Nature of central excise actBASIC CONDITIONS FOR EXCISE LIABILITY

Central Excise Act (CEA) excise duty is levied if: 1) There is a good. 2) Goods must be moveable 3) Goods are marketable 4) Goods are mentioned in the central excise tariff act (CETA). 5) Gods are manufactured in India Note- If production or manufacture is in special economic zone then no excise duty is levied. >Therefore we can say that excise duty is not levied on: Services such as doctors treating the patients, accountants preparing the accounts, in these cases service tax are levied. >Immovable goods such as roads, bridges and buildings. >Goods that are not mentioned in CETA; and >Goods manufactured or produced out of India. Meaning of central excise actCentral Excise duty is an indirect tax which is levied and collected on the goods/commodities manufactured in India. Generally, manufacturer of commodities is responsible to pay duty to the Government. This indirect taxation is administered through an enactment of the Central Government viz., The Central Excise Act, 1944 and other connected rules- which provide for levy, collection and connected procedures. The rates at which the excise duty is to be collected are stipulated in the Central Excise Tariff Act, 1985. It is mandatory to pay Central Excise duty payable on the goods manufactured, unless exempted eg., duty is not payable on the goods exported out of India.

SignificancesI. II. CONSTITUTIONAL BACKGROUND Constitution of India is foundation and source of powers to all laws in India. India is a Union of States.

III.

The structure of Government is federal in nature. Government of India (Central Government) has certain powers in respect of whole country.

Central Excise Act states that 'There shall be levied and collected in such manner as may be prescribed duties on all excisable goods other than salt which are produced or manufactured in India This definition of Central Excise duty is vital, because it clearly signifies that there are four basic conditions for levy of Central Excise duty. (1) The duty is on goods. (2) The goods must be excisable. (3) The goods must be manufactured or produced (4) Such manufacture or production must be in India. Unless all of these conditions are satisfied, Central Excise Duty cannot be levied.

Schemes of taxation in excise duty-

Constitutionally established scheme of Taxation Article 246[2] of the Indian Constitution, distributes legislative powers including taxation, between the Parliament and the State Legislature. Schedule numerates these subject matters with the use of three lists;

List - I entailing the areas on which only the parliament is competent to make laws, List - II entailing the areas on which only the state legislature can make laws, and List - III listing the areas on which both the Parliament and the State Legislature can make laws.

Separate heads of taxation are provided under lists I and II. There is no head of taxation in the Concurrent List (Union and the States have no concurrent power of taxation).[4] The list of Union heads of taxation and the list of State heads are given below:[4]

Central government
S. No. Parliament

Taxes on income other than agricultural income (List I, Entry 82)

Duties of customs including export duties (List I, Entry 83)

Duties of excise on tobacco and other goods manufactured or produced in India except (i) alcoholic liquor for human consumption, and (ii) narcotic drugs and narcotics)

Corporation Tax (List I, Entry 85)

Taxes on capital value of assets, exclusive of agricultural land, of individuals and companies, taxes on capital of companies (List I, Entry 86)

Estate duty in respect of property other than agricultural land (List I, Entry 87)

[edit]

State governments
S. No. State Legislature

Land revenue, including the assessment and collection of revenue, 1 the maintenance of land records, survey for revenue purposes and records of rights.

Taxes on agricultural income (List II, Entry 46)

Duties in respect of succession to agricultural income (List II, Entry 47)

Estate Duty in respect of agricultural income (List II, Entry 48)

Taxes on lands and buildings (List II, Entry 49)

Taxes on mineral rights (List II, Entry 50)

Taxes on entry of goods into a local area for consumption.

Taxes on the consumption or sale of electricity (List II, Entry 53)

10

Taxes on the sale or purchase of goods other than newspapers (List II, Entry 54)

Procedure before excise authorities1.Short title and commencement (A) authorized in writing by the Commissioner to act as an authorized representative;

2.Language of the Authority. (1)The language of the Authority shall be Hindi/English. Where any document is in a language other than Hindi or English, a Hindi/English translation thereof duly attested shall be filed along with the original document. 3. Powers of the Authority. (1) The Authority shall have the power to hear and determine all applications and petitions.

Powers and functions of the Secretary. (1) The Secretary shall be in overall charge of the office of the Authority and shall function under direct supervision of the Chairperson. (2) The Secretary shall (a) (b) have custody of the records and the official seal of the Authority; receive all applications and petitions filed before the Authority;

return original records to the person from whose custody they were requisitioned; (j) allow inspection of the records of the Authority

Signing of notices, etc. (1) Every requisition, direction, letter, authorization, or notice to be issued on behalf of the Authority, shall be signed by the Secretary. Mode of service of notices, etc. (1) The service of every notice or other document required to be served on or delivered to, any person in compliance with the orders of the Authority. Procedure for filing applications Procedure on receipt of an application Commissioner to be designated by the Board. Additional facts by way of a petition. Continuation of proceedings after the death,

Documentation Documentation plays a very important role in the execution of export contract. This process starts when the foreign buyer places the order with the exporter. exporter requires various documents both at pre-shipment stage and post shipment stage. Necessary documents should be prepared to comply with the rules and regulations of the exporting & importing country.

