5 General Procedures Under Central Excise

Transcription

1 5 General Procedures Under Central Excise 5.1 Introduction Physical control system (Till 1969): Till 1969, there was physical control system. Under physical control system, each clearance of manufactured goods from the factory was done under the supervision of the Central Excise Officers Self-Removal procedure (1969 onwards): Introduction of Self-Removal procedure was a welcome procedure in the industry. It was made applicable to almost all the commodities except a few items. Under the Self Removal procedure, the assessees were allowed to quantify the duty on the basis of approved classification list and the price list and clear the goods on payment of appropriate duty Gate pass system gave way to the invoice-based system (1994): In 1994, the, gate pass system gave way to the invoice-based system and all clearances were now effected on manufacturer s own invoice. (a) Gate pass system At the time of clearnces of excisable goods, manufacturers were required to issue gate pass counter-signed by Central Excise officer. (b) Invoice-based system Assessee is required to prepare invoice while clearing goods form factory and himself assess the duty payable. This duty would be indicated on the invoice Self-Assessment system (1996): Another major change was brought about in 1996, when the Self-Assessment system was introduced. This system is continuing today also. Under this system:- (i) The assessee himself assesses his returns and files it with the Department. (ii) Department scrutinises the return or conducts selective audit to ascertain correctness of the duty payment. (iii) Even the classification and value of the goods have to be merely declared by the assessee instead of obtaining approval of the same from the Department. The system of classification of goods and price lists had now been done away with Fortnightly payment of duty (2000): Prior to March 2000, the duty had to be discharged before removing the goods from the factory and in some circumstances on the day on which it is removed.

2 General Procedures Under Central Excise 5.2 However, in 2000, the fortnightly payment of duty was introduced for all commodities as an extension of the monthly payment system which was introduced for Small Scale Industries. Further, the declaration of inputs for availing the Modvat (now Cenvat) was dispensed with from April 2000 itself Central Excise Rules, 1944 replaced with Central Excise (No.2) Rules, 2001 (2001) Reasons for replacement The Central Excise Rules, 1944 were in existence for long. It was widely perceived that quite a few of them had lost relevance or utility in the context of the changes being taken place in the administration of excise duties. Many of the rigidities and technicalities engulfing some of the rules had not been compatible with the spirit of tax reforms. Quite a few rules owed their birth to Department s succumbing to pressure to resolve trivial or peripheral issues. Some others appeared to justify their existence to Department s weakness to remain attached to past, oblivious of the needs of present or future. New rules were simple and concise. New rules were facilitator to the trade and industry and not be a material comprising complex and complicated reading. Rules relating to CENVAT scheme, appeal procedure, etc. were deliberately not amalgamated in the Central Excise Rules, 2001 and were kept separate Central Excise Rules, 2002 (2002): Central Excise (No.2) Rules, 2001 were again superseded by the Central Excise Rules, 2002 with effect from 1 st March, The re-issue of Central Excise Rules was to give effect to minor modifications Monthly payment of duty (2003): With effect from , the monthly payment system of duty has been reinforced. 5.2 Removal of Excisable Goods [Rule 4] Payment of excise duty before removal of excisable goods [Sub-rule (1)]: No excisable goods shall be removed from the place of manufacture or from warehouse, when the goods are stored in warehouse without payment of duty whether for consumption, or export, or manufacture of any other commodity in or outside the place of manufacture until the excise duty leviable thereon has been paid in such manner as provided in rule 8 or under any other law. The liability to pay excise duty has been casted on every person:- who produces or manufactures any excisable goods, or

3 5.3 Central Excise who stores such goods in a warehouse In case of ready-made garments and made-up articles of textiles manufactured on job-work basis, liability to pay duty and comply with the provisions of the Central Excise Rules, 2002 is on the merchant manufacturer [Sub-rule (1A)]: Notwithstanding anything contained in sub-rule (1), every person who gets the following goods produced/manufactured on his account on job work, shall pay the duty leviable on such goods, at such time and in such manner as is provided under these rules, as if such goods have been manufactured by such person:- (a) Articles of apparel and clothing accessories, knitted or crocheted [Chapter 61 of the First Schedule to the Tariff Act] (b) Articles of apparel and clothing accessories, not knitted or crocheted [Chapter 62 of the First Schedule to the Tariff Act] (c) Other made up textile articles; sets; worn clothing and worn textile articles; rags [Chapter 63 of the First Schedule to the Tariff Act]. It is the practice in the garment and made up industry for brand owners to have goods manufactured from several job-workers. The brand owners may or may not, themselves, possess any manufacturing facility. Analysis: By virtue of the aforesaid provision, in case of ready-made garments and made-up articles of textiles manufactured on job-work basis, liability to pay duty is on the merchant manufacturer (person on whose behalf the goods are manufactured by job-workers) and not on the job-workers. Hence, the job-worker is exempt from payment of duty if the merchant manufacturer pays the duty. Further, merchant manufacturer would be required to register his private store-room or warehouse in which inputs are received for distribution to job-workers and finished goods are received from the job-workers. He would also be required to comply with all the other provisions of Central Excise law Price of the goods to indicate the amount of duty paid thereon [Section 12A]: Section 12A casts a liability on every person who is liable to pay duty of excise on any goods. It prescribes that at the time of clearance of the goods the amount of such duty which will form part of the price at which such goods are to be sold should be prominently indicated in all the documents relating to assessment, sales invoice, and other like documents. Transfer in ownership does not amount to removal of goods When stock that is lying in the factory is transferred to new owners without any physical removal of goods from the factory, no duty can be imposed. [Indorama Synthetics (I) Ltd. v. CCE 2005 (190) E.L.T. 193 (Tri. - Mumbai)] The taxable event in Central Excise is the manufacture or production of goods and not the removal of goods. Section 3 cannot shift levy of excise duty from the stage of manufacture to the stage of removal. It has only shifted the stage of collection. [Collector v. Vazir Sultan Tobacco Co. Ltd (83) E.L.T. 3 (S.C.)]

