Indirect tax 2013

ED -RATES
Basic Excise Duty is levied u/s 3(1) of Central Excise Act. The section is termed as ‘charging section’.
General rate of duty of central excise on non-petroleum products has been increased from 10%
to 12% w.e.f. 17-3-2012. (The duty rate was 14% during 1-3-2008 to 6-12-2008, which was reduced
to 10% w.e.f. 7-12-2008 and to 8% w.e.f. 24-02-2009). This duty is applicable to majority of excisable
goods. There is partial exemption to a few products.
• Education Cess @ 2% of excise duty under section 93 of Finance (No. 2) Act (w.e.f. 9-7-2004).
• Secondary and Higher Education Cess (S&H Education Cess) @ 1% of the total duties of excise
vide section 136 read with section 138 of Finance Act, 2007 w.e.f. 1-3-2007.
Thus, total excise duty is 12.36%% in majority of the cases.
Example 2: Basic Excise Duty = 12%
Add: 2% Edu. Cess on 12% = 0.24%
Add: 1% S & H Edu. Cess on 12% = 0.12%
Total effective rate of duty = 12.36%
National Calamity Contingent Duty – A ‘National Calamity Contingent Duty’ (NCCD) has been imposed
vide section 136 of Finance Act, 2001 on some products. NCCD of 1% has been imposed on mobile
phones w.e.f. 1-3-2008.
In addition, cesses and duties have been imposed on some specified products.
2

2.5.1 What is the Taxable Event?
The taxable event is of great significance in levy of any tax or duty.
Excise duty is leviable on all excisable goods, which are produced or
manufactured in India. Thus, ‘manufacture or production in India’ of an
excisable goods is a ‘taxable event’ for Central Excise. It becomes
immaterial that duty is collected at a later stage i.e. at the time of
removal of goods. Therefore, removal from factory is not the ‘taxable event’.
3

5.5 COLLECTION OF EXCISE DUTY
FOR COLLECTION OF CENTRAL EXCISE DUTY, THE FOLLOWING TWO
PROCEDURES ARE FOLLOWED BY THE CENTRAL EXCISE
DEPARTMENT:
(I) PHYSICAL CONTROL PROCEDURE: APPLICABLE TO CIGARETTES
ONLY. IN THIS CASE, THE ASSESSMENT PRECEDES
CLEARANCE, WHICH TAKES PLACE UNDER THE SUPERVISION OF
CENTRAL EXCISE OFFICERS;
(II) SELF-REMOVAL PROCEDURE: APPLICABLE TO ALL OTHER
GOODS PRODUCED OR MANUFACTURED WITHIN THE
COUNTRY. UNDER THIS SYSTEM, THE ASSESEE HIMSELF
DETERMINES THE DUTY LIABILITY ON THE GOODS AND
CLEARS THE GOODS.
4

Example 29: Raj & Co. furnish the following expenditure incurred by them and want you to find
the assessable value for the purpose of paying excise duty on captive consumption. Determine
the cost of production in terms of rule 8 of the Central Excise Valuation (Determination of Price
of Excisable Goods) Rules, 2000 and as per CAS-4 (cost accounting standard) (i) Direct material
cost per unit inclusive of excise duty at 12.36% - ` 1,320, (ii) Direct wages - ` 250, (iii) Other direct
expenses - ` 100, (iv) Indirect materials - ` 75, (v) Factory Overheads - ` 200, (vi) Administrative
overhead (25% relating to production capacity) ` 100 (vii) Selling and distribution expenses - ` 150,
(viii) Quality Control - ` 25, (ix) Sale of scrap realized - ` 20, (x) Actual profit margin - 15%.
5

SOLUTION
Answer:
Particulars Amount (`)
(i) Direct Material (exclusive of Excise Duty) [1,320 x 100/112.36] 1174.80
(ii) Direct Labour 250.00
(iii) Direct Expenses 100.00
(iv) Works Overhead [indirect material (75) plus Factory OHs (200)] 275.00
(v) Quality Control Cost 25.00
(vi) Research & Development Cost Nil
(vii) Administration Overheads (to the extent relates to production activity) 25.00
Less: Realizable Value of scrap (20.00)
Cost of Production 1,829.80
Add 10% as per Rule 8 183.00
Assessable Value 2,012.80
6

