ICSI Final - CORPORATE TAX MANAGEMENT – Indirect Taxes

Old Syllabus - June 2005

Answer 6 questions, including question No. 1 which is compulsory.

Q 1 (a) Discuss the relationship between the Central Excise Act, 1944 and the Schedules to the Central Excise Tariff Act, 1985. (b) “If duty rate specified in the Customs Tariff Act, 1975 is free, the goods are not dutiable goods.” Comment on the statement and also discuss and differentiate between ‘dutiable goods’ and ‘imported goods’. (c) Discuss the concept of ‘Excise Audit, 2000’ and briefly explain its features (d) “Safeguard duty can be imposed only for a limited period”. Discuss when and for how much period of time it can be imposed. (e) Who is authorised to assess, re-assess, collect and enforce payment of tax and interest under the Central Sales Tax Act, 1956? (4 x 5 = 20 marks).

Q 2 (a) Discuss the ‘relationship tests’ and ‘profit test’ deployed to determine the ‘manufacturer’ in case of disputes when the goods are manufactured on job work basis or are given out for further processing. (b) Discuss the features of ‘exempted goods’ under the excise law. If there were subsequent changes in classification of goods after manufacture of goods but before removal, which classification would be relevant for the purpose of levy of excise duty in case of such categories of goods? (c) What is the duty levied under Second Schedule of the Central Excise Tariff Act, 1985 known as? When was this Schedule inserted? (8+6+2 = 16 marks).

Q 3 (a) Your managing director intends to enter into a manufacturing oriented joint venture with a Korean company and has asked you to prepare a background note mentioning the salient features of ‘advance rulings scheme’ under the provisions of the Customs Act, 1962 duly discussing in brief the objectives and binding significance of such scheme. (b) ‘Transaction value of identical goods’ is referred in the provisions of the Customs Valuation (Determination of Price of Imported Goods) Rules, 1988. Discuss the concept of ‘identical goods’ and illustrate when and why the same is applied. (c) What are the powers of the ‘officers of  customs’ and how can such powers be exercised? (8+6+2 = 16 marks).

Q 4 (a) What powers does the Central Excise Tariff Act, 1985 provide to the Central Government to increase duty of excise in emergency? (b) How does the Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000 provide for determining the value of captively consumed goods?  Calculate the cost of production for the purpose of captive consumption based upon the following details: Materials purchased (includes excise duty Rs. 2,000) - Rs. 22,000  Realisable value of scrap – Rs. 2,000. Wages – Rs. 12,000. Manufacturing expenses – 8,000. Administrative expenses – 8,500. Selling and Distribution expenses – Rs. 3,400. Expenses of quality inspection department – Rs 4,000. Expenses of research and development department – Rs 6,000.  (c) If a factory has been operated during any financial year by different owners/operators/persons, how will the eligibility for excise duty concessions available to SSI units be determined? (6+6+4 = 16 marks)

Q 5 (a) Define ‘inputs service’ under the Cenvat Credit Rules, 2004. (b) What are the various duties for payment of which the Cenvat credit may be utilised? (c) State briefly with reasons whether the Cenvat credit would be available in the following cases: (i) Caustic soda used in the factory to treat the waste water let out to prevent pollution of water (ii) Chemicals used for maintaining garden of a tea factory (iii) Sulphur that is converted into sulphur-dioxide (Zero duty) and used in the purification of the final product sugar (5+5+6 = 16 marks)

Q 6 (a) Discuss the provisions of the Customs Act, 1962 relating to determination of duty where goods consist of articles liable to different rates of duty (b) Wonder Cars Ltd. imported the cars in completely knocked-down condition and presented them as such in unassembled condition as components of cars. Customs department wants to assess them as complete cars. Give your decision with valid reasons (c) When and how can the owner of warehoused goods relinquish the title to the goods? (6+6+4 = 16 marks)

Q 7 (a) When is a sale or purchase of goods said to take place in the course of export under the Central Sales Tax Act, 1956? (b) Mention the circumstances in which refund of the customs duty will be made to the claimant instead of being credited to the Consumer Welfare Fund (c) Does the appellate tribunal have the discretion to refuse to admit an appeal under Central Excise Act, 1944? (6+6+4 = 16 marks).

Q 8 (a) During the year 2004-05, the gross inter-State sales made by Chunnilal & Sons of Jaipur is Rs. 23,93,000. Although the central sales tax is not shown separately, the following information is available from the records of the company :  The company sells machinery which makes copper wire/rods. If it is sold in Rajasthan, the sales tax rate is 7% (plus additional tax @ 10% of sales tax). Information regarding sales with and without Form-C is as follows 

Ascertain the sales turnover and central sales tax payable.

Q 8 (b) A dealer wants to transfer some goods to his branch office in another State. Would it amount to an inter-State sale? What are the precautions to be taken by him to avoid tax-liability? Explain with reference to relevant provisions of the Central Sales Tax Act, 1956. (c) What is the procedure for getting registration under the Central Sales Tax Act, 1956 (8+4+4 = 16 marks).

Old Syllabus - December 2004

Answer 6 questions, including question No. 1 which is compulsory.

Q 1 State whether the following statements are correct quoting applicable statutory provisions and case laws, if any. Attempt any four : (i) Atul, located in Mumbai, purchases goods from Bobby, located in Nagpur. The goods are manufactured in Nagpur. However, Atul requests Bobby to consign the goods to his location at Delhi on payment of central sales tax. Atul cannot do so. (ii) Amar manufactures goods in Pune and transfers stock to his depot in Chennai. He pays central excise duty on the selling price at the depot claiming deduction of the transportation cost from the factory to depot. (iii) CENVAT credit is available on all inputs used in finished goods immediately. (iv) Jolly, located in Jaipur, purchases goods from Harsh, located in Hyderabad, on payment of central sales tax, takes delivery and immediately sells these goods to Chander, located in Coimbatore, without charging central sales tax by using Form E-I/Form E-II. (v) Customs duty is payable on erection and commissioning charges when the imported goods are erected in India. (5 x 4 = 20 marks)

