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29 Practice Questions Question 1 Distinguish between tariff rate of excise duty and effective rate of
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29
Practice Questions
Practice Questions

Question 1

Distinguish between tariff rate of excise duty and effective rate of excise duty.

Answer

Tariff rate of duty is the rate which is given in Central Excise Tariff. However, Government can give partial or complete exemption from payment of excise duty. Thus, the rate at which excise duty is actually payable is

termed as ‘effective rate of excise duty’. For example, if rate of excise duty given in Central Excise Tariff is 12%, the same would be termed as ‘tariff rate’.

However, if by way of an exemption notification, excise duty payable is reduced to 6%, the effective rate of excise duty would be 6%.

Question 2

Indicate whether the following activities will be liable to central excise duty?

  • (a) Manufacture of parts used for repair or replacement during warranty period.

  • (b) Manufacture of excisable goods in a factory located in Jammu & Kashmir.

  • (c) Production of excisable goods in notified designated areas at 210 nautical miles from the Indian landmass.

  • (d) Repairing, reconditioning or remaking.

  • (e) Manufacture of alcohol and wine.

  • (f) Labeling or re-labeling of unit containers of chocolate. Chocolate is specified in Third Schedule to Central Excise Act, 1944.

  • (g) Manufacture of salt by the Central Government.

  • (h) Production of excisable goods in a factory located in SEZ.

  • (i) Manufacture of medicinal and cosmetic products containing alcohol.

29 Practice Questions Question 1 Distinguish between tariff rate of excise duty and effective rate of

Answer: 30 (a) Yes. Excise duty is a levy on manufacture. Therefore, it is of no

Answer:

30
30
  • (a) Yes. Excise duty is a levy on manufacture. Therefore, it is of no importance as to whether the manufactured goods are sold, captively consumed, distributed as free sample or used for free repair / replacement during warranty period etc.

  • (b) Yes. The central excise law extends to Jammu and Kashmir.

  • (c) No. The central excise law extends to the notified designated areas in EEZ upto 200 nautical miles from the Indian landmass.

  • (d) No, since repairing, reconditioning or remaking does not result in to emergence of a new product.

    • (e) No. Entry 84 of the Union List of the Seventh Schedule specifically excludes alcoholic liquors for human consumption. Since, Entry 54 of the State List covers duties of excise on alcoholic liquors for human consumption, it may be liable to State excise duty.

  • (f) Yes. Labeling or re-labeling of unit containers of the goods specified in Third Schedule to the Central Excise Act is deemed manufacture. Since chocolate is covered under Third Schedule, the labeling or re-labeling of its container will amount to manufacture.

  • (g) No. Though there is no distinction between excisable goods produced by the Government and those produced by others, salt manufactured by Government is not leviable to excise duty.

  • (h) No. The central excise law does not apply to goods manufactured in SEZ.

  • (i) Yes. Medicinal and cosmetic products containing alcohol are covered by Entry 84 of the Union List.

Question 3:

Examine whether central excise duty is leviable in the following situations:-

  • (a) Rajat Builders have constructed an office building for M/s RR & Co.

  • (b) Jay Maintenance Services Ltd. provided maintenance services for refrigerators, washing machine and air- conditioners.

Answer

  • (a) No. Excise duty is leviable only when manufacture results in goods that are excisable. For being called

goods, items ought to be movable and marketable. Since office building is marketable but not movable, it is

not ‘goods’ but an immovable property.

Hence, excise duty is not leviable on construction of office building.

Answer: 30 (a) Yes. Excise duty is a levy on manufacture. Therefore, it is of no

(b) No . Excise duty is 31 leviable on manufacture of excisable goods. However, activity of

(b)

No. Excise duty

is

31
31

leviable on manufacture of excisable goods. However, activity of maintenance of

refrigerators, washing machine and air conditioners is not ‘manufacture’ as it does not result into emergence of a new article having different name, character or use.

Thus, since the activity is not ‘manufacture’, excise duty is not leviable on the same.

Question 4:

RK Ltd. is buying oil in drums of 200 liters. Company packs this oil in small tins of one litre each, put their label giving details of contents, volume and MRP. Advise whether RK Ltd. is liable to pay excise duty on small tins sold by it.

Answer

Mere repacking from large container to small pack is not ‘manufacture’ of oil as oil continues to be oil no new product comes into existence having a distinct name, character or use. Hence, the activity is not ‘manufacture’ and excise duty is not payable.

