Question Papers of Indirect Taxes – CMA (ICWA) Final

September 16th, 2012

New syllabus of CMA (ICWAI) final is effective from December 2008. The name of paper is ‘Indirect and Direct Tax Management’. Questions relating to indirect taxes are given below.

CMA (ICWA) Final, December 2012

Answer Question No. 1 (carrying 25 marks), which is compulsory and any five from the rest.

Q. 1. Fill in the blanks : (i) Central Excise and Service Tax Appellate Tribunal may pass an order for rectification of a mistake apparent from the record within                                                                                                                       (six month I one year) from passing of order to be rectified.

(ii) As per Rule 8A of Customs Central Excise Duties and Service Tax. Draw Back Rules, drawback rate shall not exceed    (33% I 50%) of market price of export goods.

(iii) Beyond                   (200/12) nautical miles, the area is the “High Sea” where all countries have equal rights.

(iv) Tax payers Identification Number (TIN) given to each dealer under Value Added Tax Act is conceits of            (11112) digit..

(vi) Where the input are sent under Cenvat provision or under notification No. 214/86-CE, dated 25.03.1986         (raw material supplier/job worker) will be liable for excise duty under central excise law.

(vii) Recording of sound or other phenomena on audio or video tapes shall amount to                  (Manufacture/deemed manufacture).

(viii) In case of delay in payment of service tax, interest @                  (15% I 18%) per annum is payable for delayed period.

(ix) If there is a sale from a factory gate, equalized freight is              (allowable/not allowable) as deduction to arrive at Transaction Value.

(x) Input Service Distributor has to file half yearly return in prescribed format ST-3 within                   (One month/25 days) from the end of the half year under rule 9(10) of the Cenvat credit rules 2004.

(xi) An assessee paying 1% / 2% excise duty and not manufacturing any other goods, is required under rule 12 (2A) of central excise rules to file return of annual installed capacity statement in prescribed format                          (ER-5IER-7) by 30th April for the previous year.

(xii) Goods can be cleared from DTA (Domestic Tariff Area) to EOU/SEZ without payment of excise duty and the DTA unit has to file                                                                                 (bill of export/Invoice).

(xiii) A refund claim under section 11B of the Central Excise Act has to be filed within             (one year/two years) from relevant date

(xiv) If there was fraud, suppression, wilful miss statement but transactions were recorded in specified record then penalty will be equal to                                                                                           (50%/ 25%) of duty will be imposed under section 11 (AC)1(B) of Central Excise Act.

(xv)                   (White/Green) bill of entry is used when goods cleared for home consumption. (xvi) Section 74 of the customs act 1962 provided for duty draw back if the goods imported within               (two/three) years on payment of duty are re-exported as such or after use.

(xviii) Annual Advance Authorization will be granted up to                 (300% I 200%) of FOB value of physical exports in preceding financial year and/or FOR value of deemed export of preceding year or Rs. one crore which ever is higher.

(xx) When an immovable property being land or building is received by an individual or HUF           (without consideration/inadequate consideration) the value of said property shall be treated as income in the hands of the recipient and liable for income tax.

(xxi) Boat notes under Customs act are used for transferring small cargo from ship to shore, from shore to ship    (with/without) berthing the ship.

(xxii) Notice under section 143(2) should he issued within a period of                  (six months/one year) from the end of the financial year in which the return is furnished.

(xxiv) The manufacturers who pay prescribed duty under compounded levy scheme is                 (required/do not require) to follow procedures of excise under storage and clearance of goods.

(xxv) Circular/Trade notices are                   (binding/not binding) on quasi judicial authorities or courts [1×25]

Q. 2. (a) Who are the persons not eligible for compounding of offence as per the provisions of the Central Excise Act, 1944? [4] (b) Briefly outline the procedure for fixing anti-dumping duty. [3

Q. 3(a) The following details of bills raised [excepting where specifically stated otherwise; amounts are excluding service tax] pertaining to a taxable service rendered by M/s Bhattacharya & Co. for the quarter ending 30.06.2013 are furnished to you: (i) Services rendered to foreign consular staff posted in India, for their personal use – Rs 14,00,000 (ii) Plant erection consultancy given to PQR & Co., an associated enterprise. No invoice has been raised. Value of the same as recorded in the books of PQR & Co. – Rs 22,50,000 (iii) Technical assistance provided in Indian territorial waters 8,80,000 (iv) Receipt for services rendered few years earlier, when the services were not taxable. The amount was in dispute and the same has been received now after Court decree – 3,20,000. Wherever the invoice has been raised and the service is taxable, the clients have paid the service tax due. Compute the value of taxable services rendered by M/s. Bhattacharya & Co., a partnership firm, for the above quarter.

 (b) Is it correct to say that the Cenvat credit of input services used for repair or renovation of factory is available? [2(c) What is meant by “reverse charge” in the context of VAT? [3]

Q. 4. (a) Is it correct to say that if the amount charged includes value of goods and materials sold, service tax will not be payable on value of goods and materials sold by the service provider? [5] (b) In the course of a group discussion, the issue as to what is the taxable event for the purposes of levy of customs duty relating to importation of goods has cropped up. The CEO opines that the same takes place when the goods land in India. The Accounts Manager however feels that the same takes place when the goods have entered the Indian territorial waters. You are required to resolve the controversy and also educate them as to when the taxable event arises under the customs law. [5] (c) Do you agree with the statement that liability under the Central Excise Act is the first charge on the property of the defaulter? [5]

