advance tax-last minute revision notes

8/13/2019 Advance Tax-last Minute Revision Notes

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Professional program

LMR/Short Notes

MODULE III - PAPER 6

ADVANCED TAX LAWS

AND PRACTICE--------------------------------------------------------------------------------------------------------------------

LAST

MINUTE

REVIEW-------------------

(SHORT NOTES

from exam. Point )


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Index

Serial no Details Page number

1 Syllabus for the subject 3

2 Detailed topics for Part A 4

3 Pattern of question for Part A 5

4 Chapter 1General framework of direct taxation in India 65 Chapter 2 - Companies under Income-tax Laws 8

6 Chapter 3 - Tax Planning 10

7 Chapter 4 - Tax Management 15

8 Detailed topics for Part B 20

9 Pattern of question for Part B 21

10 Chapter 5- Introduction 22

11 Chapter 6 - Central Excise Laws 24

12 Chapter 7-.Customs Laws 30

13 Chapter 8-.Promissory Estoppels in Fiscal Laws 37

14 Chapter 9 - Tax Planning and Management 38

14 Detailed topics for Part C 3915 Pattern of question for Part C 40

16 Chapter10 -. Basic Concepts of International Taxation 41

17 Chapter11 - Advance Ruling and Tax Planning 46

18 Chapter 12-. Taxation of Inbound Transactions 49

19 Chapter 13-. Taxation of Outbound Transactions 51

20 ALL THE BEST AND WISH YOU GOOD LUCK 56


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PRESCRIBED SYLLABUS

MODULE IIIPAPER 6: ADVANCED TAX LAWS AND PRACTICE--------------------------------------------------------------------------------------------------------------------

Level of knowledge: Expertknowledge

Objectives: To provide I. Knowledge of framework of taxation system in India.II. knowledge of various concepts and their application

relating to tax laws with a view to integrating the relevance ofthese laws with financial planning and management

decisionsIII. an overview of international taxation.---------------------------------------------------------------------------------------------------------------------

Contentsand marks distribution

Part Subject Marks

A Direct Taxation Law and practice1. General Framework of Direct Taxation in India

2. Companies under Income-tax Laws3. Tax Planning4. Tax Management

30

B Indirect Taxation Law And Practice5. Introduction6. Central Excise Laws7. Customs Laws8. Promissory Estoppels in Fiscal Laws9. Tax Planning and Management

50

C International Taxation10. Basic Concepts of International Taxation

11. Advance Ruling and Tax Planning12. Taxation of Inbound Transactions13. Taxation of Outbound Transactions

20


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Part A: Direct Taxation - Law and PracticeDetailed topics of syllabus

Chapter Topic Detailed syllabus1 General Framework

of Direct Taxation inIndia

Different direct tax laws and their inter-relationship; importance of Income Tax Act and

Annual Finance Act and related Constitutionalprovisions; harmonization of tax regime.

2 Companies underIncome-tax Laws

Classification and tax incidence; corporation taxas per Article 366; computation of taxable incomeand assessment of tax liability considering specialprovisions relating to companies.

3 Tax Planning Concept of tax planning; Tax planning withreference to setting up a new business; locationalaspects; nature of business; tax holiday, etc. Taxplanning with regard to specific managementdecisions such as mergers and takeovers; locationof undertaking; introduction of voluntaryretirement; tax planning with reference to financialmanagement decisions such as borrowing orinvestment decisions; reorganization orrestructuring of capital decisions. Tax planningwith respect to corporate reorganization; tax

planning with reference to employeesremuneration. Tax planning vis--vis importantprovisions of wealth-tax including court rulings andlegislative amendments

4 Tax Management Return and procedure for assessment; specialprocedure for assessment of search cases, e-commerce transactions, liability in special cases;collection and recovery of tax; refunds, appealsand revisions; penalties imposable, offences andprosecution.