4 General Procedures Under Central Excise Special provisionss for removal of molasses [Sub-rule (2)] (a) Procurer of molasses liable to pay excise duty on molasses: Where molasses are produced in a Khandsari sugar factory, the person who procures such molasses, whether directly from the factory or otherwise, for use in the manufacture of any commodity shall pay the duty leviable on such molasses as if the molasses had been produced by the procurer. (b) Duty to be paid on molasses used in the manufacture of excisable/non-excisable product: Duty on the molasses shall be payable whether or not the goods, which are manufactured with the use of the molasses, are excisable or not Removal of goods for storage in a warehouse without payment of duty [Sub- rule (4)] : In certain industries like sugar, the production is seasonal, but the off-take from the factory is throughout the year. In such cases, storage of huge quantities within the factory is burdensome. Further, since a large quantity of off-takto remove the goods on payment of duty. Consequently, sub-rule (4) provides that Commissioner may in exceptional circumstances having regard to is controlled by the Government, the management may not be in a position the storage of goods and storage space at the premises permit a manufacturer to store his goods in any other place outside his premises without payment of duty. This will be subject to such conditions as may be prescribed Procedures to remove the excisable goods:- Procedures to remove excisable goods Physical control procedure Self control procedure (a) Physical Control Procedure: Each clearancee of manufactured goods from the factory is done under the supervision of the Central Excise Officers. Today, only cigarettes are removed under physical control procedure. All other products fall under the self-removal procedure. (b) Self Removal Procedure 1. The manufacturer may ensure that the goods, which are sought to be removed, have been duly intimated to the Department providing the process flow chart of manufacture as well as list of critical raw materials. 2. He shall ensure thatt the finished goods are all duly entered in the production register daily. (This was called the RG-I register earlier). 3. The invoice raised should be in line with the purchase order if any, received from the

5 5.5 Central Excise customer. Care is to be exercised in calculations in the invoice. 4. The assessable value (whether cum-duty price or otherwise) is to be arrived at accurately by applying section 4 read with Central Excise Valuation Rules, If the value is based on MRP or Tariff Value fixed under section 3(2), the same may be applied. 5. The manufacturer shall prepare an invoice in accordance with the provisions of rule 11 and calculate the assessable value and excise duty payable. 6. He shall make the removal entry in production register providing details of value, quantity and duty payable. 7. It is to be ensured that the person/carrier who/which carries the goods is provided with "duplicate for transporter" copy of invoice. 8. He shall ensure that at the end of the month (1 st to 30 th ), he debits the duty payable in the CENVAT Credit A/c and if the balance is not sufficient, pay through the Personal Ledger Account (PLA) by the 5 th of the next month. For the month of March, payment will be made by the end of that month itself. 9. The units claiming 8/2003 (SSI Exemption) are required to pay the quarterly duty by the 5 th of the month following that quarter. Here also, for quarter ending in the month of March, payment is to be made by 31 st March itself. 10. It is hereby clarified that the duty liability shall be deemed to have been discharged only if the amount payable is credited to the account of the Central Government by the specified date. The Board has clarified that the liability would be discharged only on the date of realization of the cheque and not earlier as per the CBEC Circular No.28/2002 dated Date for Determination of Duty and Tariff Valuation [Rule 5] S.No. In case of removal of applicable rate of duty/tariff value shall be the rate/value in force on the 1. any excisable goods (other than khandsari molasses) date when such goods are removed from a factory or a warehouse, as the case may be. 2. khandsari molasses date of receipt of such molasses in the factory of the procurer of such molasses (since in case of khandsari molasses, duty is paid by the procurer and not by the manufacturer) 3. excisable goods cleared for captive consumption the date on which the goods are issued for such use (since the date of removal of such goods shall be the date on which the goods are issued for such use-explanation to rule 5)

6 General Procedures Under Central Excise Assessment [Rule 6 & 7] Before each removal, whether outside the factory of manufacture or production or for captive consumption, duty has to be assessed on the excisable goods Meaning of assessment [Rule 2(b)]: Assessment includes:- (a) Self-assessment of duty made by the assessee, and (b) Provisional assessment under rule 7 of the Central Excise Rules, Meaning of assessee [Rule 2(c)]: Assesseee means:- (a) any person who is liable for payment of duty assessed or (b) a producer or (c) manufacturer of excisable goods or (d) a registered person of a private warehouse in which excisable goods are stored and includes:- an authorized agent of such person. Assessment Self-assessment Provisional assessment Self Assessment [Rule 6] (a) Meaning of self-assessment: The assessee himself is required to determine duty liability at the time of removal of excisable goods and discharge the same. In other words, assesseee should apply correct classification and value on the quantities being removed by him, and indicate the same on the invoice. (b) Exception- Assessee manufacturing cigarettes: In the case of an assessee manufacturing cigarettes, the Superintendent or Inspector of Central Excise has to assess the duty payable before removal by the assessee. (c) Main ingredients of assessment (i) Ascertainment of date and time of intended removal; (ii) Ascertainment of classification and rate of duty (dealt in Chapter 2) at the point of removal; (iii) Valuation of goods ( dealt in Chapter 3) at the point of removal;

