5
General Procedures under Central
Excise
5.1 Introduction
5.1.1 Physical control system (Till 1969): Till 1969, there was physical control system. Under physical control system, each clearance of manufactured goods from the factory was done under the supervision of the Central Excise Officers.
5.1.2 Self-Removal procedure (1969 onwards): Introduction of Self-Removal procedure was a welcome procedure in the industry. It was made applicable to almost all the commodities except a few items. Under the Self Removal procedure, the assessees were allowed to quantify the duty on the basis of approved classification list and the price list and clear the goods on payment of appropriate duty.
5.1.3 Gate pass system gave way to the invoice-based system (1994): In 1994, the, gate pass system gave way to the invoice-based system and all clearances started getting effected on manufacturer’s own invoice. Under Gate Pass System, manufacturers were required to issue gate pass counter-signed by Central Excise Officer at the time of clearance of excisable goods. However, under Invoice-based System, assessee is required to prepare invoice while clearing goods form factory and himself assess the duty payable. This duty is indicated on the invoice.
5.1.4 Self-Assessment system (1996): Another major change was brought about in 1996, when the Self-Assessment system was introduced. This system is continuing today also. Under this system:-
(i) The assessee himself assesses his returns and files it with the Department.
(ii) Department scrutinises the return or conducts selective audit to ascertain correctness of the duty payment.
(iii) Even the classification and value of the goods have to be merely declared by the assessee instead of obtaining approval of the same from the Department. The system of classification of goods and price lists had now been done away with.
5.1.5 Fortnightly payment of duty (2000): Prior to March 2000, the duty had to be discharged before removing the goods from the factory and in some circumstances on the day on which it is removed.
However, in 2000, the fortnightly payment of duty was introduced for all commodities as an extension of the monthly payment system which was introduced for Small Scale Industries.
Further, the declaration of inputs for availing the Modvat (now Cenvat) was dispensed with from April 2000 itself.
5.1.6 Central Excise Rules, 1944 replaced with Central Excise (No.2) Rules, 2001 (2001) Reasons for replacement
• The Central Excise Rules, 1944 were in existence for long. It was widely perceived that quite a few of them had lost relevance or utility in the context of the changes being taken place in the administration of excise duties.
• Many of the rigidities and technicalities engulfing some of the rules had not been compatible with the spirit of tax reforms.
• Quite a few rules owed their birth to Department’s succumbing to pressure to resolve trivial or peripheral issues.
• Some others appeared to justify their existence to Department’s weakness to remain attached to past, oblivious of the needs of present or future.
• New rules were simple and concise.
• New rules were facilitator to the trade and industry and not be a material comprising complex and complicated reading.
Rules relating to CENVAT scheme, appeal procedure, etc. were deliberately not amalgamated in the Central Excise Rules, 2001 and were kept separate.
5.1.7 Central Excise Rules, 2002 (2002): Central Excise (No.2) Rules, 2001 were again superseded by the Central Excise Rules, 2002 with effect from 1st March, 2002. The re-issue
of Central Excise Rules was to give effect to minor modifications.
5.1.8 Monthly payment of duty (2003): With effect from 1.04.2003, the monthly payment system of duty has been reinforced.
5.2
Removal of excisable goods [Rule 4]
5.2.1 Payment of excise duty before removal of excisable goods [Sub-rule (1)]: No excisable goods shall be removed from the place of manufacture or from warehouse, when the goods are stored in warehouse without payment of duty whether for
consumption, or
export, or
manufacture of any other commodity in or outside the place of manufacture
until the excise duty leviable thereon has been paid in such manner as provided in rule 8 or under any other law.
The liability to pay excise duty has been casted on every person:- • who produces or manufactures any excisable goods, or • who stores such goods in a warehouse
Transfer in ownership does not amount to removal of goods: When stock that is lying in the factory is transferred to new owners without any physical removal of goods from the factory, no duty can be imposed [Indorama Synthetics (I) Ltd. v. CCE 2005 (190) E.L.T. 193 (Tri. - Mumbai)]
Removal of goods is not the taxable event for levy of duty: In Collector v. Vazir Sultan Tobacco Co. Ltd. 1996 (83) E.L.T. 3, the Supreme Court held that the taxable event in Central Excise is the manufacture or production of goods and not the removal of goods. Section 3 cannot shift levy of excise duty from the stage of manufacture to the stage of removal. It has only shifted the stage of collection
5.2.2 In case of ready-made garments and made-up articles of textiles manufactured on job-work basis, liability to pay duty is on the merchant manufacturer [Sub-rule (1A)]: It is the practice in the garment and made up industry for brand owners to have goods manufactured from several job-workers. The brand owners may or may not, themselves, possess any manufacturing facility.
In case of ready-made garments and made-up articles of textiles manufactured on job-work basis [products covered under Chapter 61, 62 and 63 of the First Schedule to the Tariff Act], liability to pay duty is on the merchant manufacturer (person on whose behalf the goods are manufactured by job-workers) and not on the job-workers. Hence, the job-worker is exempt from payment of duty.
Further, merchant manufacturer would be required to register his private store-room or warehouse in which inputs are received for distribution to job-workers and finished goods are received from the job-workers. He would also be required to comply with all the other provisions of Central Excise law.
5.2.3 Price of the goods to indicate the amount of duty paid thereon [Section 12A]: Section 12A casts a liability on every person who is liable to pay duty of excise on any goods. It prescribes that at the time of clearance of the goods the amount of such duty which will form part of the price at which such goods are to be sold should be prominently indicated in all the documents relating to assessment, sales invoice, and other like documents.
5.2.4 Special provisions for removal of molasses [Sub-rule (2)]
(a) Procurer of molasses liable to pay excise duty on molasses: Where molasses are produced in a Khandsari sugar factory, the person who procures such molasses, whether directly from the factory or otherwise, for use in the manufacture of any commodity shall pay the duty leviable on such molasses as if the molasses had been produced by the procurer. (b) Duty to be paid on molasses used in the manufacture of excisable/non-excisable product: Duty on the molasses shall be payable whether or not the goods, which are manufactured with the use of the molasses, are excisable or not.
5.2.5 Removal of goods for storage in a warehouse without payment of duty [Sub- rule (4)] : In certain industries like sugar, the production is seasonal, but the off-take from the factory is throughout the year. In such cases, storage of huge quantities within the factory is burdensome. Further, since a large quantity of off-take is controlled by the Government, the management may not be in a position to remove the goods on payment of duty.