Q. 5. (a) From the following chain of sales made at various stages, you are required to calculate the net VAT payable to the State Government: Manufacturer sells the goods to C & F agent for Rs 40,000, C & F agent sells the goods to wholesaler for Rs 45,000, Wholesaler sells the goods to a retailer for Rs 47,000, Retailer sells the goods to consumer for Rs 50,000. Invoice method is to be used. Assume that VAT is charged at the rate of 4% separately during first two stages and 10% during the last two stages [5]

(c) Input cleared as such to a job worker on dt. 1st September 2011, was not returned by 1st March, 2012. How you will deal with such transaction under central excise provisions. Is it different if tools & jigs cleared to job worker in place of Inputs? [2]

Q6(b) M/S White Cement Ltd. is a manufacturer of white cement. They repaired their worn-out machineries/parts of the cement manufacturing plant at its workshop such as damaged rollers, shaft etc with of the welding electrodes, mild steel cutting tools, Ms Angle, Ms Chenel, Ms Beam etc. In this process of repair, Ms Scrap & Iron Scarps were generated. M/S White Cement Ltd. cleared their metal scrap and waste, without paying any excise duty the department has issued a show cause notice demanding duty on said waste contending that the process of generation of scrap and waste amount to manufacture in terms of section 2(f) of Central Excise Act. M/s White Cement Ltd. approached you for an opinion on sustainability of the show cause notice under Central Excise Law. Pl Advise. [4]

Q6(c) M/S Akash Industries Ltd. furnished following information related to imports made during last quarter of 2011-12. Compute the (i) Assessable Value; (ii) Customs Duty Liability] as per the provisions of the Customs Act 1962 Make suitable assumptions and indicate the same in your answer : Total FOB value of the goods – US$ 74,000, Quantity imported – 100 MTS Ocean freight – US$ 10,000, Insurance – US$ 740, Landing charges – 1% of CIF value, Exchange Rate – 1 US$ = Rs 45, Date of presentation of Bill of Entry – 28.02.2008, Date of Entry Inwards of the vessel – 03.03.2008. Customs duty rates on 28-2-2008 – Basic customs duty – 5, Additional Customs duty under section 3(1) – 14, Additional Customs duty under section 3(5) – Nil * Customs duty rates on 3-3-2008 – Basic customs duty – 10, Additional Customs duty under section 3(1) – 8, Additional Customs duty under section 3(5) – Nil.

(d) State briefly, whether the following persons are liable to apply for registration under the Finance Act, 1994 and the Service Tax (Registration of Special Category of Persons) Rules, 2005 and if so, from which date – (i) An input service distributor who starts his business with effect from 1st January, 2012 (ii) A provider of taxable service under an unregistered brand name of another person. Aggregate value of taxable services was Rs. 8,00,000 up to 31.03.2012 (2 marks)

Q. 7. (a) M/s Aurobind Ltd. is a small scale Industrial Unit which is producing glass fibre an excisable Product. As per financial statement for the year 2012-13, it shows a gross sales turnover of Rs 205.10 lakhs inclusive of excise Duty & VAT. The Product glass fibre attract Duty @ 12% plus cess and VAT @ 1%. It may be noted that for the year 2011-12, the taxable clearance of M/s Aurobind Ltd. SSI Unit was Rs 160.00 lakhs. Please calculate the excise duty liability under Notification No. 8/2003-CE dated 01.03.2003. [5]

Q7(b)(i) What do you mean by project import under customs Act?] (ii) Which projects are eligible for benefit of custom duty? (iii) What to do to get such benefit [6]

CMA (ICWA) Final June 2012

Q. 1(a) Fill in the blanks in the following sentences by using appropriate words/phrases given in the brackets : [1×15=15]

(i) EOU can obtain indigenous goods without payment of excise duty by submitting  .     .          .  (B-17 Bond/CT-3 Certificate).

(ii) Vaibhav Cargo Ltd. raised a bill for cargo handling services on 2.2.2012. The payment was received on 2.3.2012. The due date for payment of service tax is .         .          .  (5th March 2012, 31st March, 2012)

(iii) Service tax paid on mobile phone bills .           .          .  (is/is not) eligible for CENVAT credit .

(iv) For units paying duty of more than Rs 3 crore EA-2000 excise audit is applicable .   .          .   (every year, once in 2 years, once in 5 years).

(v) Bonafide baggage including  .     .          .  personal effects are exempt from customs duty (used, unused, damaged).

(vi) Assessee who is paying 1% excise duty and not manufacturing any other goods is required to file quarterly return within 10 days after close of the quarter in form of return .    .          .  (ER-8/ER-1).

(vii) Any person providing taxable service of commercial or industrial construction of residential complex can opt to pay service tax @ .           .          .   (25%/33%) of gross amount charged if gross amount includes value of land.

(viii) Cost of Designing & Engineering incurred for the purpose of manufacture of excisable goods has .         .          .  (to be included/not to be included) in assessable value under Central Excise Act.

(ix) While determining the assessable value under central excise laws, equalized freight is allowable as deduction if there is  .  .           .   (sale/removal) of excisable goods at factory gate.

(x) Under Rule 4(5) of the CENVAT Credit Rules, Jigs, fixture, modules & dies can be sent to a vendor for production of goods according to specification of the Principal Manufacturer .   .          .  (with/without) reversal of credit.

(xi)  Under Rule 12(1) of Central Excise Rules, SSI Unit eligible for SSI concession (even if it does not avail such concession), has to file a quarterly return in form .     .          . (ER-3/ER-2) by 10th of the following month of the quarter.

(xii) Every exporter should obtain BIN (Business Identification Number) from    .          .  (DGFT/ CBEC).

(xiii)        Packing or repacking and labelling is  .  . .  (not manufacture/deemed manufacture) in case of goods are covered under section 4A of the Central Excise Act.

