Guidance Note on
Excise
1
Index
S. No.
Contents
Page No.
1.
Objective
5-6
2.
Claim of Cenvat on Input
7-11
3.
Payment of Excise Duty
12-15
On Dispatches
Personal Ledger Account
4.
Maintenance of Records
16-21
Daily Stock Register (R.G.-1)
Sample Issued
2
Index
S. No.
Contents
Page No.
Goods Received as Sales Return
5.
Job Work
22-26
Goods Sent for job work
Goods received for Job Work
3
Index
S. No.
Contents
Page No.
6.
Reconciliation between Accounts
& Excise
27-27
7.
Export & Deemed Export Sales
28-28
8.
Statutory Requirements
29-41
9.
Flow Charts
42-44
4
1. Objective
1.1
Ensure that
•
Proper records are maintained and
systems & procedures are being followed in
accordance with the provisions of The
Excise Act, 1944 & Rules there under.
•
Funds are not blocked in the Personal
Ledger Account and proper claim has been
made for CENVAT.
5
1.2
Identify the bottlenecks in the above
procedure & analyze the reasons
there of.
6
2. Claim of CENVAT on Input
2.1 Ensure that
•
All the Excisable materials received in the factory
premises have been entered in the CENVAT
register.
•
Proper CENVAT have been claimed on the same
day of preparation of Goods Inward Note.
•
CENVAT is claimed for correct value.
•
CENVAT is claimed on the Original CENVAT
Document.
7
•
Credit is not taken twice on same invoice.
•
Credit is not taken without receipt of material.
•
Credit is not taken on forged and fake
documents.
2.2
Verify
•
CENVAT documents i.e. transporter copy of
invoice, Bill of Entry etc. with RG 23A and C
Part-II.
2.3
Ensure that
•
CENVAT credit has been reversed for
Rejection/shortage of raw material received.
8
•
CENVAT credit on capital goods has
been taken upto 50% in current financial year in
which Capital goods are received and balance
50% in any subsequent financial year.
•
Upto 100% CENVAT credit has been
availed on capital goods purchased & sold in the
same year of receipt .
•
100% CENVAT credit on the additional
duty leviable under Section 3(5) of the Customs
Tariff Act in respect of Capital Goods has been
availed on receipt of such Capital Goods in the
factory,
9
•
Credit of CENVAT has been claimed by the
assessee properly on input directly obtained
by the job worker instead of assessee.
•
There is proper control over pending 50 %
CENVAT credit on capital goods.
•
Credit of CENVAT has been claimed correctly
on input received as captive consumption.
•
CENVAT credit has been taken on all inputs
including samples / free of cost material
received.
10
2.4 Credit on Service Tax
•
Ensure that
• After utilizing credit of Service tax for payment of Service tax
liability, unutilized credit of Service tax should be utilized for
payment of Excise Duty on monthly basis.
•
A proper detail of Service tax payable, paid & credit utilized
thereof has been prepared to keep control over service tax
credit
• Payment of education cess is made by utilization of education
cess only.
11
3. Payment of Excise Duty
3.1
On dispatches
3.1.1
Two types of excise duty is liable on the
material to be dispatched•
Basic duty.
•
Special Excise Duty.
12
3.1.2 Ensure that
•
Amount payable for duty have been adjusted
against available CENVAT credit and not
debited to Personal Ledger Account if
CENVAT credit is available.
•
Valuation of material dispatched for captive
consumption has been done at current
market price or price for which material is
being sold to other customers .(As per
Notification 64/95 C.E. dated 16.03.1995)
13
3.2 Personal Ledger Account
3.2.1
•
Verify the
Details of payment made in Personal Ledger
Account from Accounts Departments.
•
Justification for depositing amount in Personal
Ledger Account.
3.2.2
•
Ensure that
Amount has been deposited in Personal
Ledger Account on or before due dates, if
required.
