Model Answer Indirect Tax Paper Code: AU-7118 B. Com. LL.B (VI th Semester) Examination, 2015 Maximum Marks: 80

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1 Model Answer Indirect Tax Paper Code: AU-7118 B. Com. LL.B (VI th Semester) Examination, 2015 Maximum Marks: 80 Note: Attempt all the Sections. Section- A: Attempt all the questions Marks (2 X 15 = 30) 1. Select the correct answer among the four alternatives:- i. Central Excise Duty is the best Example of: b) Indirect Tax ii. Under Tariff Value Method, the Excise Duty is calculated on the basis of: b) Notional Value determine by Government iii. The CENVAT Credit is available in case of: c) Both (a) and (b) iv. The assessable value for excise duty does not include: a) Returnable Packing v. Exports under Chhattisgarh excise duty means that: vi. a) Goods sending from Chhattisgarh to other State A Ltd. sale the Bhang 100 kg. for medicinal purposes. The payable excise duty will be: a) vii. The Chhattisgarh government imposes the excise duty on: a) Intoxicated Product viii. ix. The rate of Basic Custom Duty and Additional Custom Duty for the Assessment Year is. a) 10% and 12% In case of exports, Date of determination of Tariff Value and Duty will be the: d) Date of Payment of Duty x. The Special Additional Custom Duty is calculated on: xi. xii. a) A.V. + BCD + ACD + E.Cess Which of the following is not a restricted goods for import: d) Chillies and vegetable oils Which among the following is not included in taxable turnover under C.S.T Act: d) All of the above xiii. Under C.S.T Act, Form C is used for: c) Taxation at concessional rate xiv. Central Sales Tax is leviable on the following sale: a) Interstate Sales xv. Service tax was introduced in India w.e.f. a) 1 July, 1994 Page 1 of 6

2 Section-B- Attempt any Five Questions: (Marks: 4 X 5 = 20) 2. What is the Central Excise Duty? Point out the main features of Central Excise Duty. Ans: Central Excise duty is the central indirect tax imposed by the central government on production or manufacturing of goods or articles produced in India. Main Features: 1. Central Indirect Tax 2. Imposed on Manufacturing or production* of goods 3. Imposed on excisable goods* or calculated dutiable value 4. One time* tax on finished goods 5. Goods are classified in 20 groups and 96 chapters for rate determination 6. Compulsory to maintain the record of manufacturing, stocks and removal of the goods* 3. Briefly explain any two methods of valuation of Excise Duty with suitable examples. Ans: There are five methods of valuation of excise duty but explain any two:- 1. Specific duty* 2. Duty as a percentage of tariff value * 3. Duty based on MRP* 4. Ad-vole rum Duty* 5. Compound levy scheme* * = (Explanation is require of each point with merit, demerits and examples) 4. Define Declared Goods under Central Sales Tax Act with at least four examples. Ans: Declared goods means all those article and goods which is declared as special importance for interstate transaction under section 14 of Central Sales Tax Act. These goods have the characteristic of common use and essential for public. Currently it consist 16 goods. These are: Cereals, coal, cotton, crude oil, iron and steel oilseeds, pulses, sugar, LPG, etc. 5. Discuss the use of Various Forms in Central Sales Tax Act. Ans: Use of Various Forms in Central Sales Tax Act. Form Purpose A Application for Registration B Registration Certificates C Taxation at concessional rate E-I / E-II Use in subsequent sale F Use in stock transfer G Declaration to compensate if form C is lost destroyed H For export certification Page 2 of 6

3 I J Use by purchaser in case of purchase for SEZ unit Use by purchaser in case of tax free purchase by foreign embassy or organization of U.N.O. (Explanation is required for each form) 6. Write the short note on Prohibition on Export and Import under Custom Duty Act. Ans: Reason for Prohibition of Export and Import 1. Maintenance of security of India 2. Maintenance of public order and standards of decency 3. Prevention of smuggling. 4. Prevention of shortage of goods of any description. 5. Conservation of foreign exchange and safeguard of balance of payment 6. Prevention of deceptive practices. 7. Prevention of injury of country by uncontrolled import or export of gold or silver. 8. Conservation of natural resources. 9. Protection of human, animal or plant life or health. Prohibited Items of Export and Import A) Export 1. Sandalwood oil 2. Cardamom 3. Psychotropic substance 4. Obscene book and other publication 5. Tussar/ Muga silk 6. Indian made wool 7. Chillies and vegetable oil products 8. Animal casings 9. Specified fruits 10. Mechanical lighters 11. Book containing maps/diagrams showing borders of India B) Import 1. Explosives 2. Arms and ammunition 3. Psychotropic substance 4. Narcotic drugs 5. Counterfeit coins 6. Quinine 7. Saccharine 8. Matches 9. Fictitious stamps 10. Armoured cars 11. Antiquities 12. Negative films or print of an Arial photograph of any place of India. 7. What is the procedure of computation of Assessable Value and Custom Duty? Ans: Calculation of Assessable Value Amount (1 Dollar = Rs. 50) Sl. No. Particulars In Dollars In Rupee. Invoice Price ++++ (All expenditure before the removal of goods from Add: custom area) * 1. Packing Charges +++ Page 3 of 6