EXAMPLE 31: HERO ELECTRONICS LTD. IS ENGAGED IN THE
MANUFACTURE OF COLOUR TELEVISION SETS HAVING ITS
FACTORIES AT KOLKATA AND GUJARAT. AT KOLKATA THE COMPANY
MANUFACTURES PICTURE TUBES WHICH ARE
STOCK TRANSFERRED TO GUJARAT FACTORY WHERE IT IS
CONSUMED TO PRODUCE TELEVISION SETS. DETERMINE THE
EXCISE DUTY LIABILITY OF CAPTIVELY CONSUMED PICTURE TUBES
FROM THE FOLLOWING INFORMATION: - DIRECT
MATERIAL COST (PER UNIT) ` 800; DIRECT LABOUR ` 100;
INDIRECT LABOUR ` 50; DIRECT EXPENSES ` 100;
INDIRECT EXPENSES ` 50; ADMINISTRATIVE OVERHEADS ` 50;
SELLING AND DISTRIBUTION OVERHEADS ` 100.
ADDITIONAL INFORMATION: - (1) PROFIT MARGIN AS PER THE
ANNUAL REPORT OF THE COMPANY FOR 2012-13
WAS 12% BEFORE INCOME TAX. (2) MATERIAL COST INCLUDES
EXCISE DUTY PAID ` 73 (3) EXCISE DUTY RATE
APPLICABLE IS 12%, PLUS EDUCATION CESS OF 2% AND SHEC @
1%.
7

ANSWER: COST OF PRODUCTION IS REQUIRED TO BE COMPUTED AS PER CAS-4. MATERIAL COST IS REQUIRED
TO BE EXCLUSIVE OF CENVAT CREDIT AVAILABLE.
PARTICULARS TOTAL COST (`)
1 MATERIAL CONSUMED (NET OF EXCISE DUTY) (800 – 73) 727
2 DIRECT WAGES AND SALARIES 100
3 DIRECT EXPENSES 100
4 WORKS OVERHEADS 100
5 QUALITY CONTROL COST
6 RESEARCH AND DEVELOPMENT COST
7 ADMINISTRATIVE OVERHEADS (RELATING TO PRODUCTION CAPACITY) 50
8 TOTAL (1 TO 7) 1,077
9 LESS - CREDIT FOR RECOVERIES/SCRAP/BY-PRODUCTS/MISC INCOME -
10 COST OF PRODUCTION (8-9) 1,077
11 ADD - 10% AS PER RULE 8 108
12 ASSESSABLE VALUE 1,185
13 EXCISE DUTY @ 12% OF ` 1,185 142.2
14 EDUCATION CESS @ 2% OF ` 142.2 2.844
15 SHEC @ 1% ON ` 142.2 1.422
.’.TOTAL DUTY LIABILITY = ` (142.2 + 2.844 + 1.422) = ` 8 TOTAL (1 TO 7) 1,077
= ` 146.466
NOTE - (1) INDIRECT LABOUR AND INDIRECT EXPENSES HAVE BEEN INCLUDED IN WORKS OVERHEAD (2) IN
146.466
NOTE - (1) INDIRECT LABOUR AND INDIRECT EXPENSES HAVE BEEN INCLUDED IN WORKS OVERHEAD (2) IN
8

32: A Trader supplies raw material of ` 1,150 to processor. Processor processes the raw
material and supplies finished product to the trader. The processor charges ` 450, which include ` 350
as processing expenses and ` 100 as his (processor’s) profit. Transport cost for sending the raw material
to the factory of processor is ` 50. Transport charges for returning the finished product to the trader
from the premises of the processor is ` 60. The finished product is sold by the trader at ` 2,100 from
his premises. He charges Vat separately in his invoice at applicable rates. The rate of duty is 12% plus
education cess as applicable. What is the AV, and what is total duty payable ?
Answer: Assessable Value is to be calculated on basis of selling price of trader which is ` 2,100 (cumduty).
This price is to be treated as inclusive of excise duty. Hence, assessable value will be (2,100 x
100)/112.36 i.e. . 1,868.99. Basic excise duty @ 12% will be ` 224.28. Education Cess (2%) is ` 4.49 and
Secondary and Higher Education Cess is ` 2.24. Total duty payable will be ` 231.01 .9
9