However, if such oil is covered under section 4A of Central Excise Act, 1944 (RSP based valuation provisions), the activity of labelling will be ‘deemed manufacture’ and ABC Co. will be liable to pay excise duty on such containers of one litre each.

Question 5:

Laal ji purchases cloth and gives it to Bhushan, who is a tailor, to stitch a shirt as per measurements and requirements of Laal Ji. Bhushan stitched the shirt and gave it to Laal ji. In the given case, who will be treated as manufacturer of the shirt for the purpose of levy of central excise duty?

Answer

Under central excise law, a person who carries out actual manufacturing process is considered as ‘manufacturer’ even if raw material is supplied by someone else and goods are manufactured as per the specifications of such person. In other words, ownership of raw material is not relevant.

Therefore, in this case, Bhushan (tailor), being the actual manufacturer, will be treated as ‘manufacturer’ for purpose of levy of excise duty even though the cloth (raw material) for making shirt is provided by Laal ji and the shirt is stitched as per his specifications.

Question 6:

Mr. Hari is a trader of steel articles. He purchases steel bars of 10 meters. He cuts the bars as per requirements of customer and supplies the cut bars to them. He seeks clarification whether he will be liable to pay excise duty on the cut bars sold by him.

(b) No . Excise duty is 31 leviable on manufacture of excisable goods. However, activity of

Answer 32 Supreme Court has held that ‘manufacture’ can be said to have taken place when

Answer

32
32

Supreme Court has held that ‘manufacture’ can be said to have taken place when after a process, a new and different article emerges having a distinctive name, character or use.

However, in this case, after cutting, the product continues to be a bar. There is no change in name, character or use. Hence, the activity is not ‘manufacture’ and excise duty will not be payable.

Question 7:

Kali motor Ltd. purchases raw material and supplies it to Jaydev Engineering Company. Jaydev Engineering Company manufactures automobile components as per the design supplied by LKali Motors. Such components bear brand name of Kali motor Ltd. namely, ‘Kali moto’. Jaydev Engineering Company supplies these components to Kali Motors Ltd., who in turn sells them in market as spare parts of automobiles. Who is liable to pay central excise duty on such components?

Answer

Liability to pay central excise duty falls on actual manufacturer of goods. Therefore, in this case, Jaydev Engineering Company, being actual manufacturer, will be liable to pay excise duty. This would be so even if raw material does not belong to them and goods manufactured by them bear the brand name of Kali Motors Ltd. as in case of central excise, ownership of goods is not the relevant criterion to determine duty liability.

Question 8:

 

Assessable

Date of

Date of

Rate of duty on the

Rate of duty on the

value

manufacture

removal

date of manufacture

date of removal

(i)

50,000

12-02-2011

10-02-2014

 

10%

20%

(ii)

20,000

02-01-2014

10-03-2015

 

10%

8%

(iii)

40,000

20-10-2012

15-09-2014

Goods

exempt

from

Exemption withdrawn

duty

vide

an

and now goods are

exemption notification

liable to duty @ 10%

(iv)

30,000

20-06-2014

25-01-2015

15%

15% + Additional duty @ 6% imposed w.e.f. 01-07-2013

Further, in case of point (i), goods have been removed from the factory and stored in a warehouse without payment of duty on 10.09.2014. On the same date, the applicable rate of duty was 12%. Who is liable to pay duty in this case?

Also, compute the duty payable in case the goods in point (ii) above are to valued on the basis of tariff value and such tariff value changes from ` 20,000 (applicable on the date of manufacture) to ` 25,000 (applicable on the date of removal). The other particulars remain the same as in point (ii) above.

In all the above cases, education cess @ 2% and secondary and higher education cess @
In
all
the above cases,
education cess @ 2%
and secondary and higher education cess @ 1%
has to
be
considered separately.

Answer: 33 As per Rule 5 of the Central Excise Rules, 2002, the rate of duty

Answer:

33
33

As per Rule 5 of the Central Excise Rules, 2002, the rate of duty or tariff value applicable to any excisable goods (other than khandsari molasses) is the rate or value in force on the date when such goods are removed from a factory or a warehouse, as the case may be. Therefore, the duty payable will be computed as follows:

 

Assessable

Applicable rate of duty (inclusive of 3% education cesses)

Excise duty

Value

Amount (`)

(i)

50,000

20.60% [The applicable rate of duty is the rate prevalent on the date when goods are removed from the warehouse.]

