Solved answers of Indirect Taxes for Nov 16 CA Final Exam

Q1.(a) AB Engineers are manufacturers of a product which is subject to Excise Duty. They are also eligible for exemption in terms of notification 8/2003 dt.01.03.2003 for the current financial year 2016-17. The following are the details of clearance of goods effected during the year 2016-17. (Marks -5)

Other information in respect of the above

(i) Item No.2 value of clearance with other brand names includes goods manufactured in rural area 100 lakh.

(ii) Item No. 3 value of clearance for captive consumption, final products are eligible for SSI Exemption.

(iii) Rate of excise duty - 12.5%.

(iv) Excise duty paid amounting 3 lakh on inputs consumed in exempted clearance. (Item No.5)

(v)  Excise duty paid amounting 5 lakh on inputs consumed in exempted clearance. (Item No.1 No opening or closing stock of inputs).

(vi) Excise duty paid amounting 7.5 lakh on capital goods purchased in the current financial year. (Exclusively for own brand Item No.1)

Exports made by AB Engineers are exempt from duty. (Item No.4)

Calculate the total duty payable and duty payable in cash if any, by AB Engineers for the current financial year 2016-17. Make assumptions if required and show the working notes separately.

Solution (a):

AB Engineers
Computation of Eligibility

Less cenvat credit on capital goods (full credit)  Rs. 7,50,000
cenvat credit on inputs      (proportionate)               3,50,000

                               Net duty payable                     57,75,000

Notes: the drafting of the question is confusing. Language should have been better used

1. Duty paid under item (v) is not eligible as it was used for exempted goods
2. Duty paid on  exempted clearance in item No.1 is taken as used for clearance of goods eligible for exemption. Hence proportionate credit has been taken.
3. Captively consumed goods turnover not included as their final product is eligible for exemption

Solution (b): Computation of Service Tax for the Month of April  2016

Note: Charges have been taken as value excluding service tax.

Q1.(c)  You are required to compute the value of taxable services and service tax payable thereon from the gross amount charged in respect of the following transactions made available by A. Ltd. dealing in agriculture related services in the month of December 2015:  (Marks-5)

This company is not entitled for small scale exemption in 2015-16. Assume the rate of service tax as 14.5% (Including Swachh Bharat Cess @ 0.5%) Explanation is to be given along with the working.

Solution (c): Computation of Service Tax for the Month of April  2016

Note: Values have been taken as inclusive of service tax.

Plantation  of rubber is cultivation of plants which is a part of agriculture, non taxable

Q1.(d) F. Ltd imported a machine from UK in May,15. The details in this regard are as under:

(i) FOB value of the machine : 10000 UK Pound

(ii) Freight (AIR) : 3000 UK Pound

(iii) Licence fee, the buyer was required to pay in UK: 400 UK Pound

(iv) Buying commission paid in India 20,000.

(v)  Date of bill of entry 20.05.2015 and the rate of exchange notified by CBEC on this date was Rs. 99.00 per one pound. Rate of BCD was 7.5%.

(vi) Date of arrival of aircraft was 25.05.2015 and the rate of exchange notified by CBEC on this date was 98.50 per pound and rate of BCD was 10%.

Rate of additional customs duty was 12.5% and there was no special additional duty of customs.

Insurance premium details were not available.

You are required to compute the assessable value of the machine for valuation of customs duty and the total duty payable. You may make suitable assumptions wherever required. (Marks - 5)

Solution (d) :

Rate of exchange as on the date of B/E Rs. 99/-
Applicable BCD as per S15 of Customs Act - 10%

Add Education Cess @ 3%                                                                  8,9148,914
Total                                                                                                15,57,181        3,06,056

Note:  

1) License fee is includible as payable for import of goods.
2) Buying commission is not includible.

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