Background of Procedures under Excise

All assessees have to register with Central Excise authorities. They have to maintain proper production and stock registers. Goods can be removed from factory only under cover of an Invoice. Excise duty has to be paid through PLA or Cenvat credit on monthly basis. Large assessees have to submit monthly return, while SSI units have to submit quarterly returns.

The procedures prescribed under Central Excise Rules, 1944, have been considerably simplified vide new rules w.e.f. 1.7.2001, which were later supplemented by CBEC’s Central Excise Manual released on 1.9.2001.

Overall scheme of new rules - The old rules of 1944 were all combined, i.e. the rules contained all the provisions in respect of all the procedures. However, in case of new rules, separate rules are made in respect of separate procedures. In some cases, powers have been delegated to Central Government or CBE&C (Board) to issue notifications. Thus, many provisions contained in old rules are now contained in different rules and notifications. Thus now each separate rule is small, but assessee will have to keep track of many rules and notifications. The new rules (all effective from 1.7.2001) are as follows -

Various notifications Nos 35/2001-CE(NT) to 56/2001-CE(NT) have been issued during the period 21-6-2001 to 29-6-2001. All these are effective from 1-7-2001.

CBE&C’s Central Excise Manual – In the Budget Speech on 28-2-2001, Finance Minister had stated ‘A new Manual of Procedures on Central Excise and Customs would be brought out by 1st September, 2001. The emphasis would be on simplicity, brevity and transparency. I also propose to simplify the central excise rules to make them user friendly’.

Accordingly, new rules were made effective on 1.7.2001. Later, CBE&C has issued new ‘Central Excise Manual’ on 1.9.2001. This is mainly a compendium of previous instructions given through trade circulars from time to time. The Manual is simple and comprehensive. For an assessee, it is easier to keep track of one Manual rather than innumerable trade notices and circulars.

The forwarding letter dated 31.8.2001 to the Manual states as follows, ‘If there are instructions which have not been expressly covered by this Manual, the same will remain applicable, unless they are repugnant to provisions of the new Rules. It is clarified that provisions of CE Act and Rules (including notifications issued thereunder) shall precede. [It should be ‘prevail’]’. It is stated that the Manual will be revised / updated in September every year.

Rule 31 of CE Rules authorises Board, Chief Commissioner and Commissioner to issue written instructions providing for any supplemental matters arising out of the rules.

Thus, the instructions in the manual have statutory significance, though these instructions cannot override provisions of Act or Rules. Some times, the rules / notifications issued under rules state that procedure shall be prescribed by Board. In such cases, the procedures prescribed in the Manual (or any other trade circular issued by CBE&C) will be normally held as binding. In other cases, the instructions in manual / trade circular are not strictly binding on assessee, though it is highly advisable to follow them.

General provisions in respect of procedures – Some general provisions in respect of procedures are as follows –

Private records by assessee – Earlier, rules specified various records to be maintained in prescribed formats. Now, most of the ‘statutory records’ have been abolished, except a few like records by EOU. In some cases, like Daily Stock Account (DSA) or Cenvat credit, requirements of records have been prescribed but format is not prescribed. However, this does not mean that no records are required. It only means that assessee can maintain his own private records as long as the requirements as specified in the rules are satisfied. The records should be kept in the factory to which they pertain. The records should be preserved for five years immediately after the financial year to which such records pertain. Non maintenance of records as specified in rules will mean contravention of specified rules and will attract penal action. - Chapter 6 Part I Paras 2.1 and 2.4 of CBE&C’s CE Manual, 2001.

Self pre-authentication – The DSA and even other records pertaining to Central Excise shall be pre-authenticated by assessee on first and last page of the book / register. - Chapter 6 Part I Para 2.1(v) and (vi) of CBE&C’s CE Manual, 2001. - - Naturally, such pre-authentication is possible only if records are kept in book form. Pre-authentication is not possible if (a) Records are maintained on computer (b) Records are maintained in loose leaf form. Note that there is no statutory requirement that the records must be kept in book form only.

Submission of list of records – Every assessee should submit a list in duplicate, of all records prepared or maintained by him for accounting of transactions in regard to receipt, purchase, manufacture, storage, sale or delivery of goods including inputs and capital goods to visiting Central Excise officer. [Rule 22(2) of Central Excise Rules].

Submission of records – The assessee is required to submit to his range officer duly empowered by Commissioner or audit party or audit persons of C&AG the following, for scrutiny – (a) Records maintained or prepared in terms of rule 22(2) (b) Cost Audit Report u/s 233B of Companies Act (c) Income Tax Audit Report u/s 44AB of Income Tax Act

Meaning of ‘record’ – The term 'record' means all records prepared or maintained by assessee for accounting of transactions in regard receipt, purchase, manufacture, storage, sales or delivery of 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 document' are those documents which form basis of accounting transactions. These include sales invoice, purchase invoice, journal voucher, delivery challan and debit or credit notes. - Chapter 6 Part I Para 2.2 of CBE&C’s CE Manual, 2001.

Electronic maintenance of Excise records – Provisions is specified in Chapter 6 Part  III of CBE&C’s CE Manual, 2001.