Consequently having regard the stor storage permit a ma payment of d 5.2.6 Proced (a) Physica is done unde removed und procedure. (b) Self Re 1. The ma been du as well 2. He shal daily. (T 3. The inv custome 4. The ass applying MRP or 5. The ma and calc 6. He sha quantity 7. It is to b "duplica 8. He shal y, sub-rule (4 d to age of goods space at the nufacturer to duty. This wil dures to rem al Control Pr er the superv der physical moval Proce anufacturer m uly intimated as list of critic ll ensure that This was call voice raised s er. Care is to sessable value g section 4 rea Tariff Value fi anufacturer sh culate the ass all make the y and duty pay
be ensured th ate for transpo ll ensure that P 4) provides t s and premises o store his go l be subject to move the exc
rocedure: Ea vision of the control proce edure may ensure th to the Depar cal raw mater t the finished ed the RG-I r should be in be exercised e (whether cum ad with Centr ixed under sec hall prepare a sessable valu removal ent
yable. hat the perso orter" copy of t at the end o Pro Physical contro procedure that Commis oods in any o such condit isable goods ach clearance Central Exc edure. All o
hat the goods rtment provid rials. d goods are a register earlie
line with the d in calculatio m-duty price o al Excise Valu ction 3(2), the an invoice in ue and excise try in produc on/carrier who f invoice. of the month ocedures to re excisable goo ol S sioner may i other place o tions as may s:- e of manufac cise Officers. other products s, which are ing the proce all duly enter er). purchase or ns in the invo or otherwise) i uation Rules, e same may be accordance w e duty payable ction register o/which carrie (1st to 30th), emove ods
Self control pro
in exceptiona outside his p be prescribed ctured goods Today, onl s fall under sought to be ess flow chart red in the pro rder if any, re oice.
s to be arrived 2000. If the v e applied.
with the prov e. r providing d es the goods he debits the ocedure al circumstan premises with d.
from the fac ly cigarettes the self-remo e removed, h t of manufact oduction regi eceived from d at accurately value is based visions of rule details of va is provided w e duty payabl nces hout tory are oval ave ture ster the y by d on e 11 lue, with e in
the CENVAT Credit A/c and if the balance is not sufficient, pay through the Personal Ledger Account (PLA) by the 5th of the next month. For the month of March, payment
will be made by the end of that month itself.
9. The units claiming 8/2003 (SSI Exemption) are required to pay the quarterly duty by the 5th of the month following that quarter. Here also, for quarter ending in the month of
March, payment is to be made by 31st March itself.
10. It is hereby clarified that the duty liability shall be deemed to have been discharged only if the amount payable is credited to the account of the Central Government by the specified date. The Board has clarified that the liability would be discharged only on the date of realization of the cheque and not earlier as per the CBEC Circular No.28/2002 dated 24.5.2002.
5.3
Date for determination of duty and tariff valuation [Rule 5]
S.No. In case of removal of applicable rate of duty/tariff value shall be the rate/value in force on the
1. any excisable goods (other than
khandsari molasses) date when such goods are removed from a factory or a warehouse, as the case may be. 2. khandsari molasses date of receipt of such molasses in the
factory of the procurer of such molasses (since in case of khandsari molasses, duty is paid by the procurer and not by the manufacturer)
3. excisable goods cleared for captive consumption
the date on which the goods are issued for such use
(since the date of removal of such goods shall be the date on which the goods are issued for such use-Explanation to rule 5)
5.4 Assessment [Rule 6 & 7]
Before each removal, whether outside the factory of manufacture or production or for captive consumption, duty has to be assessed on the excisable goods.
5.4.1 Meaning of assessment [Rule 2(b)]: Assessment includes:- (a) Self-assessment of duty made by the assessee, and
(b) Provisional assessment under rule 7 of the Central Excise Rules, 2002. 5.4.2 Meaning of assessee [Rule 2(c)]: Assessee means:-
(a) any person who is liable for payment of duty assessed or (b) a producer or
(c) manufacturer of excisable goods or
includes:- an authorized 5.4.3 Self A (a) Meanin liability at the • assessee by him, a • indicate (b) Excepti manufacturin the duty paya (c) Main in (i) Ascerta (ii) Ascerta remova (iii) Valuatio (iv) Quantity (v) Indicatio (vi) Assess (vii) Submis days of (viii) Submis (d) Scrutin (i) Respon self-assessm responsibility factory/premi correctness. d agent of su ssessment [ g of self-as e time of remo e should app and the same on ion- Assess ng cigarettes, able before re gredients of ainment of dat ainment of cl l; on of goods ( y intended to on of the duty ment of the re sion of return the succeed sion of ‘CENV y of assessm nsibility of D ment procedu y of the Depa ises of the as
Sel
ch person. [Rule 6] ssessment: T oval of excisa ply correct cla the invoice. see manufac the Superin emoval by the f assessmen te and time o assification a dealt in Chap be removed; y so assessed eturn for a mo n to the Rang ing month (qu VAT Return’ f ment epartmental re wherein t rtmental offic ssessee] is tolf-assessm
The assesse able goods an assification an cturing ciga tendent or In e assessee. t f intended re and rate of d pter 3) at the p ; d on the invo onth; ge Office hav uarterly return for a month w officers to s the assessee cers [Central E o scrutinize thAssessm
ent
ee himself is nd discharge nd value on t arettes: In nspector of C moval; duty (dealt in point of remo ice; ving jurisdictio n in case of S within 10 days scrutinize the e himself ass Excise Office he assessmement
Provisiona
required to the same. In the quantities the case o Central Excis n Chapter 2) oval; on over the fa SSI); s of the succe e assessmen sesses the d rs having juri ent made for val assessm
determine d n other words s being remo of an asses e has to ass ) at the poin actory within eeding month nt: In view of duty liability, sdiction over verification oent
duty , oved ssee sess t of ten . the the the f its(ii) Documents required by officer: For this purpose, the said officer(s) may require the relevant documents. Though the statutory records have been dispensed with, the assessee is required to maintain private records containing all requisite information as required by different rules and also provide a list of all records maintained by him to the Range Office. The Officer responsible for scrutiny of return may require:-
• Invoices issued by the assessee • Daily Stock Account
• CENVAT Account • Cash ledgers
• Ledger of all receipts and payments • Source documents etc.
(iii) Compulsory for assessee to furnish the documents: It shall be compulsory for the assessee to provide the necessary records upon receiving the `Requisition Letter’ from the Range Officer or other superior officers. He shall hand over the records under proper acknowledgement and receive them back under proper acknowledgement. The officer scrutinizing return may require presence of the assessee or his authorised person at mutually convenient time, for seeking certain information relating to the records.
(iv) Scrutiny of assessment : The Superintendent of Central Excise in charge of the Range Office, with assistance of the Inspectors in-charge of the factory of an assessee, will scrutinise all the returns. They shall, in selected cases, call for all connecting documents including invoices and the records and scrutinise the correctness of assessment.
S.No. Central Excise Officer who will
scrutinise the return Amount of duty paid by the unit through PLA per annum every six months
1. Deputy/Assistant Commissioner of Central
Excise More than ` 5 crores ` 1 crore, but less than 2. Additional/Joint Commissioner of Central
Excise
` 5 crores or more 5.4.4 Provisional Assessment [Rule 7]
Cases where Provisional assessment can be resorted to : Provisional assessment can be resorted to in the following cases:-
(a) Where the assessee is unable to determine the value of excisable goods or
(b) Where the assessee is unable to determine the rate of duty applicable thereto.