10,300

(ii)

20,000

8.24%

1,648

(iii)

40,000

10.30% [Since, on the date of manufacture, the goods were excisable, the rate of duty on date of removal will be applied.]

4,120

(iv)

30,000

15.45% [Since, excise duty is a levy on manufacture of excisable goods, the additional duty which was not in force on the date of manufacture cannot be imposed on goods removed after its levy.]

4,635

In case of point (i), where goods have been first stored in the warehouse without payment of duty and finally removed from the warehouse, the person liable to pay duty is the person who stores such goods in the warehouse and not the manufacturer.

Under point (ii); Since, the tariff value applicable to any excisable goods is the value in force on the date when such goods are removed from a factory, the applicable tariff value in this case will be ` 25,000 (value applicable on the date of removal). The excise duty payable will be ` 2,060 (8.24% of ` 25,000).

Question 9:

Excise duty payable on cane molasses is ` 1,000 per ton. Excise duty on cane sugar is 12%. A manufacturer cleared 100 tons of cane molasses from his factory. He sold the cane molasses @ ` 15,000 per ton. Calculate the excise duty payable.

Answer

When excise duty is

payable on

the

basis of

a specific

rate,

the

rate

at

which goods

are

actually sold is

immaterial. Therefore, since in this case, excise duty on cane molasses is payable on the basis of tonnage (specific rate), rate at which they are sold is not relevant.

Thus, excise duty payable in this case will be ` 1,00,000 [` 1,000 x 100 tons].

Answer: 33 As per Rule 5 of the Central Excise Rules, 2002, the rate of duty

Question 10: 34 Khandva Sugar Ltd. produces khandsari molasses and supplies the same to SRK Ltd.

Question 10:

34
34

Khandva Sugar Ltd. produces khandsari molasses and supplies the same to SRK Ltd. which, in turn uses it in the manufacture of a non-excisable commodity. Khandsari molasses worth ` 5,00,000 have been supplied by Khandva Sugar Ltd. to SRK Ltd. Compute the duty payable from the following information:

Particulars

 

Applicable rate of duty (inclusive of 3% education cesses)

Date of production

27-03-2014

10.30%

 

04-05-2014

10.30%

Date of removal from the factory of Khandva Sugar Ltd. Date of receipt of molasses by SRK Ltd.

20-11-2014

12.36%

Date of manufacture of non-excisable product in which molasses have been used

03-03-2015

Molasses have been exempted vide an exemption notification

Who is liable to pay duty in the above case?

Answer:

In case of molasses, the person who procures such molasses for use in the manufacture of any commodity, whether or not excisable, has to pay the duty leviable on such molasses, in the same manner as if such molasses have been produced by the procurer.

The rate of duty applicable in the case of molasses is the rate in force on the date of receipt of such molasses in the factory of the procurer of such molasses.

Therefore, the relevant rate of duty will be 12% (rate applicable on the date of receipt of molasses in the factory of the procurer) and excise duty payable will be ` 61,800 (` 5,00,000 x 12.36%). Duty is payable by SRK Ltd., the procurer of molasses, as if the molasses had been produced by it whether such molasses are used in manufacture of excisable or non-excisable commodity.

Question 11:

YK Co. is a manufacturer. It intends to pay ad valorem excise duty on the basis of assessable value computed under section 4 of the Central Excise Act, 1944. However, Excise Department insists that YK Co. should pay duty under Compounded Levy Scheme as the product manufactured by it is covered under the said scheme.

You are required to examine the situation under relevant statutory provisions. Will your answer be different if the product manufactured by YK Co. is notified under production capacity based duty scheme?

Question 10: 34 Khandva Sugar Ltd. produces khandsari molasses and supplies the same to SRK Ltd.

Answer 35 Under Compounded Levy Scheme, assessee has an option to pay excise duty on the

Answer

35
35

Under Compounded Levy Scheme, assessee has an option to pay excise duty on the basis of specified factors relevant to production of goods covered under the scheme (size of equipment employed, number and types of machines used for manufacture etc.) at specified rates.

The prescribed duty has to be paid by the assessee for a specified period.

Therefore, since Compounded Levy Scheme is an optional scheme, YK Co. can pay ad valorem duty under section 4 even if goods manufactured by it are covered under Compounded Levy Scheme.