Q 2 (a) ISPL Ltd. manufactures tailor-made machines as per the specifications and designs of their customers. The company takes 50% of the price of such machines as an advance, free-of-interest from their customers. The central excise officer wants to include the notional interest on such advance in the assessable value of the machines manufactured and cleared by ISPL Ltd. Discuss with the help of case law whether notional interest is includible in the assessable value of machines (b) Is the cost of ‘packing’ supplied free  by the customers includible in the value of excisable goods? (c) Whether cleaning, cutting and heat treatment of high speed steel bars amounts to manufacture for the purpose of levying the central excise duty? (6+5+5 = 16 marks)

Q 3 (a) Whole-time director of your company desires that you should prepare a brief note for the Board meeting that should discuss ‘how the excise laws deal with the offences committed by companies’. Prepare a brief note (b) Your manager (imports) is in Moscow. He has finalised a throw away price deal of non-ferrous metal waste at an exceptionally low price. Your managing director wants your quick advice on whether this price would be acceptable for the purpose of valuation under the Customs Act, 1962. Give your advice, with support of settled case law, if any. (c) Vishwas, your old classmate, operates a manufacturing unit having two factories with turnover of Rs. 180 lakh and Rs. 145 lakh respectively in the previous year. He seeks your advice whether his unit is eligible for exemption as is available to SSI units as per exemption notifications. (d) Your sales manager is on the verge of quoting rates for a big order and seeks your advice as to whether the ‘warranty charges or after sales service charges that are optional would be includible in the assessable value’. Advise with reference to the provisions of the Central Excise Act, 1944 and the Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000 (6+4+3+3 = 16 marks).

Q 4 (a) If a product was sold at Rs. 500 per piece inclusive of sales tax @ 10% and excise duty as per an exemption notification @ 8% (though the tariff rate of excise duty is 16%), what would be – (i) the assessable value per piece; and (ii) the duty payable per piece? (b) A technician of your foreign collaborator landed in India and was searched by the officials of the customs department. Your collaborators are concerned about the matter. Prepare a note explaining the statutory provisions under the Customs Act, 1962 regarding power of the officials to search suspected persons entering or leaving India. (c) What are the emergency powers of the Central Government to increase duty of excise? (6+5+5 = 16 marks)

Q 5 (a) You are the Company Secretary of a multinational company. The Indian company has entered into a technical collaboration with its parent company in United Kingdom for which it is paying royalty and a know-how fee. The Indian company also imports raw materials from the parent company. The Commissioner (Customs) has issued a show cause notice seeking to add the royalty and know-how fee to the transaction value of the imported raw materials. Make suitable assumptions and draft a reply to the notice in defence of the company. (b) Glow More Ltd. declared the goods imported by them as heavy melting scrap which is used to retrieve metal by the process of melting. On examination of the consignment, the customs officer found that pack of consignment was old and used angles, rods and pipes. The customs officer wants to confiscate the entire consignment on the ground that the goods are serviceable goods and as such are not melting scrap. The importer, on the other hand, contends that sale and purchase of the goods was as melting scrap and no portion of the goods had been bought as angles, rods and pipes and there is no evidence with the department to controvert the same. The importer also offers the mutilation of the goods before their clearance. Decide as to whether the goods are liable for confiscation for being mis-declared by Glow More Ltd. (c) Blackkol Ltd. imported coal from a foreign country. The customs department wants to levy additional customs duty under section 3 of the Customs Tariff Act, 1975. The importing company contests the levy of additional customs duty on the ground that the coal is an item which is neither produced nor manufactured and as such central excise duty under the Central Excise Act, 1944 is not leviable and accordingly additional customs duty equivalent to central excise duty will also not be leviable. Examine the rival contention and offer your views with the help of decided case law, if any. (8+4+4 = 16 marks)

Q 6 (a) Whether the Commissioner (Appeals) under the provisions of section 128A of the Customs Act, 1962 can remand the matter to the adjudicating authority for re-adjudication? (b) What are the orders passed by the appellate tribunal against which appeal will lie to the High Court under the provisions of the Customs Act, 1962? (c) Mention the provisions relating to imposition of fine in lieu of confiscation of the goods under the Customs Act, 1962 (d) Write a note on ‘temporary detention of baggage’ under the Customs Act, 1962 (4x 4 = 16 marks)

Q 7 (a) Under what circumstances bar of ‘unjust enrichment’ will not apply to refund of customs duty and the amount of duty shall be paid to the applicant (b) Answer the following questions in ‘yes’ or ‘no’ citing relevant section(s) of the Customs Act, 1962: (i) No duty drawback shall be allowed in respect of goods, the market value of which is less than the amount of duty drawback due thereon (ii) The Central Board of Customs and Excise appoints customs ports or customs airports (iii) The Central Government declares places to be warehousing stations (iv) A passenger can bring articles upto a value of Rs. 25,000 duty free, if returning after a stay abroad of more than 3 days (c) Balaji Traders, Nagpur, have made various sales as under: (i) Sale of Rs. 5 lakh against Form-H. (ii) Sale of Rs. 3 lakh as direct export in their names. (iii) Buyers had issued Form-D in respect of sale of Rs. 2 lakh. (iv) One Form-C was lost in respect of sale of Rs. 1.50 lakh. The buyer had sent a Xerox copy duly certified by his sales tax officer. (v) One Form-C was misplaced in post covering sale of Rs. 70,000. The buyer had sent another Form-C marked as ‘duplicate’. (vi) One Form-C was received in respect of one invoice of Rs. 4.50 lakh. If goods are sold within Maharashtra, the local sales tax rate is 15%. You are required to find out central sales tax rates applicable to different sales (6+4+6 = 16 marks).

Q 8 (a) Your employer, who is not very successful in the current line of business activity, intends to ‘change the goods dealt with’ and seeks your opinion as to whether there would be a need to get the  ‘central sales tax registration certificate’ amended. Provide opinion detailing the circumstances where amendment is required in the sales tax registration certificate. (b) Illustrate any four ‘inter-State consignment transactions’ under the sales tax laws and discuss the present provisions of levy of central sales tax thereon. (c) Define the following terms under the Central Sales Tax Act, 1956: (i) Place of business (ii) Year. (d) What are the benefits of obtaining a registration by a dealer under the Central Sales Tax Act, 1956? (4 x 4 = 16 marks)

Old Syllabus - June 2004

Answer 6 questions, including question No. 1 which is compulsory.