(xiv)  E-payment of excise duty/service tax is mandatory in case of assessee who had paid either in cash or by utilizing Cenvat credit or both for an amount of rupees         .          .  (ten/fifty) lakhs or more in the preceding financial year.

(xv) As per section 3(1) of Central Excise Act, value of excisable goods cleared by EOU to DTA shall be determined in accordance with provisions of      .          . (central excise/customs) valuation.

(b) State whether the following statements are true or false. If false give the correct statement. If true give the reason in brief : [2×5=10]

(i) Wealth-tax payable by company is treated as a charge on book profits.

(ii) In computing the net wealth of an individual, the value of assets held by a minor child will be included.

(iii) The sale of assets by bank for realization of loans is liable to tax under CST Act.

(iv) Service sector SEZs should have an area of 1,000 hectares or more in order to be eligible for exemption.

(v) Different systems of accounting e.g. Mixed or Hybrid cannot be adopted for receipts and payments.

Q2(a) Please specify the relevant date with reference to Customs Act 1962 in following cases of goods warehoused under bond.- (i) Rate of exchange when goods are removed for home consumption (ii) Rate of duty where goods are removed for home consumption. (iii) Rate of duty if the goods are not moved from warehouse within the permissible period [1+1+1=3]

Q2(b) Discuss whether remission of duty will be granted under the Central Excise Rules in the following cases   – (i) Loss of molasses due to auto combustion in sugar factory (ii) There was natural calamity in the factory, but the department was not intimated in time [1+1=2]

Q2(c) M/s. Shneha & Co. has imported goods weighing 1200 Kg with CIF value US $ 48,000.`The bill of entry was presented on 12th Jan., 2012. The exchange rate on the said date was 1$ = 45. Basic Custom Duty is chargeable @ 10% plus education cess as applicable. No Excise duty is payable on above goods if manufactured in India. As per notification issued by Govt. of India anti-dumping duty has been imposed on above goods. The antidumping duty will be equal to difference between amount calculated @ US $ 60 per Kg. and landed value of goods. You are required to compute— (i) Assessable value (ii) Customs duty payable  (iii) Anti-dumping duty payable (1+3+1 = 5 marks)

Q2(d) Explain in brief : (i) What are the purposes for which Advance Authorization can be issued? (ii) What  is  the  maximum  limit  of  duty  free  import  of  mandatory  spares  under  Advance Authorization? (iii) What is the basis of determination of Annual Advance Authorization for annual requirements of any exporter? What is the maximum value of Annual Advance Authorization can be issued? (5 marks)

Q3(a) Discuss whether assembly of machinery at customer’s site will amount to manufacture under excise law, if such machinery is bolted and can be shifted? Will your answer be different if such machinery cannot be sold without dis-assembling?

Q3(b) Briefly explain the manner in which a Cost Accountant can help a client in the handling of VAT audit called for by the Department and in conducting external audit of VAT records

Q3(c) As per the Foreign Trade Policy, can warranty spares of plant, machinery etc. be exported without authorization?

Q4(d) M/s. XYZ Ltd. shifted its factory from Sitapur to Rampur and transferred all the available inputs and capital goods to the new site. The inputs, capital goods and the balance of unutilised CENVAT credit were duly received and accounted for` in the registers of the new unit. The said balance of unutilised CENVAT credit transferred was Rs 8,00,000. However, the quantum of` CENVAT credit attributable to the inputs and capital goods so transferred to the new site was Rs 6,00,000` only. The Department raised the plea that the assessee was entitled` to transfer only Rs 6,00,000 of CENVAT credit and not the entire balance of unutilised credit of 8,00,000. Explain, with the help of a decided case law, if any, whether department’s plea is justified in law. [4+3+4+4 = 15 marks]

Q. 4. (a) Briefly outline the procedure for fixing anti-dumping duty

Q4(b) Is it correct to say that the Cenvat credit of input services used for repair or renovation of factory is available?

Q4(c) Rithika & Co., a partnership firm, has its registered office in Jammu & Kashmir. The firm has been rendering taxable services and paying service tax, for the past three years. The following details are furnished to you relating to services rendered and bills raised during the quarter ended 30.06.2011:  (i)  Taxable services rendered in Srinagar, Kashmir – 9,00,000 (ii) Services rendered in Mumbai :- –To RBI – 4,00,000 –To United Nations Organization – 3,00,000 –To Customer L – 8,00,000 –To Customer M – 4,00,000 — To Customer N, as a sub-contractor (Services rendered by N are not taxable) – 9,00,000. – – Assume that all services rendered in Mumbai are taxable, excepting where any service is outside the service tax net. The assessee has raised bills for above amounts plus service tax at applicable rates wherever required. All amounts billed have been received in the same quarter, excepting from Customer M, who refused to pay the service tax component of the bill raised to him. You are required to compute the value of taxable services rendered by the assessee during the above quarter

Q4(d) From the data given below relating to import of a machinery, you are required to compute the assessable value for customs duty purpose  (in US Dollars) –  FOB value of machinery – 1,10,000, Air-Freight – 24,000, Expenses incurred by seller for improving the design at buyer-importer’s request – 5,000, Transit insurance-1,500, Exchange rate 1 USD = Rs 51 (3+2+6+4 = 15 marks).

Q. 5. (a) What is Works Contract Tax? Can a works contractor opt for composition in respect of selected works contract? Is it essential to opt for composition scheme in respect of all the works contracts?