However, duty based on production capacity is mandatory i.e, duty cannot be paid in any other manner in respect of the goods notified under this scheme.

Therefore, if goods manufactured by YK Co. get notified under production capacity based duty scheme, it will not be able to pay duty under section 4 and will have to compulsorily pay duty based on its production capacity.

Question 12:

Determine the excise duty payable in the following cases:-

Goods

Qty. (kg)

Value of Goods (`)

Rate of Duty

R

5,000

50,00,000

` 10 per kg

G

2,000

40,00,000

10%

Education cesses @ 3% are leviable separately.

Answer:

 

Computation of excise duty payable

Goods R:

Since rate of duty is per kg, value of such goods is not relevant. Excise duty payable will be computed on the basis of the quantity of the goods produced. Therefore, excise duty payable will be:

5,000 kg x ` 10 per kg

=

` 50,000

Add: 3% education cesses

=

` 1,500

 

Total excise duty payable

=

` 51,500

Answer 35 Under Compounded Levy Scheme, assessee has an option to pay excise duty on the

36 Goods G: Since, in this case the rate of duty is a percentage of the
36
36

Goods G: Since, in this case the rate of duty is a percentage of the value of excisable goods, the quantity of the goods produced is not relevant. Excise duty payable will be computed on the basis of the value of the goods. Therefore, excise duty payable will be:

` 40,00,000 x 10%

=

` 4,00,000

Add: 3% education cesses

=

` 12,000

Total excise duty payable

=

` 4,12,000

Ad valorem duty is payable on the basis of the values prescribed under the Act namely, tariff value fixed by the Government in respect of certain goods; transaction value and value based on retail sale price printed on a package of goods.

Question 13:

G Ltd. manufactured readymade garments for ` 30 lakh (exclusive of all taxes). The retail sale price of such garments is ` 50 lakh. The rate of duty is 12.36% (inclusive of 3% education cesses). The tariff value is notified at 30% of retail sale price.

Compute the excise duty payable.

Answer:

Since the goods are such for which tariff value has been fixed by the Central Government, the excise duty will be payable on the basis of tariff value.

Tariff Value

=

Excise duty payable =

Question 14:

` 15,00,000 [30% of ` 50 lakh (RSP)]

12.36% of ` 15,00,000 = ` 1,85,400.

RSP printed on the package of a pressure cooker is ` 4,000 (inclusive of all taxes). Declaration of RSP on package of pressure cooker is required under the provisions of Legal Metrology Act, 2009 and has also been notified by the Central Government for the purpose of section 4A. The prescribed rate of abatement is 25%. The applicable rate of duty is 12% plus 2% education cess and 1% secondary and higher education cess. Compute the duty payable.

Answer:

The value under section 4A will be (` 4000 25% of ` 4000) = ` 3000.

Excise duty payable will be ` 371 (12.36% of ` 3,000) rounded off.

36 Goods G: Since, in this case the rate of duty is a percentage of the

Question 15: 37 Determine the transaction value and the duty payable from the following particulars: Particulars

Question 15:

37
37

Determine the transaction value and the duty payable from the following particulars:

Particulars

Amount (`)

Price of machinery excluding taxes and duties

5,50,000

Installation and erection expenses (machinery has been fixed to the earth)

21,000

Packing charges (primary and secondary)

11,500

 

2,000

Design and engineering charges Dharmada

500

Other information:

  • (a) Cash discount @ 2% on price of machinery was allowed as per terms of contract since full payment was received before dispatch of machinery.

  • (b) Bought out accessories valued at ` 6,000. The accessories are optional and provide ease of use of the machinery.

  • (c) Central excise duty @ 12% and educational cess as applicable @ 3%.

Make suitable assumptions as are required and provide brief reasons.

Answer:

Computation of central excise duty payable

Particular

Amount (`)

Price of machine excluding taxes and duties

5,50,000

Add: Packing charges

11,500

Design and engineering charges

2,000

Dharmada

500

Total

5,64,000

Less: 2% cash discount on price of machinery

(11,000)

Assessable value

5,53,000

 

68,350.80

Excise duty @ 12.36% Excise duty payable rounded off

68,351

Notes:

While computing the assessable value:-

  • 1. Packing charges, design and engineering charges and dharmada have been included as such payments are

‘in connection with sale’.