14
•
Payment through PLA for one calendar
month is 5th of
the following month, if
payment is made by electronic mode then
6th of the following month. For month of
March duty is payable by 31st March.
3.2.3
Verify the
•
Date of deposit of cheque on Treasury – 6
challan.
•
If the Excise Duty is not paid by the due
date, interest is payable along with the
outstanding amount at the rate of 13% p.a.
till the date of actual payment.
15
4. Maintenance of
Records
4.1 R.G.I- Daily stock register for finished
goods
4.1.1
•
Ensure that
All finished goods have been entered in
Daily Stock Register on daily basis,with
quantity mentioned in column 3 of Daily
Stock Register with daily production
report.
16
•
All material dispatched have been entered
in Daily Stock Register. Verify the total of
quantity and value for a day with the
concern column of Daily Stock Register.
•
A separate Daily Stock Statement is
maintained for each item.
•
Goods should leave the factory after Tax
invoice is prepared.
•
Tax Invoice should be prepare accordance to
Rule 11of Central Excise Rules 2002.
•
Finished Goods dispatched as per Daily
Stock Register reconcile with the Gate
Records.
17
4.2
R.G.23 A & C Part II – Cenvat
Register
4.2.1 Ensure that
• All the excisable Material received in the
factory premises has been entered in the
CENVAT register.
• CENVAT credit on inputs is recorded in
R.G.23A Part II on the same day of
preparation of Goods Inward Note.
• CENVAT credit on capital goods is recorded
in R.G. 23C Part II
18
4.3
1.
Preparation of INVOICES:
All columns with respect to sale tax particulars,
destination, mode of transport etc. should be
clearly mentioned on invoices.
2.
Any alteration should be duly authorized.
3.
Matching of time of removal as per invoice with
actual time as per gate records.
4.
Vehicle number should be same on invoice &
gate.
19
4.4 Audit of Sample Issued
4.4.1

Verify the
Record of accounts department with
records of Excise department.
4.4.2
•
Ensure that
Material sent as sample is duly
approved.
•
Excise duty on sample sales has
been paid.
20
4.5 Goods Received as Sales Return/
Rejection.
4.5.1
•
Verify
Goods Inward Note summary for
receipt of material for rectification .
•
Goods Inward Notes summary with
CENVAT
register
maintained
by
Excise Department.
21
5. Job work
5.1
Goods Sent for Job Work
5.1.1
Ensure that

Proper records have been maintained i.e.
challans under rule 4(5) (a) of The Cenvat
Credit rules, 2004 for goods sent for job
work.
5.1.2
•
Verify
Excise records with store records and gate
records on sample basis.
5.1.3
•
Ensure that
CENVAT credit has been the reversed if
goods are
22
5.1.4
Verify the
Quantity produced after Job work with
Returnable Gatepass Register
not received back within 180 days.
•
CENVAT credit has been availed when
above said goods are received after 180
days.
•
All challans for sending material have
been entered into control register.
23
•
Quantity and description of material to
be send for job work has been
mentioned properly on challans
/registers
•
List of material not yet received after
job work and check for delay.
•
Store records for excisable material
send for job work with excise records
on sample basis.
24
5.2
Material Received for Job Work
5.2.1
Ensure
•
There is proper control over material
received for job work.
5.2.2
•
Verify the
Excise records with store records/ gate
records on sample basis.
5.2.3
•
Ensure that
Entries
for
job
charges
receivable/
received have been passed in accounts.
25
5.2.4
Verify the
•
Job work done as per Excise Department with
Accounts department.
5.2.5
Ensure that
•
Amount has been debited / recovered for own
material used in job work done.
•
CENVAT credit has been availed at the time of
receipt of material.
•
Excise duty is paid for material removed after
job work same as final product is removed.
26
6 Reconciliation
Accounts
between
and
Excise
Department.
6.1 Verify that
•
Monthly amount of CENVAT as per Accounts
Department with Excise Department .
•
Monthly reconciliation and check pending
entries.