Procedure for provisional assessment: Rule 7, read with the guidelines issued by the Board, sets out the procedure for provisional assessment as follows:
(i) Request in writing to the Divisional Deputy/Assistant Commissioner of Central Excise: Wherever an assessee finds that final assessment is not possible at the point of removal, he will make a detailed request in writing to the Divisional Deputy/Assistant Commissioner of Central Excise, indicating:-
a. specific grounds/reasons, and the documents or information, for want of which final assessment cannot be made.
b. period for which provisional assessment is required.
c. the rate of duty or the value or both, as the case may be, proposed to be applied by the assessee, for Provisional Assessment; and
d. that he undertakes to appear before the Assistant/Deputy Commissioner of Central Excise within 7 days or such date fixed by him, and furnish all relevant information and documents within the time specified by the Assistant/Deputy Commissioner of Central Excise in his order, so as to enable the proper officer to finalise the provisional assessment.
(ii) Order of provisional assessment: On receipt of the request, the Deputy/Assistant Commissioner of Central Excise will examine it, if necessary, in consultation with the concerned Range Officer, to ascertain whether provisional assessment is necessary at all.
A. Order rejecting provisional assessment: If the reasons/ grounds are not sufficient, he may ask the assessee to appear before him on an appointed day and time, and if he is satisfied that provisional assessment is not necessary, he may pass a reasoned order rejecting the same and also ordering the rate of duty or the value, to be applied by the assessee.
B. Order directing provisional assessment: Where the Deputy/Assistant Commissioner of Central Excise is satisfied with the genuineness of the assessee’s request he will issue a specific order directing provisional assessment clearly stating:- (a) The grounds on which provisional assessment has been ordered.
(b) The rate and /or value, as the case may be, at which duty has to be provisionally paid. (c) The amount of differential duty for which bond is to be executed covering the
period, if any, during which assessee paid duty provisionally under the deeming provisions, after applying the rate and/ or value specified in (b) above.
(d) The amount of security or surety as may be fixed by Assistant Commissioner keeping in view the instructions issued by the Board from time to time.
(iii) Furnishing of bonds: As mentioned earlier, provisional payment of duty is allowed if the assessee executes a bond in the prescribed form with such surety or security in such amount as the Assistant/ Deputy Commissioner may order. Such bond shall bind the assessee for payment of the difference between the amount of duty finally assessed and the amount of duty paid provisionally.
Though it is incumbent upon the assessee to ensure that the bond amount and corresponding securities are sufficient, the Divisional as well as the Range Officer will also keep a strict vigil on such cases with the help of 'Provisional Assessment Register'. The Assistant/Deputy Commissioner of Central Excise will be held responsible to ensure that bonds for proper amount i.e., 3 times of the estimated differential duty are taken, in case of general bonds and that these are backed by proper (25%) security/ bank guarantee of the bond amount.
The format of bond for provisional assessment has been specified in Notification No. 56/2001-Central Excise (N.T.) dated 3.7.2001.
(iv) Marking the documents and return as "PROVISIONALLY ASSESSED" vide Order No... dated ...": The assessee is required to mark the E.R.1 (monthly/quarterly return) and documents covered under Provisional Assessment as "PROVISIONALLY ASSESSED" vide Order No... dated ..." . There is a declaration in E.R.1 where assessees have to mention the goods under ‘provisional assessment’.
(v) Finalization of provisional assessment (Order of final assessment)
A. Meaning of Finalisation of provisional assessment: Finalisation of provisional assessment means finalisation of an issue/ground and thereafter finalization of each E.R.1s.
B. Time limit for finalisation of provisional assessment: Notwithstanding ‘self-assessment’, all cases of provisional assessment have to be finalised by the Deputy/Assistant Commissioner of Central Excise, within a maximum period of 6 months from the date of communicating the order of provisional assessment.
Extension of time-limit of finalization of provisional assessment cases
(i) The Commissioner can extend the period of 6 months if sufficient cause is shown which is recorded in writing.
(ii) If the period of extension is beyond 6 months, then the permission of Chief Commissioner is required.
C. Communication of amount of duty to the assessee: The amount of duty finalized will be communicated to the assessee at the earliest.
D. Interest payable on differential amount: The amount of each differential duty shall be paid along with interest at the rate notified under section 11AA of the Act from the first day of the month succeeding the month for which such amount is determined, till the date of payment thereof.
Ascertainment of the duty by the assessee himself
In the event the assessee is in a position to ascertain the duty himself, he may pay the duty on his own at the earliest and in that case, he will not have to incur interest on account of time taken by the Department to finalise assessment and communicate the amount.
(vi) Refund after finalization of assessment
A. Refund order: Where any refund becomes due to the assessee, order shall be passed for such refund, but disbursement shall be subject to further verification about incidence of such duty.
B. Refund subject to provision of unjust enrichment: The assessee will be required to submit proof to the Assistant/Deputy Commissioner of Central Excise that the duty incidence was borne by him (assessee). If the assessee fails to produce such proof/evidence, the Assistant/Deputy Commissioner of Central Excise will pass an order for depositing the amount in Consumer Welfare Fund in the prescribed manner.
C. Interest payable on refund: The refund will be given along with interest as provided under section 11BB of the Act. Therefore, interest @ 6% will be computed from the date immediately after the expiry of three months from the date of receipt of refund application till the date of refund of such duty.
Department, suo motu, cannot issue directions for provisional assessment: It is important to note that rule 7 of the said Rules does not provide for the Department, suo motu, issuing directions for resorting to provisional assessment. Therefore, when the Central Excise Officers, during scrutiny or otherwise, find that self-assessment is not in order the assessee may be asked for all necessary documents, records or other information for issue of duty demand for differential duty, if any, after conducting inquiry. Where the assessee fails to provide the records or information and Department is unable to issue demand, ‘Best Judgement’ method may be used to raise demand based on collateral evidences. The burden will be on the assessee to provide information for appropriate re-determination of duty, if any. Prospective application of provisions of provisional assessment relating to interest clause and statutory time limit: As per the general law, the provisions of provisional assessment relating to interest clause and statutory time limit can only be prospective. Therefore, the provisions of interest and statutory time limit shall be applicable only to those cases of provisional assessment, which are ordered on or after 1st July, 2001.
5.5 Manner of payment [Rule 8]
5.5.1 General rule [Sub-rule (1)]: The duty on the goods removed from the factory or the warehouse during the month shall be paid:
S.No. Case Due date for payment of duty
1. If the duty is paid electronically through internet
banking 6
th day of the following month
2. In any other case 5th day of the following month
3. In the case of goods removed during the month
of March 31
st day of March
5.5.2 Due date for payment of duty in case of SSIs: In case of an assessee eligible to avail the exemption under a Notification based on the value of clearances in a financial year (SSIs), the duty on goods cleared during a quarter shall be paid:
S.No. Case Due date for payment of duty 1. If the duty is paid electronically
through internet banking 6th day of the month following that quarter. 2. In any other case 5th day of the month following that quarter. 3. In the case of goods removed
during the month of March 31
st day of March
Availability of the relaxation: Above relaxation is available to a unit who is “eligible” to claim SSI exemption regardless of whether he actually claims it or opts to pay duty. Further, the said relaxation is available to an “eligible” unit for the entire financial year even if it crosses the limit of ` 400 lakh (aggregate value of clearances) in the current financial year. Meaning of eligible: An “eligible” unit is one whose aggregate value of clearances did not exceed ` 400 lakh in the preceding financial year.
