8th July- Absent- Kavya’s notes

9th july

• Central Excise Duty

Is on tobacco and liquor on medicinal purposes.

Entry 89

Requirements:

 Its on goods
 Either manufactured or produced. Manufactured is not defined.
 Its has to be manufactured or produced in India.

• What are goods?

Defined in SOGA

Whether services are included or not?

Software included in what? Goods or service?

Tax is on marketability- vendability. As per Excise Act goods- capable of being bought and sold. Actual
sale is not a criteria in Excise. But is a criteria in SOGA- possession is transferred and the
transaction is complete.

Supreme court 2008- marketability is an important criteria for levy of excise duty. Amended the
definition of good and included marketability.

SC said- Goods must be movable and marketable.

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 • What is manufactured/ manufacturing?

Judiciary- Value addition is not an important criteria for being “manufactured”.

There has to be transformation- complete change in characteristics, its use and even name.

Example- conversion of marbled rocks into polished tiles- Would not amount to manufacturing as per SC.
Whole value addition is not taxable. These are the things which lead to GST. They had to increase the atx
base which was narrowed down by the judiciary.

If they have to expand the tax base, they have to increase each and every thing.

GST- Not a tax on sale but supply. There is nothing that is left now. Each and every thing is supply.
Even giving newspapers to kabadi wala is supply in GST. Hence, expansion of tax base.

They have not increased the rates of taxes. But still there is expansion. In fact they have reduced
certain rates. This is because of increase in tax base.

• Service tax-

has no entry. Service tax was levied in Entry 97. Just like wealth tax.

1994- introduced. Three services- at 5%- telecommunication, insurance and transportation.

5-8-10-12%- rate kept of increasing through amendments.

Till 2012- there was 115 services. But it was a positive list.

In 2012, 1st July- they replaced positive list with a negative list. Each and everything is service except
these 17. 15% rate of tax.

• GST

2
We had started GST in 2000 itself- CENVAT- central value added tax. Govt established a committee to
prepare a model of GST. We then introduced input tax credit. Then announcement by Union minister that we
are going to implement GST from 2010.

2009 first discussion paper release by empowered committee. White paper on GST.

2011- first constitution amendment bill 115 bill was produced un the parliament. And that bill was not
discussed in parliament for three years and in 2014 it was elapsed due to change in power.

2016- Constitution 122 (101 amendment) implemented from 1 st July 2017 for whole country except J&K. For
J&K 8th July 2017.

Logo for GST- One nation one tax one market- whole purpose of GST. Why was uniform tax thought of?

Because this affected decision making of people (of purchase and spending) as there were different rates
and different exemptions. VAT, entry tax, Purchase tax- all varied among states- no synergy.

They had committed in WTO to implement GST- GST was implemented without any major changes without
thinking. In 2016 thought of and implemented in 2017. Who is going to collect what will happen to state
or central machinery. Lot of protests from state machinery- that where will be go if you take away the
tax. Central is taking away each and every power.

• GST Council

Absolute power given to council. Finance minister is the head and all state finance ministers are
members. Centre has kept veto power and 2/3 rd majority of state is required. So whichever party is in
power say BJP then decision that way.

All decisions made by GST council without any objection from states.

Power is with the states to amend SGST.

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Any dispute between State and centre and union- Dispute settlement body of centre and that decision is
final and binding. Writ peititon lying in the court.

State/ regional tribunal, then national tribunal and then Supreme Court- bypassed High Court.

3 members- 1 judicial member and two technical and other members. Weightage to technical members.

Judiciary has quashed national tax tribunal act- as no Weightage to technical members.

• Power of arrest in GST

Absolute power to commissioner if they have reason to believe that fake invoice. Can be arrested without
proper hearing.

4 things in GST

 Supply
 Valuation of supply
 Classification- whether these goods are coming in 5%, 12% 18% or what.
 Input tax credit- how you can claim. Previously known as CENVAT.

10/07

Central Excise Act, 1940- levy and collection of excise duty. Chargeability.

Section 3- charging prov.- what is excise duty and what excise duty shall be charged. Except the goods
produced in SEZ

3 conditions:

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 1.
 Tax on all excisable goods.
 Tax on moveable goods.
 Tax on marketable goods.
2. Goods have to be manufactured or produced.
3. Have to be manf. Or produced in India.

Central Excise Tariff Act, 1985- prescribing the rate of excise duty. Classification of goods.

These are the two main legislation governing the excise levy

11/07/2019

What is taxable event for levy of excise duty? Manufacturing of goods

Tax on manufacturing profit plus manufacturing cost.

Tax is on Place of removal and time of removal

If you manufacture any goods on 15/7/19 and excise as on date was 20%. Kept those goods in warehouse and
then cleared the stocks on 15/8/19. The govt came on notification on 15/8/19 that excise duty is now 30%.
Can he argue that excise is on manufacturing so I will pay only 20% as completed manufacturing earlier
only. There was no value addition. What is taxable in this case?

Taxable event for levy and taxable event for collection:

Taxable event for levy is of manufacturing only.

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Collection time is postponed till the time of removal.

Back calculation- Actual price and tax on that.

Here also back calculation is required, price written is inclusive of excise.

However, if any value added- packaging etc. (post manufacturing activity which does not amount to
manufacturing as there is no change in characteristics of goods) increased the price now.

What would be the value- this value or additional?

Should be on: additional value as Collection is at the time and place of removal so tax on the latter
value.

Argued: Since it didn’t amount to manufacturing it wasn’t taxed. It was tax avoidance not evasion. As
taxable event is manufacturing and you cant. But court held that collection is on time and place of
removal so additional will be included. Showroom (warehouse) was fixed as place of removal. Not the place
on manufacturing. If after 6 months it’s sold, then After 6 months whatever is the date will apply, be it
higher or lower. Place of removal is tax planning and stays for 1 year, cant change before that.

Related Case Laws: (Taxable Event)

• Godfrey Philips India v. State of UP 2005 139 STC 567 SC.

• Commissioner of Central Excise v. ITC Ltd. 2006 203 ELT 532 SC.

• CCE v. Wazir Sultan Tobacco Company Ltd.

• Marketability Test

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Intent of legislature was that goods mentioned in Tariff Act- means it is taxable. Marketability was not
a criteria.

SC- no if you want to tax goods which is movable and it’s a consumtion tax, it has to be marketable-
capable of beign bought and sold. So it is SC created criteria. Amendment brought only in 2008 in
legislature

First case on marketability in 1963 only. In 1989- 2-3 cases- clear definition laid down. In 1995, 1997,
2001. Only in 2001 attorney general accepted the view of SC- that marketability is necessary for levy of
excise duty. But after 2001 also, amendment came only in 2008. Explanation added in Section 2D of Excise
Act- to define what is the meaning of goods for excise duty- which are deemed to be marketable.

• 1963: UOI v. Delhi Cloth Mills

Not given the definition of marketable. Concept of manufacturing. Court defined what is manufacturing. To
become goods, an article must be something which can be ordinarily come to market to be bought and sold.
Commerciable capability of the goods.

Manufacturer was manufacturing Dalda- banaspati oil. Groundnut oil and til oil was required for it.
Refined oil was produced during manufacturing as a semi-finished product/ intermediate product. Which was
consumed within the factory to manufacture banaspati oil. Now dept. wanted to tax this refined oil
because at that time banaspati oil was exempted and refined was taxable. The manufacturer contended: The
process of deorderisation process was not carried on this oil. After the hyderogenation process
deorderisation needs to be done. So it was argued that this refined oil was not marketable- nobody will
buy. So Court said- needs to be marketable. Mere mention in the Tariff Act would not make it excisable.

1989:

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 • Bhor Industries v. CCE 1989 40 ELT 280 SC

They were manufacturing leather cloths. PVC films was intermediate product which was not marketable- no
value.