Excise and Customs on e-mail and internet - Information about excise is available on internet at website –http://www.cbec.gov.in and http://www.finmin.nic.in . Notifications, Act, rules, Board circulars etc. in respect of Central Excise, Customs and Service Tax are available on the site. Surprisingly, they are reasonably up-to-date (though not always – certainly you cannot expect that from Government). Budget can be seen on finmin site.

Another Government site http://indiacode.nic.in gives text of many Central Government Acts.

Updates on Indirect Taxes – Many internet sites are available which provide regular updates on Indian laws. You may visit http://www.dateyvs.com to get regular updates on Indian Indirect Taxes and Corporate Laws. The site provides * up-to-date information about changes in law * Basic information about important laws * Links to various useful sites. Free replies to queries are given.

Summary of Procedures - Some procedures are basic, which every assessee is required to follow. Besides, some procedures are required to be followed as and when required.

Basic Procedures

These are core procedures which each assessee has to follow. There are other procedures which are not routine.

Following are the returns to be filed

These are core procedures which each assessee has to follow. There are other procedures which are not routine. These are as follows -

(a)      Export without payment of duty or under claim of rebate [Rules 18 and 19 of Central Excise Rules]

(b)     Receipt of goods for repairs / reconditioning [Rule 16 of Central Excise Rules]

(c)      Receipt of Goods at concessional rate of duty for manufacture of Excisable Goods.

(d)     Payment of duty under Compounded Levy Scheme

(e)      Provisional Assessment [Rule 7 of Central Excise Rules]

(f)      Warehousing of goods.

(g)      Appeals and settlement

Administrative set up of Central Excise

Rules and procedures often prescribe designations of various officers of Excise and it is essential to have an idea of administrative set up of department to understand the powers and status of these authorities. Administration of Central Excise is under Ministry of Finance, Government of India.

Board - CBE&C - A Central Board of Excise and Customs (CBE&C - called ‘Board’) has been formed with headquarters at New Delhi. The Board is formed under Central Boards of Revenue Act, 1963. This Board, consisting of six/seven members, headed by Chairman, has powers to administer the Excise Act. Chairman of Board is empowered to distribute work among himself and other members and specify cases which will be considered jointly by Board.

Rule 3(1) of Central Excise Rules authorises Board to appoint Central Excise Officers. Board can exercise all powers conferred on these officers under the Central Excise Act.

Similarly, section 4(1) of Customs Act authorises Board to appoint officers of customs. As per section 4(2) of Customs Act, Board can authorise Chief Commissioner, Commissioner of Customs, Joint/Deputy/Assistant Commissioner to appoint officers below Assistant Commissioner.

Section 37B of CEA [parallel section 151A of Customs Act] authorises Board to issue orders, instructions and directions to Central Excise Officers for purposes of uniformity in the classification of excisable goods or with respect to levy of excise duties on such goods. Rule 31(1) of Central Excise Rules (Previous Rule 233) authorises CBE&C, Chief Commissioner and Commissioner to issue written instructions providing for any supplemental matters arising out of the rules. These administrative orders are binding on lower officers.

Departmental Circulars and trade notices not binding but department cannot take a stand against trade notices - View of Supreme Court is that departmental circulars and trade notices are not binding on assessee or quasi-judicial authorities. However, department itself, which has issued the circular, cannot take a stand contrary to the circular. Department can withdraw the circular, but with prospective effect - view confirmed in Commissioner of Sales Tax v. Indra Industries 2000(6) SCALE 392 (SC 3 member bench)].

Chief Commissioner of Central Excise - Country is divided in several zones. Each ‘zone’ is under supervision of ‘Chief Commissioner of Central Excise’. Rule 3(2) of Central Excise Rules authorised Board to specify jurisdiction of Chief Commissioner, Commissioner or Commissioner (Appeals).

Posts of 34 Chief Commissioners have been sanctioned vide Notification No. 14/2002-CE(NT) dated 8-3-2002 read with 14/2002-Cus(NT) dated 7-3-2002. [23 in Excise and 11 in Customs]. The notifications have been made effective w.e.f. 1-11-2002.

In the interior i.e. non-coastal areas, Chief Commissioner of Central Excise looks after customs work also.

Commissioner of Central Excise - Each ‘zone’ covers various Commissionerates and Commissioner of Central Excise (CCE) is Administrative in-charge of the ‘Commissionerate’.

As per Notification No. 14/2002-Cus(NT) dated 7-3-2002 (made effective from 1-11-2002), there are 92 Commissioners and 71 Commissioner (Appeals).

Rule 3(1) empowers CBE&C to confer on any officer the powers of conferred by Central Excise Rules by issue of notification.

There are 35 Commissioners of Customs [Notification No. 15/2002-Cus(NT) dated 7-3-2002] and 19 Commissioner of Customs (Appeals) [Notification No. 16/2002-Cus(NT) dated 7-3-2002]. These notifications are effective from 25-10-2002.

In the interior i.e. non-coastal areas, Commissioner of Central Excise look after customs work also.

Additional Commissioner of CE - There may be one or more Additional Commissioner in a Commissionerate. Appeal against order of Commissioner lies with CESTAT while appeal against order of Additional Commissioner lies with Commissioner (Appeals). Restrictions on powers of Additional Commissioner have been placed through administrative instructions. Commissioner has unlimited powers of adjudication, while Addl Commissioner has restricted powers of adjudication.