5.5.3 E-payment of duty: Every assessee shall electronically pay the duty through internet banking. However, the Assistant/Deputy Commissioner of Central Excise may for reasons to be recorded in writing, allow the assessee to deposit excise duty by any mode other than internet banking.
Explanation - For the purpose of rule 8, -
(a) Amount of duty payable to be credited to account of the Central Government by specified date
The duty liability shall be deemed to have been discharged only if the amount payable is credited to the account of the Central Government by the specified date.
(b) Payment of duty by cheque
If the assessee deposits the duty by cheque, the date of presentation of the cheque in the bank designated by the Central Board of Excise & Customs for this purpose shall be deemed to be the date on which the duty has been paid subject to the realisation of that cheque. 5.5.4 Payment under sub-rule (1) deemed as duty paid on excisable goods [Sub-rule(2)] : The duty of excise shall be deemed to have been paid on the excisable goods removed in the manner provided under sub-rule(1) and the credit of such duty allowed as provided by or under any rule.
5.5.5 Interest @ 18% on delayed payment of duty [Sub-rule (3)] : If the assessee fails to pay the amount of duty by due date, he shall be liable to pay the outstanding amount along with interest at the rate @ 18% per annum on the outstanding amount, for the period starting with the first day after due date till the date of actual payment of the outstanding amount. 5.5.6 Consequences of failure to pay duty beyond 30 days [Sub-rule (3A)] : Sub-rule (3A) of rule 8 provides that if the assessee fails to pay the duty declared as payable by him in the return within a period of 1 month from the due date, then he would be liable to pay penalty @ 1% on such amount of the duty not paid, for each month or part thereof calculated from the due date, for the period during which such failure
continues. Here, “month” means the period between two consecutive due dates for payment of duty.
5.5.7 Recovery of duty and interest due : The provisions of section 11 of the Act shall be applicable for recovery of duty as assessed under rule 6 and the interest under rule 8(3) in the same manner as it is applicable for recovery of any duty or other sums payable to the Central Government.
Duty includes the ‘amount’ payable in terms of the CENVAT Credit Rules, 2004 For the purposes of payment of duty, the expressions ‘duty’ or ‘duty of excise’ shall also include the ‘amount’ payable in terms of the CENVAT Credit Rules, 2004.
Implication: All ‘amounts’ payable [like payment under rule 6(3) of the CENVAT Credit Rules, 2004 etc.] should be paid along with duty payable by 5th /6th of the next
month/quarter.
5.5.8 Procedure for payment of duty by conventional mode: In case the assessee is allowed to make payment by the conventional mode, following procedure would be followed: (i) Bank to have EASIEST facility: Duty is payable in authorized bank by way of GAR-7
challan where Bank is having ‘EASIEST’ facility (Earlier, it was a TR-6 challans).
(ii) Single copy challan: GAR-7 challan is a single copy challan with tax payer’s counterfoil at the bottom of challan. Both challan and counterfoil are to be filled in by assessee. The challan should be on white paper with black printing.
(iii) Challan to be serially numbered : The challans should be serially numbered from 1st April on wards.
(iv) Details required in GAR-7 challan : Details to be filled in GAR-7 challan are as follows-
(a) Full name of assessee (b) Complete Address (c) Telephone number (d) PIN code
(e) Assessee Code (15 digit) (f) Commissionerate name (g) Commissionerate Code (h) Division Code
(i) Range Code
(j) Accounting Code of duty/cess (k) Amount tendered in ` (6 columns) (l) Total
(n) Cash/Cheque/Draft/Pay order No. and date
(o) Bank on which Cheque/Draft/Pay order No. is drawn.
(v) Relevant details to be repeated on counterfoil: Relevant among these details like assessee code, amount tendered in Rs., accounting code of duty/cess etc. are repeated in the Tax payer’s counter-foil. Details filled in the challan and Taxpayer’s counter-foil should be identical.
(vi) Receipt of payment: The counterfoil duly receipted by Bank with stamp of Bank will be given by receiving Bank to assessee. The stamp of receiving bank will contain Challan Identification Number (CIN). This CIN will have to be quoted in the return.
(vi) Evidence of payment of duty: The Taxpayers acknowledgement is the evidence of payment. The Challan Identification Number (CIN) appearing on this acknowledgement will have to be quoted in the return. The banks will be giving the tax payer a computer generated acknowledgement/receipt with the various details including the CIN.
5.5.9 Procedure for e-payment of duty: E-payment of excise duty facilitates anytime, anywhere payment of the duty. Moreover, after the payment of duty online, the receipt of the same is generated instantly. It provides the convenience of making on line payment of Central Excise and Service Tax through Bank’s internet banking service. E-payment of the excise duty can be made through ACES.
For e-payment, assessees should open a net banking account with one of the authorized banks (currently there are 28 banks). For effecting payment, assessees can access the ACES website and click on the e-payment link that will take them to the EASIEST portal or they can directly visit the EASIEST portal.
Procedure for e-payment of excise duty can be summarized as follows:-
(i) To pay excise duty and service tax online, the assessee has to enter the 15 digit Assessee Code allotted by the Department under erstwhile SACER/SAPS or the current application ACES. There will be an online check on the validity of the Assessee Code entered.
(ii) If the Assessee code is valid, then corresponding assessee details like name, address, Commissionerate Code etc. as present in the Assessee Code Master will be displayed. (iii) Based on the Assessee Code, the duty / tax i.e. Central excise duty or service tax to be
paid will be automatically selected.
(iv) The assessee is required to select the type of duty / tax to be paid by clicking on Select Accounting Codes for excise or Select Accounting Codes for service tax, depending on the type of duty / tax to be paid.
(v) At a time the assessee can select up to six Accounting Codes.
(vi) The assessee should also select the bank through which payment is to be made. (vii) On submission of data entered, a confirmation screen will be displayed. If the taxpayer
confirms the data entered in the screen, it will be directed to the net-banking site of the bank selected.
(viii) The taxpayer will login to the net-banking site with the user id/ password, provided by the bank for net-banking purpose, and will enter payment details at the bank site. (ix) On successful payment, a challan counterfoil will be displayed containing CIN, payment
details and bank name through which e-payment has been made. This counterfoil is proof of payment made.
Automation of Central Excise and Service Tax (ACES)
(a) What is ACES?: In continuation of its efforts for trade facilitation, CBEC has rolled-out a new centralized, web-based and workflow-based software application called Automation of Central Excise and Service Tax (ACES) in all 104 Commissionerates of Central excise, service tax and large tax payer units (LTUs) as on 23rd December, 2009. ACES is a Mission Mode project (MMP) of the Govt. of India under the national e-governance plan and it aims at improving tax-payer services, transparency, accountability and efficiency in the indirect tax administration in India. This application has replaced the current applications of SERMON, SACER, and SAPS used in Central excise and service tax for capturing returns and registration details of the assessees.
(b) Automation of major processes: ACES has automated the major processes of Central excise and service tax-registration, returns, accounting, refunds, dispute resolution, audit, provisional assessment, exports, claims, intimations and permissions.
(c) Benefits to the assessee: The ACES offers following benefits to the assessee:- 1. Reduce physical interface with the Department
2. Save time
3. Reduce paper work
4. Online registration and amendment of registration details
5. Electronic filing of all documents such as applications for registration, returns [On-line and off-line downloadable versions of ER 1,2,3,4,5,6, Dealer Return, and ST3], claims, permissions and intimations; provisional assessment request, export-related documents, refund request.