• Amberal Sarabhai Enterprises v. CCE 1989 43 ELT 214 SC

Manufacturing Sobitol- intermediate product starch hydrolicent- licent of starch was mentioned in
Tariff Act- Assessee argued- it has very short life- only 24 hrs. and we have to consume within those
24 hrs and we cannot make it marketable in that short span. So not taxable.

Burden on dept to prove it marketable. Assess always claim that its not marketable.

Both case held the following definition:

Meaning of marketability- capable of being bought and sold for a consideration and deemed to be
marketable. This was adopted by the legislature in 2008.

1987

• UOI v. DCM 1997 92 ELT 315 SC

They were manufacturing calcium carbide- intermediate product acetylene- contended that this acetylene
is not in the pure form as prescribed in ISO- so not marketable. Actual sale is not at all required for
marketability- only capable of being bought and sold.

Capability not from theoretical possibility- because then everything is saleable. But capability from
commercial point of view. Not contravention of law. After contravening the law, everything is saleable.
That won’t be excisable.

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 Why GST came- so many things which were not taxable- persons were there to purchase. Then why not tax
them too. Therefore, supply is taxable now. Be it of rubbish items.

2001

• CCE v. Man Structural Ltd 2001 44 RLT 113 SC

Meaning of short self-life.

12/07/2019

The whole concept of marketability is based on commercial identity of the product.

Actual sale not important:

• UOI v. Sonic Electrochain Pvt Ltd. 2002 145 ELT 274 SC

Marketability of goods has certain attributes. And its difficult lay down a precise test to define
marketability. The essence of marketability is neither in form nor in sale. It is the commercial
identity of the market known to the market to be bought and sold. The fact that a product generally not
being bought or sold or has no demand in the market could be irrelevant.

There no sale of the semi-finished product because you’re the manufacturer as well as consumer of the
semi-finished product.

• Kerala laboratories v. CCE AIR 2003 SC 1700

By marketable it does not mean that the goods must be actually bought or sold in the market. The goods
that are in crude or unstable form which needs some reforming before bringing it to the market are not
said to be marketable.

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 • UOI v. Indian Aluminium Co. Ltd. 1995 77 ELT 268 SC

Even you can sale rubbish things in the market, ash of aluminium (aluminium dross and skinning)- does
not make it marketable irrespective of whether people are there to buy it or not because people would
be there.

After this judgment the tariff act was amended and they added aluminium dross in the list of excisable
product. Then the question again brought to SC.

• UOI v. Indian Aluminium Co. Ltd. 2006

After getting a clear entry in the Tariff Act, even though it is marketable but not a “manufactured”
product. There is no effort in producing this, it’s not a by- product. No process of treatment, labour.
Intention was not to produce it. Held: No excise duty can be charged.

If you need say further processing to complete the product, it would be marketable only after that
process. Not marketable “as such”.

• Crystallite industries v. CCE 2006 193 ELT 35 CESTAT Mumbai

Case on not marketable as such.

• CCE v. Osnar Chemical 2012 SC

Short self- life question was considered in this case.

Transmission is one factor to be marketable. Say steam- cannot be transmitted (short self-life) so not
marketable but electricity can be transmitted so marketable.

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 • Hindustan Petroleum Corporation v. CCE 2007 210 ELT 407 CESTAT.

If the product is in contravention to law (prohibited for sale) and it is sold then it won’t become
marketable.

• Nestle India v. CCE 2009 235 ELT 577 SC

Here the question was that the assessee was engaged in manf. of two infant food- excise duty was NIL.
Purchasing this vitamins from other manufactures after paying the excise duty. Mixing these vitamins at a
predetermined ratios. Inter mixture of vitamins. Dept served notice to tax this inter mixture of vitamins
as a product. Assessee said this inter mixture is of no use to market- the use is only known to us. Court
also upheld that it is not manufactured. No change in physical or chemical properties of vitamins just
changed ratio. So no excise duty.

• CCE v. Guldaspur Distillery 2008 224 ELT 337

Packaging of certain drinking products. Saleability v. marketability. Mere mention in Tariff is not
enough to establish marketablity.

Burden of proof is always on the dept.

 CCE v. United Phosphorus Ltd. AIR 2000 SC 3424

 Gujarat Narmada Valley Fertilizer Co Ltd. v. CCE

Burden on dept to prove marketable.

15/07/2019

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 • Movability Test

If something is marketable, then the goods are movable by itself.

Transfer of property goods defines moveable properties as something which is not immovable is moveable
property.

In case of service, movability is not an important factor.

Movability for the purpose of excise duty:

Different from TOPA

TOPA- something which is attached to the earth is immovable

Excise Act- something which is attached to the land, then what purpose for which it is attached to the
land, if purpose is to take proper advantage/ benefit of it, then it won’t be immovable for excise duty
but movable.

Part assembled together and made into one product- by commissioning these three things say you form a
product which is separately excisable. Whether it is moveable or not? If its erected at site and that
cannot be moved from one place to another without dismantling its essential parts which give the product
its essential characteristics is an immovable property.

If dismantling is required to move it from one place to another- then it is immovable. If without
dismantling you can do it, then it is movable.

Eg. bicycle cleared from the factory in dismantled form, but it is not immovable- it is done only for
convenience of the transport.

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CKD- complete knocked out

If say cars imported from outside India just need assembling in India.CKD product.

SKD- semi knocked out- you need some essential parts to be added while assembling.

CASE

• Triveni engineering and industries ltd. v. CCE 2000 120 ELT 273 SC

• Sirpur Paper Mills Ltd. v. CCE 1998 97 ELT 3 SC

Something which is attached to the earth for the beneficial requirement or proper use or proper enjoyment
will not make the product immovable. Eg. generator pinned to the land- doesn’t mean its immovable, as
getting its essential characteristics from the generator itself not nut and bolt.

• CCE v. Solid and Correct Engineering Works 2010 252 ELT 484 SC

Just fixing to the earth with mixture for better enjoyment is not immovable.

Eg. satellite AC Plat- cannot be dismantled- the moment it is dismantled, it wont be satellite AC any
longer. So not moveable.

• What is Manufacturing/ Production

Entry 84 of Union List- duty on goods “manufactured or produced” in India.

What is manufacturing? Not defined in Excise duty- inclusive definition of manufacturing

Sec 2(F) of Excise Act- what is included in manufacturing? Not defined just to give benefit to department
so kept open otherwise restrictive definition. Interpret according to circumstances of the case.

Section 2(29BA) of Income Tax Act- what manufacturing means?

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Being a manufacturer or producer you can claim additional depreciation. Some other benefits too to the
taxpayer. Defined to collect tax.

Section 80 IA of IT Act

Section 32 A of IT Act- here Income Tax authority agued that you are not manufacturing any product so no
exemption. And same person is excisable in Excise Act-dept says that this process amount to
manufacturing. So you are excisable. Is it possible? Yes, the definition under the Excise Act is wider
than the one in IT Act.

Under Excise Act, two things are important to determine “manufacturing”

 How judiciary interpret the word “manufacturing”

 Manufacturing as per excise law.

And there is no match between judicial interpretation and the law- complete mismatch is present.

• DCM Case:

Manufacture implies a change but every change is not manufacturing. And yet, every change of an article
is the result of the treatment, labour, and manipulation. But, something more is necessary, and there
must be transformation- a new and different article must emerge having distinctive name, character or
use. (Law- just mere change will not lead to manufacturing but as per excise act, every change can amount
to manufacturing because every change is leading to value addition.)

SC said, you cannot tax mere value addition.

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Hence no match between judiciary and law.

Eg packaging of Drinking Water- manufacturing or not. No, there is value addition but does not amount to
manufacturing because water remains water- no transformation (as per SC).