Q5(b) M/s. Alfa Construction Co. Ltd. expects a gross turnover of Rs 2,500 crores during the coming year 2012-13 from various commercial/industrial constructions (inclusive of charges towards various material and services). It furnishes following additional information – (i) Total value of materials and input services to be used Rs 1000 crores & Rs 300 crores respectively (Excise Duty @ 10.30%, and Service Tax @ 12.36%); Capital Goods received last year Rs 200 crores (Duty @ 12.36%), but no credit was availed on them. (ii)  Gross turnover includes completion and finishing services of Rs 100 crores. – – The company is in a dilemma whether to opt for abatement or go for full value and avail CENVAT credit. It engages you as a consultant to advice on minimization of it’s service tax liability. It is given that the above charges do not include the cost of land, as the said cost runs into thousands of crores on which the company does not want to pay service tax in any form. Service tax rate should be taken as 12.36% as the proposal is related to 2012-13.

Q5(c) A bill of entry was presented on 4th August, 2011. The vessel carrying goods arrived on 11th August, 2011. Entry inwards was granted on 13th August, 2011, and the bill of entry was assessed on that date `and was also returned to the importer for payment of duty on that date. The duty amounting to Rs 5,00,000 was paid by the importer on 22nd August, 2011. Calculate the amount of interest payable under section 47(2) of the Customs Act, 1962, given that there were four holidays during the period from 14th August to 22nd August, 2011.

Q5(d) Can an application made under Customs Act, 1962 be withdrawn in the following cases? If yes, state the time limit for withdrawal of such applications.  (i) Application for advance ruling (ii) Application for settlement. (3+7+3+2 = 15 marks)

Q 8 (a) During the financial year 2011-12, a dealer purchased 11,000 Kgs of inputs on which Vat paid @ 4% was Rs 4,000. He manufactured 10,000 Kgs of finished products from the inputs. 1,000 Kgs was the process loss. The final product was sold at uniform price of Rs 10 per Kg, as follows –sold within State – 4,000 Kgs. Finished goods sold in inter-state sale against C form – 2,500 Kgs. Goods sent on stock transfer to consignment agents outside the State – 2,000 Kgs. Goods sold to Government departments outside the State – 1,500 Kgs. There was no opening or closing stock of inputs, WIP or finished product. The State Vat rate on the finished product of dealer is 12.5%. (i) Calculate liability of Vat and CST (ii) Find Vat credit available to dealer and tax required to be paid in cash (6 marks)

Q8(b) Y & Co. is a small scale unit, eligible for exemption in terms of Notification No. 8/2003-CE dated 1-3-2003 for the year 2011-12. It provides the following particulars with regard to the clearance of goods effected during the said year. (i) Determine the excisable turnover and excise duty payable (ii) Explain in detail, the reasons in support of exclusion or inclusion in computing the turnover – (Value in Rs lakhs) – Value of domestic clearance of goods with own brand name – 120, Value of clearance of goods with the brand name of others (including Rs 30 lakhs in respect of goods manufactured in rural area) – 100, Value of clearances for exports – 50, Value of clearances for captive consumption – 40, Value of clearances for exempted goods – 20. – – Assume rate of excise duty as 10% (9 marks)

ICWA Final December 2011

Q1(a) Fill in the blanks : (i) A certificate of CST registration issued by the concerned Authority shall be in Form  .   .  (ii) Under the CST Act, 1956, one declaration in Form C can cover all the transactions of purchase in one .  .

________ , irrespective of the total value of the transactions during the said period (iii) A shipping bill or bill of entry filed through ICEGATE shall be digitally signed with digital signature

issued by .________ . (iv) Duty drawback rate shall not exceed  .      .  percent of market price of export goods (1 mark each)

Q1(b) Provide brief answers {not exceeding three or four sentences) for the following – (i) State the type of goods and the situations in which packing, repacking, etc. constitutes deemed manufacture under the Central Excise Act, 1944 (ii) Briefly discuss about excise duty based on production capacity (iii) Are inputs used for other purposes, like repair, maintenance, and/or installation of capital goods, entitled for CENVAT credit? (iv) Under Customs Law, state the initial steps to be undertaken by a person for carrying out export of goods (any two), (v) In the context of anti-dumping duty, what is meant by “New Shipper Review”? (vi) When is e-filing of service tax return mandatory? (vii) Is it correct to say that all imports are free unless restricted or prohibited under the Foreign Trade Policy (FTP)? (2 marks each)

Q2(a) In the context of business auxiliary services in service tax, when is job work liable for service tax? State the exemptions/exclusions available in this regard (b) Name the goods which have been specifically excluded from the definition of ‘input’ under Cenvat Credit Rules (c) (d) – Income tax questions (e) While ascertaining the assessable value for customs duty purposes, specify any two charges to be excluded under rule 3 of Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 (4+2=2 marks)

Q3(a) Does delayed payment of service tax attract any interest? If so, what is the rate of interest payable with effect from 1.4.2011? (b) Anantha, the assessee sold certain goods to Govinda Co. Ltd. for ` 17,000 on 29.02.2011. The buyer is a related person as defined under section 4(3)(b) of the Central Excise Act, 1944. The buyer did not sell the goods but used it as intermediary product. The cost of production of the goods was `. 16,000. What should be the assessable value? What should be the assessable value, if the goods were sold to an unrelated person for `. 20,000, who also used it as intermediary product? You may assume that the price charged from the buyer is excluding excise duty and other taxes (c) Name any four Duty Credit Schemes which are being used as export promotional measure (2+4+4 marks)

Q4(a) Johar Engineering Industries are selling a component for gross price of `. 80 per unit. The price includes packing charges of ` 2, loading charges within the factory of `. 1, excise duty @ 10%, education cess as applicable and State Vat @ 5%. Calculate excise duty and Vat payable per unit (4+3 marks)