A-1

Pre-shipment export documentation:

Documentation up to the stage of custom clearance is known as pre-shipment export documentation. As according to Section 40 of Customs Act, 1962 The person in charge of conveyance, vessel, vehicle, aircraft etc. cannot permit the loading of cargo unless & until permission to export is given by Custom authorities on the basis of declarations and certificates.

Which Documents are required for exportation Application for certificate of origin Transport documents. Post Parcel Receipt Certificates of origin. Manufacturer's Certificate Insurance Certificate of Policy. Shipment advice

PROFORMA INVOICE: Intimation for inspection Shipping Instructions Shipping Order Insurance declaration

Preparation of draw back claim formIn cases where the amount or Rate of Drawback has not been determined, the exporter may export the goods under claim for Drawback provisionally by filing Drawback Shipping Bill, provided Customs/Central Excise duties. The exporter should apply in writing to the Central Government for determination of the amount or Rate Drawback within 60 (sixty) days from the date of Let Export Order given by the proper officer of Customs on the relevant Shipping Bill. The Central Government have however, allow a further period of 30 (thirty) days if it is satisfied that the manufacturer or exporter was prevented by sufficient cause from filing the application within sixty days.

The amount of Rate of Drawback determined in such cases is commonly known as Brand Rate of Drawback.

Submission of drawback claim formSubmission of Production Formula Production formula means a document detailing quantity of raw materials used for producing or manufacturing goods which are used in calculating raw material stock account for drawback. To submit the production formula, the following rules and conditions must be observed: The production formula is to be used by entrepreneurs or drawback claimers; Prior to the exportation, the importer is required to submit, to the Drawback Unit of a relevant Customs office, an application for production formula (Customs Form No. 96) with the lists of raw materials; lists of products or manufactured goods; production process; the quantity of raw materials to be used, including wastes (if any); samples of raw materials; samples of finished products; In case where it is necessary to examine a production process at a manufacture site, the importer must allow Customs officers to visit the site as appointed; and Approval of the application for production formula will be obtained within 30 working days from the date of receiving all documents required by the drawback law and regulation.

Central sales tax Central sales tax and state sales tax are not applicable in the case of export of goods out of India or imports into India. As per CST Act the sale or purchase of goods in the course of import or export takes place in the following situations Import of Goods into India (section 5(2) Sale or Purchase of goods is deemed to take place in the course of import of the goods into the territory of India only if

(1) Direct Import. (2) In the course of Import. Penultimate Sale for Export (section 5(3)) It means the sale preceding the sale occassioning export. (1) The last sale or purchase of any goods preceding export sale is deemed to be in the course of such export

Inter state sales tax Liability to pay Central Sales Tax[Section 6(1)]

-> The registered dealer, making an Inter State sale of goods is liable to pay Central Sales tax.

-> A dealer is liable to pay Central Sales tax on the Inter State Sale done by him, even if no tax is leviable under the State Sales laws Excemption A dealer is not liable to pay Central Sales Tax when, (1) Sale of electrical energy. (2) Sale to an exporter for the purpose of export. Exemption from Central Sales Tax on subsequent sale (section 6(2)) (1) Goods are transferred to Government. (2) Goods are transferred to a registered dealer Levy and collection of sales tax-

Introduction According to section 9(1), Government of India is empowered to levy and collect the Central sales tax payable by any dealer.

But , there is no separate Department for the collection of tax.

Appropriate State governments are empowered under section 9(2) to assess, reassess , collect and enforce payment of Central Sales Tax.
Appropriate Government to collect Central Sales Tax

(a) Central sales tax is to be collected by the appropriate state government. (b) CST is collected from the movement of goods commenced even if the sales have been effected by the transfer of documents of title of goods. (c) when the goods are still in the movement from one state to another.

Collection of Central sales tax if subsequent sales is not exempt

The CST on subsequent sale is collected by the dealer in the state as follows

(1) When the subsequent sale is done by a registered dealer.

(2) When the sale is made by an unregistered dealer.