7 5.7 Central Excise (iv) Quantity intended to be removed; (v) Indication of the duty so assessed on the invoice; (vi) Assessment of the return for a month; (vii) Submission of return to the Range Office having jurisdiction over the factory within ten days of the succeeding month (quarterly return in case of SSI); (viii) Submission of CENVAT Return for a month within 10 days of the succeeding month. (d) Scrutiny of assessment (i) Responsibility of Departmental officers to scrutinize the assessment: In view of the self-assessment procedure wherein the assessee himself assesses the duty liability, the responsibility of the Departmental officers [Central Excise Officers having jurisdiction over the factory/premises of the assessee] is to scrutinize the assessment made for verification of its correctness. (ii) Documents required by officer: For this purpose, the said officer(s) may require the relevant documents. Though the statutory records have been dispensed with, the assessee is required to maintain private records containing all requisite information as required by different rules and also provide a list of all records maintained by him to the Range Office. The Officer responsible for scrutiny of return may require:- Invoices issued by the assessee Daily Stock Account CENVAT Account Cash ledgers Ledger of all receipts and payments Source documents etc. (iii) Compulsory for assessee to furnish the documents: It shall be compulsory for the assessee to provide the necessary records upon receiving the `Requisition Letter from the Range Officer or other superior officers. He shall hand over the records under proper acknowledgement and receive them back under proper acknowledgement. The officer scrutinizing return may require presence of the assessee or his authorised person at mutually convenient time, for seeking certain information relating to the records. (iv) Scrutiny of assessment : The Superintendent of Central Excise in charge of the Range Office, with assistance of the Inspectors in-charge of the factory of an assessee, will scrutinise all the returns. They shall, in selected cases, call for all connecting documents including invoices and the records and scrutinise the correctness of assessment. S.No. Central Excise Officer who will scrutinise the return Amount of duty paid by the unit through PLA per annum every six months 1. Deputy/Assistant Commissioner of Central More than ` 1 crore, but less than `

8 General Procedures Under Central Excise 5.8 Excise 2. Additional/Joint Commissioner of Central Excise 5 crores ` 5 crores or more Provisional Assessment [Rule 7] Cases where Provisional assessment can be resorted to : Provisional assessment can be resorted to in the following cases:- (a) Where the assessee is unable to determine the value of excisable goods or (b) Where the assessee is unable to determine the rate of duty applicable thereto. Procedure for provisional assessment: Rule 7, read with the guidelines issued by the Board on , sets out the procedure for provisional assessment as follows: (i) Request in writing to the Divisional Deputy/Assistant Commissioner of Central Excise: Wherever an assessee finds that final assessment is not possible at the point of removal, he will make a detailed request in writing to the Divisional Deputy/Assistant Commissioner of Central Excise, indicating:- a. specific grounds/reasons, and the documents or information, for want of which final assessment cannot be made. b. period for which provisional assessment is required. c. the rate of duty or the value or both, as the case may be, proposed to be applied by the assessee, for Provisional Assessment; and d. that he undertakes to appear before the Assistant/Deputy Commissioner of Central Excise within 7 days or such date fixed by him, and furnish all relevant information and documents within the time specified by the Assistant/Deputy Commissioner of Central Excise in his order, so as to enable the proper officer to finalise the provisional assessment. (ii) Order of provisional assessment: On receipt of the request, the Deputy/Assistant Commissioner of Central Excise will examine it, if necessary, in consultation with the concerned Range Officer, to ascertain whether provisional assessment is necessary at all. A. Order rejecting provisional assessment: If the reasons/ grounds are not sufficient, he may ask the assessee to appear before him on an appointed day and time, and if he is satisfied that provisional assessment is not necessary, he may pass a reasoned order rejecting the same and also ordering the rate of duty or the value, to be applied by the assessee. B. Order directing provisional assessment: Where the Deputy/Assistant Commissioner of Central Excise is satisfied with the genuineness of the assessee s request he will issue a specific order directing provisional assessment clearly stating:- (a) The grounds on which provisional assessment has been ordered.