Legislature if want to nullify this, what it’ll do that packaging of water amounts to manufacturing in
the list. Therefore, lot of amendments.

How you can levy excise duty on “process”?

What is excisable is manufacturing not process. Taxability of process under 97 Entry and manufacturing in
84.

300% value addition, but no tax as no change in manufacturing. (transformation).

Main reason to dispose this system and bring GST because how many amendments you can bring at the end of
the day? Therefore, ultimate tax on supply.

16/07/2019

Under Excise Act- certain processes are defined as what amounts to manufacture, Manufacturing includes
these these these activities not what manufacturing means.

Definition (Section 2(f)): 1. Manufacturing includes any process which is incidental/ancillary for the
completion of the manufactured product.

Eg. I am selling a glass bottle, just to increase the looks of the bottle, I start selling the designed
version- will it amount to incidental process? No.

Labelling or relabeling of medicine though won’t change the characteristics of the medicine but it is
incidental process to make the product a complete product, to make it marketable. Marketable here does
not mean saleable.

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Laptop is a composite machine, desktop is a set of articles. If all the items of the desktop are
assembled together, you’re getting a different product. Assembling of these things would amount to
manufacturing- as it is making a separate product.

Definition (Section 2(f)): 2. Any process which is mentioned in the first schedule of the Tariff Act as a
process amounting to deemed manufacturing. (Under Entry 97). The process is leading to value addition;
hence legislature wants to tax this process.

Eg. Printing of colour and logo on a glass bottle, that process leads to some value addition- hence
amount to manufacturing. Power under Entry 97.

• CIT v. SR tissues Case-

Value addition of 200%. Conversion of Jumbo rolls of tissue paper into small paper napkins- SC said no
change in the characteristics so no manufacturing but there was so much value addition.

Now the Tariff Act would add in the list that conversion of jumbo rolls into small tissue paper lead to
manufacturing so as to nullify the effect of the judgment.

Eg. if factory A- glass bottles manufacturing worth Rs. 100. Sent to Factroy B for colouring and logo now
value as 150. Will this work of Factory B amount to manufacturing- Value addition, yes.

However, if glass bottle, colouring, logo happening all at Factroy A and now the Price is Rs. 150.
Whether manufacturing or not will not be a question then because place of removal is important and price
at place of removal is Rs. 150.

Excise Act has three schedules:

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I schedule
HSN Classification- all goods Additional Excise Duty- item of All goods that are valued on
that are excisable are list I mentioned in List II.
classified in schedule I
Basic excise duty
Goods under I and II Schedule
are taxable on the agreement
price between the dealer and
the buyer. (on transaction
value and not MRP)
II Schedule III Schedule
their Maximum Retail Price-
FMCG Goods, all goods that are
basically to be consumed. All
packed commodities.
Eg. tobacco in list I too but Legal Metrology Act r/w Standard
if Govt wants to levy extra of weights and measures Act-
duty then Add this in this gives out MRP valuation,
list. Ingredients, Name of the manf,
address etc.
Prescribe the measures for all
packed/ consumable items.
Two types of packaging, closed-
open.
Eg. cannot test spices packed in
the packet.
But can check LED Bulb.
Rate of abatement is prescribed.
This rate shall be reduced from
the MRP and then on the reduced
price, the excise duty will
apply.
Those goods that fall under III
Schedule, any process packaging,
re packaging, labelling,
relabeling, or alteration of
retail sale prices or adoption
of any method to make the
product fit to be taken to the
market will amount to
17
 manufacturing.
Eg. Same ice-cream sold to MRP is an ultimate price-
restaurants not taxable on MRP nothing is left so you cannot
but sold to individual charge over and above this
consumers- would be excisable price.
on MRP.

If some process is declared to be manufacturing in Income Tax Act will it amount to manufacturing in
Excise Act.

No, purpose very different. Can revenue plead this before any authority that the same process is
manufacturing in IT Act but not in Excise Act.

• ITO v. Arihant Tiles and Marbles Ltd. 2010 249 ELT 161 SC.

Conversion of rock marbles by shoving them in tiles and slabs and polishing of them. Conversion would
amount to manufacturing or not?

The assessee was paying excise duty on the same. Excise dept. accepted as manufacturing. Here, IT
Authorities claimed that it is not Manufacturing, Sec 80 IA, 32 A, 32- exemptions given to assessee for
being a manufacture. Here revenue said that this process amounts to manufacture.

Court said either you make amendment- but if you don’t then you cannot deny that the same process is not
amounting to manufacturing under IT act but in a general case it is in Excise Act. Contrary position
cannot exist.

17/07/2019

• CCD v TATA Iron and Steel Co. Ltd. 2003 154 ELT 343 SC

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Issue was of Counter-veiling duties- Section 3 of Custom Tariff Act. [GST on import] Section 3 duties are
imposed on a like article, then they have to pay Counter-veiling duties at par with local duties (Excise
duty/ AD Duty) in India on a like product. If there is no like article, then on the basis on presumption
you tax them. If you’re importing a like product which is considered as manufactured in India, counter-
veiling duty shall apply. If it is not considered manf. product in India, then counter- veiling duty
shall not apply. So basically the conditions of Central Excise Act applied to determined the application
of Counter- veiling duty.

Product in question: Coke, and low ash coal.

Section 6 of Coal Mines Act- imposition of excise duty on coal. All coal which is raised form the mine is
subject to excise duties which is Rs. 10 per tonne. Dept. wanted to put excise on the low ash coal under
this Coal Mines Act (not under Central Excise Act)

Question for consideration: Process of extracting the coal is manufacturing process or not?

SC- no, it is neither manufactured nor production. Coal raised from the mines is not manufactured
product. Coal is not coming out from the process of manufacturing. This low ash coal which is imported
from outside, no counter-veiling duty shall be imposed.

• CIT v. Sesa Goa Ltd. 2004 271 ITR 331 SC

Extraction and processing of iron ore. IT gives certain benefits to manufacturers. Iron ore is extracted
(same as coal is raised/ extracted)

Under IT act it’s declared that this extraction of iron ore is production (not manufacturing). Difference
in the interpretation form the above case.

• CCE v. Steel Authority of India Ltd. 2012 SC

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Case of Excise- iron ore raised form mines, and washing of iron ore to remove foreign materials. Declared
by SC as NOT amounting to Manuf.

Excise- very strict interpretation of manuf.

IT- beneficial interpretation of the term manuf.

• CCE v.SR Tissues Pvt. Ltd. AIR 2000 SC 3694

Process of unwinding , cutting and sliding of jumbo roles of plain paper would amount manuf. Or not?

Jumbo roles of tissue paper is classified under Entry 4803 (Schedule Tariff Act). The finished products
are classified under Entry 4818. There was 180% of value addition in the process of conversion. The Dept.
wants to tax this process as amounting to manuf.

Court said – NO- followed DCM Case- Manuf. Implies change but every change does not imply manuf. Change
in characteristics, use. Here, no change. Even considering raw material or finished product in the
schedule would not make them manuf. Product. The tariff act does not give the idea whether a process is
manuf. or not. It is just to identify the product.

For deemed manuf, they have to write that this Process of unwinding , cutting and sliding of jumbo roles
amount to manuf. If you have not written this, then the definition of judicial interpretation applies
which says that there has to be a change.

SC relied on: UOI v. JG Glass industries (glass bottle and printing the colour and logo on the glass) two
fold test applied by the SC to declare whether the process would amount to manuf. or not

1. Whether by the said process, a different commercial commodity comes into existence or whether the
identity of the original commodity ceases to exist.
2. Whether the commodity which was already in existence will serve no purpose but for the said process.

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If the plain glass bottle is known to the market then it wont affect whether you sell printed as well
with the plain glass bottle. But if the whole plain glass bottles are thrown out of the market and no one
buy them then this would amount to manuf.