C E N T R A L E X C I S E V A L U A T I O N
Compute the cost of production of under-mentioned product for
Captive consumption:
1) Direct material 11,648 (2)Direct wages & salaries Rs 8,400
2) Works overheads 6,200 (3) Quality control costs- 3,500
3) R&D costs 2,400 (4)Admn. Works 4,100
4) Selling & dist 1,600 (5)Realisable value of scrap 1,200
5) Admn. Overhead relate to production costs
6) Mat.costsincludes vat Rs 1648/=
10

SOLUTION
1 Raw material – vat Rs 10,000
2 Wages & salaries 8,400
3 Works O.H. 6,200
4 Quality costs 3,500
5 R&D costs 2,400
6 Admn. O.H. 4,100
7 Total 34,600
8 Less scrap (- ) 1,200
Cost of production 33,400
Value Under rule –(8)( cost +10%) 36,740
11

COMPUTATION OF TRANSACTION VALUE
WHEN
SALE PRICE INCLUDES ED & ST
The cum duty price of a product is 10,62,024/= It includes ED 4% + education cess
Etc + ST 2%.Find A.V. & ED & ST
Sales Tax = 10,62,024 * (2/102) = 20,824
Price- ST = 10,62,024- 20,824 = 10,41,200
ED= 10,41,024* (4.12/104.12)= 41,200
A.V. = 10,00,000/=
12

OUTWARD HANDLING CHARGES & A.V.
Compute A.V. from the following information :
1 Whole sale price including ST Rs 15,000
2 Normal sec.packing 1,000
3 Cost of spl. Sec.packing 1,500
4 Cost –durable& returnable Packing 1,500
5 Freight 750
6 Ins 200
7 Trade discount 1,000
8 Rate of duty 12%. St Rs 2,000
13

SOLUTION
1) Price inclusive of duty Rs. 15,000
2) Deductions (i) sales tax 2000
3) Durable &returnable packing 1500
4) Freight 750
5) Insurance 200
6) Trade dis 1,000 5450
7) Total 9,550
8) ED @ 12.36% 1051
9) A.V. 8,499
14

SSI EXEMPTION LIMIT
From the following details ascertain whether MN&O is eligible for SSI exemption:
i)Clearances of branded goods Rs (lakhs)- 60
ii) Export sale to nepal 80
iii) Export sale to USA & canada 120
iv) Clearance of goods based on capacity 70
v) Clearance based on MRP ( goodss eligible for
(30 % abatement) 200
vi)Job work u/ notification 214/86 CE 60
The building was occupied by MNO ltd by 1/10/2012.
The privious tenant cleared goods from 1/04/2012/
To 30/09/2012 to the value of Rs 120 lakhs .
15

SOLUTION
1 Branded goods NC
2 To Nepal 80
3 To USA & CANADA nil
4 Clearance based on Annual cap 70
5 On MRP 140
6 Job Work U/ 214/86-CE nil
7 Previous tenant 120
TOTAL 410
As the clearances for home consumption exceeds 400 lakhs MNO is not
eligible for SSI Exemption
16

SOLVE
Example 34: A manufacturer has appointed brokers for obtaining orders from wholesalers.
The brokers procure orders for which they get brokerage of 5% on selling price.
Manufacturer sells goods to buyers at ` 250 per piece. The price is inclusive of State Vat
and Central excise duty. State Vat rate is 4% and excise duty rate is 12% plus education
cess and SAH education cess as applicable. What is the AV, and
what is duty payable per piece?
17

SOLUTION
Answer: Assume that Assessable Value = x. No deduction is available in respect of brokerage paid to
third parties from Assessable Value.
Since Excise duty is 12%, education cess is 2%, SAH education cess is 1% and State Vat rate is 4%,
price including excise will be 1.1 236x.
State Vat @ 4% of 1 .1236x is 0.0449x. Hence, price inclusive of sales tax and excise duty will be
1.1 685x.
Now, 1.1685x = ` 250.00
Hence, X = ` 213.95
Check the answer as follows –
Assessable Value = ` 213.95
Add duty @ 12.36% of ` 213.95 = ` 26.44
Add State Vat @ 4% on ` 240.39 (213.95+26.44) = ` 9.62
Total Price (Including duty and tax)
(213.95+26.44+9.62) = ` 250.00
18