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Pattern of question in Part A

Three questions are set in this section generally and the student is expected to answerany two questions out of three

Each question carry 15 marks each thereby making the total marks to 30

First Question

The first question is divided into three parts a, b and c each section carrying 5 marks

Question 1 a

Multiple choice questions (MCQ) of 5 are set and the student is expected to pick up thecorrect answerOne should make use of this so that one gets sure shot the entire 5 marks

Question 1 b

This question generally is of fill up the blank by putting appropriate words or figures 5are set and the student is expected fill up the blanks correctlyOne should make use of this also to ensure to get the entire 5 marks

Question 1 c

This question is at times divided into 5 sub category and asking the student to examinethe applicability of one of the direct tax laws such as wealth tax carrying 1 mark each orasking the students to discuss a particular provision of an act under any one of the taxlaw carrying 5 marks - Here also one could get the maximum marks

Question 2

This question is also generally divided into 3 parts a, b, c the marks are divided eitherequally or at times differently (5+5+5 or 4+5+6 etc)This question generally on computation of tax aspect, allowability or dis-allowability ofexpenses in computation and such other related mattersit is a practical question (oneshould know the current assessment years provisions for answering this question)

Question 3

This question is also divided into 3 parts a, b, c the marks are divided either equally orat times differently. Practical question with reference to decided case laws, differentiate


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and distinguish or certain provisionseffect of noncompliance etc are tested under thisquestion. This also should not be much of a problem to get marks one has toremember at least some of the decided cases which are discussed in study material.

Chapter 1 - General framework of direct taxation in India

S.No Topic details

Chapter 1 deals with - different laws of direct taxation and as well the inter-relationshipbetween them.

1 I T Act 1961 Importance of Income Act and the Annual Finance Act which ispresented every year in the Parliament and as well the relatedconstitutional provisions need to be understood. Also theharmonization of the current tax regime to be understood foranswering any questions.

Question patternin this

chapter

at times short notes are asked distinguish between two different aspects

descriptive questions at times

Taxwhat is tax avoidance and what is tax evasion

2 Tax avoidance It simply means, minimizing the impact of the tax by proper planningwithin the framework of the permitted law but at times it defeats thebasic intension of the legislative provisions.

- The lacunas in the provision are taken into account and tax isavoided

- Though tax avoidance is legal and within the framework oflawyet involvement of mala fide intention is there

- Tax avoidance is well planned in advance before the actualliability comes into existence

3 Tax evasion This is nothing but totally avoiding the tax liability by legal means- This is done with unfair means- This is unlawful and illegal- Evasion takes place after the tax liability has actually arisen

Administrative circular issued by CBDT vis--vis extra level benefits to tax payers4 Sec 119(1) CBDTs instructions. Circulars, instructions are to be followed by all

the administrative people employed in the execution of taxdepartment and it is of binding nature since CBDT has got adelegated authority to issue such circularsthough the circulars arenot in reality a law.

Binding of instruction, circulars and notifications are applicable fortaxpayers and it may not bind the following:

- Appellate authority, Income Tax Tribunal and the judiciary i.e.the High Courts

As you are all aware, Judiciary has a duty to interpret the statuesand the executive authority needs to accept and adhere. (Decidedcase law on this CIT vs. Hero cycles Pvt Ltd of 1997)

A notable point on this is when the administrative machinery gives


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relief to the taxpayer beyond the norms of the provisions by law orthe relevant statue then the contention of the department that thecircular has no effect cannot be accepted. The circulars issued byCBDT are binding on the tax authorities and there is also a case lawon this which is:

5 Ellermen Lines

Ltd vs. CIT

In this case held by Apex court recognized the validity of beneficent

circulars and the right of the assesses to enforce there and get reliefeven in the courtIn summarythe benefits arising out circulars by CBDT to assessesheld permissible even though the circulars

6 CIT vs.Aspinwall &Co. Ltd

Similar decision has also come in the case of CIT vs. Aspinwall &Co. Ltd clearly spelling out that the benefits arising out of circularsthough departed from the provisions of law, yet the beneficial to theassesses would be permitted.Question could be on this subject either by way of short notes, ordescription question or even concept explanation with reference todecided case lawsOne need to be familiar with tax avoidance, tax evasion CBDT

circulars and their effects, binding with whom and with whom not..7 Distribution of

legislativepowers

Also get familiarization of the three fold distribution of legislativepowers under our constitution read with the relevant schedulesdistributing the powers via

- Central list- State list and- Concurrent list

Article 146 of our constitution confers these to central and state andalso to both under concurrent list