9 5.9 Central Excise (b) The rate and /or value, as the case may be, at which duty has to be provisionally paid. (c) The amount of differential duty for which bond is to be executed covering the period, if any, during which assessee paid duty provisionally under the deeming provisions, after applying the rate and/ or value specified in (b) above. (d) The amount of security or surety as may be fixed by Assistant Commissioner keeping in view the instructions issued by the Board from time to time. (iii) Furnishing of bonds: As mentioned earlier, provisional payment of duty is allowed if the assessee executes a bond in the prescribed form with such surety or security in such amount as the Assistant/ Deputy Commissioner may order. Such bond shall bind the assessee for payment of the difference between the amount of duty finally assessed and the amount of duty paid provisionally. Though it is incumbent upon the assessee to ensure that the bond amount and corresponding securities are sufficient, the Divisional as well as the Range Officer will also keep a strict vigil on such cases with the help of 'Provisional Assessment Register'. The Assistant/Deputy Commissioner of Central Excise will be held responsible to ensure that bonds for proper amount i.e., 3 times of the estimated differential duty are taken, in case of general bonds and that these are backed by proper (25%) security/ bank guarantee of the bond amount. The format of bond for provisional assessment has been specified in Notification No. 56/2001-Central Excise (N.T.) dated (iv) Marking the documents and return as "PROVISIONALLY ASSESSED" vide Order No... dated...": The assessee is required to mark the E.R.1 (monthly/quarterly return) and documents covered under Provisional Assessment as "PROVISIONALLY ASSESSED" vide Order No... dated...". There is a declaration in E.R.1 where assessees have to mention the goods under provisional assessment. (v) Finalization of provisional assessment (Order of final assessment) A. Meaning of Finalisation of provisional assessment: Finalisation of provisional assessment means finalisation of an issue/ground and thereafter finalization of each E.R.1s. B. Time limit for finalisation of provisional assessment: Notwithstanding selfassessment, all cases of provisional assessment have to be finalised by the Deputy/Assistant Commissioner of Central Excise, within a maximum period of 6 months from the date of communicating the order of provisional assessment. Extension of time-limit of finalization of provisional assessment cases (i) The Commissioner can extend the period of 6 months if sufficient cause is shown which is recorded in writing. (ii) If the period of extension is beyond 6 months, then the permission of Chief Commissioner is required.

10 General Procedures Under Central Excise 5.10 C. Communication of amount of duty to the assessee: The amount of duty finalized will be communicated to the assessee at the earliest. D. Interest payable on differential amount: The amount of each differential duty shall be paid along with interest at the rate notified under section 11AA of the Act from the first day of the month succeeding the month for which such amount is determined, till the date of payment thereof. Ascertainment of the duty by the assessee himself In the event the assessee is in a position to ascertain the duty himself, he may pay the duty on his own at the earliest and in that case, he will not have to incur interest on account of time taken by the Department to finalise assessment and communicate the amount. (vi) Refund after finalization of assessment A. Refund order: Where any refund becomes due to the assessee, order shall be passed for such refund, but disbursement shall be subject to further verification about incidence of such duty. B. Refund subject to provision of unjust enrichment: The assessee will be required to submit proof to the Assistant/Deputy Commissioner of Central Excise that the duty incidence was borne by him (assessee). If the assessee fails to produce such proof/evidence, the Assistant/Deputy Commissioner of Central Excise will pass an order for depositing the amount in Consumer Welfare Fund in the prescribed manner. C. Interest payable on refund: The refund will be given along with interest as provided under section 11BB of the Act. Therefore, 6% will be computed from the date immediately after the expiry of three months from the date of receipt of refund application till the date of refund of such duty. Department, suo motu, cannot issue directions for provisional assessment: It is important to note that rule 7 of the said Rules does not provide for the Department, suo motu, issuing directions for resorting to provisional assessment. Therefore, when the Central Excise Officers, during scrutiny or otherwise, find that self-assessment is not in order the assessee may be asked for all necessary documents, records or other information for issue of duty demand for differential duty, if any, after conducting inquiry. Where the assessee fails to provide the records or information and Department is unable to issue demand, Best Judgement method may be used to raise demand based on collateral evidences. The burden will be on the assessee to provide information for appropriate re-determination of duty, if any. Prospective application of provisions of provisional assessment relating to interest clause and statutory time limit: As per the general law, the provisions of provisional assessment relating to interest clause and statutory time limit can only be prospective. Therefore, the provisions of interest and statutory time limit shall be applicable only to those cases of provisional assessment, which are ordered on or after 1 st July, 2001.

11 5.11 Central Excise 5.5 Manner of Payment [Rule 8] General rule [Sub-rule (1)]: The duty on the goods removed from the factory or the warehouse during the month shall be paid: S.No. Case Due date for payment of duty 1. If the duty is paid electronically through internet 6 th day of the following month banking 2. In any other case 5 th day of the following month 3. In the case of goods removed during the month of March 31 st day of March Due date for payment of duty in case of SSIs: In case of an assessee eligible to avail the exemption under a Notification based on the value of clearances in a financial year (SSIs), the duty on goods cleared during a quarter shall be paid: S.No. Case Due date for payment of duty 1. If the duty is paid electronically through internet banking 6th day of the month following that quarter. 2. In any other case 5th day of the month following that quarter. 3. In the case of goods removed during the month of March 31 st day of March Availability of the relaxation: Above relaxation is available to a unit who is eligible to claim SSI exemption regardless of whether he actually claims it or opts to pay duty. Further, the said relaxation is available to an eligible unit for the entire financial year even if it crosses the limit of ` 400 lakh (aggregate value of clearances) in the current financial year. Meaning of eligible: An eligible unit is one whose aggregate value of clearances did not exceed ` 400 lakh in the preceding financial year E-payment of duty : E-payment is mandatory for payment of duty by all assessees who have paid excise duty of rupees 10 lakh or more including the amount of duty paid by utilization of CENVAT credit in the preceding financial year. Explanation - For the purpose of rule 8, - (a) Amount of duty payable to be credited to account of the Central Government by specified date The duty liability shall be deemed to have been discharged only if the amount payable is credited to the account of the Central Government by the specified date. (b) Payment of duty by cheque If the assessee deposits the duty by cheque, the date of presentation of the cheque in the bank designated by the Central Board of Excise & Customs for this purpose shall be deemed to be the date on which the duty has been paid subject to the realisation of that cheque