PRODUCT NOT COVERED BY SEC .4A
Example 35: Find Assessable Value and duty payable. The product is not covered under section 4A.
Maximum Retail Trade Price : ` 1,100 per unit, State Vat, Octroi and other Local Taxes: 10% of net price,
Cash Discount :2%, Trade Discount: 8%, Primary and Secondary packing cost included in the above
MRP: ` 100, Excise duty rate: 12% ad valorem plus education cesses as applicable.
Answer: Cash discount ` 22 (2% of ` 1,100) and trade discount ` 88 [8% of ` 1,100] are available as
deduction. Packing cost is not allowable as deduction. Hence, price of excise purposes is ` 990. [` 1,100
– 22 – 88]. — Now, if X is the assessable value, excise duty is 0 1 .1236x. State Vat and local taxes
@ 10 % of 1 .1236x will be 0.1236x and price including Excise duty is inclusive of excise duty and sales
tax will be 1 .2360x.
Now, 1 .2360 x = ` 990.00
Hence, x = ` 800.97
Excise Duty @ 12.36% of ` 800.97 x = ` 99.00
Check the answer as follows Assessable Value = ` 800.97
Add duty @ 12.36% of ` 800.97 = ` 99.00
Add State Vat @ 10% on ` 899.97 = ` 90.00
(800.97+99)
Total Price (After allowable deductions) = ` 989.97 or ` 990
19

Q.3-P/46
Mahesh ltd started business on 1/06/2010.It availed SSI exemption for 2010-11.
The following details are available for the year.
1)Inputs purchased 12,500 kg @ rs 1.190.64. inclusive of ED @ 10.3%-1,48,83,000/=
2)Capital goods purchased on 31/05/2010, Rs 80,90,400/=
3)Finished goods sold (at uniform rate thro out the year) Rs 3,00,00,000/=
You are required to calculate the amount of ED payable during the year 2010-11
Selling price is exclusive of CE which is 10..30%.There is no process loss.The input output ratio 1:2..
20

SOLUTION
21
Duty paid on inputs 1)RM = 148,83,000 X (10.3/110.3) = 13,89,800
2)Machinery 980,09,400 X ( 10.3/110.3)= 747,931
Total =21,37,731.
Duty payable : as the turn over is less than 400 laks he need have to pay duty upto 150 lakhs
& therefore may not avail cenvat credit but on crossing the limit he can avail 50% the entire
Credit ,i.e. is Rs 10,68,865.50
Duty payable on 150 lakhs = 150,00,000 X 10.3/100= 15,45,000
Duty after adjusting credit = 15,45,000 – 10,68,865.50 = 476, 134.

SOLVE
22
Example 37: M/s. XYZ Ltd., sold machinery to Mr. Kapoor at a price of ` 5 lakhs on 15th June, 2012 and
the same was removed from the factory at Kolkata. The rate of excise duty applicable is 12.36% on the
date of removal. Mr. Kapoor refused to take delivery of the machine when it reached his destination.
In the meantime, M/x. XYZ Ltd. increased the prices of the similar type of machinery to ` 6 lakhs with
effect from 16th June, 2012. The machinery as refused by Mr. Kapoor has been sold on 20th June 2012
to Mr. Lal at the revised price of ` 6 lakhs. The excise duty including Education Cess is 12.36% applicable
with effect from 10th June, 2012.
Explain the following with reasons:
(i) What is the value to be taken as assessable value?
(ii) What is the rate of excise duty applicable and duty payable on above transaction?
(iii) The Central Excise Officer is demanding duty on the price of ` 6 lakhs at the time of sale to Mr. L. Is
he right in his approach?
(iv) Does cost of production have any bearing on the assessable value?

SOLUTION
23
(i) The price prevailing at the time of removal from factory (i.e. ` 5 lacs on 15th June 2012 is the
assessable value.
(ii) The applicable rate of duty is @1 2.36% and duty amount is ` 61,800 (i.e. ` 5 lacs x 12.36/100).
(iii) The Central Excise Officer is not right in his approach.
(iv) Cost of production has no bearing with assessable value in present case. Central Excise valuation
can be below manufacturing cost. If price is the sole consideration and dealing between seller
and buyer are arm’s length, assessable value will be decided on the basis of selling price, even if
it is below manufacturing cost. So cost of manufacturing will not change the assessable value.