Q 1 Attempt any four of the following: (a) “Provisional Collection of Taxes Act, 1931 provides immediate effect for a limited period.” Discuss. (b) “Protective duty protects” Discuss, whom and how? Is it acceptable under WTO? (c) “Compounded levy scheme under the Central Excise Act, 1944 relieves the assesses from the procedural formalities” Discuss the provisions. (d) (i) Define ‘Indian customs waters’ under the Customs Act, 1962 (ii) Name the ‘appellate tribunal’ as defined under section 2(1B) and constituted under section 129 of the Customs Act, 1962 (iii) Who decides the rates of interest under section 27A of the Customs Act, 1962 on delays beyond three months on the duty ordered to be refunded under section 27(2) to an applicant? (iv) Under which Act is the Central Board of Excise and Customs (CBEC) constituted? (e) When a sale or purchase shall be deemed to take place inside a State under the Central Sales Tax Act, 1956? ( 5 x 4 = 20 marks)

Q 2. (a) MSL Ltd. received an order in original passed by the Assistant Commissioner of Central Excise on 3^rd July, 2003. It filed an appeal before the Commissioner (Appeals) on 10^th October, 2003. Can the Commissioner (Appeals) condone the delay on the ground that the person-in-charge was seriously ill? (b) What are the ‘relevant dates’ for the purpose of issuing notice for demanding central excise duty not levied? (c) Whom the rebate of duty paid on excisable goods is given in case of an export to Nepal and what is the extent of rebate so given? (6+6+4 = 16 marks)

Q 3 (a) Your managing director intends to diversify into a venture of importing finished goods and components from China. Prepare a background note mentioning the types of ‘customs duties’ under the provisions of the Customs Act, 1962 (b) What are the different classes of ‘officers’ which can be appointed under the Customs Act, 1962? After the amendment of the relevant provisions of the said Act by the Finance Act, 2002, who is empowered to appoint them? (c) What would be the value for the purpose of customs, if a consignment imported by air has a CIF price of US $ 2,500 including freight US $700 and insurance US $ 90? The exchange rate notified by the Government of India under section 14(3)(a)(i) of the Customs Act, 1962 is Rs. 45.50 (8+4+4 = 16 marks)

Q 4 (a) Whole-time director of your company desires that you should prepare a brief note for the Board meeting that should discuss how the offences committed by companies are viewed by the customs laws. Prepare the required note. (b) Write a note on ‘minimum rate of duty drawback’. (c) What is the scope of tax planning in indirect taxes? (d) Your old classmate Anand operates a manufacturing unit having two factories with turnover of Rs. 200 lakh and Rs. 125 lakh respectively in the previous year. He seeks your advice whether his unit is eligible for exemption as is available to SSI units as per exemption notifications No.8/2003 and 9/2003-CE (5+4+4+3 = 16 marks)

Q 5 (a) (i) Whether CENVAT credit in respect of the additional duty of excise leviable under the Additional Duties o Excise (Textiles and Textile Articles) Act, 1978 can be used to pay CENVAT? (ii) When are the goods liable to confiscation and penalty is imposable under Rule 13 of the Cenvat Credit Rules, 2002. (b) How will the assessable value be determined in the following cases under the Central Excise Act, 1944: (i) when goods are not sold, but captively consumed? (ii) when goods are sold to related person other than inter-connected undertaking? (c) What is the ‘relevant date’ for determination of rate of duty under the Central Excise Rules, 2002? (6+6+4 = 16 marks)

Q 6. (a) Discuss the leviability of excise duty when ‘branded goods’ are manufactured by SSI units (b) What are the two rates of excise duty levied under the Central Excise Act, 1944? Which is more in use and why? Give illustrations of some goods attracting a hybrid system of rates of duty. (c) Refrigerators under heading No. 8418.10 carry ‘abatement rate’ of 40% and they are specified only in the First Schedule to the Central Excise Tariff Act 1985. Find out the amount of duty, if the maximum retail price (MRP) of a refrigerator is Rs. 20,000 only and the rate of excise duty is 16%. (6+6+4 = 16 marks)

Q 7. (a) What is ‘advance ruling’ under the Customs Act, 1962? In what matters advance ruling can be obtained? Mention the applicability of advance ruling (b) Vasudev has set up an SSI unit in the State of Kerala. At the time of setting up of the SSI unit, a government order prevailed by which a new industrial unit in SSI sector was exempted from payment of sales tax for a period of 5 years from the date of production. Immediately after commencement of production by Vasudev, Government of Kerala issued another notification in which exemption from sales tax to SSI was curtailed by a formula, i.e. the cumulative sales tax concession granted to a unit at any point of time within the five year period shall not exceed 90% of the cumulative gross fixed capital investment of the unit. Vasudev wants to challenge the second notification which curtailed the sales tax exemption under the earlier notification. Will Vasudev succeed? (10+6 = 16 marks)

Q 8 (a) Explain the following terms with reference to the Central Sales Tax Act, 1956 : (i) Business (ii) Goods and (iii) Turnover. (b) For what purposes and by whom Form E-I and E-II are issued?  Discuss relevant provisions. (c) What is the liability of directors of a private company in liquidation under the Central Sales Tax Act, 1956? (6+6+4 = marks)

ICSI Final - CORPORATE TAX MANAGEMENT – Indirect Taxes

Old Syllabus - December  2003

Answer 6 questions, including question No. 1 which is compulsory.