6. System-generated E-Acknowledgement
7. Online tracking of the status of selected documents 8. Online view facility to see selected documents
9. Internal messaging system on business-related matters
(d) Registration with ACES: To transact business on ACES a user has to first register himself/herself with ACES through a process called ‘Registration with ACES’. This registration is not a statutory registration as envisaged in Acts/Rules governing Central Excise and Service Tax but helps the application in recognizing the bonafide users.
(e) E-filing of Returns: The assesses can electronically file statutory returns of Central excise and service tax by choosing one of the two facilities being offered by the Department at present:-
(b) download the off-line return utilities which can be filled-in off-line and uploaded to the system through the internet.
(f) Certified Facilitation Centres (CFCs): CBEC has set up ACES Certified Facilitation Centres (CFCs) with the help of professional bodies like Institute of Chartered Accountants of India (ICAI), Institute of Cost and Works Accountants of India (ICWAI) etc.
(i) These CFCs provide a host of services to the assessees such as digitization of paper documents like returns etc. and uploading the same to ACES.
(ii) Assessees requiring the services of the CFCs may be required to pay service fees to the CFCs.
(iii) CBEC will approve the maximum rates at which CFCs can charge their customers for the services rendered by them.
(iv) For this purpose, assessees are required to write to the Department authorizing one of the CFCs, from the approved list, to work in ACES on their behalf. They have to furnish the name and other details of the CFCs, including the registration number issued by the ICAI/ICWAI etc.
(v) At any given time, one assessee can authorize one CFC, while one CFC can provide services to more than one assessee throughout India.
(vi) In case the assessee wants to withdraw the authorization, it can do so by intimating the department.
(vii) However, an assessee will be held liable for all actions of omission or commission of the CFC, during the period they are authorized by him/her to work in ACES.
EASIEST (Electronic Accounting System in Excise and Service Tax)
(i) What is EASIEST scheme?: EASIEST has been developed to make payment of tax easy. The facility is available with 28 banks.
(ii) Benefits of EASIEST to the taxpayer
(a) Only one copy of the challan has to be filled instead of earlier four copies. (b) Facility of online verification of the status of tax payment using CIN.
(iii) Challan Identification Number (CIN): Challan Identification Number (CIN) is a 20 digit unique identifier which will be given on the Taxpayer’s computer generated acknowledgement /receipt. This number is a combination of the BSR code of the bank branch (first 7 digits), the date of deposit (next 8 digits) and Challan Serial Number (last 5 digits).
(iv) Assessee code: Assessee code/registration number/ECC code are all one and the same. It is a 15-character identification number allotted by the system to the assessee based on the PAN number or temporary number (if PAN is not submitted) when the registration details are entered in the Central Server. The 15-character assessee code will be available in the registration certificate issued to the assessee by the Assistant Commissioner/Deputy Commissioner of the Division.
5.5.10 Personal Ledger Account
(a) Account current: Assessee may pay duty through account current. It is popularly known as PLA (Personal Ledger Account). Any assessee who has obtained 15 digit ECC number from Superintendent can operate a current account.
(b) Debits and credits in PLA: The PLA is credited when duty is deposited in bank by GAR-7 challan. Thereafter, the duty is required to be paid by making a debit entry in the PLA on monthly basis. PLA and CENVAT credit should be used only for payment of excise duty and not for other payment like rent, lines, penalties etc.
(c) PLA to be maintained in triplicate: PLA has to be maintained in triplicate using indelible pencil and both sided carbon. Two copies of PLA and zerox copy of GAR-7 (earlier TR-6) receipted challans shall be submitted along with monthly/quarterly ER-1/ER-3 return. (d) Practically redundant: However practically, after introduction of monthly payment system, PLA has become redundant except in the month of March. In the month of March, duty is required to be paid before 31st March. Hence, generally assessee pays higher amount to be on
safe side.
(e) CENVAT credit only of inputs received upto end of month: Duty can be paid through PLA and/or CENVAT credit. Excise duty is payable on monthly basis. CENVAT credit available at the end of the month can be availed, even if duty is payable by 5th/6th of following month.
CENVAT credit of all inputs and 50% duty paid on capital goods is available as soon as goods enter the factory, even if book entry is made later. Thus, CENVAT credit is available in respect of all goods received upto end of the month, even if book entry is made later.
5.5.11 Procedure for deposit of Central excise duties during bank strikes, natural calamities etc.: This procedure is to be followed only when all the banks nominated to collect revenues within a Commissionerate are unable to transact business, due to strike of banks or sudden closure of banks due to riots, imposition of curfew or natural calamities such as flood, cyclones, etc.
Normally in all cases of closure of bank business due to strike by bank employees, the public gets advance intimation either through the press, or otherwise. In all such cases, the assessees should make advance arrangements to deposit money into the banks and keep sufficient amounts in their account current [PLA] so that they do not face any difficulty in the clearance of the goods during the period of the strike.
In cases where the strike of bank employees is without notice, or where the strike called for after due notice is prolonged beyond a reasonable time (say over 3-4 days) or where there is sudden closure of banks due to riots, imposition of curfew or natural calamities such as flood, cyclones, etc., the Commissioner may adopt the procedure specified hereinafter in partial relaxation of the provisions contained in the “Manual for collection of Revenue and payment of refunds etc.” (hereinafter referred to as ‘Manual’)” only for the duration of the strike or the sudden closures.
The Commissioners should issue a Trade Notice stating that during the days of the closure of bank business due to such strikes (specifying the dates wherever possible), the assessees can send their cheques by registered post, acknowledgement due (R.P.A.D.) or special
messenger, with the GAR-7 challan duly filled in, to the Chief Accounts Officers of the Commissionerates, with a clear declaration that they have sufficient balance in their bank account.
i. They should be advised to send a copy of the letter forwarding the cheque, to the concerned Range Officer also.
ii. On the strength of a cheque so sent, they may take credit in the P.L.As.
iii. On receipt of the cheque in his office, the Chief Accounts Officer will immediately intimate the concerned Range Officer about the name of the assessee, the number and date of the cheque and its amount.
iv. Immediately after the strike is over, all such cheques should be deposited by the Chief Accounts Officer into the Focal Point Bank/State Bank of India at the Headquarters or Reserve Bank of India, as the case may be, through GAR-7 challan according to the procedure prescribed in the Manual.
v. Bank commission or collection charges, if any, chargeable by the banks should be debited in the P.L.A of the assessees by the Chief Accounts Officer under intimation to them as also the R.Os.
vi. If any of the cheques sent by the assessees are dishonoured, the Commissioners shall take appropriate penal action as prescribed under the rules.
vii. The Chief Accounts Officer should maintain a suitable record in regard to receipt and disposal of such cheques.