8 Tax collectionmethod

Tax collection method at source, on self assessment individualand corporate, one need to have the basic ideas

9 Finance bill Finance bill passed every year in February last week keeps

amending the tax provision in direct taxes and as well in indirecttaxes from the examination point of you, one need to know thecurrent years tax law provisions


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Chapter 2 - Companies under income tax laws

S.No Topic details

Chapter 2 deals with- classification and tax incidence; corporation tax as per

Article 366; computation of taxable income and assessmentof tax liability considering special provisions relating tocompanies.


chapter

Practical question

Descriptive question

At times short notes

Distinguish between two aspects

1IndianCompany

We refer section 2(26) of the IT Act - obviously the company isregistered and incorporated under the Indian Companies Act of1956 and it will also includes:-

- company formed and registered under any law relating tocompanies formerly in force in any part of India except J & Kand Union territories

- corporation established under Central / State or ProvisionalAct

- any institutions, associations or body which is declared bythe board as company

In respect of J & Kcompany formed and registered under any lawfor the time being in force and in case of union territories of Dadraand Nagar Haveli, Goa, Daman and Die and Puducherry, acompany formed and registered under any law for the time being inforce in that union territory.Provided that the registered or as the case may be, principal officeof the company, corporation, institutions, association or body, in allcases is in India.

2 MinimumAlternate Tax(MAT)

Where in the case of a company, the income tax payable on thetotal income as computed under the IT Act, in respect of previousyear relevant to assessment year 2011-12 or thereafter is less than18% ( it was 15% for A.Y2010-11) its book profit, such book profitshall be deemed to be the total income of the assessee on suchtotal income i.e. book profitshall be the amount of the income tax

at the rate of 18%What is theMAT payable

Income Tax payable would be higher of the following two:-a) tax on total income computed as per normal provisions of the Actby charging applicable normal rates and special rates if any,income included in the total income of the company taxable atspecial rates b) 18% of book profit

Computationof book profit

For this purpose, the net profit as per P & L account is adjusted forvarious items under sec. 115 JB, by adding them back to net profit


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or deducting from it.By and large the following are not added back

1) Fringe benefit tax2) Wealth tax3) Penalty for nonpayment of income tax4) Excise duty due not paid

5) Gratuity provisionBy and large the following are added back

1. Provision for doubtful debts2. Proposed dividend

Addition and deduction of Depreciationwhole amount of depreciation added back and the amount ofdepreciation which is not on account of revaluation of assets is thenrequired to be deducted from the net profit

One could expect a practical question on the computation of MAT

5 Preparation ofaccounts and

computation of

MAT

While preparing the account it is to be seen that the company hasadopted the following

a. Accounting policies of the company

b. Accounting standards followed for preparation of ARsc. The method and rates adopted for calculating the

deprecationARs is required to be laid before the annual general meeting of thecompany as required under section 210 of the CosActEven if the company adopts different financial years than the onethat is followed of IT Act ( IT act is for period April to March of eachyear)the above required to be followed

6 Applicability ofMAT to foreigncompany

MAT applies to any company whether it is domestic or foreign.However, where a non resident companys income is assessed ona presumption at a flat rate under section 115A on royalty andtechnical fees, the book profit becomes immaterial for regular

assessment and the presumptive income tax would prevail.7

Computation of taxallowability

OrOtherwise

relevant case laws

Supreme court decision in CIT vs. Mysore Sugar Co. LtdHeldWhere advance was given by a sugar mill to sugar cane grower butthe grower did not supply the sugar cane, the loss on account ofnon-recovery of advance was foregoing them shall be allowed as adeduction while computing the income tax liability

Allahabad HCcase L H Sugar Factories & Oil Mills Co. LtdHeldSum expended to replacement of old roof by using new khaprails(tiles) in new roofing of labourers quarters was not allowed as it isnot the one, necessary for repairs. It would be a capital expenditureand depreciation could be claimed on this

Expenditure towards dismantling and refitting the plant at another

place is a capital expenditure will not be allowed as deduction CaseSitalput Works Ltd Vs CITSupreme court decision in L H Sugar Factories & Oil Mills P.Co. LtdConstruction of road within the premises was facilitating the runningof the business and no benefit of enduring nature accrued to theassessee and expenditure is revenue nature and allowed asdeduction