Q4(d) M/s. Pioneer Consulting Ltd., provided Consulting Engineering Services to a client at USA for value of `. 50 lakhs during the financial year 2010-11. No service tax was paid during the year. The company availed input services and procured inputs capital goods which were used in relation to providing such services. Total eligible input tax credit was ` 50,000. M/s. Pioneer Consulting Services Ltd. claimed rebate for such input tax complying to the procedures enumerated under service tax legislation/rules and notifications there-under. The jurisdictional Assessing Officer rejected the claim of rebate on the ground that the export of services are exported against which no rebate would be available. As a tax consultant, you are required to clarify,—  (i) Should Consulting Engineering Services provided by M/s. Pioneer Consulting Services Ltd. be treated as an exempted service? (ii) What are the alternatives available to M/s. Pioneer Consulting Services Ltd. on payment of service tax and claim of refund of input tax credit? (iii) Has M/s. Pioneer Consulting Services Ltd. rightly exported without payment of service tax? (6 marks)

Q5(b) Briefly explain the provisions relating to provisional assessment of customs duty (c) What are the purposes for which Advance Authorisation can be issued? (d) In respect of stock/branch transfers, can input tax credit be claimed under State VAT laws? (4+2+2 marks)

Q6 (b) From the data given below relating to import of printing machinery, compute the assessable value for customs duty purposes (in USD) – * FOB value of printing machinery – 1,00,000 * Air Freight- 22,000 * Expenses incurred by seller for improving the design, at buyer-importer’s request – 4,000 * Transit insurance – 3,000. Exchange rate 1 USD = ` 50. Basic duty may be taken as 30% (4 marks) (c) State the excise duty exemptions conferred to SSI units (7 marks)

Q7(a) Who are the persons not eligible for compounding of offence as per the provisions of the Central Excise Act, 1944? (4 marks) (b) Mr. Nathan is a qualified Cost Accountant and has been rendering taxable services for the past several years. He furnishes the following details pertaining to the quarter ended 30th June, 2010 (in Rupees) – (i) Services rendered to Reserve Bank of India – 6,18,000 (ii) For preparation of accounting statements for Charitable trusts – 2,00,000 (iia) For preparation of accounting statements for other clients – 7,00,000 (iii) Advance received from LMN Ltd. for tax consultancy – 3,09,000 (iv) Fees received for appearing before first appellate authority in income tax – 4,12,000 (v) Fees received from World Health Organisation – 6,00,000. The assessee ultimately did not render any service to LMN Ltd. and by mutual consent, ` 2 lacs was returned to LMN Ltd. on 10th March, 2011. All the above figures are gross amounts of receipts and wherever required, service tax was billed separately and the same was also received separately from all the clients. You are required to compute the value of taxable services rendered by Mr. Nathan for the above quarter (assume that service tax is chargeable on receipt basis) (7 marks) (c) In the context of VAT law, explain the difference between exempt sale and zero rated sale (4 marks)

Q8(a) What is ‘Importer Exporter Code Number’ (IEC)? State the manner in which IEC has to be applied for. In what export/import documents should the same be stated? (4 marks) (c) Achdha Castings Ltd. is manufacturing a product (which is captively consumed) to produce a final product, which is exempt from the payment of excise duty. The intermediary product is having a distinct market of its own. The company is of the view that since the final product is exempt, no duty liability arises on the intermediary product also. The Department objected to the view of the assessee. Discuss, with reference to a decided case law, if any, whether the view of company is justified (4 marks)


ICWAI – FINAL EXAMINATION New Syllabus – June.-2011

Answer Question No. 1 which is compulsory and any five questions from the rest.

Q 1 (a) Fill in the blanks in the following sentences by using appropriate words/phrases given in the brackets (2 marks each) –  (vii) As per section 35C(2A) of Central Excise Act, the validity or stay granted by CESTAT for recovery of duty, interest and penalty is for.          .           .           . (180/365) days (viii) If it is found that customs duty is not levied, short levied or erroneously refunded, the Customs Officer u/s 28 of Customs Act, can issue a show cause notice within .            .           .           . (six/twelve) months demanding duty or interest.

Q1(b) State whether the following statements are true or false. If false, give the correct statement. If true give the reason in brief (3 marks each) –  (i) Person claiming refund of excise duty and interest paid on such duty should make application to AC/DC within six months of relevant date (ii) Excise duty cannot be levied on immovable property (iii) Process of mixing and grinding amounts to manufacture (3 x 3 = 9 marks).

Q2.(a) M/s. Engineers Ltd. is a Works Contractor providing works contract services to M/s BKAY Ltd. and already crossed the threshold limit under service tax laws. The Company quoted an amount of ` 10 lakhs for a construction contract. It is agreed that if M/s. BKAY Ltd. supplied the steel and cement, the contract amount will be reduced on the agreed basis. M/s. BKAY Ltd. supplied steel and cement of ` 1 lakh for use in the construction activities as a result the contract amount reduced to ` 9 lakhs. Further M/s. Engineers Ltd. had supplied goods worth ` 2 lakhs under a separate agreement which was also used while providing above works contract service. M/s. Engineers Ltd., the Service Provider preferred to pay service tax under composition scheme. Please find out (i) What is the gross amount chargeable to Service Tax Laws? (ii) What is the Service Tax payable under Composition Scheme by Engineers Ltd. (iii) Can M/s. Engineers Ltd. avail Cenvat credit also? (3+2+2 = 7 marks)

Q2(b) M/s. Ajay Security Services Ltd., a Company while signing a contract for providing taxable service on dated 15th June, 2010 has received ` 1,00,000 by an account payee cheque as advance. On dated 14th November, 2010 an amount of ` 5,00,000 has been received through credit card while providing the service and another ` 5,00,000 by a pay order after completion of service on 18th March, 2011. Above amount is inclusive of service tax as applicable and over and above threshold limit of exemption available under service tax law (i) What would be the total service tax liability for the financial year 2010-11? (ii) What is the value of taxable Service? (iii) What would be the due date of payment of service tax electronically through internet banking? What would be the amount of service tax payable on different due dates? (iv) If the entire service tax is deposited on dated 14th April, 2011 what would be the interest liability (2 x 4 = 8 marks)