Question 15: 37 Determine the transaction value and the duty payable from the following particulars: Particulars

38 2. Installation and erection expenses have not been included as they result in immovable property
38
38
  • 2. Installation and erection expenses have not been included as they result in immovable property which is not goods.

  • 3. Value of bought out accessories has not been included as they are optional and do not provide any value addition.

  • 4. Cash discount has been allowed as deduction as it has been passed on to the buyer.

Question 16:

Hush Puppies Footwear is a leading manufacturer of shoes. Legal Metrology Act, 2009 requires declaration of retail sale price on the package of shoes and shoes are also notified under section 4A of Central Excise Act, 1944 (RSP based valuation provisions). Following information has been furnished by Hush Puppies Footwear:

Aabatement available on shoes MRP marked on the package Price at which Hush Puppies sells the shoes to their wholesalers Price at which wholesalers sell the shoes to retail shop owners Price at which shoes are sold by retailers to final consumers

40% of retail sale price ` 5,000 per pair of shoes ` 3,300 per pair of shoes ` 4,000 per pair ` 4,500 (` 500 offered as discount on printed MRP

Excise duty

12%

Education cess

2%

Secondary and Higher Education Cess

1%

Calculate excise duty payable on a pair of shoes.

Answer

Since Legal Metrology Act, 2009 requires declaration of retail sale price on the package of shoes and shoes are also notified under section 4A of Central Excise Act, 1944 (RSP based valuation provisions), excise duty will be payable on the basis of RSP less abatement.

Particulars

`

MRP marked on the package of a pair of shoes

5,000

Less: Abatement @ 40% of RSP [40% of ` 5,000]

2,000

Value for purpose of excise duty

3,000

Excise duty @ 12% [12% of ` 1,200]

360

Education cess @ 2% [2% of ` 144]

7.20

Secondary and Higher Education Cess @ 1% [1% of ` 144]

3.60

Total excise duty payable (rounded off)

371

38 2. Installation and erection expenses have not been included as they result in immovable property

Question 17: 39 Laxmi Engineers are manufacturers of specialty articles. Such articles are sold through retail

Question 17:

39
39

Laxmi Engineers are manufacturers of specialty articles. Such articles are sold through retail shops.

MRP marked on the package Price at which Laxmi Engineers sells articles to their wholesalers Price at which wholesalers sell the articles to retail shop owners Price at which articles are sold by retailers to final consumers

` 2,000 per piece ` 1,300 per piece ` 1,500 per piece ` 1,900 (` 100 offered as discount on printed retail sale price

Excise duty

12%

Education cess

2%

Secondary and Higher Education Cess

1%

Calculate excise duty payable on an article. Such articles are not covered under section 4A of Central Excise Act,

1944.

Answer

Since the articles are not covered under section 4A of Central Excise Act, 1944 (RSP based valuation provisions), excise duty will be payable on the basis of assessable value under section 4 of Central Excise Act (transaction value). Thus, value for purpose of excise duty will be ` 1,300 i.e., the price at which the articles are sold to wholesalers.

Particulars

`

Transaction value [price at which Zebra Engineers sells articles to their wholesalers]

1,300

Excise duty @ 12% [12% of ` 1,300]

156

Education cess @ 2% [2% of ` 156]

3.12

Secondary and Higher Education Cess @ 1% [1% of ` 156]

1.56

Total excise duty payable (rounded off)

161

Question 18:

What will be the assessable value of the excisable goods in the following cases?

  • (i) The price-cum-duty of excisable goods sold by ‘A’ is ` 200 per unit. Excise duty @ 8% has been charged by ‘A’ on such goods. However, ‘A’ comes to know that the actual rate of duty chargeable on the goods sold by him is 12% and not 8%. ‘A’ has collected only ` 200 per unit from the customers.

(ii) ‘B’ sells his excisable goods @ ` 200 per unit (inclusive of excise duty @ 12%). However, it has been found that ‘B’ has collected ` 50 per piece separately.

(iii) The price of the excisable goods sold by ‘C’ is ` 500 per unit. ‘C’ does not charge any duty of excise in his invoice on the belief that the goods sold by him are exempt from payment of duty vide an exemption notification. However, he comes to know that the goods are not exempt from excise duty but are liable to duty @ 12%.

In all the above cases education cesses have to be considered separately.