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Practical questions involving computation of tax is set in Part Ayou would be able to tackle =get familiarized with the adjustments, relief, exemption provisions- MAT seems to be anotherfacourte topic of the examiner since questions have been repeatedly asked on MAT/

Chapter 3 - Tax planning

--------------------------------------------------------------------------------------------------------------------

S.No Topic details

Chapter 3 deals withConcept of tax planning; Tax planning with reference to settingup a new business; locational aspects; nature of business; taxholiday, etc. Tax planning with regard to specific managementdecisions such as mergers and takeovers; location ofundertaking; introduction of voluntary retirement; tax planning

with reference to financial management decisions such asborrowing or investment decisions; reorganization orrestructuring of capital decisions. Tax planning with respect tocorporate reorganization; tax planning with reference toemployees remuneration. Tax planning vis--vis importantprovisions of wealth-tax including court rulings and legislativeamendments

Questionscould be on

Tax planning, tax management, tax evasion, taxavoidance

Fringe benefitsits applicability

Question on wealth taxreverse mortgage

Transfer pricing officer

Certain practical questions

1 Tax planning This is an arrangement of financial activities in such a way sothat maximum tax benefits are enjoyed by making use of allbeneficial provisions of the tax laws which entitles the assesseeto get certain rebates and reliefs and this is permitted by law andnot frowned upon

2 Tax management This refers to the compliance with the statutory provisions of law while tax planning is optional but tax management ismandatory. It includes maintenance of accounts, filing returns,payment of taxes, deduction of tax at source, timely payment ofadvance tax etc.

3 Tax evasion It is deliberately suppressing the income or inflating theexpenditure and resorting to various types of deliberatemanipulation. Tax evasion which is the cancer of modernsocieties and weighted against planned developmentachievement of socio-economic goals, has to be curbed and thesociety has a greater role to play in this.

4 Tax avoidance It simply means, minimizing the impact of the tax by properplanning within the framework of the permitted law but at times it


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defeats the basic intension of the legislative provisions.- The lacunas in the provision are taken into account and

tax is avoided- Though tax avoidance is legal and within the framework

of lawyet involvement of mala fide intention is thereTax avoidance is well planned in advance before the actual

liability comes into existenceAt times question are askeddeposit in PPF comes into what categoryevasion, avoidancethis would not come under any category treating personal expenditure as businessexpenditure under what category this is evasion you need to know the difference andanswer accordingly

5 Provision relating tosubstantialexpansion

Sec. 80-IE and 8-IC

Special provisions in respect of certain undertakings orenterprises in certain special category of states of Sikkim,Himachal Pradesh, Uttaranchal or the North Eastern states asper section 80 IC as per this provision of this sectionsubstantial expansion means increase in the investment in theplant and machinery before taking depreciation in any year as onthe first day of the previous year in which the substantial

expansion is undertakenSpecial provisions in respect of certain undertakings in NorthEastern states section 80-IE substantial expansion meansincrease in the investment in the plant and machinery by at least25% of the book value of plant and machinery before takingdepreciation in any year, as on the first day of the previousfinancial year in which the substantial expansion is undertaken

6 Transfer pricingofficer

Time limit forassessment

As per section 92CA Transfer Pricing Officer is wither a JtCommissioner or Dy Commissioner or Asst Commissionerauthorized by board to perform all or any of the function of theassessing officer specified in section 92C and 92D in respect ofany person or class of persons

The time limit for completing the assessment, re-assessment,assessment pursuance to search etc is 33 months from the endof the relevant assessment year in which the income was firstassessable. The transfer pricing officer should determine thearms length price at least two months before the expiry of suchtime limit by making the assessment or re-assessment.

7 Wealth taxAll companies liableScope of minimizing

Non profit making companies registered under section 25 of theCos Act 1956 are exempt from levy of wealth tax.Where the company is not resident in India, its assets and debtslocated outside India shall be excluded fro9m the computation ofnet wealth.Companies could minimize their wealth tax liability by

- By avoiding investment in taxable assets like jewelry,motor cars, other unproductive assets

- In unavoidable cases, investment in the said assets couldbe made out of loans or debts may be incurred in relationthereto by way of furnishing a security for the loans, sothat such debts could be claimed as deduction incomputing net wealth.