Q3(a) An excisable product is covered under provision of the Standards of Weights & Measures Act. 1976 and falls in the category of specified goods subject to excise duty on the basis of retail price. From the particulars compute (rounded to nearest rupee) : (i) Assessable value (ii) Excise duty & Cess payable. – MRP printed on the package is ` 10,640. The price is inclusive of excise duty @ 10% and education and secondary and higher education cess at the applicable rates as per Finance Act, 2010. The product is eligible for an abatement of 38% [5+4 = 9 marks]

Q 3(b) Briefly explain the following with reference to Central Excise Laws – (i) Is it compulsory to pay tax through PLA after forfeiture of facility of payment by installments? (ii) Can an assessee claim refund of money deposited in PLA, when there is a provision of unjust enrichment? (2 + 2 = 4 marks)

Q3(c)(i) An exemption notification under Central Excise Act was issued on 22nd December, 2010.The same was published in Official Gazette on 2nd January, 2011. From which date the notification is effective? (ii) KSK Ltd. a manufacturer dispatched rubber products to Mr. X from factory at Pune after payment of duty. The goods were rejected by the buyer as found defective and sent back to the manufacturer for rectification. Can Mr. X avail Cenvat credit? (1 + 1 = 2 marks)

Q4(a) Briefly explain the term ‘Export’ for the purpose of duty drawback under section 75 of the Customs Act, 1962. Is duty drawback available if the goods do not reach the destination? (5 marks)

Q4(b) Computation of duty drawback : Discuss whether any duty drawback is admissible under section 75 in the following cases and if yes, what is the quantum of such duty drawback? (10 marks)



FOB value of exported Rate or amount Market price of Value of imported
goods (`) of drawback goods (`) material used in goods (`)
(i) 1,00,000 0.75% of FOB value


(ii)    49,000 1% of FOB value


(iii)    60,000 0.80% of FOB value


(iv)      3,000 1.5%


(v) 2,00,000 40% of FOB value


(vi) 1,00,000 (2,000 kgs.) ` 30 per kg.


(vii) 4,00,000 3.5% of FOB value


(viii) 4,20,000 4% of FOB value



* In case (viii), the Central Government has specified a minimum value-addition to be achieved @ 40% of imported material in terms of FOB value.

Q5(a) A, an unit in SEZ, received services as covered u/s 65(105) from various service provider in relation to the authorized operation in the SEZ. At the time of making payment, service provider ask it to pay the service tax, however, it argues that service tax is not liable on taxable services provided to it. Now, you are approached to confirm the contention of A with the following details –  (i) Services consumed within the SEZ – ` 5,00,000 (ii) Service partially consumed within the SEZ and partially out of the SEZ – ` 3,00,000 (iii) Services consumed wholly out of the SEZ – ` 6,00,000 (6 marks)

Q5(b) A show cause notice demanding customs duty was issued in case of clearances made by a 100% Export Oriented Undertaking (EOU) to Domestic Tariff Area (DTA). Is the show cause notice defective in law? (2 marks)

Q5(c) Detail the provisions for registration of dealers under section 7 of CST Act, relating to (i) Compulsory Registration (ii) Voluntary Registration and indicate the benefits of certificate of registration (7 marks)

ICWAI – FINAL EXAMINATION New Syllabus – December 2010

(Only questions relating to indirect tax covered)

Answer Question No. 1 which is compulsory and any five questions from the rest.

Q 1(a) (iv) A service provider, whether registered or not, providing taxable services under brand name//trade name of others ___________ (will/will not) be eligible for availing threshold limit of Rs. 10 lakhs available to small service providers. (v) Where excise duty has been paid on provisional basis, refund claim should be filed within _________ (one year/two years) after duty has been adjusted in final assessment (vi) A sale or purchase of goods is deemed to be in the course of import, inter alia, if such sale or purchase _________ the import of such goods (occasions/follows) (vii) Certificate of registration under Central Sales Tax Act is to be issued by the registration authority in the prescribed Form ________ (B/G). (viii) An EOU is required to execute a bond in form _______ (B22/B17) for issue of a certificate on strength of which goods will be cleared from Customs without payment of duty. (ix) If raw material is supplied to a job worker on principal to principal basis the supplier is _______ (manufacturer/not manufacturer) under Central Excise Law (xi) Anti dumping and countervailing duties are imposed under the ________ Act (Customs/Central Sales Tax). (xii) The form for bill of entry for _______ (warehousing/home consumption) is printed on yellow paper. (xiii) The demand of duty can be raised within ________ (one/five) years, in case of fraud, collusion, willful misstatement and suppression of facts or contravention of any provision of Central Excise Act or Rules with intent to evade payment of duty made by a manufacturer (xiv) An importer importing under an authorization or EPCG is required to execute ________ (a bond/a bond with guarantee), when he has export obligation. (xv) Transaction Value _____ (includes/does not include) receipts/recoveries or charges incurred or expenses provided for in connection with manufacturing, marketing, selling of excisable goods to be part of the price payable for goods sold (1 mark each)

Q1(b) Answer the following questions in brief :  (i) What is a Large Tax Payer Unit? (ii) What is the basic distinction between VAT & Sales Tax? (iii) Is mens rea essential for imposing penalty under Central Excise Act/Customs Act? (2 marks each)