12 General Procedures Under Central Excise Payment under sub-rule (1) deemed as duty paid on excisable goods [Subrule(2)] : The duty of excise shall be deemed to have been paid on the excisable goods removed in the manner provided under sub-rule(1) and the credit of such duty allowed as provided by or under any rule % on delayed payment of duty [Sub-rule (3)] : If the assessee fails to pay the amount of duty by due date, he shall be liable to pay the outstanding amount along with interest at the 18% per annum on the outstanding amount, for the period starting with the first day after due date till the date of actual payment of the outstanding amount Consequences of failure to pay duty beyond 30 days [Sub-rule (3A)] : If the assessee defaults in payment of duty beyond 30 days from the due date then he shall pay excise duty:- (a) for each consignment (from PLA) at the time of removal. It implies that facility of monthly payment of duty would be withdrawn. The assessee has to pay the duty through PLA before removal of goods. (b) without utilizing the CENVAT credit. It implies that assessee would not be able to utilize the CENVAT credit for payment of duty. He shall continue to pay duty in this manner till the date he pays the outstanding amount including interest thereon. In the event of any failure, it shall be deemed that such goods have been cleared without payment of duty and the consequences and penalties as provided in these rules shall follow Recovery of duty and interest due : The provisions of section 11 of the Act shall be applicable for recovery of duty as assessed under rule 6 and the interest under rule 8(3) in the same manner as it is applicable for recovery of any duty or other sums payable to the Central Government. Duty includes the amount payable in terms of the CENVAT Credit Rules, 2004 For the purposes of payment of duty, the expressions duty or duty of excise shall also include the amount payable in terms of the CENVAT Credit Rules, Implication: All amounts payable [like payment under rule 6(3) of the CENVAT Credit Rules, 2004 etc.] should be paid along with duty payable by 5 th /6 th of the next month/quarter Procedure for payment of duty by conventional mode: In case the assessee is not required to make the e-payment of the excise duty and the assessee opts to make payment by the conventional mode, following procedure would be followed: (i) Bank to have EASIEST facility: Duty is payable in authorized bank by way of GAR-7 challan where Bank is having EASIEST facility (Earlier, it was a TR-6 challans). (ii) Single copy challan: GAR-7 challan is a single copy challan with tax payer s counterfoil at the bottom of challan. Both challan and counterfoil are to be filled in by assessee. The challan should be on white paper with black printing.

13 5.13 Central Excise (iii) Challan to be serially numbered : The challans should be serially numbered from 1st April on wards. (iv) Details required in GAR-7 challan : Details to be filled in GAR-7 challan are as follows- (a) Full name of assessee (b) Complete Address (c) Telephone number (d) PIN code (e) Assessee Code (15 digit) (f) Commissionerate name (g) Commissionerate Code (h) Division Code (i) Range Code (j) Accounting Code of duty/cess (k) Amount tendered in ` (6 columns) (l) Total (m) Total Rupees in words (n) Cash/Cheque/Draft/Pay order No. and date (o) Bank on which Cheque/Draft/Pay order No. is drawn. (v) Relevant details to be repeated on counterfoil: Relevant among these details like assessee code, amount tendered in Rs., accounting code of duty/cess etc. are repeated in the Tax payer s counter-foil. Details filled in the challan and Taxpayer s counter-foil should be identical. (vi) Receipt of payment: The counterfoil duly receipted by Bank with stamp of Bank will be given by receiving Bank to assessee. The stamp of receiving bank will contain Challan Identification Number (CIN). This CIN will have to be quoted in the return. (vi) Evidence of payment of duty: The Taxpayers acknowledgement is the evidence of payment. The Challan Identification Number (CIN) appearing on this acknowledgement will have to be quoted in the return. The banks will be giving the tax payer a computer generated acknowledgement/receipt with the various details including the CIN Procedure for e-payment of duty: E-payment of excise duty facilitates anytime, anywhere payment of the duty. Moreover, after the payment of duty online, the receipt of the same is generated instantly. It provides the convenience of making on line payment of Central Excise and Service Tax through Bank s internet banking service. E-payment of the excise duty can be made through ACES. For e-payment, assessees should open a net banking account with one of the authorized banks (currently there are 28 banks). For effecting payment, assessees can access the