Q 1. With reference to the relevant Acts/Rules and decided case laws, if any, comment on any four of the following statements: (i) Indirect taxes are regressive in nature. (ii) Though taxable event for central excise is ‘manufacture’, duty payable is as applicable on the date of removal. (iii) Registration under central excise is not transferable. (iv) Residual method of valuation for customs is used in cases where ‘assessable value’ cannot be determined by any other method (v) All goods purchased by ‘registered dealer’ are not eligible for concessional rate of tax under the Central Sales Tax Act, 1956. [5 x 4 = 20 marks]

Q 2. Write notes on any four of the following: (i) Refund of CENVAT credit. (ii) Mandatory penalty under the Central Excise Act, 1944 (iii) Warehousing station under the Customs Act, 1962 (iv) Minimum rate of duty drawback (v) Central Sales Tax on a works contract. [ 4 x 4 = 16 marks]

Q 3. State, giving reasons in brief, whether the following statements are correct or incorrect (i) Goods manufactured or produced in special economic zones are ‘excisable goods’, but no duty is leviable. (ii) If excisable goods are used within the factory (captive consumption), invoice is not required to be made. (iii) The duty under the First Schedule to the Central Excise Tariff Act, 1985 is called CENVAT. (iv) Provision of ‘notified goods’ has been made for prevention and detection of illegal exports (v) Imported goods cannot be unloaded unless they are specified in the import manifest or report. (vi) When any officer of customs is about to search any person, he shall, if such person so requires, take him without unnecessary delay to the nearest gazetted officer of customs or magistrate. (vii) Sales tax on declared goods can be imposed at one stage only. (viii) A dealer can have only one registration certificate in a State for all the places of business under the Central Sales Tax Act, 1956 [2 x 8 = 16 marks].

Q 4. (a) ISPL manufactures tailor-made heavy machines for its customers. It takes interest-free advance to the extent of 25% of the price of the machines from its customers. The central excise authorities want to add the notional interest in the assessable value of the goods on the ground that such advances are similar to bank loans on which interest would normally be payable by the manufacturer. The contention of the ISPL is that as the machines are tailor-made goods, it has to ensure that machines are taken delivery of failing which it may suffer losses. The advances are thus nothing else than mere security for the due performance of the contract. Offer your views and cite the decided case law, if any. (b) Explain the provisions made in the Central Excise Act, 1944 in respect of ‘interest on delayed refunds’. (c) Discuss the cases in which an appeal can be made to Supreme Court under the Central Excise Act, 1944 [6+6+4 = 16 marks].

Q 5 (i) Explain the conditions for allowing CENVAT credit. (ii) Explain the provisions in the Central Excise Act, 1944 for ‘remission of duty’. (iii) Does the Central Government have powers under the Central Excise Act, 1944 not to recover excise duty which has not been levied as a result of general practice?  [6+6+4 = 16 marks]

Q 6. (a) Certain goods were imported in February 2002. “Into bond” bill of entry was presented on 14^th February, 2002 and goods were cleared from the port for warehousing. Assessable value was $5,00,000. Customs officer issued the order under section 60 permitting the deposit of the goods in warehouse on 21^st February, 2002 for 3 months. Goods were not cleared even after warehousing period was over, i.e., 21^st May, 2002 and extension of time was also not obtained. Customs officer issued notice under section 72 demanding duty and other charges. Goods were cleared by importer on 28^th June, 2002. What is the amount of duty payable while removing the goods? Compute on the basis of following information (assume that no additional duty or special additional duty is payable):

(b) A machine was originally imported from the overseas supplier, which was sent back to supplier for repairs. The machine is re-imported within three months after repairs. Your opinion has been sought whether the duty (BCD and CVD) is payable on re-import of such machinery or not. Support your answer with relevant provisions of the Customs Act, 1962 and decided case law, if any. (c) Pro-Active Ltd. filed a bill of entry for home consumption of the imported item through Mumbai port. The assessment was finalized and the bill of entry was returned on 26^th September,2002 to the importer for payment of duty Rs. 3,50,000. Pro-Active Ltd. did not, however, clear the goods. Subsequently, Pro-Active Ltd. sought re-assessment for the goods on the strength of advance licences obtained by it for clearance under the DEEC Scheme. The bill of entry was accordingly   re-assessed at nil rate of duty on 4^th October, 2002. As a company secretary of the company, advise about the payment of duty and interest leviable under section 47(2) of the Customs Act, 1962 [6+6+4 = 16 marks]

Q 7. (a) Define the following terms under the Customs Act, 1962: (i) Prohibited goods (ii) Customs area. (b) Briefly describe the provisions of the Customs Act, 1962 regarding determination of duty where imported goods consist of a set of articles liable to different rates of duty (c) As a company secretary, prepare a note for the information of your Board of directors stating the procedure for export of containerized cargo from inland container depot. [4+4+8 = 16 marks]

Q 8 (a) Ram and Raheem have submitted the following particulars of their inter-State sales for the year 2002-03:

Sales tax collected from customers has been included in their total sales. On the basis of above information, compute the amount of taxable turnover and the sales tax payable (without surcharge) under the Central Sales Tax, 1956 by Ram and Raheem for the year 2002-03
(b) State, with reasons, whether the following are goods or not under the Central Sales Tax Act, 1956: (i) Standing trees. (ii) Newspapers. (iii) Lottery tickets. (iv)  Advance licences [8+8 = 16 marks].

CORPORATE TAX MANAGEMENT – ICSI Final

Indirect Taxes - June 2003

Answer 6 questions, including question No. 1 which is compulsory.

Q 1. Critically analyse any four of the following statements and support your views with case law, if any, and applicable statutory provisions - (i) Even if an item is mentioned in central excise tariff, it is not exigible to duty unless ‘test of marketability’ is satisfied (ii) The manufacturer-exporter is not required to submit a bond in Form B-1 for removal of goods without payment of duty (iii) The Customs Valuation Rules, 1988 are only for valuation of imported goods and are not applicable to export goods (iv) For any export product where the duties paid on inputs work out to less than 1% of FOB value thereof, no duty drawback rate is determined. (v) Subsequent sales during movement of goods, by transfer of documents, are exempt from central sales tax. [5 marks each]

Q 2. (a) An assessee manufactures certain goods on job-work basis. The trader supplies the raw material to job-worker and sells the manufactured product under his brand name. Find the assessable value for the purpose of levy of excise duty from the following particulars - (i) Cost of raw material supplied by trader – Rs. 10,000. (ii) Cost of bringing raw material to factory – Rs. 500. (iii) Value of job work done – Rs. 2,500. (iv) Job worker’s profit – Rs. 400. (v) Transportation charges incurred for returning the manufactured product to the trader – Rs. 600. (vi) Trader’s sales price of finished product – Rs. 15,000. (b) Outline the provisions of the Central Excise Act, 1944 which empower the central government not to recover excise duty in cases of non-levy as a result of general practice. If excise duty has been paid despite such practice, is it refundable? (c) Write a note on ‘daily stock account’ with reference to excise law. [6+6+4 = 16 marks]