Joint Commissioner - This post has been created in May, 1999, subsequent to implementation of report of fifth pay commission. [The post is equivalent to earlier Dy Commissioner]

Deputy Commissioner, Assistant Commissioner and Superintendent - Each Commissionerate of Central Excise is divided into divisions and each division is under administrative control of ‘Deputy Commissioner' or 'Assistant Commissioner of Central Excise’. Assistant Commissioner (Senior Scale) is designated as 'Deputy Commissioner'. However, both Assistant Commissioner and Deputy Commissioner have same powers. The post of Dy Commissioner has been created in June 1999, subsequent to implementation of report of fifth pay commission [Previous Dy Commissioners have been elevated as 'Jt Commissioners'].

The division under each Deputy / Assistant Commissioner of Central Excise is further divided into various ranges and each range is under control of Superintendent of Central Excise, who is of the rank of a Gazetted Officer. Inspectors work under Superintendent and some powers have been delegated to them. Inspector is not a Gazetted Officer.

Registration of factory/warehouse

As per section 6 of CEA, registration is compulsory for (a) every manufacturer or producer of excisable goods (b) warehouse where goods are stored without payment of duty.

As per Rule 9 of Central Excise Rules (Earlier rule 174), every person who produces, manufactures, carries on trade, holds private store-room or warehouse or otherwise uses excisable goods shall get registered. The rule also authorises Board to issue notifications (a) specifying conditions and procedures for registration and (b) granting exemption to person or class of persons from provisions of registration.

Registration is compulsory as both section 6 of CEA and rule 9(1) use the words ‘shall’. It has been clarified that registration granted in earlier old rule 174 will be valid under new rules.

Application for registration should be made in prescribed form A-1 issued vide notification No. 35/2001-CE(NT). The requirements for registration, as contained in Notification No. 35/2001-CE(NT) are -

Registration of Dealers - As per Cenvat rules, dealers / importers can issue invoices for Cenvat purposes, i.e. buyer can avail Cenvat on basis of such invoices. Dealers who intend to issue Cenvatable Invoices need registration. Other dealers (i.e. those who do not intend to issue Cenvatable Invoice) are exempt from registration.

Procedure for obtaining registration. - Procedure for registration has been prescribed vide CBE&C circular No. 662/53/2002-CX dated 17-9-2002 and notification No. 35/2001-CE(NT) dated 26-6-2001.

Application for registration in form A-1 duly completed and signed should be submitted in office of jurisdictional Assistant/Deputy Commissioner in duplicate. In case of EOU located in port towns, application should be submitted to DC/AC Customs, who is administrative in-charge of the EOU. 

EOU units procuring goods from DTA or supplying goods to DTA are required to be registered. EOU unit having no inter-linkage with domestic economy through sale or purchase of goods need not register. [There will be hardly such a unit]. Unit in SEZ is not required to be registered under Central Excise.

Application should be accompanied by self-attested copy of PAN issued by Income Tax department. If PAN is not available, copy of application made for PAN should be submitted. Temporary 15 digit registration number can be issued which will later be converted into permanent number based on PAN.

The application will be scrutinized by inspector in the office of AC/DC and if found in order, it shall be fed into computer through website SACER (System for Allotment of Central Excise Registration). Suitable entry will be made of the action taken in the record to be maintained. Registration Certificate bearing the 15 digit PAN based registration number will be generated by computer system, which will be delivered to assessee on the spot. Registration Certificate should be ready within 30 minutes on completion of data entry. If it is not possible to issue Registration certificate immediately, acknowledgment of application will be given on the spot. Later, registration certificate shall be either sent by post or handed over personally to assessee on the next working day.

After grant of registration certificate, original copy will be retained by divisional office and duplicate copy will be sent to Range Superintendent for post facto verification. The Range Officer and Sector Officer (i.e. Superintendent and Inspector) shall verify the declared address and premises within 5 working days. If found in order, it will be certified on the duplicate copy and sent to Divisional Office for record. Name of officer doing verification and date of verification will be entered into system. In case of EOU, verification is already done while granting Customs private bonded warehouse. Hence, post facto verification may not be required.

Major variation like fake address, non-existence of factory etc. shall be intimated to AC/DC for revoking the registration, after giving opportunity of hearing.

In case of company / partnership firm, the name of company / firm should be mentioned as ‘legal name of business’ and not of the person who is signing the application.

Exhibition of registration certificate – The registration certificate or a copy thereof shall be exhibited by registered person in a conspicuous part of registered premises. - Chapter 2 Part  I Para 7.3 of CBE&C’s CE Manual, 2001.

Registration of different portions of same factory - Often a factory has different portions located in adjoining premises, or premises separated by road, railway line or canal. In such case, Commissioner can allow single registration, subject to proper accountal of movement of goods from one premise to other and other conditions and limitations as he may specify. - Para 3 of notification No. 36/2001-CE(NT) dated 26.6.2001.