SC also relied on: Moti Laminates Pvt. Ltd. v. CCE 1995 SC

Section 3 of the Act levies duties on the all excisable goods provided they are produced and manuf.
Therefore, goods they are provided under the schedule excisable but whether they are subject to duty or
not will depend or whether they are manuf. or produced.

Also relied on Shaam Oil case. read on your own.

18/07/2019

• Satnam overseas v. CCE 2015 318 ELT 538 SC

SC has relied on essential characteristics test, whether the product has changed its characteristics or
not

Whether the mixture of dried rice, dehydrated vegetables and spices- will amount to manuf, or not?

This packet of mixture is not going to change the characteristics of rice- there is new product which
comes into existence. It is raw form only and it has to cooked like any other rice.

• Servomet industries pvt ltd. v. CCE 2015 319 ELT 578 SC

JG glass case required reconsideration. The appellant was purchasing the syringe from the open market
after paying the excise duties and then those were sterilised and the needle and syringe, put unassembled
form in a pouch. Whether this process of sterilisation will amount to manuf. or not?

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Argued: yes, new product came into existence- the needles become disposable. (As per JG glass case)

SC- no JG glass case should not be relied. They applied following test:

 Where the goods remain exactly the same even after a particular process which only removes foreign
matters from the goods complete in themselves.
 Where the goods remain essentially the same after a particular process and the original article
continues as such despite the changed process. Like JG glass case printed bottle as well as plain
both existed.
 Where the goods are transformed something different or new after the particular process but the said
goods are not marketable.
 Transformation, change in the condition and marketability of it as such. The question of excise duty
will only arise when there is transformation resulting to change in condition and marketability is
there.

Observation that if we declare this process of sterilisation then every hospital undertake this process
at least twice or thrice a day then each time would it amount to manuf. And charge excise duty every
time? Not practicable so NO.

• CCE v. Fitrite Packers 2015 324 ELT 635 SC

In this case, they deviated from the established principle of manuf. The assessee was purchasing blank GI
paper and printing and putting brand name and logo of that particular customer. Question whether this
printing of brand name and logo amount to manuf.?

Applying SR tissues case: customised use, restrictive use and there is change in the end use- now it is
not simple GI paper but it is special paper. Any customisation process will amount to goods or service?
Customised for self-consumption. Eg. printing of marriage card- personal use- would amount to goods/
service. Service since its customised, and it has end use- personal. It is works contract.

22
 • Maruti Suzuki India Ltd. v. CCE 2015

ED coating on bumper of car/ vehicle. No change in characteristics so no manuf.

Applied JG Glass Case.

Interesting to note that the judiciary has never held any process declared as deemed manuf. To be ultra
vires.

19/07/2019

• Usha Rectifier Corp Ltd. v. CCE 2011 263 ELT 655 SC

Question was whether assembling of testing equipment for testing the final product in the factory amounts
to manufacturing or not. The assessee was manufacturer of semiconductors and other electronic devices.

 The company had stated in their balance sheet that additional to the Plant and Machinery, there
existed these testing equipment. Considered this as their plant and machinery.
 Further substantiated in the Director’s report annually =, during a particular year, they had
assembled lot of testing equipment and then de-assembled them.
 Assembling these equipment to save foreign exchange.

Revenue argued that these testing equipment amount to manuf.

SC- once the co. had mentioned in their balance sheet that the equipment was an asset and substantiated
in the Dir. Report that it was salebale and marketable and further- The assessee’s stand that they were
assembling of testing equipment this to save foreign exchange meant that they were saleable. Hence,
amount to manuf. Even though dismantled later.

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 • CCE v. GTC Industries Ltd. 2011 266 ELT 160

Question was whether the process of cutting and imposing aluminium foil for packing the cigarettes amount
to manuf. or not. Role of aluminium foil was cut horizontally, and the word pull was imposed on them,
thereafter fixed number of cigarettes were wrapped into that. To protect the cigs from moisture and to
keep them dry.

Aluminium foil remained foil in that packing too, there was no change in the characteristics. SR tissue
relied upon- Held Not amount to manuf.

Even the packet of sample drugs which are manuf. by the company- which is not for the purpose of sale-
whether subject to excise duty or not? The identical drugs inside the packet would be marketable of
course. Or some products which are prohibited to be sold by law.

If that prohibition is applied to all the products then it is not marketable. But that prohibition is
applied to only a particular lot- so would amount to manuf. this issue was decide in following case:

• Medley Pharmaceuticals v. CCE 2011 263 ELT 641 SC

• ITC Ltd v. CCE 2002 151 ELT 246 SC

Incidental or ancillary in section 2(f)- if in absence of those process the product is not marketable.
Say if without quality testing the product is absolutely non marketable then that quality testing would
amount to manuf.

Eg. Chocolates are part of Legal Metrology Act- primary packaging- essential things are required to be
put on the packet. Now they are packed in secondary packaging too. Then say they are put in jar-

24
What is incidental and ancillary process here?- primary and secondary packaging not jar packaging.

• Keshav Dev Shiv Prasad v. UOI 1992 61 ELT 404

Packing- incidental and ancillary process must be integral and inextricable process- only then would
amount to manuf.

• Prachi Industries v. CCE 2008 225 ELT 16 SC

Assessee was a small scale industries and buy MS tubes and cut them in requisite length and fit in the
swagging which is already dyed which mould the MS tubes into desired shape and design. End use is
restricted here, so amount to maunf. Cannot be used for anything else except as MS Tubes. Cannot be
brought to an original one as well.

Burden on Dept. to prove it amount to manuf.

Eg. I purchase the plastic furniture- melt that and again making plastic furniture- whether amounting to
manuf.? yes, Relevant Case:

• National Metal works v. CCE 2005 179 ELT 189 CESTAT

For missing and blending- whether amount to manuf. or not? No new product resulting.

• Nestle India v. CCE

25
 • CCE v. Goyal Gases 2000 119 ELT 5 SC

• Gas authority of India Ltd. v. CCE 2004 163 ELT CESTAT

That kind of mixing through which you get a new product- amount to manuf. so LPG is manuf.

Even repair- if not leading to any new change- no manuf. if lead to transformation- repair can also be
manuf.

Supplying two or more things together, whether amount to manuf. or not? No They manuf. the base and take
other parts from other vendors.- lid, casket etc, in disassembled form? – will not amount to manuf. just
because assembling together is required. Held in: just putting two or things together won’t amount to
manuf. even though there might be some value addition.

• Hockins Cookers Ltd. v. CCE 1997 96 ELT 507 SC

• Eureka Forbes v. CCE 2000 125 ELT 195

20/07/2019

• Who is a manufacturer? Read Jigs’ notes too for this day.

Section 2(f)- last para defines who is manufacturer. Manufacturer is liable for payment of excise duty.
Manufacturer is the person converting the raw material into the end product. Not necessary that the
supplier of the material is manufacturer.

26
Two categories in 2(f):

1. Who get the goods manufactured by the hired labourers. The relation must be of master servant or
principal agent. If independent contract, then hired person is not considered to be hired labourer.
 The relationship test- M-S/ P-A. If the relation between the employer and the job worker is of
M-S/P-A then the employer would be manufacturer but if the relation is of independent
contract, then the job worker would be manufacturer. However, if it is established that job
workers are independent on my wish/ at my will, even though independent they won’t be
manufacturer. Lot of cases where the employer would get the products manufactured by Small
Scale Industries (SSI) or SMEs- used as culpable device- their independence were at the will
of employer- they could in this way indulge lot of SSI for every different product and they
won’t have to pay excise duty in this way. [SSIs are exempted for the payment of excise duty].
I will distribute work between say 10 SSIs. Therefore amendment made, that the moment you
(SSI) manufacture a product under some brand, the actual manufacturer wont be able to take the
benefit of the exemption.