5.5.12 Payment by cheque when not permitted: For removal of doubts and to ensure uniformity of application of the procedure it is clarified that the payment of duty/other dues through cheques should not be permitted in the following cases: -
i. If there is a strike in or closures of only one nominated bank of the Commissionerate and the assessee still remains in a position to deposit money in the other nominated banks or Departmental Treasury (wherever they exist) – unless the assessees’ bank is the only nominated bank in the Commissionerate.
ii. In the case of declared bank holidays because such holidays are known well in advance.
iii. Where the public has been given advance intimation of a strike, unless the strike is unduly prolonged (say over 3-4 days).
iv. Where bank employees adopt “go-slow” tactics.
5.5.13 Duty payment under protest: Sometimes, it happens that the classification and assessable value of goods determined by the excise authorities are not agreeable to or acceptable to the assessee. In such cases, the assesee can file an appeal and in the meanwhile he can pay duty under protest if no stay is obtained from Appellate Authorities. Tribunal held that significance of ‘payment under protest’ is that it safeguards the position of the person who makes the payment and ensures that it may not be claimed that the payment he made was a voluntary one [Alpha Electrical Products v. CCE 1987 (30) E.L.T. 752 (T)] (subsequently maintained by Supreme Court)
Time-limit of one year for claiming refund not applicable: Section 11B of the Central Excise Act, 1944 provides that the time limit of one year for claiming refund of excise duty shall not apply where the duty has been paid under protest.
Procedure for payment under protest: As per the Supplementary Instructions issued by Central Board of Excise and Customs, any assessee who desires to pay duty under protest, may do so by following the procedure mentioned below:
(a) The assessee shall inform the Superintendent or Inspector of Central Excise in writing giving reasons for paying duty under protest and dated acknowledgement will be given to him.
(b) The assessee shall mark invoices or monthly/quarterly returns indicating the goods on which duty is paid ‘under protest’. If it is a lump-sum duty payment in respect of past demand, he may record the fact of duty payment under protest in the Personal Ledger Account, CENVAT Account and the Daily Stock Account.
(c) If a case is appealed against by the assessee or where the appeal period for further appeal is available, he may continue to pay duty under protest. However, if decision is not in his favour and he exhausts the appellate remedy or does not appeal within stipulated period, he shall not have any right to pay duty under protest.
5.5.14 Central Excise (Removal of Goods At Concessional Rate Of Duty For Manufacture Of Excisable Goods) Rules, 2001 [issued vide Notification No.34/2001-C.E. (N.T.) dated 21.6.2001 as amended]: If a buyer is entitled to obtain the excisable goods at nil/concessional rate of duty under an exemption notification issued under section 5A, he has to follow the procedure prescribed in the said rules. The procedure for availing the benefit can be underlined as below:-
(a) Application by the manufacturer to obtain the benefit [Rule 3]
(i) Application to jurisdictional Assistant Commissioner/Deputy Commissioner of Central Excise: A manufacturer who intends to receive the specified goods for specified use at concessional rate of duty, is required to make an application in quadruplicate in the specified form to the jurisdictional Assistant/Deputy Commissioner of Central Excise.
However, he is required to make separate application in respect of each supplier of subject goods.
(ii) Execution of bond: Further, the manufacturer is required to execute a general bond with surety or security to cover the recovery of duty liability estimated to be involved at any given point of time.
(iii) Application countersigned by jurisdictional authorities: The application shall be countersigned by the jurisdictional authorities (i.e. jurisdictional Assistant/Deputy Commissioner of Central Excise) certifying that the manufacturer has executed the required bond.
(iv) Subsequent procedure: Of the four copies of application, one copy shall be forwarded to the jurisdictional range Superintendent of the manufacturer of the
subject goods and two copies shall be handed over to the applicant manufacturer and one copy shall be retained by the Assistant/Deputy Commissioner of Central Excise.
(b) Procedure to be followed by the manufacturer of subject goods [Rule 4]: The manufacturer of the goods can avail the exemption from duty based on the above referred application.
The manufacturer receiving a copy of application shall avail the benefit of exemption notification issued under section 5A of the Central Excise Act and shall record the removal particulars like:-
(i) Date and number of invoice; (ii) Description of goods; (iii) Quantity of goods; (iv) Value of goods;
(v) Amount of duty paid at concessional rate. The said details shall be recorded on the application.
(c) Manufacturer to give information regarding receipt of the subject goods and maintain records [Rule 5]: The manufacturer receiving the above goods is required to maintain the simple account indicating the quantity and value of subject goods received, consumed and quantity remaining in stock. Further, he is also required to submit a quarterly return in the specified form.
(d) Goods received at concessional rate of duty not used for intended purpose [Rule 6]
(i) Consequence of goods not being used for intended purpose: If the material received at concessional rate of duty is not used for intended purpose, manufacturer is liable to pay differential duty along with interest.
(ii) Responsibility cast on the jurisdictional Assistant/Deputy Commissioner: The responsibility to ensure, that the material received at concessional rate of duty is used for intended purpose, is cast on the jurisdictional Assistant/Deputy Commissioner of Central Excise.
(iii) Recovery of duties: Provisions of section 11A and section 11AA shall apply mutatis mutandis for effecting such recoveries.
(iv) Defective/damaged/unsuitable/surplus goods returned to manufacturer: If the manufacturer on receiving the subject goods finds them to be defective or damaged or unsuitable or surplus to his needs, he may return the subject goods to the original manufacturer of the goods. Such returned goods shall be added to the non duty paid stock of the manufacturer of the subject goods and dealt with accordingly.
(v) Goods lost or destroyed by natural causes or by unavoidable accident deemed to be not used for intended purpose: If the goods are lost or destroyed
by natural causes or by unavoidable accident during transport from place of procurement to the manufacturer's premises or from place of manufacturer to the place of procurer (if goods are returned) during handling or storage in the manufacturer's premises, it will not be treated as used for intended purpose. Consequently, differential duty and interest will become payable.
5.6 Registration [Rule 9]
For the administration of the Central Excise Act, 1944 and the Central Excise Rules, 2002, manufacturers of excisable goods or any person who deals with excisable goods with some exceptions, are required to get the premises registered with the Central Excise Department before commencing business.
Rule 9(1) of Central Excise Rules, 2002 provides that every person, who produces, manufactures, carries on trade, holds private store-room or warehouse or otherwise uses excisable goods or an importer who issues an invoice on which CENVAT credit can be taken shall get registered. It may be noted that rule 9 applies only to excisable goods and not just “goods”.
5.6.1 Persons requiring registration: In accordance with rule 9 of the Central Excise Rules, 2002 read with section 6 of Central Excise Act, 1944 and Notifications issued thereunder, the following category of persons are required to register with jurisdictional Central Excise Officer in the Range office having jurisdiction over his place of business/factory:
i. Every manufacturer of excisable goods (including Central/State Government undertakings or undertakings owned or controlled by autonomous corporations) on which excise duty is leviable.
ii. First stage or second stage dealers (including manufacturer’s depot and importers) desiring to issue cenvattable invoices.
iii. Persons holding private warehouses for storing non-duty paid goods.
iv. Persons who obtain excisable goods for availing end-use based exemption notification. vi. Exporter-manufacturers under rebate/bond procedure; and Export Oriented Units, which
have interaction with the domestic economy (through DTA sales or procurement of duty free inputs).
vii. Importer who issues an invoice on which CENVAT credit can be taken.