Excise Control Code - ECC to assessee - Each registered person is given an assessee code (Excise Control Code - ECC). New ECC code has been introduced w.e.f. 1-1-2000.

In the new system, PAN of Income Tax will be common identifier by various agencies like excise, customs, DGFT, RBI etc. PAN is a 10 digits alpha numeric code and can identify upto 96 crores business entities. It is generated centrally by the computer system. Advantage of the code is that it is not dependent upon office of registration of the company. Common identifier by all departments will facilitate linkages, exchange of information and verification. Assessee will have to obtain and quote only one number to all departments.

Exemption from registration - Rule 9(2) of Central Excise Rules authorises Board to grant exemption from registration in certain cases. Under these powers, Notification No. 36/2001-CE(NT) grants exemption from registration, in various cases as explained below.

When manufacturer is completely exempt from duty - If products of a manufacturer are completely and unconditionally exempt from duty, he is required to file a declaration in prescribed form to CE authorities. Mercifully, such declaration is required to be filed only once and not every year.

Exemption from registration if goods conditionally exempt - Some goods are exempt on basis of value of clearances e.g. goods manufactured by small scale units are exempt upto turnover of Rs 100 lakhs. Such units are also exempt from registration. An SSI unit has to submit a declaration in prescribed form, only in cases where its turnover is more than 'specified turnover’ of Rs 90 lakhs. If clearances are more than 'specified turnover' (Rs 90 lakhs), a declaration has to be submitted. However, they do not have to register with excise authorities. They do not have to follow any excise procedures. Such declaration has to be filed only once and not every year.  SSI units whose clearances are less than Rs 90 lakhs in a financial year are not required to submit any declaration. While calculating limit of Rs 90 lakhs, export turnover is not required to be considered, as the limit of Rs 90 lakhs is only in respect of clearances for home consumption.

Export turnover not to be considered for purpose of exemption from registration - As per earlier instructions, while calculating turnover of Rs 100 lakhs for exemption from registration, export turnover was not to be considered. Thus, if clearance for home consumption (i.e. excluding export turnover), are less than Rs 100 lakhs, it is not necessary to take registration and follow excise procedures. - CBE&C circular No 284/118/96-CX dated 31.12.1996. Since para (1)(b)(ii) of notification No 36/2001-CE(NT) dated 26.6.2001, which grants exemption from registration, uses similar words as per earlier notification, the instructions are still valid.

Exemption if goods got manufactured from others - If a person gets goods manufactured on his account from others, he is the ‘manufacturer’ and has to obtain registration. However, he can be exempted from registration if (a) He authorises actual manufacturer to comply with all excise procedural formalities (b) Agrees to furnish information regarding selling price for determination of Assessable Value.

In case of textile and textile articles, the duty liability is on the raw material supplier. Hence, he is not exempted from registration, unless the job worker himself, at his option, agrees to register himself and pay excise duty.

Special provision in respect of textile articles including readymade garments - The exception is that in case of textile articles (yarn and fabrics) and readymade garments or made up textile articles, duty liability is on raw material supplier, even if he is not really the manufacturer. He will have to register with central excise and pay duty. [Rule 12B(1)] of Central Excise Rules].

Wholesale and retail traders and dealers - Persons carrying on wholesale trade or dealers in Excise require registration only if they intend to issue Cenvatable Invoice. Otherwise, they are exempt from registration.

‘Factory’ under Central Excise - Section 2(e) define ‘factory’ as any premises, including the precincts thereof, wherein or in any part of which, excisable goods are manufactured; any part of manufacturing process connected with production of these goods is ordinarily carried on. Thus, whole premises will be ‘factory’ if in any of its part, excisable goods are manufactured or manufacturing process connected with production is carried out. - Bongaigaon Refinery and Petro Chemical Ltd. v. CCE - 1992 (57) ELT 383 (Cal HC). In Grauer Weil (I) Ltd. v. CCE - (1995) 1 SCC 77, it was held that ‘any premises including precincts thereof’ covers all buildings with its surroundings which form part of the unit. In Superintending Engineer v. CCE 1992(59) ELT 610 (CEGAT), it was held that 'premises' is not restricted to buildings, but it covers open land also.

Cenvat allowed only if inputs / CG used within factory - Cenvat credit is allowed only if inputs or capital goods are used within the factory as defined in section 2(e). Hence, definition of 'factory' is very important for Cenvat purposes. See case law under Cenvat.

Storage and Accounting of Goods

Since excise is a duty on manufacture of goods, duty liability is fastened as soon as goods are manufactured. However, under Rule 4(1) of Central Excise Rules, goods cannot be removed from the place they are produced or manufactured without payment of duty. Thus, finished goods can be stored in place of manufacture without payment of duty. This only defers the liability till clearance of goods from factory.

There is no time limit within which goods must be removed from the place of manufacture or production (that time it was store room). Duty is payable only when goods are removed and hence duty cannot be demanded in respect of goods accounted for and lying in the store room. - Tirupati Cigarettes v. CCE 1998(101) ELT 426 (CEGAT).

Daily Stock Account of stored goods - A daily stock has to be maintained by every assessee. [Rule 10(1) of Central Excise Rules]. [earlier rule 53(1)]. [Till 30-6-2000, the record was required to be maintained in prescribed form termed as RG-1 register. That register has been scrapped. However, records are required to be maintained].