4 2. Design and Development Expenditure incurred outside India Commission and Brokerage Value of goods and services sent by the importer Royalty and License Fee FOB Value Add: 4. Transportation Charges to Indian Port* Insurance premium paid in India * CIF Value Add: 6. Handling 1% on CIF * +++ Assessable Value Calculation of Custom Duty 1. Rate of Basic Custom duty (BCD) Assessable Value 10% 10% Additional Custom Duty (ACD) * (AV+BCD) 12% 12% Education Cess (BCD+ACD) 3% 3% Special Additional Custom Duty and is payable * (AV+BCD+ACD+Cess) 4% 4% +++ Custom Duty Payable ++++ Note: *= need to be explained. 8. Calculation of Total Excise Duty Payable under Chhattisgarh Excise Act: Sl. No. Goods Quantity Rate(Rs.) Amount (Rs.) 1. Plain Country Liquor 2,950 P.L 78 /P.L 2,30, Spiced Country Liquor 5,050 P.L 78/ P.L 3,93, Whisky to Military organization 2,400 P.L 30/ P.L 72, Bhang Ghonta 400 Kg 100/Kg 40, Wine to a license holder (Rs. 1,750 per P.L) 8,000 P.L 140/ P.L 11,20, Bhang to a Trader for consumers 1,000 Kg 100/Kg 1,00, Beer to Authorized Military canteen 1,260 B.L 8/B.L 10, Beer to a beer bar Indore 5,000 B.L 22/B.L 1,10, Beer to Indo-Tibet Border Police 28,200 B.L 8/B.L 2,25, Foreign liquor to contractors (Rs. 1,900 per P.L) 3,450 P.L 140/ P.L 4,83,000 Excise Duty 27,84,680 Add: 10% on Excise Duty 2,78,468 Total Excise Duty Payble 30,63,148 Page 4 of 6

5 Section-C: Attempt any two questions (Marks 15 X 2 = 30) 9. Computation of Assessable Value and Excise Duty Particulars Amount (Rs.) Price of the Goods 5,00,000 Less: 10% (-) 50,000 4,50,000 Add: Advertising Charges 50,000 Publicity Charges 25,000 Marketing and Selling Charges 20,000 Outward Handling Charges 5,000 Servicing charge 50,000 Assessable Value 6,00,000 Central Excise 12% on 6,00,000 72,000 Add: Education Cess 2,160 Total Excise Duty 74,160 Working Note:- 1. VAT is not the part of production cost and also not included in invoice price. Therefore, it is not deducted from price of the goods. 2. Outward Freight and Insurance is the expenditure of after removal of the goods. 3. Outward handling charge is the part of production. 10. Calculation of Assessable Value of the Machine for Hind Ltd. Sl. No. Particulars Amount (1 Dollar = Rs. 50) In Dollars In Rupee. Invoice Price ,00,000 Add: 1. Packing Charges , Commission to Agent of American Company , Design and Development Expenditure incurred outside India 4,100 2,05,000 FOB Value ,15,000 Add: 4. Transportation Charges to Indian Port 1,350 67, Insurance premium paid in India ,500 CIF Value 17,00,000 Add: 6. Handling 1% on CIF 17,000 Assessable Value 17,17,000 Calculation of Custom Duty 1. Rate of Basic Custom duty Assessable Value 10% 10% 1,71, Rate of Excise Duty is on such goods (AV+BCD) 12% 12% 2,26, Education Cess 3% 11,950 Page 5 of 6

6 (BCD+ACD) 3% 4. Special Additional Custom Duty and is payable. (AV+BCD+ACD+Cess) 4% 4% 85,092 Custom Duty Payable 4,95, Determination of Taxable Turnover Sl. N. Particulars Amount (Rs.) 1. Sugar 4,00, Newspapers (not goods hence excluded) Tobacco 50, Shares and Securities (not goods hence excluded) Export to Canada 3,50, Goods sold within the district of Madhya Pradesh 10,00, Interstate sale on which rate of tax being 10% 4,60, Interstate sale on which rate of tax being 2% 2,04,000 Gross Sales 24,64,000 Less: Sales which is not interstate sales i) Sugar (Exempt in M.P.) 4,00,000 ii) Tobacco (exempt in M.P.) 50,000 iii) Export to Canada 3,50,000 iv) Goods sold in Madhya Pradesh 10,00,000 (-) 18,00,000 Grass Interstate Sales 6,64,000 Less: Goods Return Within 6 Month (-) 20,000 Net Interstate Sales 6,44,000 Less: Tax Paid on Sales i) Sales after return within six month (4,60,000 20,000) = 4,40,000*10/110 40,000 ii) 204,000*2/102 4,000 44,000 Taxable Turnover 6,00,000 ********************************* Prepared By: Dr. Sanjay Kumar Patel Asst. Prof., Department of Commerce Guru Ghasidas University, Bilaspur Page 6 of 6