14 General Procedures Under Central Excise 5.14 ACES website and click on the e-payment link that will take them to the EASIEST portal or they can directly visit the EASIEST portal. Procedure for e-payment of excise duty can be summarized as follows:- (i) To pay excise duty and service tax online, the assessee has to enter the 15 digit Assessee Code allotted by the Department under erstwhile SACER/SAPS or the current application ACES. There will be an online check on the validity of the Assessee Code entered. (ii) If the Assessee code is valid, then corresponding assessee details like name, address, Commissionerate Code etc. as present in the Assessee Code Master will be displayed. (iii) Based on the Assessee Code, the duty / tax i.e. Central excise duty or service tax to be paid will be automatically selected. (iv) The assessee is required to select the type of duty / tax to be paid by clicking on Select Accounting Codes for excise or Select Accounting Codes for service tax, depending on the type of duty / tax to be paid. (v) At a time the assessee can select up to six Accounting Codes. (vi) The assessee should also select the bank through which payment is to be made. (vii) On submission of data entered, a confirmation screen will be displayed. If the taxpayer confirms the data entered in the screen, it will be directed to the net-banking site of the bank selected. (viii) The taxpayer will login to the net-banking site with the user id/ password, provided by the bank for net-banking purpose, and will enter payment details at the bank site. (ix) On successful payment, a challan counterfoil will be displayed containing CIN, payment details and bank name through which e-payment has been made. This counterfoil is proof of payment made. Automation of Central Excise and Service Tax (ACES) (a) What is ACES?: In continuation of its efforts for trade facilitation, CBEC has rolled-out a new centralized, web-based and workflow-based software application called Automation of Central Excise and Service Tax (ACES) in all 104 Commissionerates of Central excise, service tax and large tax payer units (LTUs) as on 23rd December, ACES is a Mission Mode project (MMP) of the Govt. of India under the national e-governance plan and it aims at improving tax-payer services, transparency, accountability and efficiency in the indirect tax administration in India. This application has replaced the current applications of SERMON, SACER, and SAPS used in Central excise and service tax for capturing returns and registration details of the assessees. (b) Automation of major processes: ACES has automated the major processes of Central excise and service tax-registration, returns, accounting, refunds, dispute resolution, audit, provisional assessment, exports, claims, intimations and permissions. (c) Benefits to the assessee: The ACES offers following benefits to the assessee:- 1. Reduce physical interface with the Department 2. Save time

15 5.15 Central Excise 3. Reduce paper work 4. Online registration and amendment of registration details 5. Electronic filing of all documents such as applications for registration, returns [On-line and off-line downloadable versions of ER 1,2,3,4,5,6, Dealer Return, and ST3], claims, permissions and intimations; provisional assessment request, export-related documents, refund request 6. System-generated E-Acknowledgement 7. Online tracking of the status of selected documents 8. Online view facility to see selected documents 9. Internal messaging system on business-related matters (d) Registration with ACES: To transact business on ACES a user has to first register himself/herself with ACES through a process called Registration with ACES. This registration is not a statutory registration as envisaged in Acts/Rules governing Central Excise and Service Tax but helps the application in recognizing the bonafide users. (e) E-filing of Returns: The assesses can electronically file statutory returns of Central excise and service tax by choosing one of the two facilities being offered by the Department at present:- (a) they can file it online, or (b) download the off-line return utilities which can be filled-in off-line and uploaded to the system through the internet. (f) Certified Facilitation Centres (CFCs): CBEC has set up ACES Certified Facilitation Centres (CFCs) with the help of professional bodies like Institute of Chartered Accountants of India (ICAI), Institute of Cost and Works Accountants of India (ICWAI) etc. (i) These CFCs provide a host of services to the assessees such as digitization of paper documents like returns etc. and uploading the same to ACES. (ii) Assessees requiring the services of the CFCs may be required to pay service fees to the CFCs. (iii) CBEC will approve the maximum rates at which CFCs can charge their customers for the services rendered by them. (iv) For this purpose, assessees are required to write to the Department authorizing one of the CFCs, from the approved list, to work in ACES on their behalf. They have to furnish the name and other details of the CFCs, including the registration number issued by the ICAI/ICWAI etc. (v) At any given time, one assessee can authorize one CFC, while one CFC can provide services to more than one assessee throughout India. (vi) In case the assessee wants to withdraw the authorization, it can do so by intimating the department.