• CCE v. MM Kambhatwala AIR 1996 SC 3319

Various house hold ladies involved in the process- these house hold ladies are manufacturer.

Basically, brand name owner is not the manufacturer under the excise act. Eg. Hindustan Lever not
manufacturer- only marketed the products. Allowed to use the brand. The brand name owners.

Even pepsi etc. only providing brand- not manufacturer. Bottling company would be the
manufacturer. Actual manufacturer is the person who is converting the raw material into finished
product.

• Pepsico India Ltd. v. CCE 2005.

27
 Pepsi is not a manufacturer, actual manuf. is the bottling company.

Britannia- franchise agreement- B is giving the packaging etc. and bringing the goods to their
factory and then selling it from there.

• Pawan biscuits Co Ltd. v. CCE 2000 120 ELT 24 SC.

Pawan biscuits- manufacturer

B supplying recipe, raw material packing material, goods produced strictly as per specification
of B. B is not the manufacturer, pawan biscuits is the manufacturer. Basically you have to
manufacture as per my standard.

• Phillips India Ltd. v. UOI

If the other party is dummy company and only culpable device, and even if declared as independent
wouldn’t be independent company but hired labourers and the brand owner would be the
manufacturer.

 The profit test- corollary to relationship test. Who is enjoying the manufacturing profit
basically. If that is controlled by raw material supplier or the owner of end product, then he
would be manufacturer. But if profit is enjoyed by the work labourer himself, then he would
manufacturer.

Both the tests have to be satisfied.

• Unique pharmaceutical laboraties v. CCE 1990 15 ETR 1

When two interpretation are possible to who is manufacturer then the interpretation beneficial to the
assessee is adopted and not of revenues.

28
 22/07/2019

• Definition of Supply (take jigyasa’s notes also for today)

CGST IGST Act

GST- tax on Supply

Excise- Collection is postponed up to the place and time of removal

GST- time and place of supply; if place is two states- integrated GST.

IGST- If interstate- one tax only- whatever tax structure is there. IGST is combination of CGST and SGST.
Collection power is given to central. The part of state govt. (half) would be given to state govt. IGST
is just a mechanism to collect tax in interstate transactions.

If CGST is collected by state- have to give to center. State may utilize SGST full.

Two types of supply-

 Intra state- domestic supply; two CGST and SGST

 Interstate- cross border the state; IGST charged

Composition levy

Four structures of GST:

o 5%- if intra then 2.5 SGST; 2.5 CSGT.

o 12%- likewise- 6%,6%
o 18%
o 28%

29
Out of central fund too, some amount is given to states. Suppose TN said 1000 cr loss in the first year
because you changed it to consumption based tax (those which are not even industrial states but have
large populations will have more collection naturally). This is post GST- the centre compensates the loss
to the state. Say there is a growth of 14% in the consolidated fund so next year centre will pay 1000 cr
plus 14% of 1000 cr to TN. (compensation to state due to change in taxation regime). Very few states who
asked for compensation though- no loss after GST imposition.

Section 7 of IGST- “intra state supply”

Place of supply

o If location of supplier in one state and place of supply in another state

o One state- one union territory
o One UT- another UT
o Importation of goods into India will always be taxed under IGST.
o When supplier is located in India but place of supply is outside India (export)
o If supply from SEZ or taking supply from SEZ- interstate supply
o In the taxable territory, but it is not intra state supply- then it would be considered as
Interstate supply only.

Section 7 of CGST- “supply” r/w Schedule 1 (supply without consideration), 2 (those activities which are
clearly defined by legislature as supply of goods or supply of services- eg. software/ IP related things,
restaurants) , 3 (negative list of supply- neither supply of goods nor supply) of CSGT- meaning of
“supply” in different different situations. These four definition tried to make as wide as possible.

30
 o Goods: 2(52) of CGST every kind of movable property except money and securities including
actionable claims, grass,
o Services: 2(102) of CGST anything other than goods, money can be considering service if you’re
engaged in exchange of foreign services.
o Consideration: 2(31) CGST wide than the one in contracts act 2(d)- inclusive definition- they have
tried to cover each and every aspect of consideration.
o Business: 2(17) CGST nothing has been exempted from the definition of business. Inclusive
definition. Your individual/ one time activity. No requirement of frequency/ profit motive etc. Even
selling of kabaad- supply in GST.

Section 8- inter state

23/07/2019

Take notes from Jigyasa from point 2 of Schedule I

Schedule I Schedule II Schedule III

Activities to be considered Supply of goods v. supply of Exemption list- neither supply
supply even made without services of goods nor supply of service
consideration.
Exception to Section 7(1) Why this distinction is relevant? ACTIVITIES OR TRANSACTIONS
Point of taxation of goods and WHICH SHALL BE TREATED NEITHER
points of taxation of services is AS A SUPPLY OF GOODS NOR A
different. Time and place and SUPPLY OF SERVICES
classification of supply is
different. To fix rate of duties, 1. Services by an employee to
this distinction is important. the employer in the course of
or in relation to his
Those activities which are employment.
controversial for the levy of
service or goods distinction. 2. Services by any court or

31
 Tribunal established under any
law for the time being in
force.

3.
(a) the functions performed by
the Members of Parliament,
Members of State Legislature,
Members of Panchayats, Members
of Municipalities and Members
of other local authorities;
(b) the duties performed by
any person who holds any post
in pursuance of the provisions
of the Constitution in that
capacity; or
(c) the duties performed by
any person as a Chairperson or
a Member or a Director in a
body established by the
Central Government or a State
Government or local authority
and who is not deemed as an
employee before the
commencement of this clause.

4. Services of funeral,
burial, crematorium or
mortuary including
transportation of the
deceased.

32
 5. Sale of land and, subject
to clause (b) of paragraph 5
of Schedule II, sale of
building.

6. Actionable claims, other

1. Permanent transfer or
disposal of business assets
where input tax credit has
been availed on such assets.
Eg. giving of phone by the
firm and the employee who
left the firm after say 1
month. The firm has to pay
GST on that phone. It is
“supply”.
than lottery, betting and
gambling. Explanation.—For the
purposes of paragraph 2, the
term "court" includes District
Court, High Court and Supreme
Court.
Composite and mixed supply
Naturally bundled- say hotel
services of free breakfast, here
major service is of providing
accommodation.

Earlier 15% tax on restaurant Entry 1:

services (pre GST) Transfer
Then 18%- post GST (a) any transfer of the title in
Then in nov. amendment which goods is a supply of goods;
brought it down to 5%. (b) any transfer of right in
Whatever tax you have paid on goods or of undivided share in
the raw materials like food goods without the transfer of
etc. can be claimed as a title thereof, is a supply of

33
credit while paying the GST. services;
And then you don’t mention (c) any transfer of title in
this in the price of the goods under an agreement which
goods. stipulates that property in goods
shall pass at a future date upon
Input tax credit is a tax on payment of full consideration as
value addition not a tax on agreed, is a supply of goods.
Price+ tax.

Role of anti- profiteering

authority- if you are
availing the benefit of Input
tax credit, you’ve to
transfer the benefit to the
consumer as well, otherwise
offence.

For claiming ITC, every

supplier has to upload the
invoices on online platform
otherwise, the credit cannot
be claimed.

ITC available on:

 All input goods
 All input services
 All capital goods

What has been resulted is

that fake invoices are being
upload just to take benefit

34
of ITC- loss of revenue to
dept.
It was called as CENVAT
earlier.
Entry 2:

Land and Building

(a) any lease, tenancy, easement,
licence to occupy land is a
supply of services;
(b) any lease or letting out of
the building including a
commercial, industrial or
residential complex for business
or commerce, either wholly or
partly, is a supply of services.
2. Supply of goods or Entry 3
services or both between 3. Treatment or process
related persons or between
distinct persons as specified
in section 25, when made in
the course or furtherance of
business:

Provided that gifts not

exceeding fifty thousand
rupees in value in a
financial year by an employer
to an employee shall not be
treated as supply of goods or
services or both.

