I : POWER OF HIGH COURT/SUPREME COURT If the High Court or the Supreme Court is not satisfied with the statement of case drawn up by the Tribunal, the court may refer the case back to the Tribunal, the court may refer the case back to the Tribunal for the purpose of making suitable additions or alterations as the court may direct in that behalf. SECTION 35J It states that where a case has been referred to the High Court under section 35G. it shall be heard by a Bench of not less than two judges and shall be decided by majority. In case there is no majority the judges shall state the point of law upon which they differ and this may be heard by one or more other judges and the point shall be decided by majority. SECTION 35K : DECISION OF THE HIGH COURT/SUPREME COURT The High Court or the Supreme Court which hears a case stated to it under section 35G shall decide the question of law raised therein and shall deliver a judgment containing the grounds of the decision. A copy of the judgement shall be sent to the Tribunal, which shall thereafter pass such orders as are necessary to dispose of the case in terms of the Court's judgment.