- Purchase house property likely to be used by the


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directors, managers or senior officers as their residentialaccommodation or by any other employee havingsubstantial interest in the company could be funded out ofloan

8 Scientific researchSec. 35(1)(iia)

As per section 35(1)(iia) any sum paid to a company to be usedby it for scientific research is allowed as a deduction @ 125% of

the amount so paid in the previous year in which payment ismade. The sum paid to a company to be used for scientificresearch shall be allowed to the assessee only if the companyregistered in India with the main object of scientific research anddevelopment and it should be approved by the prescribedauthority for this purpose.This deduction could be claimed by any person whether it iscompany or not making payment to company approved for thepurpose. There is no requirement that the scientific researchcarried out by the approved company should be related to thebusiness by the assessee. It also give a scope of tax planningespecially by small and medium sized assesses who are

otherwise handicapped for making heavy investment for buildingin house scientific research.

9 Reverse mortgage When the borrower makes monthly or yearly repayment to lenderthen it is called to be regular mortgage but when a lender makespayments to the borrower it is known as Reverse Mortgage. Thecentral government has notified the Reverse Mortgage Scheme2008. As per the same, an individual aged 60 years or above andin case of a married couple, where either the husband or wife is60 or above, will be treated s an eligible reverse mortgagor toavail the above benefit. Any eligible person may enter reversemortgage transaction by applying in writing to the approvedlending institution if the capital asset as a residential house

property located in India, which is mortgaged, is owned by him isfree from any encumbrances.

An approved lending institution being any scheduled bank 0orhousing finance company may disburse the loan to the reversemortgagor by any one or more of the following modes namely:-

a. Periodic payment to be decided mutually between theinstitution and the reverse mortgagor

b. Lump sum payment in one or more trenches, to the extentthat the aggregate amount disbursed as lump sumpayment does exceed 50% of the total loan amountsanctioned

c. The loan under reverse mortgage shall not be granted for

a period exceeding 20 years from the date of signing theagreement by the reverse mortgagor and the approvedlending institution

9(a) Section 10(43) As per section 10(43) any amount received by an individual as aloan either in lump sum or in installment, in a transaction ofreverse mortgage shall be exempted

9(b) Section 47(xvi) Any transfer of a capital asset in a transaction of reversemortgage is not treated as transfer for the purpose of capital gain


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tax. - incase of alienation of the mortgaged property by themortgagor for the purpose of recovery of the loan will be treatedas transfer and the borrower i.e., mortgagor will be liable to taxon capital gains if any, arising out of such alienation.

10 Provisions relatingto hospitals

section 80-IB(11C)

As per this section deduction of 100% of profits and gainsderived from business of operating and maintaining hospitals

anywhere in India other the excluded areas for a period of 5consecutive assessment years, beginning with the initialassessment year if the following conditions are satisfied

i. The hospital is constructed and has started or startsfunctioning at any time during the period beginning on1 April 2008 and ending on 31 December 2013

ii. It has at least 100 beds for patientsiii. The construction of the hospital is in accordance with

the regulations or bye-laws of the local authorityiv. Report of audit in the prescribed form certifying the

correctness of claim for deduction is furnished alongwith the return of income

Excluded areas- Delhi urban agglomeration, Greater Mumbaiurban agglomeration, Chennai urban agglomeration, Kolkataurban agglomeration, Hyderabad urban agglomeration,Bangalore urban agglomeration, Ahmadabad urbanagglomeration, Districts of Faridabad, Gurgaon, Ghaziabad,Gautam Budh Nagar and Gandhi Nagar and City ofSecunderabad.