The records should be maintained on daily basis, in a legible manner, indicating particulars regarding (a) Description of goods manufactured or produced (b) Opening Balance (c) Quantity produced or manufactured (d) Inventory (i.e. stock) of goods (e) Quantity Removed (e) Assessable Value (f) Amount of duty payable (g) Particulars regarding amount of duty actually paid.

The first page and last page of such account book shall be duly authenticated by the producer or manufacturer or his authorised agent. All such records shall be preserved for 5 years.

Note that concept of ‘store room’ and ‘stock taking’ has been abolished w.e.f. 1.7.2001. Thus, now there is no restriction in storage of final products in factory and these can be stored anywhere.

When entry is required in DSA - As soon as goods are manufactured, these should be deposited in store room. In the opinion of author, the correct legal position is that entry in Daily Stock Account (DSA) should be made only after goods are fully manufactured, duly tested and packed by assessee.

Storage for trading - Some manufacturers may like to trade from their factory in goods not manufactured by them. Manufacturers of consumer goods wish to maintain a retail sale shop near the factory, which is open to public. So far, there were restrictions, as the old rule 51A of Central Excise provided that no duty paid goods shall be allowed to enter or retained in any part of premises of factory, except with general or special order of Board or Commissioner. Now, that rule has been deleted and there is no corresponding provision in new rules. Hence, in the opinion of author, there is now no prohibition if manufacturer wants to trade in goods from his factory. Of course, proper records will have to be maintained. The fact should be disclosed in part II of form A-1 which is application for registration. However, as per the present form of registration certificate (RC), amendment to registration certificate is not required.

If the manufacturer intends to issue Cenvatable Invoice, separate registration certificate as ‘dealer’ should be obtained. Separate series of Invoices may be used as ‘Dealer’s Invoice’ and this fact should be informed to department.

Department has clarified that a manufacturer can bring duty paid goods in the registered premises for trading activity and permission from excise department is not required. However, a factory cannot receive goods from outside which are identical to those manufactured by assessee, without permission from Commissioner. – CCE, Pune II instruction No. 2/2001 dated 12.11.2001 – similar CCE, Indore TN 29/2002-CE dated 7-10-2002. [The instruction that identical goods should not be brought without permission does not seem to have any legal backing, in absence of any statutory provision].

Remission of duty on lost/destroyed goods - Goods which are fully manufactured and entered in Daily Stock Account (DSA) are liable for duty. However, if these are lost or destroyed in storage, by natural causes or by unavoidable accident or are unfit by consumption for marketing, remission of duty can be given by Commissioner on application. ‘Remission’ means waiver or cancellation of excise duty legally payable. Section 5 of CEA provides that Central Government can provide for remission of duty of excise payable on excisable goods, which due to any natural cause, are found to be deficient in quantity, by making rules in that behalf.

If the goods were not entered in 'daily stock account' as they were not fully manufactured, question of remission of duty does not arise at all as there is no duty liability.

The application for remission has to be made before removal of the goods from factory. [Rule 21 of Central Excise Rules].

Penalty for not maintaining records - Not accounting for excisable goods manufactured, produced or stored by assessee is an offence under Rule 25(1)(b) of Central Excise Rules. Penalty upto duty payable on goods can be imposed and offending goods can be confiscated.

Goods can be confiscated and penalty can be imposed if DSA (daily stock account - that time RG-1 register) is not maintained upto date and there is overwriting and cutting in the accounts - Hawkins Cookers Ltd. v. CCE 1997(12) ELT 255 (CEGAT SMB).

Difference in stock as per DSA and physical stock - Though the concept of store room and stock taking have been deleted in new rules, not maintaining proper records of excisable goods is an offence under rule 25(1)(b) of Central Excise Rules. As per this rule, all such (contravening) goods are liable to confiscation, plus penalty upto duty on the excisable goods in respect of which contravention has been committed or Rs 10,000 whichever is more, can be imposed. Hence, in the opinion of author, if difference is found between physical stock and book stock or if finished goods are not entered in Daily Stock Account, penalty can be imposed and goods in respect of which contravention is done can be confiscated.

Clearance of Goods from factory

'Clearance' means removal from the factory of excisable goods. Rule 11 of Central Excise Rules [earlier rule 52A] provides that excisable goods can be removed from factory only under an ‘Invoice’.  Requirements of Invoice are as follows :

Contents of Invoice - As per Rule 11(2) of Central Excise Rules, invoice shall contain (a) Registration Number (b) Name of consignee (c) Description and classification of goods (d) Time and date of removal (e) Quantity and Value of goods (f) Rate of duty (g) Duty payable on the goods. [Obviously, other details like name and address of assessee and consignee should be mentioned. Mode of transport may also be indicated though not mandatory].

serial numbered - Invoice should be serially numbered.  Earlier rule provided for ‘Printed Serial Number’. Now, the word ‘printed’ has been removed. However, the serial number can be given either by printing or by franking machine. Hand written serial numbers shall not be accepted. The serial number should start from 1st April and will continue for the whole financial year. - Chapter 4 Part I Paras 3.1 and 3.2 of CBE&C’s CE Manual, 2001.