Consignment of sales tax-

Instead of making direct sales, individuals and businesses often place goods with others who make sales for them. These types of transactions are commonly called consignment sales. In most cases, the owner of the item (the consignor), and the seller (the consignee), need to register with us to obtain a sellers permit, and report and pay sales on their returns. However, if you make no more than two qualifying sales or consignments in any twelvemonth period, your sales are generally considered occasional sales, and you do not have to register for a sellers permit or report those two sales. I sell items placed with me on consignment. When is my consignment sale considered a retail sale? You are responsible for obtaining a sellers permit and paying the sales tax on the retail selling price of consignment sales when you: Have possession or control of the item you are selling, and Can transfer ownership or use of the item to the buyer without further action on the part of the owner.

For example, you may own a jewelry store where you sell jewelry on consignment. Typically, the owner of the jewelry will bring it to you and sign an agreement that authorizes you to sell the item and transfer ownership to the buyer. You are considered the retailer of jewelry you sell in this way and must pay sales tax based on your retail selling price.

CENVATCenvat, or the Central Value Added Tax, is a component of the tax structure employed by many countries in the western section of Europe. The inspiration for Cenvat is derived from a tax system that is generally referred to as VAT, or a Value Added Tax. Both Cenvat and VAT are designed with the express purpose of minimizing a cascading effect when it comes to taxes on income, goods and services, and other forms of tax revenue. The aim of Cenvat is to aid in maintaining a tax structure that is considered equitable for both the citizens incurring the tax and the government that is collecting the tax revenue. One notable example of Cenvat can be found in India. Originally designated as a modified value added tax, this approach placed some limits on the type of taxation that could occur on goods used in the manufacturing process of finished consumer products. Modvat was later designated as Cenvat, and continued to function as a means of promoting industry within the country while still receiving some form of tax it is helpful to think of Cenvat as an incentive that encourages the production of goods within the country, rather than outsourcing the production to countries where the economic and tax climate is more favorable. By providing a credit on the taxes associated with materials used in the creation of finished goods, the government makes it more attractive for manufacturers to maintain operations within the country. This of

course leads to the creation of more jobs for the citizens within the community and provides income for the purchase of products within the country. By reducing the tax burden for the end user of the materials, Cenvat opens the door to a more stable economy within the country, and a better standard of living for its citizens. Under the best of circumstances, the application of Cenvat can accomplish three goals. First, the structure for Cenvat requires a tax collection procedure that is fairly transparent and easy to follow. Second, the benefits associated with Cenvat help to cut down on tax evasion and creative bookkeeping. Last, the use of Cenvat ultimately leads to an overall increase in collected tax revenues by keeping more citizens employed and thus able to pay taxes on salary and wages.

Fringe benefit tax-

The Finance bill, 2005 has introduced Chapter XII-H providing for the levy of Income-tax on fringe benefits offered by employers to their employees. The Finance Minister Mr. P. Chidambaram while presenting the budget in the year 2005 had made the statement that I have looked in to the present system of taxing the perquisites and I have found that many perquisites are disguised as fringe benefits and escape tax. Neither the employer nor the employee pays any tax on these benefits, which are certainly of considerable material value. At present where the benefits are fully attributable to the employee they are taxed in the hands of the employee: the position will continue. He also justifies that this tax has to continue to provide equity in taxation in this year while moving the Finance Bill 2006. The Fringe Benefit Tax is a tax on expenditure incurred by employers on their employees and thus strictly speaking does not constitute a tax on income. It is for consideration whether the cost of the fringe benefits which constitutes the tax base should be deemed to be income under the Income-tax Act. A similar provision is contained in section 115JB. The concept of presumptive taxation has become the order of the day. The fringe benefit tax was tackled to a certain amounts in the hands of the employees by way of valuation of perquisites using certain elements of presumption.

The Finance Act 2005 covers the concept of taxation of fringe benefits in the nature of personal elements in the hands of the employer. The Amendments carried out by the Finance Act 2006 gave certain relief to a group of employers. Fringe Benefit Tax [Section 115w (B)] Fringe Benefit Tax or Tax means the tax chargeable under section 115WA.

Fringe Benefit Tax helps in eliminating discretion. Under FBT, scope for evasion is very very limited. FBT will increase effective rate of corporate tax by 1 to 1.5%. FBT is one method of requiring corporates to pay a little more tax. Applicability The Fringe Benefit tax is a tax to be paid by an employer in addition to the income tax payable for every assessment year starting from the assessment year 2006-07. The tax is to be paid in respect of the fringe benefits provided or deemed to have been provided by an employer to his employees. The liability to pay Fringe Benefit Tax shall be there even when there is no liability to pay income tax by an employer. Accordingly, all those who fall within the definition of employer shall be required to pay tax on the fringe benefits provided to the employees irrespective of the fact that income, which an employer is earning, is exempt under the Income Tax Act or there is a loss. Accordingly, those entities which are claiming exemption under Section 10 such as mutual funds, undertakings in free trade zone claiming exemption under Section 10A, export-oriented units claiming exemption under Section 10B or Section 10BA, shall be liable to pay Fringe Benefit Tax. The Fringe Benefit Tax is a liability of the tax of the employees to be born by the employer. That is why even loss making entities and entities whose income is exempt shall also be required to pay Fringe Benefit

Basics of Indian income tax act

Taxes in India are of two types, Direct Tax and Indirect Tax. Direct Tax, like income tax, wealth tax, etc. are those whose burden falls directly on the taxpayer. The burden of indirect taxes, like service tax, VAT, etc. can be passed on to a third party.