11 Meaning ofJewellery

Under Wealth tax

Ornaments made of gold, silver, platinum or any other preciousmetal or any alloy containing one or more of such preciousmetals, whether or not containing and precious or semi-preciousstones and whether or not worked or sewn into any wearingapparel

Precious or semi-precious stones whether or not set in anyfurniture, utensils or other article or worked or sewn into0 anywearing apparel

12 Meaning of urbanland

Under Wealth tax

In any area comprised with in jurisdiction municipality orcantonment board having a population of 10,000 or moreaccording to the last preceding census orWithin 8 km from the local limit of such municipal or cantonmentboardNotemunicipality includes municipal corporation, notified areacommittee, town planning committee, town committees or amunicipality known by any other name

13 Asset held by minor

childprovisionunder wealth tax

Sec 4(1)(a)(ii)

As per this section of wealth tax act, assets held by the minor

child shall be included in the net wealth of that parent whose net,wealth excluding the assets of the minor child is greater.However the following assets shall not be included in the netwealth of the parent and would be taxable in the hands of theminor only

i. iAssets held by minor child suffering from anydisability of the nature specified under section 80 ofthe IT act i.e, disability or severe disability (section


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4(1)(a)(ii)ii. Assets held by a minor married daughteriii. Assets acquired by a minor child out of the following

income referred to in proviso to section 64(1A) of theIT act.a. Income from manual work done by him

b. Income from any activity involving application ofhis skill, talent or specialized knowledge orexperience

Also where the marriage of the parents does not subsist then theassets of minor child will be clubbed in the net wealth of theparents who maintained the minor in the previous year as definedin the IT act

Also get familiar with depreciation provisions under section 32 read with section 43Best examplewhen a non-operating plant and machinery is a part of block of assets and thesaid block assets is used for purpose of businessallowability of depreciationYou should know once various assets are clubbed together and they become block of assetswith the meaning of sec 2(ii).- then it is said to be one asset for the purpose of depreciation.

Individual assets lose their identity from that very moment and become inseparable part of blockof assets in so far as calculation of depreciation is concerned

Question would be asked based on certain factsallowability, exemption, relief etcPractical question would also be askedbetter to get to familiarized with thisPast question papers might help you on this to know the type of practical questions asked


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Chapter 4 - Tax management

---------------------------------------------------------------------------------------------------------------------

S.No Topic details

Chapter 4 deals withReturn and procedure for assessment; special procedure for

assessment of search cases, e-commerce transactions, liability inspecial cases; collection and recovery of tax; refunds, appeals andrevisions; penalties imposable, offences and prosecution.


chapter

1 Tax planningvs

Taxmanagement

Tax planningWider and includes taxmanagementEvery person may not requiretax planningTax planning helps decision

makingTax planning helps in claimvarious benefits of the act

Tax managementNarrower term and in the firststep towards the planningIt is essential for every personIt helps in complying theconditions for effective decision

makingIt helps in complying theconditions for claiming taxbenefits

2 Annualinformation

returnSec 285 BA

The person specified under section 285BA(1) responsible forregistering, or maintaining books of account or other documentscontaining a record of any specified financial transaction, under anylaw for the time being in force, shall furnish an annual informationreturn. Annual information return shall have to be furnished for

(i) Such specified financial transactions which is registeredor recorded by the above persons during any financialyear beginning on or after 1.4.2004 and

(ii) Such in information which is relevant and required for thepurposes of this act

3 Tax collectionat source

Sec 206(C)

Every person being a seller shall collect from the buyer of goodsspecified in section 269C(1) at source the tax. Tax has to becollected by the seller by the seller at the time of debiting of theamount payable by the buyer to the account of the buyer or at thetime of receipt such amount from the buyer whichever is earlier.206C(1) it shall be paid to the central government within 7 days.


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Such amount shall be deemed as payment of tax on behalf of theperson from whom the amount has been collected and credit shall begiven for the amount so collected on production of certificate.

4 TDS on feespaid for

professional

and technicalservicesSec 194J

According to this section, any person other than an individual or aHUF who is responsible for paying to a resident any sum by way offees for professional services or technical services, shall deduct tax

on income comprised therein. Tax is to be deducted either at thetime of payment of such fees or its credit to the account of the payeewhichever is earlier.No deduction shall be made under this section, where the amount ofsuch sum or as the case may be, the aggregate or the amounts ofsuch sums credited or paid or likely to be credited or paid during thefinancial year by the aforesaid person to the amount of, or to thepayees does not exceed Rs. 30,000 w.e.f 1.7.2010 in the case offees for professions serviced or technical servicesProfessional services means services rendered by person in thecourse of carrying on legal, medical, engineering or architecturalprofession or the profession of accountancy or such other profession

as is notified by the board for this purpose of section 44AA5 Tax

managementin respect to

advancepayment of tax(companies)