Invoice in triplicate with suitable marks - Invoice should be in triplicate and should be marked as follows (i) Original shall be marked ‘ORIGINAL FOR BUYER’ (ii) Duplicate copy shall be marked ‘DUPLICATE FOR TRANSPORTER’ (iii) Triplicate shall be marked ‘TRIPLICATE FOR ASSESSEE’.

Each copy should be distinctively marked as aforesaid. In some cases, it is observed that the copies are either stamped or all copies are printed with all the four descriptions and one of them is ticked. This practice is illegal and should be stopped forthwith to avoid detention of consignments or denial of Cenvat credit - Pune Commissionerate TN 122/95 dated 3-1-1996.

Additional copies of Invoice – Assessee can make more copies of invoice for other requirements. These should be clearly marked as ‘NOT FOR CENVAT PURPOSES’.

Serial numbers to be informed - Before making use of the invoice book, serial numbers shall be intimated to Range Superintendent. It is not necessary to obtain dated acknowledgment. Hence, intimation though post, e-mail, fax or hand delivery is sufficient. [What he does with that information is a mystery and closely guarded secret].

one set of invoice book at a time, but separate series for export permitted - There should be only one invoice book in use at a time. Separate sets of invoices can be maintained with different serial numbers, with permission of Assistant / Deputy Commissioner. He can permit use of more than one invoice books of each type in special circumstances of each case. The Invoices should have different numeric serial numbers for different sets.

However, general permission has been granted to use two different invoice books – one for removals for home consumption and other for removal for export. Assessee has to just intimate AC / DC. No permission is required. - Chapter 4 Part I Para 5.2 of CBE&C’s CE Manual, 2001.

Rounding up of duty - As per section 37D, duty, interest, penalty etc. should be rounded off to nearest Rupee. Part less than 50 Ps shall be ignored.

Pre-authentication of Invoice - Each foil of the Invoice shall be pre-authenticated by the assessee - by owner, working partner, Managing Director or Secretary or any person duly authorised for this purpose, before being brought into use. [Rule 11(5) of CE Rules]. The company, owner or working partner can authorise any person to authenticate the Invoice. Copy of letter of authority should be submitted to Range Office. - Chapter 4 Part I Para 6.1 of CBE&C’s CE Manual, 2001.

Invoice should be in book form – Rule 11(4)  of Central Excise Rules [earlier rule 52A(7)] refers to ‘Invoice Book’. Hence, invoices should be in book form i.e. bound form. Original and duplicate should be delivered to the consignee and triplicate copy should be retained in the Invoice Book. The invoices can be ‘loose leaf’ only if Invoices are computerised. Rule 11(3) [earlier rule 52A(3)] states that Invoice shall be marked as ORIGINAL FOR BUYER etc.

Cenvat credit cannot be denied for minor defects – Cenvat credit cannot be denied for minor defects in invoice.

Provisions in respect of computerisation of Invoices - Computerisation of Invoices is freely permitted and no permission is required. If running stationary is used, the stationary should be pre-printed with distinctive names and marks of the assessee. After invoices are prepared, triplicate copy shall be retained in bound book form. - Chapter 4 Part I Para 5.4 of CBE&C’s CE Manual, 2001.

If invoices are prepared on computer, generation of serial number by computer at the time of printing of invoice on blank stationery of computer is permitted. However, this is so only if the software is such that computer automatically generates number and same number cannot be generated more than once. - Chapter 4 Part I Para 3.3 of CBE&C’s CE Manual, 2001.

Supplementary Invoice for differential duty - Assessee may have to pay differential duty as his assessment was provisional or he got price escalation from buyer later or duty was short paid through mistake or for any other reason. In such cases, he has to pay differential duty by preparing supplementary invoice. Buyer can avail Cenvat credit on basis of such supplementary invoice, except when such differential duty payment was on account of fraud, suppression of facts, collusion or wilful misstatement. [Rule 7(1)(b) of Cenvat Credit Rules].

Though rules do not specify, such supplementary invoice should be from same series of invoice. It should give cross reference to the original invoice under which the goods were cleared.

Relevant Date for determination of duty and tariff valuation – Rule 5 of Central Excise Rules [earlier rule 9A] provides that rate of duty and tariff valuation applicable for excisable goods shall be decided as follows :

Date of actual removal from factory or warehouse – Duty will be payable at rate and valuation as applicable at the time of actual removal from factory or warehouse, except in case of khandsari molasses.

Date in case of khandsari molasses – Rate of duty applicable in case of khandsari molasses shall be the rate in force on date of receipt of such molasses in the factory of the procurer of such molasses. [The provision has been made as in case of khandsari molasses, duty is payable by procurer and not the manufacturer] - Rule 5(2) of Central Excise Rules. - - Validity of this rule has been upheld in Ranson Industries v. UOI 2003(151) ELT 53 (J&K HC DB).

Date when goods cleared for captive consumption – If excisable goods are used within the factory (captive consumption), the date of removal will be the date on which the goods are issued for such use within the factory. – Explanation to Rule 5(2) of Central Excise Rules.

