Excise duty is indirect tax. means the final consumer only bear the tax levy.

it levied on manufactured goods at the time crossing the factory gate excise duty = input raw materials (including excise duty on that goods) + factory & other processing cost X 8% +( 2% of that 8%) + (1% of that 8%) the excise duty of that raw material input is called CENVAT CREDIT

EXAMPLE: I bought from you raw material of 216480/- include excise duty (Rs.16480) further I processed with Rs. 50000/I sold the goods Rs.324720 with profit & excise duty (Rs.24720) I only paid to the excise department Rs. 8240/- i.e. (24720-16480)

Practical Examples on Cenvat

Question An assessee cleared various manufactured final products during June 2007. The duty payable for June 2007 on his final products was as follows Basic Rs 2,00,000 Education Cesses As applicable. During the month, he received various inputs on which total duty paid by suppliers of inputs was as follows Basic duty Rs 50,000, Education Cess Rs 1,000, SAH education Cess Rs 500. Excise duty paid on capital goods received during the month was as follows Basic duty Rs 12,000. Education Cess - Rs 240. SAH education cess - Rs 120. Service tax paid on input services was as follows Service Tax Rs 10,000. Education cess Rs 200 SAH Education Cess - Rs 100. How much duty the assessee will be required to pay by GAR-7 challan for the month of June 2007, if assessee had no opening balance in his PLA account? What us last date for payment? Answer Education Cess payable on final products is Rs 4,000 (2% of Rs 2,00,000). SAH education cess payable is Rs 2,000. The Cenvat credit available for June 2007 is as follows Description Basic duty Service Tax Education Cess 1,000 120 SAH Education Cess 500 60

Inputs Capital Goods (50% will be eligible and balance next year) Input Service Total

50,000 6,000

56,000

10,000 10,000

200 1,320

100 660

Credit of Rs 66,000 (56,000 + 10,000) can be utilised for basic duty Credit of education cess and SAH education cess can be utilised only for payment of education cess and SAH education cess on final product only. Hence, duty payable through GAR-7 challan for June 2007 is as follows Basic Duty Rs Education Cess Rs 4,000 1,320 2,680 SAH Education Cess Rs 2,000 660 1,340

(A) Duty payable (b) Cenvat Credit Net amount payable (A-B)

2,00,000 66,000 1,34,000

Last date for payment is 5th July, 2007. Question - In aforesaid example, calculate duty payable by GAR-7 challan if assessee had following balance in his PLA account on 6-6-2007 (after debiting utilised amount for payment of duty for May 2007) - Basic duty - Rs 1,70,000, Service tax - Rs 30,000. Education Cess - Rs 4,000. SAH education Cess Nil. Answer - If credit was available on 1-6-2007, the total Cenvat credit available for June 2007 is as follows Description Basic duty Rs 1,70,000 50,000 6,000 Service Tax Rs 30,000 Education Cess Rs 4,000 1,000 120 SAH Education Cess Rs Nil 500 60

Opening Balance Inputs Capital Goods (50% will be eligible and balance next year) Input Service Total

2,26,000

10,000 40,000

200 5,320

100 660

The duty payable will be as follows Hence, duty payable through GAR-7 challan for June 2007 is as follows Basic Duty Rs Education Cess Rs 4,000 5,320 SAH Education Cess Rs 2,000 660

(A) Duty payable (b) Cenvat Credit (basic plus service tax)

2,00,000 2,66,000

Net amount payable (A-B)

(-66,000)

(-1,120)

1,340

The credit of education cess of Rs 1,120 is to be carried forward since the credit cannot be utilised for payment of any other duty. Credit of basic duty can be utilised for payment of SAH education cess. Hence, the balance left in basic duty account will be Rs 64,660. Thus, no excise duty is required to be paid for the month of June 2007. Balance carried forward will be as follows - (a) Basic duty - Rs 64,660 (b) Education Cess - Rs 1,120. Question - An assessee cleared his manufactured final products during January 2008. The duty payable for the month on his final products was as follows: Basic duty Rs. 44,000, NCCD Rs. 2,000, Education cesses As applicable. During the month, he received various inputs on which total duty paid by suppliers of inputs was as follows - Basic duty Rs. 40,000 plus applicable education cess. Service tax paid on input services was as follows: Service tax Rs. 8,000. Education cess Rs. 160. There is no opening balance in his PLA account. How much duty the assessee will be required to pay through account current for the month of January 2008? (ICWA Inter June 2006 adopted) Education Cess payable on final products is Rs 920 (2% of Rs 46,000). SAH education cess payable on final products is Rs 460. Education cess on his inputs is Rs 800 (2% of Rs 40,000)> SAH education cess on inputs is Rs 400. The Cenvat credit available for the month of January, 2008 is as follows Description Basic duty 40,000 40,000 8,000 8,000 Service Tax Education Cess 800 160 960 SAH Education Cess 400 80 480

Inputs Input Service Total

Credit of Rs 48,000 (40,000 + 8,000) can be utilised for payment of any duty. Credit of education cess of Rs 960 can be utilised only for payment of education cess on final product. Credit of SAH education cess of Rs 960 can be utilised only for payment of education cess on final product. Basic Duty NCCD Education SAH Rs Cess Rs Education Cess Rs (A) Duty 44,000 2,000 920 460 payable (b) Cenvat 48,000 960 480 Credit (basic plus service tax) Net (-4,000) (-40) (-20) amount payable (A-B) The credit of basic duty and service tax of Rs 4,000 can be utilised for payment of NCCD of Rs 2,000. Hence for the month of January, 2008, assessee is not required to pay any duty through PLA.

He will carry forward following balances for February 2008 - Basic duty - Rs 2,000. Education Cess - Rs 40. SAH education Cess - Rs 20. Question An assessee cleared his manufactured final products during July 2007. The duty payable for July 2007 on his final products was as follows Basic Rs 49,000. NCCD Rs 1,000. Education Cess As applicable. During the month, he received various inputs on which total duty paid by suppliers of inputs was as follows Basic duty Rs 40,000, Education Cess Rs 800, SAH education Cess - Rs 400. Service tax paid on input services was as follows Service Tax Rs 8,000. Education cess Rs 160, SAH education Cess - Rs 80. How much duty the assessee will be required to pay by GAR-7 challan for the month of July 2007, if there was no opening balance in his PLA account? Kept for self study. Question - Sona Ltd. purchased a lathe machine at a cum-duty price of Rs. 18,63,680. The excise duty rate charged on the said machine was 16% plus education cess 2% plus secondary and higher education cess 1%. The machine was purchased on 1-7-2007 and was disposed of on 30-09-2009 for a price of Rs. 10,00,000 in working condition as second hand machine. Calculate the amount of CENVAT credit allowable for the financial years 2007-08 and 200809 and also specify the amount payable towards CENVAT credit already taken at the time of disposal of the machinery in the year 2009-10 (CA Final New Syllabus November 2010) Answer Kept for self study.