24
Answer:
Calculation of Assessable Value
Offered Price to DEF = 14,000
ADD: Discount = 1,000
ADD: Packing charges = 1,300
ADD: Free after sale service = 500
ADD: Dharmada charges = 200
Assessable Value = 17,000
E-Example 39: How will the assessable value under the subject
transaction be determined under section 4 of the Central
Excise Act, 1944? Give reasons with suitable assumptions
where necessary.Contracted sale price for delivery at buyer’s
premises ` 10,00,000. The contracted sale price includes
the following elements of cost:
(I) Cost of drawings and designs ` 3,000
(II) Cost of primary packing ` 3,500
(III) Cost of packing at buyer’s request for safety
during transport ` 7,500 (IV) Excise duty ` 2,11,200
(V) VAT (Sales tax) ` 37,000 (VI) Octroi ` 9,500
(VII) Freight and insurance charges paid from factory to
‘place of removal ` 20,000 (VIII) Actual freight and insurance
from ‘place of removal’ to buyer’s premises ` 42,300

25
Answer:39
Sale price ` 10,00,000
Less: Excise Duty ` 2,11,200
VAT ` 37,000
Octroi ` 9,500
Freight and insurance from Place of removal to buyers ` 42,300
= 3,00,000
Assessable Value = 7,00,0000

26
Example 41: B Ltd manufactures two products namely, Eye Ointment and Skin Ointment. Skin Ointment is a
specified product under section 4A of the Central Excise Act, 1944. The sale prices of the two products
are ` 43 per unit and ` 33 per unit respectively. The sale price of both the products included 14% excise
duty as BED, education cess of 2% and SAH of 1%. It also includes CST of 4%. Additional information is
as follows:
Units cleared: Eye Ointment - 1,00,000 units, Skin Ointment – 1, 50,000 units. Deduction permissible under
section 4A: 40%
Calculate the total excise duty liability of B Ltd for both the products.
solutionAnswer:
Eye Ointment:
Let us assume X as the assessable value
Assessable Value = x
Add: BED @14% = 0.14X
Add: Education Cess @2% = 0.0028X
Add: SAH @1% = 0.001 4X
= 1.1 442X
Add: CST @ 4% = 0.045768X
Selling price = 1.1 89968X

27
Solution 41.
Assessable value ` 43 x 1/1.189968
Total Assessable Value = ` 36.1354 per unit
Excise duty @14% = ` 36, 13,540 (i.e. ` 36.1354 x 1,00,000 units)
Education Cess @2% = ` 5, 05,896
SAH Cess @1% = ` 10,118
Total Excise Duty = ` 5,059
= ` 5, 21,073
Skin Ointment
Maximum Retail Price = ` 33
Less: Abatement @40% = ` (13)
Assessable Value (per unit) = ` 20
Total Assessable Value = ` 30,00,000 (i.e. ` 20 x 1,50,000 units)
Excise Duty @14% = ` 4,20,000
Education Cess @2% = ` 8,400
SAH Cess @ 1% = ` 4,200
Total Excise Duty = ` 4,32,600
B Ltd liable to pay total excise duty = ` 9,53,673

28
Example 44: A manufacturer having a factory at Mumbai has uniform price of ` 2,000 per unit (exclusive
of taxes and duties) for sale anywhere in India. During the financial year 2012-13, he made the following
sales:
Particulars Quantity sold in units Cost of transportation (`)
Goods sold at factory in Mumbai 1,000 Nil
Goods sold from New Delhi 500 12,000
Goods sold from Chennai 600 48,000
Goods sold from Kolkata 900 30,000
Find assessable value per unit and total excise duty payable by the manufacturer. Excise duty @12% plus
2% education cess and 1% Secondary and Higher Education cess

SOLUTION 44
29
Answer: (Rule 5 of valuation rule)
Selling price per unit = ` 2,000
Less: cost of equalized freight = ` 30
Assessable value per unit = ` 1,970
Total excise duty payable = ` 7,30,476 (3,000 units x ` 1 ,970 per unit x 12.36%)
Working note:
(1)
Particulars Quantity sold in units Cost of transportation (`)
Goods sold at factory in Mumbai 1,000 Nil
Goods sold from New Delhi 500 --12,000
Goods sold from Chennai 600--- 48,000
Goods sold from Kolkata 900---- 30,000
Total 3,000 90,000
(2) Cost of equalized freight = ` 30 (` 90,000/3,000 units)
(3) The aforesaid equalized freight has to be certified by the Cost Accountant/Chartered Accountant/
Company Secretary in practice.