Income Tax is all income other than agricultural income levied and collected by the central government and shared with the states. According to Income Tax Act 1961, every person, who is an assessee and whose total income exceeds the maximum exemption limit, shall be chargeable to the income tax at the rate or rates prescribed in the finance act. Such income tax shall be paid on the total income of the previous year in the relevant assessment year. The total income of an individual is determined on the basis of his residential status in India.

Residence Rules
An individual is treated as resident in a year if present in India

I.
II.

for 182 days during the year or for 60 days during the year and 365 days during the preceding four years. Individuals fulfilling neither of these conditions are nonresidents. (The rules are slightly more liberal for Indian citizens residing abroad or leaving India for employment abroad.)

A resident who was not present in India for 730 days during the preceding seven years or who was nonresident in nine out of ten preceding yeas I treated as not ordinarily resident. In effect, a newcomer to India remains not ordinarily resident. For tax purposes, an individual may be resident, nonresident or not ordinarily resident.

Non-Residents and Non-Resident Indians

Residents are on worldwide income. Nonresidents are taxed only on income that is received in India or arises or is deemed to arise in India. A person not ordinarily resident is taxed like a nonresident but is also liable to tax on income accruing abroad if it is from a business controlled in or a profession set up in India. Capital gains on transfer of assets acquired in foreign exchange is not taxable in certain cases. Non-resident Indians are not required to file a tax return if their income consists of only interest and dividends, provided taxes due on such income are deducted at source. It is possible for non-resident Indians to avail of these special provisions even after becoming residents by following certain procedures laid down by the Income Tax act.

Application of fringe benefit taxApplication of FBT a dilemma : # FBT applies to non-resident employees of the Indian company: Indian company is liable to pay for non-resident. As the non-resident employees are none other than the employees who are deputed by the Indian company to go to foreign country. The deputed employees becomes non-resident but still they continue to be the employees of Indian company, therefore, non-resident employees comes within the ambit of employees for whom Indian company is liable to pay tax. # This provision is introduced as a presumption tax so as not to avoid incentive accounting practices. There is a possibility of shift of classification of expenditure from one heads of account to another . Therefore, in order to avoid the leakage of tax and evasion of tax this FBT provision has come into play.

Fbt will be onFBT will be taxed[3] on(a) entertainment; (b) festival celebrations; (c) gifts; (d) use of club facilities; (e) provision of hospitality of every kind to any person whether by way of food and beverage or in any other manner, excluding food or beverages provided to the employees in the office or factory; (f) maintenance of guest house; (g) conference; (h) employee welfare; (i) use of health club, sports and similar facilities;

(j) sales promotion, including publicity; (k) conveyance, tour and travel, including foreign travel expenses; (l) hotel boarding and lodging;

Service tax returns and appealsService Tax Appeals Any person may appeal to the Commissioner of Central Excise (Appeals) in the following cases: If he is aggrieved by any assessment order passed by the Assistant or Deputy Commissioner of Central Excise; Against an order passed under Section 71 (Assessment) or S 72 (best judge assessment) or S 73 (escaped assessment); If denying his liability to be assessed.

An assessee aggrieved by the order of Assistant Commissioner/Deputy Commissioner in respect of Service Tax, may file an appeal to the Commissioner of Central Excise (Appeals) in Form ST-4, in duplicate along with a copy of order appealed against. The appeal should be presented within three months from the date of receipt of the decision or order of the Central Excise Officer. Any person aggrieved by any order passed by any assessing officer or adjudicating authority below the rank of Commissioner may file an appeal before the Commissioner, Central Excise (Appeals). 1. The appeal shall be filed in the prescribed form ST-4 2. It shall be presented within three months from the date of receipt of order which is being appealed against. If the Commissioner of Central Excise (Appeals) is satisfied that the appellant was prevented by sufficient cause, from presenting the appeal within the statutory period of three months, he may allow the appeal to be presented within a further period of three months. 3. It should be filed in duplicate. 4. It should be accompanied by a copy of the order appealed against.