35
3. Supply of goods— (a) by a
principal to his agent where
the agent undertakes to
supply such goods on behalf
of the principal; or (b) by
an agent to his principal
where the agent undertakes to
receive such goods on behalf
of the principal.
4. Import of services by a
taxable person from a related
person or from any of his
other establishments outside
India, in the course or
furtherance of business.
4. Transfer of business assets
(a) where goods forming part of
the assets of a business are
transferred or disposed of by or
under the directions of the
person carrying on the business
so as no longer to form part of
those assets, whether or not for
a consideration, such transfer or
disposal is a supply of goods by
the person;
(b) where, by or under the
direction of a person carrying on
a business, goods held or used
for the purposes of the business
are put to any private use or are
used, or made available to any
person for use, for any purpose
other than a purpose of the
business, whether or not for a
consideration, the usage or
making available of such goods is
a supply of services;
(c) where any person ceases to be
a taxable person, any goods
forming part of the assets of any
business carried on by him shall
be deemed to be supplied by him
in the course or furtherance of
his business immediately before
he ceases to be a taxable person,
unless— (i) the business is
36
transferred as a going concern to
another person; or (ii) the
business is carried on by a
personal representative who is
deemed to be a taxable person.
5. Supply of services The
following shall be treated as
supply of services, namely:—
(a) renting of immovable
property;
(b) construction of a complex,
building, civil structure or a
part thereof, including a complex
or building intended for sale to
a buyer, wholly or partly, except
where the entire consideration
has been received after issuance
of completion certificate, where
required, by the competent
authority or after its first
occupation, whichever is earlier.

(c) temporary transfer or

permitting the use or enjoyment
of any intellectual property
right;

(d) development, design,

programming, customisation,
adaptation, upgradation,
enhancement, implementation of
information technology software;

37
(e) agreeing to the obligation to
refrain from an act, or to
tolerate an act or a situation,
or to do an act; and

(f) transfer of the right to use

any goods for any purpose
(whether or not for a specified
period) for cash, deferred
payment or other valuable
consideration.

6. Composite supply The following

composite supplies shall be
treated as a supply of services,
namely:—

(a) works contract as defined in

clause (119) of section 2; and

(b) supply, by way of or as part

of any service or in any other
manner whatsoever, of goods,
being food or any other article
for human consumption or any
drink (other than alcoholic
liquor for human consumption),
where such supply or service is
for cash, deferred payment or
other valuable consideration.

38
 25/07/2019

• Composite and mixed supply:

for mixed and composite supply, pricing has to be single. If not single price then it is neither.

Composite supply- u/s 2(30) r/w section 8

mixed supply- 2(74) r/w Section 8

(30) “composite supply” means a supply made by a taxable person to a recipient consisting of two or more
taxable supplies of goods or services or both, or any combination thereof, which are naturally bundled
and supplied in conjunction with each other in the ordinary course of business, one of which is a
principal supply;

Illustration.— Where goods are packed and transported with insurance, the supply of goods, packing
materials, transport and insurance is a composite supply and supply of goods is a principal supply;

 GST is the consumption based tax- where the goods are going to be consumed that’s why time and place
of supply are relevant.
 Education guide of CBC 2012- meaning of bundled services.

Mixed supply- if supply of two or more services but they are not naturally bundled is mixed supply. All
those which are not composite supply- is mixed supply.

(74) “mixed supply” means two or more individual supplies of goods or services, or any combination
thereof, made in conjunction with each other by a taxable person for a single price where such supply
does not constitute a composite supply.

39
Illustration.— A supply of a package consisting of canned foods, sweets, chocolates, cakes, dry fruits,
aerated drinks and fruit juices when supplied for a single price is a mixed supply. Each of these items
can be supplied separately and is not dependent on any other. It shall not be a mixed supply if these
items are supplied separately;

READ: Circular 11/11 of 2017- Relating to printing industry.

• Place of supply for goods

Important because deciding the rate to be applicable.

Section 10 of IGST- place of domestic supply of goods. Both recipient and supplier in India

Section 12 of IGST- place of domestic supply of services Both recipient and supplier in India

From Section 13 onwards- cross-border supply.

10. (1) The place of supply of goods, other than supply of goods imported into, or exported from India,
shall be as under,––

(a) where the supply involves movement of goods, whether by the supplier or the recipient or by any other
person, the place of supply of such goods shall be the location of the goods at the time at which the
movement of goods terminates for delivery to the recipient.

What is the invoice and how are they mentioning the supply in invoice is important. Helps in claiming
ITC.

26/07/2019

40
Section 10(1)- 5 specifications have been mentioned as to place of supply of goods, not for services/
import/ export.

(b) where the goods are delivered by the supplier to a recipient or any other person on the direction of
a third person, whether acting as an agent or otherwise, before or during movement of goods, either by
way of transfer of documents of title to the goods or otherwise, it shall be deemed that the said third
person has received the goods and the place of supply of such goods shall be the principal place of
business of such person;

(c) where the supply does not involve movement of goods, whether by the supplier or the recipient, the
place of supply shall be the location of such goods at the time of the delivery to the recipient;

(d) where the goods are assembled or installed at site, the place of supply shall be the place of such
installation or assembly;

(e) where the goods are supplied on board a conveyance, including a vessel, an aircraft, a train or a
motor vehicle, the place of supply shall be the location at which such goods are taken on board. (2)
Where the place of supply of goods cannot be determined, the place of supply shall be determined in such
manner as may be prescribed.

In case of import: location of the importer

In case of export: location of place outside the India

Export is rated as zero rated supply- means they are tax free- no rate of tax on that. (Section 11)

29.07.2019

• Place of supply for services

41
Section 12(2)- generic supply- basic rules shall apply.

Section 12(3)- (14) special supply- special rules shall apply.

If location of supplier of service in India and location of recipient of service is in India- Section
12(1) applies.

Location of supplier of service- defined in 12(15)

Location of recipient of service- Section 12(14)

12. (1) The provisions of this section shall apply to determine the place of supply of services where the
location of supplier of services and the location of the recipient of services is in India.

(2) The place of supply of services, except the services specified in sub-sections (3) to (14),––

(a) made to a registered person shall be the location of such person;

(b) made to any person other than a registered person shall be,–– (i) the location of the recipient where
the address on record exists; and (ii) the location of the supplier of services in other cases.

(3) The place of supply of services,–– (a) directly in relation to an immovable property, including
services provided by architects, interior decorators, surveyors, engineers and other related experts or
estate agents, any service provided by way of grant of rights to use immovable property or for carrying
out or co-ordination of construction work; or

(b) by way of lodging accommodation by a hotel, inn, guest house, home stay, club or campsite, by
whatever name called, and including a house boat or any other vessel; or

(c) by way of accommodation in any immovable property for organising any marriage or reception or matters
related thereto, official, social, cultural, religious or business function including services provided
in relation to such function at such property; or

42
(d) any services ancillary to the services referred to in clauses (a), (b) and (c), shall be the location
at which the immovable property or boat or vessel, as the case may be, is located or intended to be
located: Provided that if the location of the immovable property or boat or vessel is located or intended
to be located outside India, the place of supply shall be the location of the recipient.

Explanation.––Where the immovable property or boat or vessel is located in more than one State or Union
territory, the supply of services shall be treated as made in each of the respective States or Union
territories, in proportion to the value for services separately collected or determined in terms of the
contract or agreement entered into in this regard or, in the absence of such contract or agreement, on
such other basis as may be prescribed.