Q 3. (a) Him-Air Company manufactures electric fans which are exempted from payment of excise duty under a notification issued under section 5A of the Central Excise Act, 1944. The notification was withdrawn by the central government with effect from 1^st March, 2001. The company was having the stock of 5,000 electric fans as on 28^th February, 2001 which they want to clear without payment of excise duty in the month of March, 2001 on the ground that these goods were manufactured when no duty of excise was leviable. As a company secretary, advise your managing director in this regard. (b) Hi-Tech Company manufactures electric motors which are exempted from payment of central excise duty. During the process of manufacture of electric motors, they manufacture parts of electric motors on which excise duty is discharged by them after availing of CENVAT credit of duty paid on the inputs. While working out the manufacturing cost for the purpose of determining the assessable value, the department has taken the entire cost of inputs whereas the company is of the view that the cost of the inputs should be taken after deducting the amount of CENVAT credit taken by them. Is the contention of the assessee justified? Give reasons for your answer. (c) The deputy commissioner of central excise demanded central excise duty from Radiant Company under the adjudication order dated 9^th October, 2002. The said order was received by the company on 10^th October, 2002. As the dealing clerk of the company left the service suddenly, the company filed an appeal before the Commissioner (appeal) on 15^th January, 2003. Is the delay in filing the appeal condonable by the Commissioner (appeals)? [6+5+5 = 16 marks]

Q 4. (a) State, with reasons, whether the CENVAT credit is available or not on the following items: (i) Storage tank: (ii) Inputs used in manufacture of capital goods which are further used in the factory: (iii) Components, spares and accessories of the pollution control equipment; and (iv) Building material used for factory building. (b) Discuss the Rule 16 of the Central Excise Rules, 2002 regarding return of goods to factory for various purposes. [8+8 = 16 marks]

Q 5. (a) Good Health Hospital imported certain medical equipments without payment of import duty under an exemption notification. The condition of the notification was that on an average 40% of outdoor patients will be provided free treatment. As the department found that the hospital has provided free treatment only to 39.8% outdoor patients, the hospital was directed to pay customs duty leviable on the medical equipments. Hospital has contended, on the other hand, that the short fall is only marginal and in any case the condition is to be satisfied during the entire life of the medical equipments imported. Discuss with the help of case law whether the contention of the hospital is to be accepted by the department. (b) Discuss with reference to the Customs Act, 1962 as to whether the customs duly is leviable in the following circumstances: (i) Re-import of the goods exported from India (ii) Importer relinquished the title to the imported goods after an order for clearance of the goods for home consumption has been made. (iii) Goods imported into a customs port for the purpose of transshipment. (iv) A consumption of imported stores on board a foreign going vessel. [4+12 = 16 marks]

Q 6 (a) An importer imported some goods in February, 2002 and the goods were cleared from Mumbai port for warehousing on 8^th February, 2002 after assessment. Assessable value was Rs. 4,86,000 (US $ 10,000 at the rate of exchange Rs. 48.60 per US $). The rate of duty on that date was 35% (assume that no additional duty is payable). The goods were warehoused at Pune and were cleared from Pune warehouse on 4^th March, 2002, when rate of duty was 30% and exchange rate was Rs. 48.75 = 1 US $. What is the duty payable while removing the goods from Pune on 4^th March, 2002? (b) What are the cases in which appeal cannot be heard by the Customs, Excise and Gold (Control) Appellate Tribunal (CEGAT) under the Customs Act, 1962? What is the remedy available otherwise in these cases? (c) What are the various goods in respect of which the burden of proof is on the person from whose possession the goods were seized or who claim to be the owner to prove that the goods are not smuggled goods?  [6+4+6 = 16 marks]

Q 7. (a) What are the relevant dates for demanding customs duty not-levied/short-levied under section 28 of the Customs Act, 1962? (b) Define the following under the Customs Act, 1962: (i) Person-in-charge (ii) Goods. (c) Under what provisions additional duty of customs equivalent to central excise duty is levied? (d) Write a short note on ‘anti-dumping duty’. [3+6+2+5 = 16 marks]

Q 8. (a) State giving reasons and quoting case law, if any, whether the following are ‘dealer’ under the Central Sales Tax Act, 1956: (i) Rajasthan Roadways selling its unserviceable, old and obsolete parts. (ii) A Bank selling assets for realization of loan amount in exercise of its right obtained as a result of pledge. (iii) A textile company making sale in stores maintained as a welfare measure for employees (b) On the basis of following information, compute the taxable turnover, and amount of central sales tax payable by the registered dealer of Rajasthan under the Central Sales Tax Act, 1956. The amount of tax is not included in the sales given below: (i) Sale of goods against Form ‘D’ to Bihar Government [Rajasthan Sales Tax (RST) is 6%] –  Rs. 8,00,000 (ii) Sale of undeclared goods to registered dealers of Gujarat without Form ‘C’ (RST is 5%) – Rs. 80,000. (iii) Sale of declared goods to unregistered dealers of Haryana (RST is 4%) – 3,00,000. (iv) Sale of goods in Jaipur (RST is 12%) – Rs. 12,00,000. (c) What is ‘penultimate sale’ under the Central Sales Tax Act, 1956? Can the central sales tax be imposed on such sale? [6+6+4 = 16 marks].

CORPORATE TAX MANAGEMENT – ICSI Final

Indirect Taxes - December 2002

Answer 6 questions, including question No. 1 which is compulsory.