Q 2(d) TRAI EXPORTERS imported some goods in January 2010 and the goods were cleared from Paradeep Port for warehousing on 8th January, 2010 after assessment. Assessment was completed at the exchange rate $ 1 = Rs. 47.50. The rate of duty on that date was 20% (no other additional duty is payable). The goods were warehoused at Cuttack and were cleared from Cuttack warehouse on 5th March, 2010 when rate of duty was 15% and exchange rate was $1 = 47.00. What is the rate of duty and exchange rate applicable on the date of removal of goods from Cuttack warehouse (4 marks)

Q3(c) What will be the Central sales Tax leviable to registered and unregistered dealer in following situations? Rate of CST applicable is 2%. (i) If local VAT is 1%. (ii) If VAT is 2%. (iii) If VAT is 4%. (iv) If VAT is 12.5% (4 marks) (d) M/s Link Ltd. a service provider engaged in providing advertising agency services deposited Rs. 2 lakhs as service tax for the month of April, 2009 on 5th May, 2009 with a designated bank by cheque. The check was cleared on 10th May, 2009. The department alleging that the service tax for the month of April, 2009 has not been deposited in due rate for which interest @ 13% p.a. would be levied. (i) Is the action of the department right on levy of interest? Give reasons in support of your answer. (ii) Will the situation be different if the cheque deposited could not be realized due to insufficient funds (3 marks)

Q4 (a) State briefly whether the following services are taxable services under the Service Tax: (i) Services provided in the State of Rajasthan by a person having a place of business in Jammu and Kashmir (ii) Service provided from outside India and received in India by an individual otherwise than for the purpose of use in business or commerce (6 marks) (b) M/s. Y Consultants are engaged in the business of supply of manpower to M/s Z Enterprises. They charge to the principal employer for the wages of their labour which amounts to Rs. 1,50,000 plus their service charges of Rs. 30,000, What is the amount of service Tax payable? (2 marks) (c) (i) is e-filing of service tax return permitted? (ii) Should service tax be paid even if not collected from the client or service receiver? (4 marks) (d) M/s Y rendered taxable service to a client. A bill for Rs. 40,000 was raised. No service tax was separately charged in the bill. What is the value of taxable service and the service tax payable? (3 marks)

Q5 (a) State the objectives of Central Sales Tax Act (b) State whether the following are goods under CST Act: (i) Patent (ii) Lottery Tickets (iii) Old newspapers (iv) Cheque (4 marks) (c) State whether the following are includible in ‘Sale Price’- (i) Excise Duty (ii) Packing materials and Packing charges (iii) Insurance charges (iv) Weighment charges paid for goods (2 marks) (d) A registered dealer of Bikaner (Rajasthan) sold goods worth Rs. 4,36,000  (including tax @ 9%) to an unregistered dealer in Gujarat. Calculate the amount of Central Sale Tax payable, if the sales tax rate on such goods in Rajasthan is 9% and surcharge @ 15% is also payable on it (4 marks)

Q8. (a) What are the essential ingredients of interstate sale – Elucidate (6 marks) (b) State whether sale by VPP is liable to CST (3 marks) (c) What are the exceptions to section 3 of CST Act? (4 marks) (d) Give four instances of Goods of special importance in Interstate Trade or Commerce u/s 14 of CST Act (2 marks)


ICWAI FINAL EXAMINATION June 2010 (New Syllabus)

Indirect and Direct Tax Management

Answer Question No. 1 which is compulsory and any five questions from the rest.

 (Only questions relating to indirect tax covered)

Q1 (a) Fill up the blanks: (1 mark each)

(ii) A unit is entitled to SSI concessions under excise provisions if its turnover in the earlier year does not exceed Rupees .           .           ..

(iii) Parts used during warranty period for repairs or replacement .      .           . (are/are not) excisable.

(iv) CVD .        .           . (is/is not) payable on anti-dumping duty.

(v) Customs value of excisable goods is determined, inter alia, under section .          .           . of the Customs Act, 1962.

(vi) Section 18 of the Customs Act, 1962 provides for .          .           . of duty.

(vii) All items other than those which are restricted/prohibited can be imported .        .           . (freely/subject to nominal import duty of 10% on assessable value).

(viii) Where advance authorization has been obtained, export obligation should be fulfilled within . .           . from the date of .           .           ..

(ix) Forms received from branches for stock transfers should be submitted to CST authorities on .    .           . basis.

(x) Under the Central Sales Tax Act, 1956, sale price means the amount payable to dealer as consideration for sale of goods and .      .           . (includes/does not include) CST whether shown separately or not.

(xv) In service tax matters, an eligible appeal should be filed within .            .           . from the date of receipt of order appealed against.

Q1(b) State with reasons, whether the following statements are True or False (mere conclusion will not deserve any credit; for a ‘True” conclusion, the question should not be merely repeated, but reasoning should be given):   (2 marks each) –  (ii) Import manifest is required to be submitted at the customs station within twelve hours of arrival of aircraft or vessel. (v) Where taxable services are provided by a person not residing in India and are utilized in India, the agent of the non-resident residing on India is liable to collect and pay the service tax on behalf of the non-resident.