Goods cleared for export but not exported – There is no specific provision. As per rule 5, relevant date is date of removal from factory. Hence, it appears that if goods cleared from factory are not exported, rate of duty or tariff value applicable will be rate or value in force on the dates when the goods were removed from the factory. Same principle should be applicable to goods cleared to be re-warehoused at another place, but sold without re-warehousing.

Date when goods are clandestinely removed – New rules do not make any provision in respect of cases when goods are clandestinely removed. Thus, it will be necessary to estimate the dates/period during which the goods might have been removed and apply rate as applicable during that period.

Payment of duty

Goods have to be cleared from factory (or under bond for export or Chapter X procedure without payment of duty), under an Invoice. Duty is payable on  monthly basis. Duty can be paid through current account (PLA) and/or Cenvat credit. [Till 31-3-2000, duty was required to be paid on daily basis or consignment basis through PLA / Cenvat credit, before removal of goods from factory].

Goods have to be cleared from factory, under an Invoice. Duty is payable on  monthly basis. [Rule 8 of Central Excise Rules]

Special provisions for month of March - Since Government accounts close on 31st March, special provisions are made for payment of duty in March. Duty in respect of clearances in the month of March are payable by 31st March only and not in the following month.

Cenvat credit available instantly - Even if the manufacturer pays duty on monthly basis, the buyer of goods is entitled to get Cenvat credit as per Cenvat rules as soon as goods are received in the factory, as if the duty has been already paid on the goods. - Rule 8(2) of Central Excise Rules.

Payment before removal each time is also permissible - Till 31-3-2000, assessee was required to make payment of duty before clearance of goods. If assessee wants to pay duty on daily basis or consignment basis, he is allowed to do so– Chapter 3 Part V Para 1.2 of CBE&C’s CE Manual, 2001.

EOU/SEZ have to pay duty each time before clearance – For some unknown and obscure reasons, the facility of monthly payment of excise duty is not available to EOU/SEZ units. They have to pay excise duty every time before clearance of goods, as per clear provisions of rule 17 of Central Excise Rules.

recovery of duty self assessed under rule 6 and interest payable under rule 8(3) [Rule 8(4)]. [Section 11 provides for recovery of amount due from assessee by attachment and sale of excisable goods or by certification proceedings].

Maintenance of PLA – Assessee should pay duty through account current (Popularly known as PLA – Personal Ledger Account). Any assessee who has obtained 15 digit ECC number from Superintendent can operate a current account. No specific permission is necessary.

The PLA is credited when duty is deposited in bank by TR-6 challan and 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 payments like rent, fines, penalties etc.

PLA contains following details : (a) Serial No. and date, (b) details of credit like TR-6 challan number, date and amount - separately for each subhead of excise duty like basic duty, special duty, additional duty etc. (c) details of debit and (d) balance. PLA has to be maintained in triplicate using indelible pencil and both sided carbon. Each entry should be serially numbered and should be made on a separate line. The running serial number should start from 1 every financial year. Both debit and credit entry should not be on same line and there should be separate line for each debit or credit entry. Mutilations or erasures of entries once made in PLA are not allowed. If any correction is necessary, the original entry should be neatly scored out and attested by assessee. Two copies of PLA and copies of TR-6 receipted challans shall be submitted along with monthly / quarterly ER-1 return.  Form of PLA has been prescribed in Annexure 8 of CBE&C’s CE Manual, 2001.

It is not necessary that there must be some minimum credit balance in PLA. It is sufficient if there is balance at the time of debit in PLA on monthly basis. - Chapter 3 Part V Para 3.4 of CBE&C’s CE Manual, 2001.

Debit to PLA is payment of duty -   It has been held that debit of duty to PLA is effective payment of duty and not mere adjustment entry - Samrat International (P.) Ltd. v. CCE - 1992 (58) ELT 561 (SC) = AIR 1991 SC 369.

TR-6 Challan - The prescribed challan form TR-6 should be filled in giving details like name and 15 digit ECC code number of manufacturer, code number of Excise Commissionerate/Division/range and code of branch of Bank. The challans should be serially numbered, from 1st April onwards - Belgaum Commissionerate TN 129/95 dated 13.12.1995.

Four copies are submitted to authorised Bank. These should be marked as Original, Duplicate, Triplicate and quadruplicate. Two copies of challan are returned by bank duly stamped after amount is paid and two copies are retained by bank. One copy is to be submitted to excise authorities along with monthly return. (Out of two copies retained by Bank, one copy is sent to Excise authorities directly for their accounting and cross verification of the credit entries made by assessees.) If cash is deposited, receipted challan is given immediately by bank. However, if payment is made by cheque, challan is given duly receipted only after cheque is realised. Credit of amount deposited in Bank can be taken only after the bank issues receipted challan.

Columns in TR-6 Challan - The TR-6 challan requires details like (a) serial number (b) Name, address and code number of assessee (c) Excise Commissionerate, Division and Range (d) PLA number, name of commodity (e) Account head of duty - this is computer code decided by Excise department (e) Amount deposited in cash/cheque/demand draft.

Countersignature of excise officer not necessary - Amount under TR-6 challan for credit in PLA can be paid in bank with signature of authorised officer of assessee. Countersignature of excise officer is not necessary - Meerut Commissionerate Trade Notice No. 98/88 dated 18-7-88.