(4) The place of supply of restaurant and catering services, personal grooming, fitness, beauty
treatment, health service including cosmetic and plastic surgery shall be the location where the services
are actually performed.

(5) The place of supply of services in relation to training and performance appraisal

to,––

(a) a registered person, shall be the location of such person;

(b) a person other than a registered person, shall be the location where the services are actually
performed.

Eg. In hotels (lodging)

Upto 1000 Rs- GST exempted

From 1000-2500- 12%

43
More than 2500- 18%

Now after discounted value your price for hotel is 2400 but declared value is 3000

Declared value by the hotel matters for rate purpose but that tariff would apply on your actual tariff.

So 18% in 2400.

(6) The place of supply of services provided by way of admission to a cultural, artistic, sporting,
scientific, educational, entertainment event or amusement park or any other place and services ancillary
thereto, shall be the place where the event is actually held or where the park or such other place is
located.

(7) The place of supply of services provided by way of,—

(a) organisation of a cultural, artistic, sporting, scientific, educational or entertainment event

including supply of services in relation to a conference, fair, exhibition, celebration or similar
events; or

(b) services ancillary to organisation of any of the events or services referred to in clause (a), or
assigning of sponsorship to such events,––

(i) to a registered person, shall be the location of such person;

(ii) to a person other than a registered person, shall be the place where the event is actually held and
if the event is held outside India, the place of supply shall be the location of the recipient.

Explanation.––Where the event is held in more than one State or Union territory and a consolidated amount
is charged for supply of services relating to such event, the place of supply of such services shall be
taken as being in each of the respective States or Union territories in proportion to the value for

44
services separately collected or determined in terms of the contract or agreement entered into in this
regard or, in the absence of such contract or agreement, on such other basis as may be prescribed.

30/07/2019

(8) The place of supply of services by way of transportation of goods, including by mail or courier to,––

(a) a registered person, shall be the location of such person;

(b) a person other than a registered person, shall be the location at which such goods are handed over
for their transportation.

(9) The place of supply of passenger transportation service to,—

(a) a registered person, shall be the location of such person;

(b) a person other than a registered person, shall be the place where the passenger embarks on the
conveyance for a continuous journey: Provided that where the right to passage is given for future use and
the point of embarkation is not known at the time of issue of right to passage, the place of supply of
such service shall be determined in accordance with the provisions of sub-section

(2). Explanation.––For the purposes of this sub-section, the return journey shall be treated as a
separate journey, even if the right to passage for onward and return journey is issued at the same time.

45
(10) The place of supply of services on board a conveyance, including a vessel, an aircraft, a train or a
motor vehicle, shall be the location of the first scheduled point of departure of that conveyance for the
journey.

11.

(12) The place of supply of banking and other financial services, including stock broking services to any
person shall be the location of the recipient of services on the records of the supplier of services:
Provided that if the location of recipient of services is not on the records of the supplier, the place
of supply shall be the location of the supplier of services.

(13) The place of supply of insurance services shall,–– (a) to a registered person, be the location of
such person; (b) to a person other than a registered person, be the location of the recipient of services
on the records of the supplier of services.

(14) The place of supply of advertisement services to the Central Government, a State Government, a
statutory body or a local authority meant for the States or Union territories identified in the contract
or agreement shall be taken as being in each of such States or Union territories and the value of such
supplies specific to each State or Union territory shall be in proportion to the amount attributable to
services provided by way of dissemination in the respective States or Union territories as may be
determined in terms of the contract or agreement entered into in this regard or, in the absence of such
contract or agreement, on such other basis as may be prescribed.

31/07/2010

Value of goods

Value for the purpose of fixing the rate of excise duty- what should be value to charge excise duty. The
seller might have put up cost taking in profit etc. but that doesn’t mean that this value is binding on
revenue.

46
For a matter of valuation, there is provision of a direct appeal to SC under Excise Act and GST both.

VALUE UNDER EXCISE

Six methods:

1. Specific duty method- part of Central Excise Tariff Act

2. Tariff value method- Section 3(2) of Central Excise Act
3. Compound levy method- Rule 15 of Central Excise Rules
4. Production capacity method- Section 3A of Excise Act
5. MRP method- Section 4A of Excise Act
6. Transaction value method- Section 4 of Excise Act

All methods are mandatory for the manf. to follow only exception is point 6.

I. Specific Duty Method:

Most convenient, hassle free. Here the excise duty is not on the value of the goods- but on certain other
measurements such as per quintal basis or length basis or per unit basis.

Eg. Sugar- part of excise duty- under the Specific duty method- fixed on the per quintal basis. If I
clear 10 quintal of sugar form my factory and rate of excise is Rs. 300 per quintal then rate of excise
would be Rs. 3000. Sale value is not important.

Disadvantage as well may be to manf or revenue as case may be. When price increase revenue cannot claim
higher amount so frequently. If price reduces- loss to manufacturer.

47
Eg. cigarettes- duty is on length (in cms.) earlier in MRP method- because lot of discrepancies then
printed price is different and effective price is different. Therefore, fix some other criteria at a
higher price.

II. Tariff Value Method:

Section 3(2) of the excise Act

(2) The Central Government may, by notification in the Official Gazette, fix, for the purpose of levying
the said duties, tariff values of any articles enumerated, either specifically or under general headings,
in the First Schedule and the Second Schedule to the Central Excise Tariff Act, 1985 (5 of 1986) as
chargeable with duty ad valorem and may alter any tariff values for the time being in force. 

 Tariff value- central govt. by notification in the official gazette will determine what is speicifc
duty
 They have to then determine the tariff value- Price of ready made garment is Rs. 1000. 60% of tariff
value in ready-made garments then what 60% of?---> price fixed by the retailer/ manf is considered
as value and 60% of that is tariff value. Rs. 600. Back calculation has to be made- how much is the
value and how much is the tax.

What goods are covered under that and at what rate of value- has to be made clear in the notification.

III. Compound Levy Method:

Is an optional scheme subject to notification of the govt. if the manf. says he will not apply compound
levy method then he has the only option left is transactional value method.

48
On production capacity itself.

Composition levy- 1.5 Crores is the thresh hold. If your turnover is 1.5 crore- no requirement to obtain
GSTN number- you have to pay tax on turnover not on supply of goods.

As a dealer or manf- 1% as composition levy

Restaurant services 5% - if not an AC and turnover is below 500 Crores is covered under GST. If no GSTN
number- then cannot charge GST.

Not like other Indirect taxes- liability and incidence is on the same person.

threshold values in GST:

Exempted 40 Lakhs for supply of good and 20 Lakhs for supply of service

• CCE v. Venus Costing Ltd. AIR 2000 SC 1568

Compound levy though is optional but once you have opted the scheme you have to carry on the scheme for
at least one financial year.

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 • State of Kerala v. Builder’s association of India AIR 1992 SC 3640

Constitutional validity of Rule 15. HELD: CONSITUTUIONALLY VALID. Govt. can involve hassle free and
convenient method of assessment and simple method which is rough at the option of the assessee.
(optional) since it is optional, there is no question of challenging this.

Only disadvantage of compound levy is that no input tax credit can be claimed.

01/08/2019

IV. Production Capacity Method:

Section 3A added in 2008- to make it mandatory. Gutka industries in the production capacity method-
capacity of the machine is fixed by number of pouches. Say 5000 Rs. per month per pouching machine. Not
on the value but on the capacity of the machine regardless of how much you’re selling and at value you’re
selling.

V. MRP Scheme

There are 15 goods are covered under the specific duty, 5-6 in next, 2 in next and paan masala (gutka) in
PC method, some in MRP. So overall 200 about goods but what about the rest- TV method.