16 General Procedures Under Central Excise 5.16 (vii) However, an assessee will be held liable for all actions of omission or commission of the CFC, during the period they are authorized by him/her to work in ACES. EASIEST (Electronic Accounting System in Excise and Service Tax) (i) What is EASIEST scheme?: EASIEST has been developed to make payment of tax easy. The facility is available with 28 banks. (ii) Benefits of EASIEST to the taxpayer (a) Only one copy of the challan has to be filled instead of earlier four copies. (b) Facility of online verification of the status of tax payment using CIN. (iii) Challan Identification Number (CIN): Challan Identification Number (CIN) is a 20 digit unique identifier which will be given on the Taxpayer s computer generated acknowledgement /receipt. This number is a combination of the BSR code of the bank branch (first 7 digits), the date of deposit (next 8 digits) and Challan Serial Number (last 5 digits). (iv) Assessee code: Assessee code/registration number/ecc code are all one and the same. It is a 15-character identification number allotted by the system to the assessee based on the PAN number or temporary number (if PAN is not submitted) when the registration details are entered in the Central Server. The 15-character assessee code will be available in the registration certificate issued to the assessee by the Assistant Commissioner/Deputy Commissioner of the Division Personal Ledger Account (a) Account current: Assessee may pay duty through account current. It is popularly known as PLA (Personal Ledger Account). Any assessee who has obtained 15 digit ECC number from uperintendent can operate a current account. (b) Debits and credits in PLA: The PLA is credited when duty is deposited in bank by GAR-7 challan. Thereafter, the duty is required to be paid by making a debit entry in the PLA on monthly basis. PLA and CENVAT credit should be used only for payment of excise duty and not for other payment like rent, lines, penalties etc. (c) PLA to be maintained in triplicate: PLA has to be maintained in triplicate using indelible pencil and both sided carbon. Two copies of PLA and zerox copy of GAR-7 (earlier TR-6) receipted challans shall be submitted along with monthly/quarterly ER-1/ER-3 return. (d) Practically redundant: However practically, after introduction of monthly payment system, PLA has become redundant except in the month of March. In the month of March, duty is required to be paid before 31 st March. Hence, generally assessee pays higher amount to be on safe side. (e) CENVAT credit only of inputs received upto end of month: Duty can be paid through PLA and/or CENVAT credit. Excise duty is payable on monthly basis. CENVAT credit available at the end of the month can be availed, even if duty is payable by 5 th /6 th of following month. CENVAT credit of all inputs and 50% duty paid on capital goods is available as soon as goods enter the factory, even if book entry is made later. Thus, CENVAT credit is available in

17 5.17 Central Excise respect of all goods received upto end of the month, even if book entry is made later. (f) Procedure for deposit of Central excise duties during bank strikes, natural calamities etc.: This procedure is to be followed only when all the banks nominated to collect revenues within a Commissionerate are unable to transact business, due to strike of banks or sudden closure of banks due to riots, imposition of curfew or natural calamities such as flood, cyclones, etc. Normally in all cases of closure of bank business due to strike by bank employees, the public gets advance intimation either through the press, or otherwise. In all such cases, the assessees should make advance arrangements to deposit money into the banks and keep sufficient amounts in their account current [PLA] so that they do not face any difficulty in the clearance of the goods during the period of the strike. In cases where the strike of bank employees is without notice, or where the strike called for after due notice is prolonged beyond a reasonable time (say over 3-4 days) or where there is sudden closure of banks due to riots, imposition of curfew or natural calamities such as flood, cyclones, etc., the Commissioner may adopt the procedure specified hereinafter in partial relaxation of the provisions contained in the Manual for collection of Revenue and payment of refunds etc. (hereinafter referred to as Manual ) only for the duration of the strike or the sudden closures. The Commissioners should issue a Trade Notice stating that during the days of the closure of bank business due to such strikes (specifying the dates wherever possible), the assessees can send their cheques by registered post, acknowledgement due (R.P.A.D.) or special messenger, with the GAR-7 challan duly filled in, to the Chief Accounts Officers of the Commissionerates, with a clear declaration that they have sufficient balance in their bank account. i. They should be advised to send a copy of the letter forwarding the cheque, to the concerned Range Officer also. ii. On the strength of a cheque so sent, they may take credit in the P.L.As. iii. On receipt of the cheque in his office, the Chief Accounts Officer will immediately intimate the concerned Range Officer about the name of the assessee, the number and date of the cheque and its amount. iv. Immediately after the strike is over, all such cheques should be deposited by the Chief Accounts Officer into the Focal Point Bank/State Bank of India at the Headquarters or Reserve Bank of India, as the case may be, through GAR-7 challan according to the procedure prescribed in the Manual. v. Bank commission or collection charges, if any, chargeable by the banks should be debited in the P.L.A of the assessees by the Chief Accounts Officer under intimation to them as also the R.Os. vi. If any of the cheques sent by the assessees are dishonoured, the Commissioners shall take appropriate penal action as prescribed under the rules.

18 General Procedures Under Central Excise 5.18 vii. The Chief Accounts Officer should maintain a suitable record in regard to receipt and disposal of such cheques. (g) Payment by cheque when not permitted: For removal of doubts and to ensure uniformity of application of the procedure it is clarified that the payment of duty/other dues through cheques should not be permitted in the following cases: - i. If there is a strike in or closures of only one nominated bank of the Commissionerate and the assessee still remains in a position to deposit money in the other nominated banks or Departmental Treasury (wherever they exist) unless the assessees bank is the only nominated bank in the Commissionerate. ii. In the case of declared bank holidays because such holidays are known well in advance. iii. Where the public has been given advance intimation of a strike, unless the strike is unduly prolonged (say over 3-4 days). iv. Where bank employees adopt go-slow tactics Duty payment under protest: Sometimes, it happens that the classification and assessable value of goods determined by the excise authorities are not agreeable to or acceptable to the assessee. In such cases, the assesee can file an appeal and in the meanwhile he can pay duty under protest if no stay is obtained from Appellate Authorities. Tribunal held that significance of payment under protest is that it safeguards the position of the person who makes the payment and ensures that it may not be claimed that the payment he made was a voluntary one [Alpha Electrical Products v. CCE 1987 (30) E.L.T. 752 (T)] (subsequently maintained by Supreme Court) Time-limit of one year for claiming refund not applicable: Section 11B of the Central Excise Act, 1944 provides that the time limit of one year for claiming refund of excise duty shall not apply where the duty has been paid under protest. Procedure for payment under protest: As per the Supplementary Instructions issued by Central Board of Excise and Customs, any assessee who desires to pay duty under protest, may do so by following the procedure mentioned below: (a) The assessee shall inform the Superintendent or Inspector of Central Excise in writing giving reasons for paying duty under protest and dated acknowledgement will be given to him. (b) The assessee shall mark invoices or monthly/quarterly returns indicating the goods on which duty is paid under protest. If it is a lump-sum duty payment in respect of past demand, he may record the fact of duty payment under protest in the Personal Ledger Account, CENVAT Account and the Daily Stock Account. (c) If a case is appealed against by the assessee or where the appeal period for further appeal is available, he may continue to pay duty under protest. However, if decision is not in his favour and he exhausts the appellate remedy or does not appeal within stipulated period, he shall not have any right to pay duty under protest.