Account Head Code - The account head code has to be mentioned in TR-6 challan. Major accounting head code is 0038 for Central Excise, 0037 for Customs duties and 0044 for Service Tax. Some of the minor account head codes normally required are as follows : * Basic Excise Duty - 00380003 * Additional excise duties in lieu of sales tax - 00380335 * Other Receipts – 00380453 * National Calamity Contingent Duty - 00380106

In case of customs, minor account heads are : * Import duty - 00370002 * Export duty - 00370052 * National Calamity Contingent Duty – 00370060 * Other Receipts - 00370107 * Fees, fines, forfeitures and misc. items - 00370114.

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. Duty for clearances during the month is payable by 5th of following month. In case of SSI units, the duty for whole month is payable by 15th of following month.

Proviso to rule 3(3) of Cenvat Credit Rules states that Cenvat credit available at the end of the month only can be availed, even if duty is payable by 5th or 15th of following month. Thus, even if some inputs / capital goods are received after end of the month, only Cenvat credit available as on last day of the month can be utilised for payment of duty, while paying duty by 5th or 15th of the following month.

Payment of rent, fines or penalties – The account current (PLA) can be used only for payment of excise duty. Other payments like rent, penalty, fine etc. should be paid directly through TR-6 challan. Particulars of payments, account heads should be specified in TR-6 challan. Such challan need not be countersigned by CE officer (even if there is a column in TR-6 challan). If such dues are required to be paid through current account, a separate account current under the group minor head ‘E- Miscellaneous –1 Miscellaneous’ may be opened with permission. - Chapter 3 Part V Para 4.1 of CBE&C’s CE Manual, 2001.

Accounting Treatment of PLA - When the amount is deposited in Bank by TR-6 challan, it is an excise deposit, hence ‘Excise Deposit’ account in General Ledger should be debited and Bank/Cash Account should be credited. When duty is debited in PLA on monthly basis, it is effective payment of duty. Hence, ‘Excise Duty Paid’ account should be debited and ‘Excise Deposit’ account should be credited. After this entry, balance in ‘Excise Deposit’ account and closing balance in your PLA must tally. Such entry may be passed twice in the month when PLA is debited. At the year end balance in ‘Excise Deposit’ account will be reflected as ‘Current Asset’, while amount in ‘Excise Paid’ account will be transferred to P and L account.

Periodic returns

Vide Rule 12 of Central Excise Rules a monthly return, is to be submitted to Superintendent of Central Excise of production and removal of goods, by 10th of the following month. [SSI unit availing concession on basis of annual turnover and small units in textile sector manufacturing yarn, unprocessed fabrics and readymade garments have to file return on quarterly basis within 20 days from close of quarter]. As per Notification No. 48/2001-CE(NT) dated 26.6.2001, the return is required in quintuplicate, in form ER-1. [Earlier form RT-12]. Assessee will have sixth copy as his record copy.

The return should be accompanied by (a) Two copies of PLA (b) Relevant TR-6 challans evidencing payment of duty. Since duty is required to be paid by 5th/15th of following month, PLA extract should be submitted upto 5th/15th i.e. till payment of duty of the relevant month. A summary extract could be put at end of PLA extract indicating (a) Opening balance after discharging duty liability of previous month (b) Credits during the month and upto 5th of following month (15th in case of SSI) (c) Total duty discharged during the month (d) Closing balance after discharging duty liability - Chapter 6 Part II Paras 2.3 and 2.7 of CBE&C’s CE Manual, 2001.

In addition, Cenvat Credit record in prescribed form is required to be submitted by 10th of the following month. Hence, both ER-1 and Cenvat Credit return may be submitted simultaneously.

EOU unit has to file return in form ER-2. [Earlier form RT-13]

If there is delay in payment of duty, interest should also be deposited before filing ER-1 return.

This return is acknowledged by Superintendent of Central Excise and one copy duly acknowledged is returned to assessee.

Requirements of return - Following are the requirement of returns -

1. Product description should tally with description actually used in invoices.

2. Production and removal details must be given for each commercially separate product / group of products of similar nature falling under same sub-heading having same rate of duty, based upon data maintained under DSA (Daily Stock Account). For product group having separate classification / rate of duties, separate entries must be given. Commissioner can relax this requirement by a general or special order.

3. Duty liability will be consolidated adjustment in current account (PLA) and Cenvat credit account, as may be decided by assessee. [Thus, he can show pro rata through PLA and Cenvat credit or in some products he can show full payment through PLA and in some other products, he can show full payment through Cenvat credit].

4. If same product is cleared under different rates of duty under different notifications, the details are required to be given separately.

5. Goods received for repairs , reconditioning or export return are required to be shown in appropriate column.

6. Fine, penalties and interest cannot be paid through Cenvat credit. It must be paid through PLA only. [In fact, they should be paid through TR-6 challan as PLA is meant only for payment of duty].

7. If there is delay in payment of duty, interest should also be paid and details of interest calculations should be shown along with return.

8. If duty on some invoices is paid under protest or on provisional basis, the details are required to be given in the ER-1 return.