30
Example 45: Compute the assessable value and amount of excise duty payable under the Central
Excise Act, 1944 and rules made there-under from the following information:
Particulars No. of units Price at Factory Per unit Price at Depot Per unit Rate of Duty
AdvaloremGoods
(i) transferred from
(ii) factory to
depot on 8th February 1,000 ` 200 ` 220 12%
(ii) Goods actually sold at depot on
18th February 950 ` 320 ` 350 8%

31
Solution 45
Answer: (Rule 7 of valuation rules)
Amount (`)
Assessable Value = 2,20,000 [i.e. 1,000 units × ` 220]
Basic Excise Duty = 26,400 [i.e. ` 2,20,000 × 12/100]
2% Education Cess = 528 [i.e. ` 26,400 × 2/100]
1% SAH Edu. Cess = 264 [i.e. ` 26,400 × 1/100]
Total Excise Duty = 27,192 [i.e. ` 26,400 + `528 + `264]
Example 46: Name the Cost Accounting Standard which is to be used while calculating cost of
production for valuation for captive consumption under Central Excise. Is the standard mandatory?
AS per that standard, which of the following costs are includible/not includible in ‘Cost of Production’?
(i) Research and Development Cost
(ii) Interest on capital borrowed,
(iii) Lay-off wages to workmen
(iv) Packing cost.
Answer: (Rule 8 of valuation)

ANS 46
32
The Cost Accounting Standard 4 is required to be used while calculating cost of production for valuation
for captive consumption under Central Excise. As per circular issued by CBEC, cost of production is
required to be calculated as per CAS-4 issued by the Central Council Members of The Institute of Cost
Accountants of India (ICAI). Hence, the standard is mandatory.
Cost includible Cost not includible
(i) Research and Development (i) Interest on capital borrowed
(ii) Packing cost (ii) Lay off wages to workmen

33
Example 38: ABC Ltd of Kanpur agreed to sell an electronic motor to DEF Ltd of New Delhi for ` 15,000.00
on ex-factory basis. Other particulars are:
(i) Transportation and transit insurance were arranged by ABC Ltd. This was at the request of DEF
Ltd and amounted to for ` 1,250 and ` 1,500 respectively which were charged separately. Actual
transportation charges amounted to ` 1,000 only.
(ii) A discount of ` 1,000 was given to DEF Ltd. on the agreed price on payment of an advance of
` 3,500 with the order. (Ignore notional interest on advance).
(iii) Interest of ` 800 was charged from DEF Ltd. as it failed to make the payment within 30 days.
(iv) Packing charges of the motor amount to ` 1300.
(v) The expenditure incurred by ABC Ltd. towards ‘free after sale service’ during warranty period
comes out to be ` 500 per motor.
(vi) Dharmada charges of ` 200 were recovered from DEF Ltd.
(vii) ABC Ltd. sold a lubricant worth ` 250 along with the motor to the interested customers. Lubricant
which was purchased from the market by ABC Ltd. at ` 200 ensured durability and high efficiency
of the motor. DEF Ltd. opted for the said lubricant

1) Goods covered by central excise tariff but fully exempt from duty are _______
2) (excisable/not excisable)
2)SSI units whose turnover exceeds Rs ________ per annum have to furnish
declaration in prescribed form for central excise purpose.
3)Compressing & bottling gas is/is not manufacturing service
4)Affixing brand name , labelling or relabelling & repacking from bulk to small
pack of ready made garments ________ (is/is not ) manufacture
5)Cenvat credit _______( can/cannot )be utilized for payment of service tax
on output service.
35