Question 17: 39 Laxmi Engineers are manufacturers of specialty articles. Such articles are sold through retail

Answer: 40 Particulars A B C 200 200 500 Price-cum duty charged (per unit) ` Additional

Answer:

40
40
 

Particulars

A

B

C

   

200

200

500

Price-cum duty charged (per unit) ` Additional consideration (`)

 

-

50

-

   
  • 200 500

250

 

Actual price-cum duty (including additional consideration) (`) Correct rate (including 3% education cesses)

12.36%

12.36%

12.36%

Value (`)

 
  • 178 445

222

 

Duty Payable @ 12.36%

22

28

55

Question 19:

Calculate the assessable value and the excise duty payable from the following particulars:

List price of the product (inclusive of taxes)

` 8,120

Trade discount

10%

VAT

12.5%

Excise duty Education cesses as applicable

12%

An exemption notification grants exemption of 50% of the duty payable on this product.

Answer:

 

Particular

Amount (`)

List Price of the product

8,120

Less: Trade Discount

(812)

Price net of discount but including taxes Less: VAT

 

7,308

 

(812)

Price- cum duty

6,496

Less: Excise duty @ 6% (on account of 50% exemption)

 
 

367.70

Education cess@ 2%

7.35

SHEC @ 1%

3.68

Assessable Value

6,117

Answer: 40 Particulars A B C 200 200 500 Price-cum duty charged (per unit) ` Additional

Question 20: 41 A manufacturer cleared some goods by charging excise duty. The invoice provided the

Question 20:

41
41

A manufacturer cleared some goods by charging excise duty. The invoice provided the following details:

Particular

Amount (`)

Price

30000

 

3090

Excise duty @ 10.30% Total

33090

However, he came to know later that actual rate of excise duty is 12.36%. How much differential duty is payable by him, if he is not able to recover any extra amount from the customer?

Answer:

Since the manufacturer charged only Rs. 33,090 and he is not able to recover any extra amount from customer, this amount is required to be treated as pricecumduty. Hence, differential duty payable by him will be computed as under:-

 

Particular

Amount (`)

 

33,090

Price-cum duty Excise duty @ 12.36%

 
 

3,640

Differential excise duty to be paid (3,640 -3,090)

550

Question 21:

Calculate assessable value and excise duty payable on the basis of following information:

Particular

Amount (`)

Total invoice price

40,000

State VAT

4,000

Insurance charges for dispatch of final produce

200

 

1,000

Packing charges Freight charged from factory to the place of customer

2,000

Excise duty rate is 12% and education cesses as applicable

 
Question 20: 41 A manufacturer cleared some goods by charging excise duty. The invoice provided the

Answer: Computation of excise duty payable 42 Particular Amount ( ` ) Total invoice price 40,000

Answer:

Computation of excise duty payable

42
42

Particular

Amount (`)

Total invoice price

40,000

Less: State VAT

(4,000)

Freight charges

(2,000)

(200)

Insurance charges Price cum duty

33,800

Less: Excise duty @12.36% (inclusive of 3% education cess)

 

3,718

Total excise duty including education cesses

3,718

Assessable value

30,082

Question 22:

YR India Ltd. sold a machine, manufactured by it, to LML at a price of ` 10,00,000 (excluding taxes and duties). Further, following additional amounts were also charged:

Particular

Amount (`)

Expenses pertaining to installation and erection of the machine at premises of

30,000

LML (machine was permanently affixed to earth)

 

12,500

Special packing charges Design and engineering charges

40,000

Dharmada (charged in the invoice and recovered from LML)

10,000

Determine the total amount of central excise duty payable on the machine from the aforesaid information.

Answer:

Computation of central excise duty payable

Particular

Amount (`)

Price of machine excluding taxes and duties

10,00,000

Installation and erection expenses

-

Special packing charges

12,500

Design and engineering charges of the machine

40,000

 

10,000

Dharmada charged in the invoice Assessable value

10,62,500

Excise duty payable @ 12.36% [inclusive of 3% education cesses]

1,31,325

Answer: Computation of excise duty payable 42 Particular Amount ( ` ) Total invoice price 40,000

Notes: 43 1. Installation and erection expenses have not been included in the assessable value as

Notes:

43
43
  • 1. Installation and erection expenses have not been included in the assessable value as after the installation and erection, machine has been permanently affixed to earth and thus, it has resulted in an immovable property.

  • 2. Special packing charges and design and engineering charges have been included in the assessable value as such payments are ‘in connection with sale’.