Separate registration for separate premises: Separate registration is required in respect of separate premises except in cases where two or more premises are actually part of the same factory (where processes are interlinked), but are segregated by public road, railway line or canal. The Commissioner of Central Excise decides whether the two premises are part of the same factory or not based on factors, such as interlinked process, common electricity supplies, labour /work force, sales tax registration and assessment, income Tax assessment etc.
Registration Certificate to minors: Registration Certificate may be granted to minors provided they have legal guardians i.e. natural guardians or guardians appointed by the Court, as the case may be, to conduct business on their behalf.
5.6.2 Exemption from Registration: Rule 9(2) gives power to the Board to issue the notification for giving exemption from registration subject to the conditions and safeguards. Accordingly the Central Board of Excise and Customs (CBEC), by Notification No. 36/2001-CE (NT) dt.26.6.2001, has exempted the following specified categories of persons/premises from obtaining registration.
i. Persons who manufacture the excisable goods, which are chargeable to nil rate of excise duty or are fully exempt from duty by a notification subject to the declaration to be made in the specified form.
ii. Small scale units availing the slab exemption based on value of clearances under a notification. However, such units will be required to give a declaration in a specified form once the value of their clearances touches ` 90 lakhs.
iii. In respect of final products falling under Chapter 61 or 62 the job-worker need not get registered if the principal manufacturer undertakes to discharge the duty liability.
iv. Persons manufacturing excisable goods by following the warehousing procedure under the Customs Act, 1962 subject to the following conditions:
a. the said excisable goods and any intermediary or by-product including the waste and refuse arising during the process of manufacture of the said goods under the Customs Bond are either destroyed or exported out of the country to the satisfaction of the Assistant Commissioner of Customs or the Deputy Commissioner of Customs, in charge of the Customs Bonded Warehouse;
b. the manufacturer shall file a declaration in the specified form in triplicate for claiming exemption under this notification;
c. no drawback or rebate of duty of excise paid on the raw materials or components used in the manufacture of the said goods, shall be admissible.
v. The person who carries on wholesale trade or deals in excisable goods (except first and second stage dealer, as defined in CENVAT Credit Rules, 2004).
vi. A hundred per cent Export Oriented Undertaking or a unit in Export Processing Zone or a unit in Special Economic Zone licensed or appointed, as the case may be, under the provisions of the Customs Act, 1962. These units are deemed to be registered for the purpose of rule 9.
However, such 100% EOU or a unit in EPZ shall not be deemed to be registered if such undertaking or unit procures excisable goods from the domestic tariff area or removes excisable goods to the domestic tariff area.
vii. Persons who use excisable goods for any purpose other than for processing or manufacture of goods availing benefit of exemption extending concessional rate of duty. viii. A godown or retail outlet of a Duty Free Shop appointed/licenced under section 57 or 58 of Customs Act, 1962. Such godown/retail outlet are deemed to be registered as warehouse under rule 9.
5.6.3 Procedure for registration: Notification No. 35/2001 CE (NT) dated 26.06.2001 as amended prescribes the conditions, safeguards and procedures for registration of a person and exemptions from registration in specified cases: -
(1) Application for registration: Every person specified under rule 9(1), unless exempted from doing so by the Board under sub-rule (2) of rule 9, shall get himself registered with the jurisdictional Deputy or Assistant Commissioner of Central Excise by applying in the specified form.
(2) Registration of different premises of the same registered person: If the person has more than one premises requiring registration, separate registration certificate shall be obtained for each of such premises.
However, if a person manufactures or carries on trade in goods falling under Chapter 50 to 62 of First Schedule to the Central Excise Tariff Act, 1985 and has more than one premises requiring registration, he may obtain a single registration for all such premises, which fall within the jurisdiction of one Commissioner of Central Excise provided he declares the details of all such premises in the specified form.
Also, if a person manufactures Compressed Natural Gas (Tariff item 2711 of Central Excise Tariff) and has more than one premises requiring registration, which fall within the jurisdiction of one Chief Commissioner of Central Excise, he may obtain a single registration for all such premises with any of the Commissioner of Central Excise falling within the jurisdiction of the said Chief Commissioner. He will have to submit the details of all such premises along with the application for registration, subject to the condition that prior intimation shall be given before starting any additional premises subsequent to obtaining such registration:
(3) Registration Certificate and Number: Registration Certificate containing registration number shall be granted within seven days of the receipt of the duly complete application. (4) Transfer of Business: Where a registered person transfers his business to another person, the transferee shall get himself registered afresh.
(5) Change in the Constitution: Where a registered person is a firm or a company or association of persons, any change in the constitution of firm, company or association, shall be intimated to the jurisdictional Central Excise Officer within thirty days of such change. (6) De-registration: Every registered person, who ceases to carry on the operation for which he is registered, shall de-register himself by making a declaration in the specified form and depositing his registration certificate with the Superintendent of Central Excise.
(7) Revocation or suspension of registration: A registration certificate granted under this rule may be revoked or suspended by the Assistant/Deputy Commissioner of Central Excise, if the holder of such certificate or any person in his employment, is found to have committed breach of any of the provisions of the Act/rules or has been convicted of an offence under section 161, read with section 109 or with section 116 of the Indian Penal Code.
5.6.4 Mines engaged in the production of specified goods exempt from registration when premises from where centralised billing/accounting is done is registered: Every mine engaged in the production/manufacture of following goods is exempt from obtaining
registration where the producer/manufacturer of such goods has a centralized billing/accounting system in respect of such goods produced by different mines and opts for registering only the premises or office from where such centralized billing or accounting is done:-
• Coal, briquettes, ovoids and similar solid fuels manufactured from coal [Chapter heading 2701]
• Lignite, whether or not agglomerated, excluding jet [Chapter heading 2702] • Peat (including peat litter), whether or not agglomerated [Chapter heading 2703]
• Coke and semi-coke of coal, of lignite or of peat, whether or not agglomerated; retort carbon [Chapter heading 2704]
• Tar distilled from coal, from lignite or from peat and other mineral tars, whether or not dehydrated or partially distilled, including reconstituted tars [Chapter heading 2706] 5.6.5 Other units of manufacturers of recorded smart cards exempt from registration when premises from where centralised billing is done is registered: Manufacturing units engaged in the manufacture of recorded smart cards falling under sub-heading 8523 have been exempted from obtaining registration if the manufacturer of such goods has a centralized billing or accounting system in respect of such goods manufactured by different manufacturing units and he opts for registering only the premises or office from where such centralized billing or accounting is done.
5.6.6 Job-workers of goods of Chapters 61-63 of Central Excise Tariff exempt from registration: Every job worker who undertakes job work in relation to goods falling under Chapter 61, 62 or 63 of Central Excise Tariff on behalf of any other person who pays the excise duty leviable on the said goods and comply with all procedural formalities under Central Excise Act, 1944, is exempt from obtaining registration.
However, the job worker who is authorised to pay excise duty on such final products manufactured by him on behalf of such other person, will have to register himself.
The term "job worker" shall have the meaning assigned to it in rule sub rule (1A) of rule 4 of Central Excise Rules, 2002.
