Q1.(a) Divine Ltd. manufactures product K which is a notified product under Section 4A of the Central Excise Act, 1944. The output for the month of October, 2015 was 8,000 units out of which 6,000 units were consumed captively. Abatement permissible under Section 4A of Central Excise Act is 20%.
From the following information provided by Divine Ltd. for the month of October 2015. Calculate the excise duty payable. (5 marks)
Cost of direct materials (includes Central Excise 18,800 duty Rs. 1,800*)
Direct wages and salaries 11,000
Administrative Cost
Production related Rs.5,000
Corporate office expenses Rs.1,500
Sale of By-products Rs.1,000
Research and development cost Rs.8,000
Abnormal and non-recurring cost Rs.10,000
Retail sale price printed on the package of the product per unit Rs.10
*Note: CENVAT credit of the excise duty so paid is available.
Divine Ltd. is not eligible for SSI exemption under Notification No.8/2003 CE dated 01-03-2003. There were no opening or closing inventory for the month.
Central Excise duty payable is 12.5%. Advalorem. Education cess need not be calculated.
Ans.1(a) Computation of cost of product K
|
Cost of Direct Material (-) Duty paid |
18,800 1,800 |
|
Direct Wages…. |
17,000 11,000 |
|
Administrative Cost production related Research & Development Cost |
5,000 8,000 |
|
Less: Sale of By product |
41,000 1,000 |
|
Cost of 8000 units |
40,000 |
Cost of 6,000 units = 40,000 x 6,000 / 8,000
Assessable Value 110% of cost = Rs. 33,000
Duty @12.5% = Rs. 4,125
Less: cenvat credit = 1,800
Net duty payable = 2,325
Working notes:
(1) Since the goods are captively consumed value has been computed as per CAS-4
(2) As per CAS-4, abnormal & non-recurring costs are not part of the cost.
(3) Corporate office expenses, being not related to production, have been ignored.
Comment: This type of question appeared in the exam for the first time. Alternative solution is to ignore the cost data and find out value at 80% of the MRP. Then assessable value would be Rs.48,000 which would be very harsh on the assessee. I have found no precedent to that effect.
(b) Mr. Navab, a performing artist, provides the following information relating to August, 2015 Receipts from: (5 marks)
Performing classical dance Rs.98,000
Performing in television serial Rs. 2,80,000
Services as brand ambassador Rs. 12,00,000
Coaching in recreational activities relating to arts Rs. 2,10,000
Activities in sculpture making Rs.3,10,000
Performing western dance Rs.90,000
Determine the value of taxable services and service tax payable by Mr. Navab for August. 2015. Service Tax @ 14% has been charged separately, wherever applicable. Mr. Navab has paid service tax of 4,00,000 during the preceding financial year.
Ans.1(b) Computation of Value and Service Tax of Mr. Navab, for August, 2015.
|
Activity |
Amount received |
Taxable value |
Remarks |
|
Performing classical dance |
98,000 |
.................................. |
Exempt under entry No.16 |
|
Performing in television serial |
2,80,000 |
2,80,000 |
taxable |
|
Services as brand ambassador |
12,00,000 |
12,00,000 |
taxable |
|
Coaching in recreational activities relating to arts |
2,10,000 |
...................... |
Exempt under entry No.8 |
|
Activities in sculpture making |
3,10,000 |
3,10,000 |
Taxable, only coaching / training is exempt. |
|
Performing western dance |
90,000 |
90,000 |
taxable |
|
Total taxable value |
................... |
18,80,000 |
Tax @ 14% on 1880,000= Rs.263,200
Working Notes:
(1) Activities in sculpture making are taxable, only coaching / training in sculpture is exempt u/ Entry No. 8
(2) Mr. Navab is not eligible for SSP exemption.
Comment: This is an easy question
(c) Monogram Ltd. is engaged in providing several services to the customers/clients. It has started its business (except construction of mall completed earlier but consideration received in August. 2015) for the first time, in a taxable territory, on 1st August 2015 and transactions undertaken until 31st August. 2015 are as follows: (5 marks)
|
Particulars |
Amount ₹ |
|
Services provided in its own brand name of ‘Monogram’ |
2,85,000 |
|
Services provided in the brand name of ‘Tonogram’ belonging to one of its suppliers |
6,40,000 |
|
Consideration on transfer of Mall for which completion certificate has been obtained in June 2015 |
63,00,000 |
|
Full advance received towards construction of residential unit of carpet area of 1200 sq. ft. in a complex |
30,00,000 |
|
Gross amount charged for transportation of goods in a single goods carriage |
1,280 |
|
Freight charges paid to goods transport agency |
46,000 |
Monogram Ltd. intends to make use of all exemptions and abatements. Compute its service tax liability @ 14% with appropriate notes where required.
Ans.1(c) Computation of Value and Service Tax of Monogram Ltd. for August, 2015.
|
Activity |
Amount received |
Taxable value |
Remarks |
|
|
Services provided in its own brand name of ‘Monogram’ |
2,85,000 |
2,85,000 |
Taxable |
|
|
Services provided in the brand name of ‘Tonogram’ belonging to one of its suppliers |
6,40,000 |
............ |
Taxable separately |
|
|
Consideration on transfer of Mall for which completion certificate has been obtained in June 2015 |
63,00,000 |
............. |
Non taxable activity |
|
|
Full advance received towards construction of residential unit of carpet area of 1200 sq. ft. in a complex |
30,00,000 |
7,50,000 |
Taxable, at 75% abatement. Only 25% taxable |
|
|
Gross amount charged for transportation of goods in a single goods carriage |
1,280 |
........... |
Exempt upto Rs. 1500 |
|
|
Freight charges paid to goods transport agency |
46,000 |
.......... |
Taxable separately @ 30% |
|
|
Total value of services upto August 2015 |
10,35,000 |
|||
|
Less exemption limit |
10,00,000 |
|||
Taxable value: Rs. 35,000
GTA Service value under reverse charge Rs. 13,800
46,000x 30%)
Services under others brand: Rs.6,40,000
Total value 6,88,800
Service tax @ 14% = Rs.96,432
Working Notes:
(1) Construction of mall is not a taxable service as the amount was received after the work certified.
(2) Construction of residential unit attracts 75% abatement as the carpet area is below 2000 Sft and the value is below 1 crore.
(3) Gross amount charged for transport in a single carriage below 1500 is exempt.
(4) Freight charges paid to GTA are subject to reverse charge not eligible for small service providers exemption.
(5) Services in others brand name are taxable separately.
(6) Monogram Ltd is eligible for SSP exemption in the first year of operation.
Comment: This question is based on SSP Exemption requiring a little understanding of declared services and abatement scheme.
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