19 5.19 Central Excise Central Excise (Removal of Goods At Concessional Rate Of Duty For Manufacture Of Excisable Goods) Rules, 2001 [issued vide Notification No.34/2001-C.E. (N.T.) dated as amended]: If a buyer is entitled to obtain the excisable goods at nil/concessional rate of duty under an exemption notification issued under section 5A, he has to follow the procedure prescribed in the said rules. The procedure for availing the benefit can be underlined as below:- (a) Application by the manufacturer to obtain the benefit [Rule 3] (i) Application to jurisdictional Assistant Commissioner/Deputy Commissioner of Central Excise: A manufacturer who intends to receive the specified goods for specified use at concessional rate of duty, is required to make an application in quadruplicate in the specified form to the jurisdictional Assistant/Deputy Commissioner of Central Excise. However, he is required to make separate application in respect of each supplier of subject goods. (ii) Execution of bond: Further, the manufacturer is required to execute a general bond with surety or security to cover the recovery of duty liability estimated to be involved at any given point of time. (iii) Application countersigned by jurisdictional authorities: The application shall be countersigned by the jurisdictional authorities (i.e. jurisdictional Assistant/Deputy Commissioner of Central Excise) certifying that the manufacturer has executed the required bond. (iv) Subsequent procedure: Of the four copies of application, one copy shall be forwarded to the jurisdictional range Superintendent of the manufacturer of the subject goods and two copies shall be handed over to the applicant manufacturer and one copy shall be retained by the Assistant/Deputy Commissioner of Central Excise. (b) Procedure to be followed by the manufacturer of subject goods [Rule 4]: The manufacturer of the goods can avail the exemption from duty based on the above referred application. The manufacturer receiving a copy of application shall avail the benefit of exemption notification issued under section 5A of the Central Excise Act and shall record the removal particulars like:- (i) Date and number of invoice; (ii) Description of goods; (iii) Quantity of goods; (iv) Value of goods; (v) Amount of duty paid at concessional rate. The said details shall be recorded on the application.

20 General Procedures Under Central Excise 5.20 (c) Manufacturer to give information regarding receipt of the subject goods and maintain records [Rule 5]: The manufacturer receiving the above goods is required to maintain the simple account indicating the quantity and value of subject goods received, consumed and quantity remaining in stock. Further, he is also required to submit a quarterly return in the specified form. (d) Goods received at concessional rate of duty not used for intended purpose [Rule 6] (i) Consequence of goods not being used for intended purpose: If the material received at concessional rate of duty is not used for intended purpose, manufacturer is liable to pay differential duty along with interest. (ii) Responsibility cast on the jurisdictional Assistant/Deputy Commissioner: The responsibility to ensure, that the material received at concessional rate of duty is used for intended purpose, is cast on the jurisdictional Assistant/Deputy Commissioner of Central Excise. (iii) Recovery of duties: Provisions of section 11A and section 11AA shall apply mutatis mutandis for effecting such recoveries. (iv) Defective/damaged/unsuitable/surplus goods returned to manufacturer: If the manufacturer on receiving the subject goods finds them to be defective or damaged or unsuitable or surplus to his needs, he may return the subject goods to the original manufacturer of the goods. Such returned goods shall be added to the non duty paid stock of the manufacturer of the subject goods and dealt with accordingly. (v) Goods lost or destroyed by natural causes or by unavoidable accident deemed to be not used for intended purpose: If the goods are lost or destroyed by natural causes or by unavoidable accident during transport from place of procurement to the manufacturer's premises or from place of manufacturer to the place of procurer (if goods are returned) during handling or storage in the manufacturer's premises, it will not be treated as used for intended purpose. Consequently, differential duty and interest will become payable. 5.6 Registration [Rule 9] For the administration of the Central Excise Act, 1944 and the Central Excise Rules, 2002, manufacturers of excisable goods or any person who deals with excisable goods with some exceptions, are required to get the premises registered with the Central Excise Department before commencing business. It may be noted that rule 9 applies only to excisable goods and not just goods Persons requiring registration: In accordance with rule 9 of the Central Excise Rules, 2002 read with section 6 of Central Excise Act, 1944 and Notifications issued thereunder, the following category of persons are required to register with jurisdictional Central Excise Officer in the Range office having jurisdiction over his place of business/factory: i. Every manufacturer of excisable goods (including Central/State Government undertakings or undertakings owned or controlled by autonomous corporations) on