5.6.7 Unregistered premises used solely for affixing lower ceiling prices on pharmaceutical products to comply with DPCO, 2013 exempt from registration: Unregistered premises used solely for affixing a sticker/re-printing/re-labeling/re-packing of pharmaceutical products falling under Chapter 30 of the Central Excise Tariff Act, 1985 with lower ceiling price to comply with the notifications issued under Drugs (Prices Control) Order, 2013 are exempt from obtaining registration under central excise. However, the exemption from registration is available subject to the conditions specified in Notification No. 22/2013 CE dated 29.07.2013 exempting the pharmaceutical products from payment of central excise duty.
5.7 Records
Records shall mean all the records prepared or maintained by the assessee for accounting of transactions with regard to receipt, purchase, manufacture, storage, sales or delivery of the goods including inputs and capital goods. All accounts, agreements, invoice, price-list, return, statement or any other source document, whether in writing or in any other form shall be treated as records. Source documents are those documents which form the basis of accounting of transactions and include sales invoice, purchase invoice, journal voucher, delivery challan and debit or credit note.
Prior to April 2000, the rules had prescribed the records to be maintained, referred to as ‘Statutory records’. The statutory records under Central Excise Rules, 1944 were dispensed with in the year 2000 and it was decided to rely on private records of the assessee which they usually maintain for their activities. This was done as a measure of simplification and for adopting a common accounting system. While framing the Central Excise (No.2) Rules, 2001 and subsequently, the new 2002 rules issued under the Central Excise Act, 1944, the Government has continued with the policy of relying on the private records of the assessee. 5.7.1 Main features: The main features of the acceptance of private records are as below: - (a) No statutory records: The fact that the rules do not prescribe ‘statutory records’ shall not
be construed that no record has to be maintained. Every assessee has to compulsorily maintain private records.
The rules which require certain records to be maintained are self contained and they specify the minimum information that an assessee MUST enter in their own record by which the assessee has to decide himself as to the form in which they are going to maintain such information.
(b) No format for record-keeping except 100% EOU: There is no format for record– keeping, except in the case of rule 17 of the said rules where it is provided that the 100% EOU unit or a unit in FTZ/SEZ shall maintain in proper form appropriate account relating to production, description of goods, quantity removed, duty paid and each removal shall be made on an invoice. This format has been notified by Notification No. 59/2001-Central Excise (N.T.) dated 6th August, 2001.
This means that the assessee is free to devise his record-keeping, depending upon his accounting requirements, but shall ensure that the requirements of particular rules are met. (c) Daily Stock Account [Rule 10]: There is a specific requirement about maintenance of
“Daily Stock Account’ in rule 10 of the Central Excise Rules, 2002. It provides that every assessee shall maintain proper records, on a daily basis, in a legible manner indicating the particulars regarding
a. description of the goods produced or manufactured, b. opening balance, quantity produced or manufactured, c. inventory of goods,
d. quantity removed, e. assessable value,
f. the amount of duty payable; and
g. particulars regarding amount of duty actually paid.
The first page and the last page of each such account book shall be duly authenticated by the producer or the manufacturer or his authorised agent.
(d) No pre-authentication of records required: There is no requirement of ‘authentication’ of records by jurisdictional Central Excise Officer before a book/register is brought into use by an assessee. These records (relevant for Central Excise) shall, however, be authenticated on the first and last page by the assessee in the same manner as the Daily Stock Account.
(e) Preservation of records: Records shall also be preserved for a period of five years immediately after the financial year to which such records pertain.
(f) Furnishing of list of records to Range Officer [Rule 22(2)]: Every assessee, and first stage and second stage dealer shall furnish to the Range Officer, a list in duplicate, of - (i) all the records prepared and maintained for accounting of transaction in regard to
receipt, purchase, manufacture, storage, sales or delivery of the goods including inputs and capital goods, as the case may be;
(ii) all the records prepared and maintained for accounting of transaction in regard to payment for input services and their receipt or procurement; and
(iii) all the financial records and statements (including trial balance or its equivalent). (g) Furnishing of records on demand [Rule 22(3)]: Every assessee, and first stage and
second stage dealer shall, on demand make available to the officer empowered under sub-rule (1) or the audit party deputed by the Commissioner or the Comptroller and Auditor General of India or Cost Accountant/ Chartered Accountant as nominated under section 14A/14AA of the Act, -
(i) the records maintained or prepared by him in terms of sub-rule (2);
(ii) the cost audit reports, if any, under section 233B of the Companies Act, 19561; and
(iii) the Income-tax audit report, if any, under section 44AB of the Income-tax Act, 1961 for the scrutiny of the officer or the audit party or the cost accountant or chartered accountant, within the time limit specified by the said officer or the audit party or the cost accountant or chartered accountant, as the case may be.
(h) Every assessee who is having more than one factory, and maintains separate records in respect of every factory for the purpose of audit, shall produce the said records for audit purposes.
5.7.2 Non-maintenance of daily stock account: Non-maintenance of daily stock account as contemplated under rules or other information mentioned in other rules mentioned above by the assessee in his private records will mean contravention of specified rules attracting appropriate penal action. If such non-maintenance of records is with intent to evade payment
of Central Excise duty, the more stringent penal provisions of the Central Excise Act and Central Excise Rules shall be attracted.
The private records relevant for Central excise including the Daily Stock Account maintained in compliance with the provisions of the said rules shall necessarily be kept in the factory to which they pertain.
5.8 Electronic maintenance of records and preparation of returns
and documents
Any person may electronically maintain or generate all or any of the records, returns, invoices and other documents prescribed under the rules made under Central Excise Act, 1944, using a computer, in electronically readable format. No specific permission from the Central Excise Department is required for this purpose. Such person is also not required to give any intimation to the Department.
However, the Department will record in “Scrutiny Register” or any other record indicating a person’s profile the fact that such person is electronically maintaining records or generating returns, invoices or other documents, using computer.
The records can be kept on any electronic media, such as hard disk of computers, floppies, CDs or tapes and preserved.
The records, returns and documents should be in electronically readable format. This also means that a person who uses computerized system to generate records/books of accounts, returns etc., must keep the electronic record, even when a hard copy is kept.
It is suggested to take the printouts (hard copies) of records and documents at the end of each month and kept in bound folders, separately for each type of record, return, documents etc. The person should ensure that proper back-up records are also maintained and preserved so that in the event of destruction due to unavoidable accidents or natural causes, the information can be restored within reasonable period of time. All such records, returns, invoices and other documents (both electronic and hard copy, including back-ups) shall be preserved for a period of five years (counted from the first day of the financial year following the financial year to which a record, return, invoice or document pertains).
It shall be incumbent upon a person (who maintains electronic records, returns, documents etc.) to produce, on demand, the relevant records, returns or documents, in hard copy and/or in the form of tapes or floppies or cartridges or compact disk or any other media in an electronically readable format (duly authenticated by the assessee), documentation including policy and procedure manuals, instructions to record the flow and treatment of transactions through accounting system, from the stage of initiation to closure and storage to the Central Excise Officers, or the audit parties deputed by the Commissioner or the Comptroller and Auditor General of India. Such records, returns, invoices or other documents will be produced pertaining to such period (subject to the period of preservation) as may be requested including the daily entries in electronic format relating to the current month for which the printouts are not taken out.