27
7. Export & Deemed Export Sales
7.1 Ensure that
•
Export sale is being made either under rebate
of duty or under bond.
•
Form CT – 3 certificate has been collected
from the exporter for the deemed Export sale.
•
Timely submission of ARE – 1 return as
evidence of export dispatch for each
consignment.
28
8. Statutory Requirements
Obligation and
Form Number
Type of Assessees
Last
Date
Payment of Excise
Duty in Challan
Form No.- GAR-7
All assessees (other
than SSIs)
5th of every month, 6th
of every month for epayment (except in
month of march), for
march – By 31st of
March
Payment of excise duty
in
Form No.- GAR -7
Assessees availing
exemption based on
value of clearance
(SSIs)
15th of every month,
16th of every month for
e-payment (except in
month of march), for
march – By 31st of
March
29
Monthly Return
Form No.– ER-1
All assessees(SSIs,
Assessees availing area
based exemption and
assessees manufacturing
processed yarn /
unprocessed fabrics falling
under chapter 50 to 55,58 &
60 of the tariff.)
10th of every
month (for
removal during
the previous
month)
Monthly Return
Form No.– ER-2
100% EOU for removals
made in DTA
10th of every
month (for
removal during
the previous
month)
Quarterly Return SSIs, Assessees availing
Form No. –ER-3 area based exemption and
assessees manufacturing
processed yarn /
unprocessed fabrics falling
under chapter 50 to 55,58 &
60 of the tariff.
20th of every
month following
the particular
quarter
30
Annual
Financial
Information
Statement
Form No.- ER-4
All assessees (other than
those who had paid less
than Rs. 1 crore from PLA
for the previous financial
year and ordnance
factories)
20th November
every year (for
the previous
financial year)
Annual
information on
Principals Input
Form No.- ER-5
All assessees (other than
those who had paid less
than Rs. 1 crore from PLA
for the previous financial
year and those
manufactured goods falling
under specified headings)
30th April every
year (for the
previous
financial year)
Monthly return
on principal
inputs
Form No.- ER-6
All assessees (other than
those who had paid less
than Rs. 1 crore from PLA
for the previous financial
year and those
manufactured goods falling
under specified headings)
10th of every
month (for the
receipts and
consumption of
principals inputs
during the
previous month)
31
Quarterly Return
Form No.Annexure 13B in
Part 7 of this
Manual
All Registered Dealers
15th of the month
following the
particular quarter
Declaration form
( for the persons
exempted from
registration)
Form No.Annexure 13B in
Part 7 of this
Manual
All Persons manufacturing
goods which are either
chargeable to nil rate of
duty or fully exempted
persons availing SSI
exemption – If value of
clearances in preceding
financial year was more
than Rs. 90 lakhs
For the first category,
before
commencement of
manufacture of such
goods .
For the second
category , once value
of clearances
reaches Rs.90 lakhs
32
•Penal Provisions
Grounds
Provision
/ rules
Quantum of
interest/ Penalty/
Other
•
Section 9
•
Contravention of Sec. 8
(Restriction on possession of
maximum amount of excisable
goods as stipulated by
notification) or rule made to
prohibit transit of excisable
goods or specification of
persons requiring registration
(incl. attempt to commit /
abetment)
•
Evasion of duty payment
(incl. attempt to commit/
abetment)
Imprisonment upto 7
years and fine if duty
involved exceeds Rs.1
lakh
•
Imprisonment for not
less than 6 months when
special and adequate
reasons absent
•
Other cases:
Imprisonment upto
33
•
Removal of
excisable goods
violating Act/ rules
•
Possession,
transport, deposit,
concealment, sale, etc
of goods liable to
confiscation
3 years or fine or both
• Second/ subsequent
conviction under this
section – Imprisonment
upto 7 years and fine
imprisonment for not less
than 6 months when special
and adequate reasons
absent.