Q. 1 Write notes on any four of the following: (i) ‘Remission of duty on relinquished goods’ under the Customs Act, 1962. (ii) ‘Administrative set-up’ under the Central Excise Act, 1944. (iii) ‘Conditions to be fulfilled for export sales’ under the Central Sales Tax Act, 1956. (iv) ‘Restrictions’ under the Customs Act, 1962 while determining the assessable value following the residual method. (v) ‘Doctrine of unjust enrichment’ under the Central Excise Act, 1944. [20 marks]

Q. 2 (a) The Commissioner of Central Excise demanded excise duty amounting to Rs. 50 lakh from EEL Company in respect of excisable goods cleared clandestinely without payment of duty during the period from April, 1994 to July, 1996 and imposed penalty of the same amount under section 11AC of the Central Excise Act, 1944. The company is only disputing the imposition of penalty on the ground that section 11AC was not on statute book when the offence was committed as it came into effect on 28th September, 1996. The contention of the department is that when duty was determined, section 11AC was in force. Offer your views with the help of case law. (b) High Cool Ltd. assembled central air-conditioning plants at the site of its customers. Their plea is that central excise duty is not payable on these central air-conditioning plants, being immovable. Is their plea correct? Discuss with the help of case law. (c) BP Ltd. imported kits of components of VCR on payment of customs duty. When the central excise department demanded excise duty on assembled VCR, they took the plea that assembly of components imported in semi-knocked down condition into VCR did not amount to manufacture, as imported components were only put together by using fasteners. Is their stand justified? (d) KBC manufactured fans bearing brand name of another person and cleared the same without payment of duty by availing small scale exemption. Subsequently, the central excise department demanded excise duty as small scale exemption is not available to goods bearing brand name of another person. Is CENVAT credit available to them in respect of duty paid on inputs though no procedure was followed by them? [4+4+4+4 = 16 marks]

Q. 3 (a) Explain the following: (i) Provisional assessment under rule 7 of Central Excise Rules, 2002. (ii) Confiscation of excisable goods and penalties that would be imposed under rule 25 of the Central Excise Rules, 2002. (iii) Criteria for granting/dispensing pre-deposit of duty by the appellate authority. (b) A steel plant company determined the cost price of various products on the basis of cost data and declared the same as per the Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000 issued under the Notification 45/2000 C.E.(N.T.) dated 30th June 2000. But on scrutiny of sales records, it was found that the products were sold at considerable lower price, i.e. 25% to 30% less than the cost price fixed and the assessee has paid duty on the basis of transaction value. Department demands the difference of excise duty. As a company secretary, how would you deal with this issue? [12+4 = 16 marks]

Q. 4 (a) “Exemption from excise duty does not mean automatic exemption from registration.” Comment on the statement in the light of the Central Excise Act, 1944 and the Central Excise Rules, 2002. (b) What is the procedure to be followed by a manufacturer who intends to receive excisable goods at concessional rate of duty for specified use, as prescribed in the Central Excise (Removal of Goods at Concessional Rate of Duty for Manufacture of Excisable Goods) Rules, 2001? [10+6 = 16 marks]

Q. 5 (a) Discuss the concept of ‘taxable event’ under the customs law referring to decided case laws. (b) What is ‘safeguard duty’? State the procedure to be adopted before imposing the safeguard duty under the customs laws. (c) Appellant, who are traders in ball bearings in Goa, imported ball bearings of ‘YEN’ brand from a trader firm based in Indonesia who had earlier imported from another party from Singapore. Appellant filed a ‘bill of entry’ for clearance of goods for warehousing and subsequent removal on payment of duty. The assessable value declared was Rs. 50 lakh based upon the supplier’s invoice. The assessing officer compared the ‘YEN’ brand ball bearings with that of another ‘LAN’ brand of Korea and also relying on the opinion of merchants association who certified that all Korean brand ball bearings are qualitatively comparable and at par valuation, took the price of ‘LTN’ brand ball bearings, and increased the assessable value from Rs. 50 lakh to Rs. 60 lakh after allowing certain discount. The assessing officer also observed that value declared for certain varieties of ‘YEN’ brand ball bearings imported at Kolkata were higher though the quantities imported were lower and that what he had adopted was correct. Appellant pleaded that the contention of the assessing officer was wrong and that invoice price alone to be considered under section 14 of the Customs Act, 1962. Discuss the validity of contention of the appellant with reference to the provisions of the Act and customs valuation rules and also referring to case laws. [5+5+6 = 16 marks]

Q. 6 (a) Discuss the includibility or otherwise of following costs/payments in the assessable value of imported goods, if these are not already included in the invoice price. Support your arguments with case law, if any, and statutory provisions applicable to – (i) Buying commission; (ii) License fee and technology transfer fees; (iii) Costs incurred outside India; and (iv) Interest on delayed payment. (b) What are the aspects on which advance rulings can be sought under section 28H of the Customs Act, 1962? [12+4 = 16 marks]

Q. 7 (a) What are the provisions for refund of export duty? (b) What is ‘interest free period’ in respect of warehoused goods under the Customs Act, 1962? Whether the interest is payable when warehoused goods are exempt from duty on the date of clearance? (c) How are volatile goods treated for loss in quantity, etc., at the time of levying of import duty on clearance from a warehouse? (d) Explain briefly the penal provisions under section 72 of the Customs Act, 1962 in respect of goods improperly removed from a warehouse.  [4 x 4 = 16 marks]

Q. 8 (a) From the following details, compute the central sales tax payable by a dealer of oilseeds, carrying on business in Jaipur : Total turnover for the year to unregistered dealers Rs. 16,00,000 which included – (i) Trade commission for which credit notes have to be issued separately – Rs. 48,000 (ii) Freight, insurance and transport charges recovered separately in the invoice – Rs. 64,000 (iii) Goods returned by dealers within six months of sale, but after the end of financial year – 60,000 (iv) Goods rejected by buyers and sent back after six months of sale – 24,000. Sales tax payable on goods @ 4%, if sold within the State of Rajasthan. (b) What are the uses of Form-A, Form-B, Form-F and Form-H under the Central Sales Tax (Registration and Turnover) Rules, 1957? (c) Discuss the incidence of central sales tax in a ‘transaction of hire-purchase.’ [8+4+4 = 16 marks].

CORPORATE TAX MANAGEMENT – ICSI Final

Indirect Taxes - June 2002

Answer 6 questions, including question No. 1 which is compulsory.