  • 3. Dharmada charged in the invoice and recovered from the customer has been included in the assessable value.

Question 23:

  • (i) RG Ltd. wants to claim SSI exemption in the year 2014-2015. Its clearances for the year 2013-2014 are ` 3 crore. RG Ltd. manufactures goods bearing brand name of PKL Ltd. Is RG Ltd. eligible for SSI exemption?

(ii)

MP Ltd. wants to claim SSI exemption in the year 2014-2015. Its clearances for the year 2013-2014 are ` 3 crore. MP Ltd. manufactures goods bearing brand name of LK Ltd. in rural area. Is ABC Ltd. eligible for SSI exemption?

Answer:

  • (i) RG Ltd. is not eligible for SSI exemption as it manufactures goods bearing brand name of others.

(ii)

MP Ltd. is eligible for SSI exemption even though the goods manufactured by it bears the brand name of others as it manufactures goods in rural area.

Question 24:

OPG Kitchen is a leading manufacturer of pressure cookers. Legal Metrology Act, 2009 requires declaration of retail sale price on the package of pressure cookers and pressure cookers are also notified under section 4A of Central Excise Act, 1944 [Retail Sale Price (RSP) based valuation] with notified rate of abatement of 25%.

Calculate excise duty payable on 50 pieces cleared during October, 2014 using the following information furnished by Safe Kitchen assuming the rate of excise duty as 12% plus 2% education cess and 1% secondary and higher education cess:

No. Of

Particulars

Pieces Sold

10

RSPs printed on the package of pressure cooker are ` 4,500 and ` 3,800.

20

RSP printed on the package of 15 pieces sold in Delhi is ` 3,000 per piece RSP printed on the package of 5 pieces sold in Haryana is ` 2,800 per piece

20

RSP printed on the date of removal of package from factory is ` 3500 per unit. However, after removal from factory RSP is increased to ` 4,100 per piece

Would the provisions of section 4A of Central Excise Act, 1944 apply had the goods not been notified by Central Government and manufacturer voluntarily affixed RSP on the products?

Notes: 43 1. Installation and erection expenses have not been included in the assessable value as

Answer: 44 Since Legal Metrology Act, 2009 requires declaration of retail sale price on the package

Answer:

44
44

Since Legal Metrology Act, 2009 requires declaration of retail sale price on the package of pressure cooker and pressure cookers are also notified under section 4A of Central Excise Act, 1944 (RSP based valuation provisions), excise duty will be payable on the basis of RSP less abatement.

Computation of central excise duty payable

Particular

Amount (`)

Amount (`)

RSP of 10 pieces (10 × ` 4,500)

45,000

 

Less: Abatement @ 25%

(11,250)

 

Assessable value

33,750

RSP of 15 pieces sold in Delhi (15 X ` 3,000)

45,000

 

Less: Abatement @ 25%

(11,250)

 

Assessable Value

33,750

RSP of 5 pieces sold in Haryana (5 X ` 2,800)

14,000

 

Less: Abatement @ 25%

(3,500)

 

Assessable Value

10,500

RSP of 20 pieces sold in Delhi (20 X ` 4,100)

82,000

 

Less: Abatement @ 25%

(20,500)

 

Assessable Value

61,500

 

Total Assessable value

 

1,39,500

   

16,740

Excise duty @ 12% Education cess @ 2%

 

335

Secondary and Higher Education Cess @ 1%

 

167

 

Total Excise duty payable

 

17,242

Notes:

  • 1. Where more than one RSP is declared on the package of excisable goods, the maximum of such price will be deemed to be the RSP.

  • 2. If different RSPs on different packages are declared for different areas, each such RSP is deemed to be the RSP.

  • 3. If RSP on the package is increased after removal from factory, increased RSP would be deemed to be the RSP.

  • 4. All goods on which RSP has been declared will not be covered under the provisions of section 4A. Only when the declaration of RSP on the goods is mandatory under the Legal Metrology Act, 2009 or under any other law and such goods have been notified by the Central Government for the purpose of section 4A, then the goods be valued under section 4A. Thus, provisions of section 4A of Central Excise Act, 1944 would not apply if the goods had not been notified by Central Government and manufacturer voluntarily affixed RSP on the products.

Answer: 44 Since Legal Metrology Act, 2009 requires declaration of retail sale price on the package