Q2.(a) Is it correct to say that mandatory levy of penalty under section 11 AC of the Central Excise Act, 1944 is not applicable to every case of non-payment or short-payment of duty? (5 marks) (b) LMN Aluminium Ltd. is engage in manufacture of aluminium sheets and allied products. The assessee noticed some difference at the time of physical verification of stock, as compared to book records, due to several reasons like rain seepage, weighment differences, accounting method employed, etc. The assessee applied under Rule 21 of the Central Excise Rules, 2002, seeking remission of duty. This claim is resisted by the Department on the ground that the reasons for the differences were neither due to natural causes, nor due to unavoidable accident. The assessee’s request was hence turned down, though there was clear evidence to the effect that the assessee has suffered loss of stock. Is the action of the Department justified? Advise the assessee suitably (6 marks) (c) Who are the persons not eligible for compounding of offence as per the provisions of the Central Excise Act, 1944? (4 marks)

Q3.(a) VSK Motors manufactures Light Motor Vehicles (LMV). The practice followed is that the chassis of the LCV is sent to Nathan Ltd. for building the body as per design and specifications furnished. The LCV chassis is not sold but is transferred after payment of excise duty on stock transfer basis. Nathan Ltd. avails CENVAT credit on the excise duty on chassis; after completing the body building, Nathan Ltd. discharges the duty on the assessable value comprising the value of chassis and the job charges. After receipt of the body-built LMV from Nathan Ltd., VSK Motors sells the same at a higher price. You are required to examine whether the practice followed is correct in terms of Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000 (4 marks)  (b) What is the quantum of CENVAT credit that can be availed in respect of inputs and capital goods cleared on or after 07.09.2009 from an EOU or by a unit in electronic hardware technology park or in a software technology park? (5 marks) (c) State the cases under which the Central Government is empowered under Rule 12CC of the Central Excise Rules, 2002 to withdraw facilities or impose restrictions on a manufacturer, first stage or second stage dealer, or an exporter (6 marks)

Q 4(a) State the cases where the import duty shall be refunded to the person who has paid such duty, as laid down in section 26A of the Customs Act, 1962 (5 marks) (b) Mr. Bhar imported goods on 14.1.2010, Bill of entry was presented on 15.1.2010, Assessable value (in Euro) 50,000. Goods were removed to warehouse. Order permitting the deposit of goods in bonded warehouse issued on 19.1.2010. Mr. Bhar neither obtained permission of time for the warehousing period, nor cleared the goods within the permitted warehousing period of 18.4.2010. Only after a notice was issued under section 72 demanding duty and other charges, Mr. Bhar removed the goods from the warehouse, on 15th May, 2010. Assuming that no additional duty or SAD is payable, on the basis of following information, compute the amount of duty payable by Mr. Bhar while removing the goods (i) Rate of exchange (1 Euro =) 65 (on 15.1.2010), 66 (on 18.4.2010) and 67 (on 15.5.2010) (ii) Basic customs duty 12% (on 15.1.2010), 15% (on 18.4.2010) and 18% (on 15.5.2010) (5 marks).

Q4(c) M/s. Nigamanth Cables are engaged in the business of providing cable TV and high speed internet services in Salem, Tamil Nadu. For their business requirements, they imported Optic Fibre Cables (OFC) and classified them under Heading 85-44 of the Customs Tariff. This was not accepted by the Revenue and according to them, the goods should be classified under Heading 9001. The assessee’s stand was accepted by Commissioner of Customs (Appeals). The matter was carried in appeal before CESTAT against the said order, which has yet not been decided. Meanwhile, the customs authorities (DRI officers) had seized the consignment of OFC imported and permitted Nigamanth Cables to clear the goods on payment of duty assessed under Heading 9001 and forced Nigamanth Cables to pay the differential duty between Headings 85-44 and 9001 by threat and coercion. You are required to consider the validity of the aforesaid action of the customs authorities in the light of judicial pronouncements (5 marks)

Q5(a) M/s. DPC & Co., a consulting engineering firm, has provided consulting engineering services to NFD Ltd. in connection with construction of power plant during the financial year 2009-10, for a value of Rs. 50 lacs, excluding service tax. While providing the services, DPC & Co. appointed Mr. X, sub-consultant, to provide services to the extent of Rs. 11 lacs, inclusive of all expenses and taxes, if any. A show cause notice has been served on Mr. X, requiring them to pay services of Rs. 11 lacs rendered by it to DPC & Co., who have utilised the same in providing the services to NFD Ltd. Mr. X is of the opinion that he is not liable to service tax since DPC & Co. have paid the service tax on the entire contract of Rs. 50 lacs. In the light of these facts, state (i) Whether the ground taken by Mr. X for non-payment of service tax is correct. (ii) If the answer is in the negative, what is the service tax payable, assuming that Mr. X has crossed threshold limit, (iii) How payment of service tax by Mr. X is beneficial to DPC & Co.  (4 marks)  (b) With reference to business auxiliary services, examine whether service tax liability is attracted in following cases – (i) Manufacture of an excisable goods on behalf of the client, which is exempt from duty, (ii) Business auxiliary service provided by a service provider to any other person (service receiver) during the course of manufacture or processing of alcoholic beverages by the service provider, for or on behalf of the service receiver (6 marks)  (c) Compute the net VAT liability of Janak from the under-mentioned information: (i) Raw material purchased from foreign market (including duty paid on imports @ 20%) – Rs 47,000 (ii) Raw material purchased from local market (including VAT charged on the material @ 1 %) – Rs 10,100 (iii) Raw material purchased from another State (excluding CST) – Rs 20,000 (iv) Storage, transportation cost and insurance – Rs 3,000 (v) Other manufacturing expenses incurred – Rs 600. – – Janak sold the goods to Prem adding margin of profit @ 10% on the selling price. VAT rate on sale of such goods is 10% (5 marks)

Q6(a) What are the reasons for setting up of Export Promotion Councils? Write a brief note on their responsibilities and types of Councils in India in the context of foreign trade policy. Should an exporter compulsorily register himself as a member of such Export Promotion Council? (5 marks)  (b) Briefly explain the different types of Drawback rates (7 marks)  (c) While importing goods under Duty Free Import Authorisation (DFIA), should any customs duty be paid? Is the DFIA transferable? (3 marks)

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