Sec 210and the

importanceand need of

the tax

planning

As per section 210, the company has to suo moto pay relevant tax inthe financial year immediately proceeding the relevant financial yearin 4 installments. The advance has to be paid by the assessee onthe basis of an estimate of his current income assessed in theimmediately proceeding A.Y. as reduced by the tax deducted orcollected at source. Section 208 f the IT act species that the advancetax shall be payable in every case where the amount of such taxpayable by the assessee during a finance year is nRs.10,000 ormore. The advance tax shall be paid as under

Due date of installment Amount payablea. On or before 15 June Not less than 15% of

advance tax liabilityb. On or before 15thSept. Not less than 45% of

advance tax as reduced bythe amount if any paid inearlier installments

c. On or before 15 Dec ---- do ---- 75%d. On or before 15 Mar ----dowhole amount

Conceptually, it is clear that the company is required to make anestimate of total income even before the year is completed or inother words, even before it is fully earned. Estimate of incomecannot exactly be identical with the income finally earned whenaccounts are drawn or prepared. As the advance tax is adjustable

only in the regular assessments, tax management is needed. A goodtax manager should be able to estimate the figure more or less near,the final figure that would be payable on regular assessment. If anyexcess amount is paid, though would be eventually refunded, thecompanies resources will be blocked with the government. Butcharge of interest for defaults in payment of advance tax undersection 234B as well mandatory charge of interest for deferment taxunder section 234C,. if one fails to pay advance tax, the assessing


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officer may pass an order under section 210(4) and issue notice ofdemand under section 156 requiring him to pay advance tax on hiscurrent years income specifying the installments in which theamount has to be paid. Hence, tax management of the companyshould be in such way that neither the funds of the company isblocked by paying higher advance tax than required nor the

company has to pay interest payment of advance tax.6 Provision

relating to filingof T return in

electronic formSec. 139D

The board may make the provisions as under as per sec 139Da. The class / classes of persons who shall be required to

furnish the return in electronic formb. The form and manner in which the return in electronic form

may be filedc. The documents, statements, receipts, certificates or audited

reports which may not be furnished along with the return inelectronic form but shall be produced before the assessingofficer on demand

d. The computer resource or the electronic record in which thereturn in electronic form may be transmitted

7 Revision oforder

&Rectification of

order

Revision of assessmentsection 263/264Revision is made under section 263 if prejudicial to the interest of therevenue.However, revision under section 264 either of his own motion by thecommissioner or an application made by the assessee cannot beprejudicial to the assesseeNo order under the revisional jurisdiction can be passed after theexpiry of two years from the date of order sought to be revised as persection 263(2). The CIT on his own motion cannot revise any order,if the order has been made more than one year previously

Rectification of assessment

The rectification is done with a view to rectifying any mistakeapparent and rectification at the instance of the assessee can alsobe favourable or prejudicial to him.There can be no rectification order after the expiry of four years fromthe end of the financial year in which it was passed.

8 Points ofdifferencebetween

section 271AAand

Section 271B

1. Nature of defaultSec 271AAfailure to keep and maintain any such information anddocuments as required under section 92(d)(1) & (2) in relation tointernational transactionSec 271B failure to get accounts audited or to furnish a report insuch audit as required under section 44AB2.Minimum Penalty

Sec 271AA a sum equal to 2% of the value of each internationaltransactionSec 271B 0.5% of total sales turnover or gross receipts as thecase may be3.Maximum PenaltySec 271AAsame as minimumSec 271BRs. 1,00,000revised w.e.f 1.4.2011 Rs. 1,50,0004.Person who can impose penalty


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Sec 271AAassessing officer or commissioner appealSec 271Bassessing officer

9 Revised returnSec 139(5)

If an assessee having furnished a return of income under section139(1) or in pursuance of a notice issued under section 142(1)discovers any omission or any wrong statement in the return filed, hemay furnish a revised return. Such revised return can be filed at any

time before the expiry of one year from the date of the relevantassessment year or before the completion of the assessment,whichever is earlier

10 Defectivereturn

Sec.39(9)

According to section 139(9) a return shall be considered as adefective return if it is not properly filed in and also not accompaniedby all the necessary annexures. If the assessing officer considersthat the return is defective, then he may intimate the defect to theassessee and give him an opportunity to rectify the same within 15days or the extended period as may be allowed. If the assesseedoes not rectify the defect within 15 days, then it is treated as void-ab-initio and it shall be deemed that the assessee has not filed thereturn of income

Provided where the assessee rectified the defect after the saidperiod of 15 days or the extended time period but before thecompletion of assessment, then the assessing officer may condonethe delay and treat the return as valid return.