EXAMPLE 49: A COMPANY MANUFACTURING A DUTIABLE PRODUCT IN THE FACTORY AT
COCHIN, WAS MAKING
SALES THROUGH ITS DEPOT IN MUMBAI. THE SALE PRICE AT MUMBAI DEPOT AT ` 30,000 PER
PIECE INCLUSIVE OF
TRANSPORT CHARGES FROM COCHIN TO MUMBAI OF ` 3,000. THE DEPOT PRICE INCLUDES
EXCISE DUTY @ 16% PLUS
CESS @ 3% BUT EXCLUDES MAHARASHTRA VAT. ANNUALLY 2,000 PIECES ARE SOLD BY THE
DEPOT. THE COMPANY
DECIDES TO MAKE DIRECT SALE FROM COCHIN TO ITS CUSTOMERS WHICH WOULD ATTRACT
CST AT 2% TO BE BORNE
BY THE COMPANY. THE COMPANY WANTS TO CLOSE DOWN THE DEPOT AT MUMBAI BRINGING
COST SAVING OF
` 5,00,000 PER ANNUM. THE SALE PRICE WILL CONTINUE TO BE AS EARLIER.
EVALUATE THE IMPLICATIONS OF THE DECISION.
36

38
An assessee can claim refund of ED with in _____ from
the relevant date u/s11 (b)of the central excise act.
EOU has to issue ___________ certificate for obtaining inputs w/o
Payment of ED.
ANS: 1) 1YR (2)CT-3

WASTE & SCRAP ARE ALWAYS TREATED AS
EXCISABLE GOODS.
39

vi)In case of central execise & customs appeals must be filed with in ____
Days from the date of communication of order.
vii)Job work done under cenvat provisions ________( is /is not)exempt from
service tax.
viii)Goods under central excise should be _______ (movable /immovable) and
_________ (marketable/packaged)
ix)CETA specifies some _____( processes /operations)as amounting to
manufacture.
x)Processing can amount to manufacture if a ____(new /existing) and ___
(identifiable/ similar) known in the market emerges.
xi)Erection of civil structure ________ (is /is not)manufacture.
40

Example 24:
M/s. Snow White Ltd., Mumbai sells iron rods
to M/s. Hyderabad Ltd. in Vijayawada for a
value of
` 10,00,000 inclusive of Central Sales Tax @
2%. The local sales tax on iron rods in
Mumbai is 12.5%. Both
the dealers are registered dealers.
(i) Ascertain the Central Sales-tax payable.
(ii) If Hyderabad Ltd. were unable to submit
Form ‘C’, being an unregistered dealer, what
will be the
Central Sales Tax liability, if the local sales tax
rate is 12.5% ?
Note: Iron rods are not declared goods
45

SOLUTION
CST payable = ` 19,608 [(i.e. ` 10,00,000 x 100/102) x 2/100]
CST payable = ` 1,22,549 [(i.e. ` 10,00,000 x 100/102) x 12.5/100]
Example 25:
Mr. K of Kolkata sells goods to Mr. C of Chennai and delivers the same at Kolkata to MKS Transport.
The lorry receipt was sent to Mr. C by post. While goods were in transit, Mr. C sells the goods to Mr. V of
Vijayawada by making an endorsement of LR and goods were diverted to Vijayawada. Is the second
sale between Mr. C and Mr. V chargeable to tax?
46

SOLUTION
Answer:
The first sale by Mr. K to Mr. C is chargeable to central sales tax. However, sale of goods by C to V is
exempt under Section 6(2) i.e. subsequent sale by transfer of documents to avoid multiple tax incidences.
Note: Form E-I from K and Form C from V has to be received by C.
Example 23:
Total interstate sale for the Financial Year 2011-12 of X Ltd. is ` 1,50,70,000, which consists of the following:
`
4 % CST sales 91,50,000
2% CST sales 59,20,000
Out of the goods sold for ` 91,50,000, on 16.7.2011 that were liable to CST @ 4% goods worth ` 50,000
were returned on 12.12.2011 and goods worth ` 1,20,000 were returned on 01.2.2012. A buyer to whom
goods worth ` 55,000 carrying 2% CST was dispatched on 16.4.2011, rejected the goods and the same
were received back on 15.1.2012.
Compute the taxable turnover and tax liability of X Ltd., since all the relevant Forms have been received.
47

