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Excise - IDT ( Mostly asked Q.)

Patricia (C.S.- Professional) (sdd) (197 Points)

03 September 2010

While determining transaction value for Central Excise purpose, how are the following items dealt with :

(a) Trade Discount

(b) Cost of After Sale Service.

Elucidate the concept of CENVAT Scheme. How does it reduce the cascading effect?
The CG 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 ?

regards,

Aditi Garg (CA Final)

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2 Replies

CS P K Pandey (employed) (97 Points)
Replied 05 September 2010

SEND MAIL TO MR. PRITAM capritamkumar @ gmail.com

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C.V.R.SARMA (SERVICE) (90 Points)
Replied 11 September 2010

Query No.1 : Presently excise duty valuation is based on the transaction value. Discounts of any form are eligible for abatement from the transaction value provided if they have been actually passed on to the customer and it is established by a documentary evidence, prefarably invoice.

Cost of after sales service: Service after sales is not related to manufacturing activity. If the transaction value is fixed keeping in view the service after sale, then the manufacturer will naturally pays the duty including the cost of after sales service. If there is no link between the manufacture and after sales service, then the service after sales comes under service tax provisions. i.e., repairs and maintenance service.

The very purpose of Cenvat Scheme is to reduce the cascading effect. Let the price of the goods is Rs 1000/- If the CE duty is 10% then excise duty payable is Rs 100/-. If the cenvat scheme is not there, then the manufacturer has to pay in cash the duty amount of Rs 100/- from his kitty. Let the cost of input used in the finished product is Rs 800/- and the manufacturer has paid duty of Rs 80/- while purchasing the same from the supplier. Because of the cenvat scheme, now the manufacturer can set off his duty liability with the input credit of Rs 80/- and he only pays the duty amount of Rs 20/- to the Government. Thus it reduces the duty burden on the manufacturer. It indirectly avoids the duty on the duty.

Central Government is having the power to increase the duty rates under the Provisional collection of Taxes Act,1931 during the intervening period of enactment of finance bill. For reduction in rate of duty, CG can issue notification at any point of time as it is nothing but granting exemption. If the new levey is introduced, then a notification will be issued notifying the date of effect and the concerned has to follow the revised rates.

Restructuing of tariffs is covered under Central Excise Tariff Act, 1985