•
Contravention of
provisions in relation to
Cenvat credit
•
Failure to give
required information or
supply of false
information
34
Duty not paid, short paid, Section
not-levied, short levied or 11A
erroneously refunded
•
Delay in payment of duty
– after expiry of 3
months from passing
order demanding duty
Section
11AA
•
Interest @ 15%
Delay in payment of duty
Section
11AB
•
Interest @ 13%
•
No Interest if duty
Penalty of 25% of duty if
duty paid in full or in part
with interest within 30 days
of receipt of Show Cause
Notice.
35
paid in full foregoing right t
appeal when duty becomes
due on issue of Order under
section 37B
Duty not paid , not
Section
levied, short paid,
11AC
short levied, or
erroneously refunded
due to fraud, collusion,
willful misstatement or
suppression or facts
with intent to evade
duty payment.
•
Interest on delayed
refund
•
Section
11BB
Penalty equal to duty
•
25% penalty if duty and
interest within 30 days from
communication of adjudication
order
Interest @ 6% payable by
Department if amount not
refunded within 3 months from
receipt of refunded claim
36
Interest on amounts
collected in excess of
duty.
Section
11DD
•
Publication of names
and particulars of
persons relating to nay
proceedings or
prosections under
Central Excise Tax in
public interest.
Section
37E
•
Failure to pay duty by
due date
Rule 8
Of Central
Excise
Rules
2002
•
Interest @ 15%
No publication relating to
penalty till appeal is filed/
disposed.
Interest from first day after
due date till payment of dues
•
Default more than 30 days
– Consignment wise
payment of duty without
utilizing
37
Cenvat Credit till payment
of dues with interest.
•
Removal of goods in
contravention of Central
Excise Rules /
Notifications issued
under such rules.
• Non – accountal of
excisable goods
• Manufacture without
applying for registration
Certificate.
• Contravention of any
provision under Central
Excise Rules /
notifications issued under
such rules
Rule 25
Of Central
Excise
Rules 2002
•
Confiscation of goods
•
Penalty upto duty
amount or Rs. 2,000
whichever is greater
38
Possession, transport ,
deposit, keeping,
concealing, etc of
confiscable goods
Rule 26
Of Central
Excise
Rules 2002
•
Issue of excise invoice
without delivery of
goods or abetment in
making such invoice or
issue of (incl.
abetment) such
document by which
ineligible benefit like
Cenvat credit is likely to
be taken or has been
taken
Rule 26
Of Central
Excise
Rules 2002
•
Breach of rules for
which no penalty is
separately provided
Rule 27
Of Central
Excise
Rules 2002
•
Penalty upto duty
amount or Rs. 2,000
whichever is greater
penalty upto such
ineligible benefit or Rs.
5,000 whichever is greater
Penalty upto Rs. 5,000
and confiscation of goods.
39
Recovery of Cenvat
credit taken wrongly or
erroneously refunded
Rule 14
Of Central
Credit Rules
2004
•
Cenvat credit wrongly
availed or in
contravention of
Cenvat Credit Rules,
2004 in case of inputs
and capital goods
Rule 15
Of Cenvat
Credit Rules
2004
•
Interest payable along
with such credit amount and
provisions of section 11A
and section 11AB
applicable
Penalty of Rs. 2,000 or
upto duty amount whichever
is greater and confiscation
of goods
•
Penalty under Section
11AC also payable if credit
availed due to fraud,
collusion, suppression, etc
with intent to duty payment.
40
Cenvat credit wrongly
availed or in
contravention of Cenvat
Credit rules, 2004 in
case of input services
Rule 15
Of Cenvat
Credit Rules
2004
•
Breach of Rules for
which no penalty is
separately provided
Rule 15A
Of Cenvat
Credit Rules
2004
•
Penalty upto
Rs.2,000
• Penalty as per
Section 78 of Finance
Act,1994 also payable
if credit availed due to
fraud, collusion,
suppression, etc with
intent to evade tax
payment
Penalty upto Rs.
5,000
41
Flow Charts
42