Question 1. Distinguish between any four of the following: (i) ‘Special audit’ under section 14A and under section 14AA of the Central Excise Act, 1944. (ii) ‘Goods chargeable to Nil rate of duty’ and ‘goods exempt from duty’ under the central excise provisions. (iii) ‘Transit goods’ and ‘transshipment of goods’ under the Customs Act, 1962. (iv) ‘First appraisement system’ and ‘second appraisement system’ under the Customs Act, 1962. (v) ‘Sale price’ and ‘turnover’ under the Central Sales Tax Act, 1956. [5 marks each]

Question 2. (a) Discuss the features of the new valuation rules introduced with effect from 1^st July, 2000 and how is the scheme framed for determining the value of the manufactured goods (i) for a sale to a unrelated person; (ii) for a sale from a depot of the manufacturer; (iii) for a captive consumption within the factory and for inter-plant transfer; (iv) if the price is not the sole consideration; and (v) to an inter-connected undertaking. (b) What are the elements of expenses to be considered by the assessee for the purpose of reckoning the assessable value of the product? [10+6 = 16 marks]

Question 3. (a) While determining transaction value for central excise purpose, how are the following items dealt with: (i) trade discount; and (ii) cost of after-sales service? (b) In respect of which duties CENVAT credit is allowed? (c) What are the documents on which CENVAT can be taken? (d) State whether or not a manufacturer can transfer unutilized credit of Rs. 50,000 earned for Mumbai factory to the factory shifted to Pune, when the stock of goods are not transferred. [6+4+4+2 = 16 marks]

Question 4. (a) Discuss whether the following activities would amount to manufacture or not – (i) affixing brand name; (ii) process of embossing and plating on fabrics; and (iii) recording of sound or other phenomena on audio/video tapes. (b) Reliable Biscuit Co. Ltd. entered into an agreement with Delicious Biscuits Co. for manufacture of biscuits, for which Reliable Biscuit Co. Ltd. would supply all the raw materials, recipe and the method by which they were to be manufactured. If the biscuits do not satisfy the required standard of Reliable Biscuit Co. Ltd., then they are to be destroyed and no payment is to be made to the manufacturer. The excise department issued a show cause notice to the effect that excise duty was to be paid on the biscuit after taking into consideration of Reliable Biscuit Co. Ltd.’s wholesale price. Discuss the justification of the claim of the department in the light of the decided case laws. [9+7= 16 marks]

Question 5. (a) State the provisions of the Customs Act, 1962 regarding remission of duty on lost, destroyed and abandoned goods. (b) State and summarise the provisions and procedure in the Customs Act, 1962 governing the preparation and filing of bill of entry. (c) Explain the procedure for clearance of goods imported by post under the Customs Act, 1962. [6+6+4 = 16 marks]

Question 6. (a) A consignment is imported by air. CIF price is US$ 12,500. Freight is US$ 2,450 and insurance cost is US$ 300. On the date of presentation of bill of entry, RBI floor rate was US$ = Rs.47.80 and rate notified by Government of India was Rs. 47.75. Find the value of the consignment for customs purposes. (b) Your company at Jaipur has got an export order and directors of your company want to stuff the goods in container at factory itself so that whole container can be sent for export. As a company secretary, you have been asked by your managing director to prepare an advice note for your Board of directors regarding procedure for export of containerized cargo from Inland Container Depot (ICD). [6+10 = 16 marks]

Question 7. (a) What are the provisions regarding ‘payment of customs duty under protest’ and ‘provisional assessment’ under the Customs Act, 1962? (b) Briefly state the penalty provisions under the Central Sales Tax Act, 1956. [10+6 = 16 marks]

Question 8. (a) Write notes on – (i) ‘Dealer’ under the Central Sales Tax Act, 1956 (ii) Tax on subsequent sale of goods in the course of inter-state trade or commerce under the Central Sales Tax Act, 1956. (b) In which cases the refund of customs duty and interest paid on such duty can be made to importer/buyer under the Customs Act, 1962? [10+6 = 16 marks]

CORPORATE TAX MANAGEMENT – ICSI Final

Indirect Taxes - December 2001

Answer 6 questions, including question No. 1 which is compulsory.

Question 1 Distinguish between any four of the following: (i) ‘Return of goods’ under rules 173H and 173L of the Central Excise Rules, 1944. (ii) ‘Remission of duty’ under sections 13 and 23(1) of the Customs Act, 1962. (iii) ‘Redemption fine’ and ‘penalty’ under the Central Excise Act 1944 and Central Excise rules. (iv) ‘Indian territorial waters’ and ‘Indian customs waters.’ (v) ‘sale’ and ‘turnover’ under the Central Sales Tax Act, 1956. [5 marks each]

Question 2 (a) What is the new procedure of payment of central excise duty under rule173G(1) ? (b) What are the essential features of central excise duty being charged on the basis of maximum retail price? (c) How is the assessable value of the excisable goods captively consumed to be determined under the Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000 ? [5+5=6 = 16 marks].

Question 3 (a) ABCL manufactures P & P Medicine and files RT-12 Returns regularly. It cleared medicine on payment of duty on 4^th April, 2000. A show cause notice was issued to it for demanding duty short levied on 6^th April, 2001 under section 11A of the Central Excise Act, 1944. Discuss whether the demand is time barred. (b) What are the situations in which refund of duty of excise can be made to a claimant under section 11B of the Central Excise Act, 1944? (c) Prayas Ltd., a registered small scale unit, affixes brand name of XYZ, a trader, on the excisable goods manufactured by it. Is the company eligible to avail of the benefit of Notification No. 9/2000-Central Excise dated 1^st March, 2000 granting exemption from payment of excise duty to a small scale unit (SSU)? [5+5+6 = 16 marks].

