Chapter 27 of 17th edition and 18th edition

Question 1 A manufacturer under CENVAT purchased inputs of value at Rs. 60,000 on which duty of Rs. 9,000 was paid @ 15% on 25th January, 2005. After two months, due to change in production schedule, he found that he does not need the material. He sold the inputs lying in stock @ Rs. 70,000 on 17th July, 2005. However, due to budget change announced earlier, duty on those inputs was increased to 20%. (a) Does the manufacturer have to pay excise duty? If so, how much? (b) If, instead of increase of duty to 20%, the inputs were exempted from duty in the budget, what would have been your answer?

Answer 1 – (a) The manufacturer has to pay an 'amount' (not 'duty') equal to Cenvat credit taken i.e. Rs 9,000. (b) Even in this case, manufacturer has to pay 'amount' of Rs 9,0000 under rule 3(5). The buyer will be eligible to avail Cenvat credit of this ‘amount’.

Chapter 28 of 17th edition  and 18th edition

Question 2 A manufacturer manufactures 3,500 Nos. of a product ‘P’. Its Assessable Value is Rs. 650 per piece. Duty payable is 10%. He bought inputs for the same, on which duty paid was Rs. 90,000. The manufacturer sells 2,000 pieces in India and 1,500 pieces are exported. What is CENVAT available and what is the duty payable through PLA ?.

Answer 2 – In case of sale in India, duty payable is 2,000 x Rs 65 per piece, i.e. total 1,30,000. No duty is payable on 1,500 pieces which are exported. Cenvat credit available is Rs 90,000. Thus, the manufacturer has to pay duty of Rs 40,000 only by cash i.e. through PLA.

Chapter 24 of 17th edition and  18th edition

Question 3 Following transactions took place in a month :

(a) The manufacturer received inputs with Invoice evidencing payment of duty of Rs. 42,800 on 2nd. The invoice was marked ‘ORIGINAL FOR BUYER’.

(b) 400 pieces of Final products were despatched under Invoice on 6th. Assessable value was Rs. 80 per piece and excise duty rate was 16%.

(c) 1,000 pieces of input ‘I’ were sent outside for job work on 10th. When the inputs were received, credit of duty of Rs. 15,000 was taken on those inputs.

(d) Some inputs were purchased from a manufacturer in Chennai in March 2004. These were directly despatched from factory of the supplier to factory of job worker. Duty paid on the inputs is Rs. 40,000. Out of those inputs, 45% on inputs were received after carrying out the job work. On 18th.

(e) An imported consignment of raw materials was received on 19th. The materials were not imported directly, but were purchased from an importer. The invoice of importer showed that customs duty paid was Rs. 26,000, special duty of Rs 3,000, additional customs duty paid was Rs. 13,200 and special additional duty paid was Rs 5,400. The importer was registered with Central Excise authorities.

(f) Goods worth Rs 2,00,000 were despatched on 24th. Rate of duty was 16%.

There was no opening balance in PLA or Cenvat credit account at the beginning of the month. Calculate the amount of duty payable in each of the following situations –

1) The month under question is February 2005 and the assessee is a large manufacturer.

2) The month in question is March 2005 and assessee is a large manufacturer.

3) The month is February 2005 and the assessee is a SSI unit. His turnover upto end January, 2005 was Rs 70 lakhs and he is availing Cenvat credit and is paying duty at concessional rate.

4) The month under question is March 2005 and assessee is a SSI unit. His turnover upto end February 2005 was Rs 130 lakhs.

Answer 3 – In case of (a), Cenvat credit of Rs 42,800 is available.

In case of (b), duty payable is Rs 5,120 (400 pieces x Rs 12.80). if assessee is large manufacturer. Same will be the duty payable if SSI had already crossed turnover limit of Rs 100 lakhs in the financial year. In case of SSI, if earlier clearances were less than Rs 100 lakhs, duty payable is 60% of normal duty i.e. 9.6%. Thus, duty payable by SSI is Rs 3,072. (400 pieces x Rs 7.68).

In case of (c), no duty is payable while sending the goods for job work. In case of (d), Cenvat credit can be taken only after fully quantity is received after job work. In case of (e), Cenvat credit of Rs 13,200 is available.

In case of (f), duty payable is Rs 32,000 (16% of Rs 2,00,000). Same will be the duty payable if SSI had already crossed turnover limit of Rs 100 lakhs in the financial year. In case of SSI, if earlier clearances were less than Rs 100 lakhs, duty payable is 60% of normal duty i.e. 9.6%. Thus, duty payable by SSI is Rs 19,200 (9.6% of Rs 2,00,000).

If the assessee is large manufacturer, Cenvat credit available is Rs 56,000, while duty payable is Rs 37,120. Thus, no duty in cash is payable. Excess Cenvat credit of Rs 18,880 will be carried forward next month. The position is same whether the month is February or March.

In case of SSI, Cenvat credit available for whole month is more than duty payable. Hence, SSI unit does not have to pay any duty whether the month in February or March.