SOLUTION
Answer:
Statements showing taxable turnover and CST payable:
Particulars Taxable Turnover (`)CST payable Workings
Sales against Form ‘C’ 86,34,615 1,72,692 91,00,000 – 1,20,000 = (`) 89,80,000.
CST = ` 1,72,692 (89,80,000x100x104) x 2/100
Sales against Form ‘C’ 57,50,000 1,15,000 ; 58,65,000 x 100/102 = ` 57,50,000
Sales without Form ‘C’ 1,15,385 4,615 1,20,000 x 100/104 = ` 1,15,385
Total 1,45,00,000 2,92,307
Working Note:
Particulars 4% CST sales (`) 2% CST sales (`)
Sales 91,50,000 59,20,000
Less: sales returns within six months from the date of sales 50,000
Less: rejected — 55,000
Sub-total 91,00,000 58,65,000
48

Mr. Raja, a first stage dealer in packing machinery in the State of Tamil Nadu furnishes the following data:
(i) Total inter-state sales during F.Y. 2010-11(CST not shown separately) 92,50,000
(ii) Above sales include: Excise duty 9,00,000
Freight (Of this ` 50,000 is not shown separately in invoices) 1,50,000
Insurance charges incurred prior to delivery of goods 32,000
Installation and commissioning charges shown separately 15,000
Incentive on sales received from manufacturer 30,000
Determine the turnover and CST payable, assuming that all transactions were covered by valid ‘C’ Forms.
49

ANSWER
Computation of Mr. Raja turnover and central sales tax payable
Particulars `
Total inter-State sales 92,50,000
Less: Freight shown separately in the invoices 1,00,000
Installation and commissioning charges shown separately 15,000
-------------
Aggregate turnover 91,35,000
========
CST payable is ` 1,79,118 (i.e. ` 91,35,000 x 2/102)
Taxable turnover is ` 89,55,882 (i.e. ` 91,35,000 – 1,79,118)
Notes:
Excise duty forms part of the sale price and is not deductible.
Freight not shown separately in the invoices and insurance charges incurred prior to delivery of goods
are not deductible in calculating the turnover.
Sale price includes incentive on sales received from manufacturer.
The CST on transactions covered by valid ‘C’ forms is 2% or the State sales-tax rate, whichever is lower.
It has been assumed that in this case, the State VAT rate is higher than 2%. Therefore, the rate of CST is
taken as 2%.
50

SCHEDULE
Class/Week Topic Reading Assignment
1 Topic Chapter Task
51

COMPUTATION OF LANDED COST
1) Assessable value of goods Rs 10,00,000/=
2) Basic custom’s duty @ 10 %
3)ED on like articles 12%
4)Addl custom’s duty equalling ST = 4%
5)Education cess 2% higher education cess 1%
Compute customs’ duty & imported cost of goods
Ans:
Sl no. Details Amount Rs
1 A.V. 10,00,000
2 Basic CD 100,000
3 Total 11,00,000
4 Addl Duty/ED @ 12 % 132,000
5 Cess @ 3%on 232,000 6,960
6 Total value u/s 3(5) of cta 12,38.960
7 Addl. duty@ 4% 49,558
8 Landed cost 12,88,518
9 Total customs duty 288,518 54

INTRODUCTION/COURSE
DESCRIPTION
 Introduction
Introductory notes
55

OBJECTIVES AND RESULTS
 Objectives
Course objective 1
 Results
Expected results
 Skills developed
Skill 1
Skill 2
56

VOCABULARY
 Term One
Definition A
Definition B
 Term Two
Definition
 Term Three
Definition
57

 Add procedure
here
Step one
Step two
PROCEDURES/LECTURE SLIDE
58

GRAPHS/CHARTS 1
0
10
20
30
40
50
60
70
80
90
100
Test 1 Test 2 Test 3 Test 4
First
Second
Third
59

GRAPHS/CHARTS 2
Project
Item 1
Item 2
Item 3
Item 4
60

CONCLUSION
 Add your conclusions here.
61

QUESTIONS/DISCUSSIONS
 Question One
Discussion
Discussion
 Question Two
Discussion
 Questions Three
Discussion
62

Indirect tax 2013

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