Question 4 (a) Elucidate the concept of CENVAT Scheme. How does it reduce the cascading effect? (b) Indicate the essential features of self removal procedure. (c) Taurus Ltd., Chennai, claimed the benefit of MODVAT on the purchase of machinery during the financial year 1999-2000. By inadvertence and due to communication gap between the factory and the accounts department, depreciation was also claimed on the very same machinery without realizing the claim of MODVAT made by the factory. The superintendent of central excise issued a notice on 2^nd January, 2000 proposing to levy penalty for the alleged violation committed by the company for which the company filed a reply stating that the mistake was committed inadvertently and the department is not entitled to proceed further in the absence of a ‘saving clause’ for continuation of the proceedings relating to MODVAT after 1^st March, 2000 due to the fact that the new provisions of CENVAT has been introduced from 1^st March, 2000. Is there any substance in the argument? [8+4+4 = 16 marks]

Question 5 (a) Write a short note on ‘boat note’ under the Customs Act, 1962. (b) State and discuss the features of temporary detention of baggage imported under section 80 of the Customs Act, 1962. (c) What are the powers to search suspected persons in cases other than for those persons entering and leaving India? [5+5+6 = 16 marks]

Question 6 (a) Bright India Ltd. imported hard disks loaded with computer software. The price paid for six such hard disks was approximately Rs. 68 lakh while the value of the hard disk simplicitor would be roughly Rs. 60,000. Customs duty on hard disk drive is leviable under chapter heading 84.71 at higher rate and on computer software under chapter heading 85.24 at lower rate. The assessing officer has asked to pay duty at higher rate, saying the goods imported as ‘hard disks’. As a company secretary of the Bright India Ltd., advise about the appropriate classification of the imported goods and rate of duty applicable on it (higher/lower rate). (b) Rogger imported certain goods at agreed rate of US $ 990 PMT. However he failed to take delivery and hence the goods were sold to Yesh after negotiations for US $ 800 PMT. What is the price relevant for customs valuation ? Give reasons. (c) Define the concept of ‘identical goods’ and ‘similar goods’ for the purpose of customs valuation rules. [6+4+6 = 16 marks].

Question 7 (a) What are the conveyances liable for confiscation under the Customs Act, 1962? (b) Explain briefly the provisions relating to ‘redemption fine’ under the Customs Act, 1962? (c) When can a penalty be imposed equivalent to duty under section 114A of the Customs Act, 1962? [6+5+5 = 16 marks]

Question 8 (a) Ankit & Bros., Jodhpur submitted the following information regarding their inter-State sales for the previous year 1999-2000 -

Other relevant informations are as under: (i) The sales to the government and to registered dealers are under the certificates and declaration forms (forms D and C). (ii) The tax collected by Ankit & Bros. from its customers is included in total sales. (iii) Undeclared goods worth Rs. 2,600 sold to government on 29^th February, 2000 were returned in May, 2000. - - On the basis of the information given above, compute the amount of taxable turnover and the amount of sales tax payable thereon by Ankit & Bros., Jodhpur under the Central Sales Tax Act, 1956 for the financial year 1999-2000. - - (b) Writer short notes on the following: (i) Consignment tax. (ii) Doctrine of promissory estoppel in sales tax law. [10+6 = 16 marks].

CORPORATE TAX MANAGEMENT – ICSI Final

Indirect Taxes - June 2001

Answer 6 questions, including question No. 1 which is compulsory.

Question 1  Write notes on any four of the following: (i) ‘Manufacturer’ under the Central Excise Act, 1944 (ii) ‘Related person’ under the Central Excise Act, 1944 (iii) ‘Consumer welfare fund’ under the Central Excise Act, 1944 (iv) Derelict, Jetsam, Flotsam and Wreck under the Customs Act, 1962. (v) ‘General agreement on tariff and trade (GATT)’ under the Customs Act, 1962. [5 marks each].

Question 2 (a) Under rule 173B of the Central Excise Rules, 1944 an assessee has to file ‘declaration of goods produced or manufactured in the factory’. Explain in detail the contents of the declaration and procedure to be followed in filling the return. (b) “The central government has power to collect the increase in excise duty before passing the finance bill under the Provisional Collection of Taxes Act, 1931”. Explain. What happens if duty is reduced? What is the effect if new levy has been introduced on excisable goods? Whether restructuring of tariff headings are covered under this Act? [10+6 = 16 marks]

Question 3 (a) Explain clearly the role of settlement commission in reducing the litigations in excise matter. (b) What are the remedies available to the parties aggrieved by the decisions of the Customs, Excise and Gold Control Appellate Tribunal (CEGAT) under the Central Excise Act, 1944. [10+6 = 16 marks]

Question 4 (a) Under section 4 of the Central Excise Act, 1944 certain deductions are available when valuing the goods sold. Explain them briefly. (b) XYZ sells its products A,B and C though unrelated wholesalers. The wholesale price is Rs. 91,500 (inclusive of excise duty). Cash discount of Rs. 2,000 is allowed if the payment is made within 7 days; and if the payment is made after 30 days interest is charged at 18% per annum. Charges for secondary and returnable packing is Rs. 3000 which is included in the price. Cost of primary packing is Rs. 1500. The manufacturer has paid turnover tax Rs. 910 and this is not recoverable from the buyer. What is the assessable value and what is the excise duty payable, if the product is liable for excise duty @ 16%? [10+6 = 16 marks]

Question 5 (a) Enumerate the documents on the basis of which CENVAT credit can be claimed. (b) Explain the penalty provisions as applicable to CENVAT. [8 marks each]

Question 6 What is the different between duty drawback given under section 74 and duty drawback given under section 75 of the Customs Act, 1962? Explain the main features of both of them. [16 marks]

Question 7 (a) What is ‘bill of entry’? (b) What are the different types of bill of entry? (c) Whether bill of entry can be amended? If yes, what is the restriction applicable? If no, what is the reason? (d) Which are the documents required to be filed along with the bill of entry? [2+6+4+4 = 16 marks]

Question 8 (a) (i) What do you understand by ‘declared goods’ under the Central Sales Tax Act, 1956? (ii) What are the restrictions and conditions in regard to powers of the State government to tax declared goods inside the State? (iii) What will be the tax rate if such declared goods are sold to (a) a registered dealer; and (b) an unregistered dealer? (b) Explain with case laws what do you understand by ‘branch transfer’ or ‘stock transfer’? When would a transfer of goods from head office to branch office in another State attract liability under the Central Sales Tax Act, 1956? Explain with the help of at least one case law. [9+7 = 16 marks]