Conditions (if the govt. want to tax under the MRP Scheme):

i) Goods have to be notified in the third schedule of Central Excise Tariff Act
ii) The goods which are notified have to be covered under the Legal Metrology Act, 2009 and the rules
thereunder. Therefore, it also includes Drugs and Cosmetics Act. All kind of consumable items sold
in the packed forms and all kind of appliances tv, fridge etc. are covered under this method.
iii) This notification should provide the rate of abatement.

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iv) This provision is applicable only if the good is intended to be sold in retail sale. Same class or
description of the goods might be subject to different methods. (because of this wholesale and
retail difference).

If goods are covered in this method, no one can charge more than MRP in any case. Someone charging for
storing it cold, transporting etc. all is offence. MRP is inclusive of excise, sale tax, advertisement
charge, commission to retail, wholesaler, delivery, packing, transporting everything.

Rate of abatement eg. for chocolate is 40%, 60- excise would be calculated on this and 40 includes local
taxes, delivery, etc.

Section 4A- Explanation 1 of Central Excise Act

Explanation 1. - For the purposes of this section, "retail sale price" means the maximum price at which
the excisable goods in packaged form may be sold to the ultimate consumer and includes all taxes, local
or otherwise, freight, transport charges, commission payable to dealers, and all charges towards
advertisement, delivery, packing, forwarding and the like and the price is the sole consideration for
such sale:
Provided that in case the provisions of the Act, rules or other law as referred to in sub-section (1)
require to declare on the package, the retail sale price excluding any taxes, local or otherwise, the
retail sale price shall be construed accordingly.
Legal Metrology Act- important definitions
 Retail Dealer
 Retail package
 Retail Sale
 Retail Sale Price

• Jayanti Food Processing pvt ltd v. CCE 2007 8 SCC 34

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SC clubbed 9 different cases from different tribunals.

This company like Bislery- 200 ML in one bottle and selling 12 bottles- MRP on the set of 12 bottles of
200 ML-giving it to Jet airways. There is no MRP written on 200 ML water. Question whether retail sale or
wholesale?

Retail sale, jet airways as ultimate consumer because not selling further but providing for free in
flight.

• Nestle India Ltd. v. CCE

Package of Kitkat Chocolate was sold by the company to another company Pepsi under a condition of free
distribution on bottle of 150 ML of pepsi and no MRP was fixed on this chocolate.

All three conditions are fulfilled- covered in legal metrology act, rate of abatement given which is 40%.

Chocolate under third schedule of MRP.

Now is this retail sale or wholesale sale?

Advertised that with this bottle kitkat worth Rs. 10 would be given as FREE.

No MRP is written so technically Legal metrology not applicable so no application Section 4A

What about the case of free samples? Section 4 would apply or Section 4A?

If no MRP written, and not for retail sale written- then Section 4 will apply.

If MRP written, and no not for retail sale written- complete package in itself then Section 4A would
apply.

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Section 4A is not applicable if Section 4 is applicable “notwithstanding”.

• CCE v. Godrej Soaps 2006

If they can be separated without dismantling the packaging then individual item shall be valued. If they
cannot be separated without dismantling the packaging, the price on the whole package shall be considered
as MRP.

If two MRPs written say 15 and 13, one for Jodhpur other for outside Jodhpur, if 15 is crossed- then
lower MRP would be considered for MRP. If not crossed, higher MRP would be considered for excise duty,
even if consumed in Jodhpur because department cannot determine whether its consumed in Jodhpur or not.
(administrative convenience).

02/08/2019

CBC Circular 673/64/2002 (28/10/2002)

For MRP valuation- different aspects discussed.

If 4 conditions are applicable- then MRP provision is applied.

One view- Jayanti Food processing unsettled the law that before it it was assumed that MRP scheme would
apply if the conditions are fulfilled.

After the case- amended the Standard of weights and measures Act- that any institutional sale would be
exempted from MRP Scheme.

Small sachets (say shampoo)- not taxable- less than 10 gram/ ml- MRP though written but MRP scheme not
applicable. Sold by Standard of Weights and Measures Act. What about the whole string of sachets?

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 • CCE v. Kraftech Industries Ltd. AIR 2008 SC 2238

Same issue of 72 pieces of lip smoother in one string- tribunal allowed the exemption. Rule 34 of
Standard of Weights and Measures Act.

SC- Held- exemption clause under Rule 34 could apply if the commodity was sold by Standard and Weights
when weight is less than 10 gram/ ml. section 4A of the Act will have no application because it is multi
piece packaging (defined in Legal Metrology Act- containing two or more individual pack of the same
commodity… ). General Trade parlance applied- No consumer will buy 72 piece together. So not meant for
retail sale. SC said individual piece will be considered for package and if weight is less than 10 gram/
ml- it will be exempted from Legal Metrology Act, hence exempted from application of 4A- MRP Scheme.

• Cadbury v. CCE 2012

If you consider Jar as a unit- cannot call exemption of Legal Metrology Act- but if you consider
individual unit- exempted from application of Section 4A- SC held in light of Kraftech case- that
individual units shall be considered.

• Whirlpool of India v. UOI AIR 2008 SC 397

Legal Metrology Act will apply only on Packed Commodities.

Now question that whether refrigerator is a packed commodity or not?

Contention that Legal Metrology Act or Standard of Weights and Measures would not apply as refrigerator
is not a packed commodity.

• What is the meaning of Pre-packed commodity?

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There are 2 kinds of pre packed commodity- one is closed pack and other is open pack. Pre pack- packed in
an individual quantity by buyer not being there. You have to buy as per the information written on that.
Eg. (Maggie- cannot be opened- closed pack) Eg. (LED bulb, TV, AC- open pack). They contended fridge is
open packed commodity- can check the colour, functioning etc. hence, MRP has to be declared and valuation
to be as per MRP Scheme.

Advantageous to bring under MRP- so that more revenue can be collected.

Section 4A of Central Excise Act-

(4)   Where any goods specified under sub-section (1) are excisable goods and the manufacturer -

(a)     removes such goods from the place of manufacture, without declaring the retail sale price of
such goods on the packages or declares a retail sale price which is not the retail sale price as
required to be declared under the provisions of the Act, rules or other law as referred to in sub-
section (1); or

(b)     tampers with, obliterates or alters the retail sale price declared on the package of such goods
after their removal from the place of manufacture,

then, such goods shall be liable to confiscation and the retail sale price of such goods shall be
ascertained in the prescribed manner and such price shall be deemed to be the retail sale price for the
purposes of this section.

2 conditions put-

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 1. either the retail sale price not declared or
2. declared not as per law- Drugs control act or legal metrology act or
3. he write the MRP as per law but obliterates/ change the MRP

consequence is that

1. goods are liable for confiscation and the value of the goods are to be determined in a prescribed
manner
2. value shall be decided by the department not by the manufacturer
3. you’ll have to pay redemption fine

Rules of 2008- Determination Of Value Of Retail Sale Goods Rules.

Explanation  2. - For the purposes of this section, -

    (a)    where on the package of any excisable goods more than one retail sale price is declared, the
maximum of such retail sale prices shall be deemed to be the retail sale price;
    (b)    where the retail sale price, declared on the package of any excisable goods at the time of its
clearance from the place of manufacture, is altered to increase the retail sale price, such altered
retail sale price shall be deemed to be the retail sale price;
    (c)     where different retail sale prices are declared on different packages for the sale of any
excisable goods in packaged form in different areas, each such retail sale price shall be the retail sale
price for the purposes of valuation of the excisable goods intended to be sold in the area to which the
retail sale price relates.

• Central Excise (determination of retail sale price of excisable goods) Rules 2008

Notification NUMBER 13/ 2008 ISSUED ON MARCH 1 2008

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 VI. Transaction Value Scheme (Ad-valorem Duty)

Agreement price between the buyer and the seller.

Earlier discounts were permissible, but now under GST- unless the discounts are in the agreement or in
pre agree terms- than no discounts are available under GST.

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