11 Best judgmentassessment

Sec 144

Where any persona. Fails to make return of income under section 139(1) and has

not made a return or a revised return under section 139(4) or139(5)

b. Fails to comply with all terms of a notice issued under 142(1)c. Fails to comply with a direction issued under sec 142(2A)d. Fails to comply with all terms or a notice issued under section

143(2)Then the assessing officer after taking into consideration all relevantmaterial facts which he has gathered shall make an assessment inthe of his judgment and determine the tax payable by the assessee.The assessing officer shall not make the assessment unless hegives an opportunity of being heard to the assessee.

12 Assessmentwhich is not

subject to timelimit under IT

act

According to section 153(3) notwithstanding anything contained insection 153(1) and (2) but subject to the provisions of section153(2A) the following cases of assessment / reassessment, re-computation of income or assessment or re-assessment of fringebenefits may be completed at any time

a. Where the assessment. Re-assessment or re-computation is

made on the assessee or any person in consequence of , orto give effect to, any findings or directions contained in orderunder section 250, 254, 260, 262 and 264 or order of courtunder any other law and

b. Where in case of a firm an assessment is made on a partnerof the firm in consequence of an assessment on the firm.However, as per section 153(2A) if in the above case, theoriginal assessment is set aside or cancelled, the period for


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fresh assessment will 9 months.

Descriptive question areset in this chapter

You should getfamiliarized

- Possibilities of reduction/ waiver of interest under section234A, 234B and 234Cthe circumstances

- Circumstances when revised return could be filed- Duties of persons who deducts tax at sourceconsequences

of not deducting tax- Powers of the commissioner appeals- What order could be appealed against?- Revision of order, rectification of order- Original return, revised return, defective return related

provisions- There could be questions on special audit under section

142(2A to 142(2D)get to know this also since questions areasked at times

- Penalties for not filing return under section 139- Failure to get accounts audited under section 44AB (section

271B

- You might be also asked in some of the questions therelevant case laws

Practical questions Practical question, computation of income, advising on certainmatters considering the given facts are some of the questions set inthis sectionyou need to get familiarized with this too


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Part B: Indirect Taxation Law and PracticeDetailed topics of syllabus

Chapter Topic Detailed syllabus5 Introduction Special features of indirect tax leviesall

pervasive nature, contribution to Governmentrevenues; constitutional provisions authorizing thelevy and collection of duties of central excise,customs, service tax, central sales tax and VAT.

6 Central Excise Laws Basis of chargeability of duties of central excise -goods, manufacture classification and valuation ofexcisable goods,CENVAT; assessment procedure, exemption,payment, recovery and refunds of duties.Clearance of excisable goods; Central ExciseBonds; maintenance of accounts and records andfiling of returns.Duties payable by small scale units. set-off ofduties concept, meaning and scheme; CentralExcise Concessions on exports; search, seizureand investigation; offences and penalty.

Adjudication, Appeal and Revision, includingappearance before CEGAT by CompanySecretary as authorized representative; settlementof cases.

7 Customs Laws Levy of and exemption from, customs duties specific issues and case studies; assessment andpayment duties; recovery and refund of customsduties.Procedure for clearance of imported and exported


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goods; drawback of duties.Transportation and warehousingConfiscation of goods and conveyances andimposition of penalties; search, seizure and arrest,offences and prosecution provisions. Adjudication,

Appeal and Revision; Settlement of Cases8 PromissoryEstoppels in FiscalLaws

Principles and applicability with reference toindirect taxes.

9 Tax Planning andManagement

scope and management in customs, with specificreference to important issues in the respectiveareas.

Pattern of question in Part B

In this section, there is always a compulsory question carrying 20 marks. In addition thestudent is expected to answer 2 more questions out of 3 questions each carrying 15marks each.

The total marks in this section is of 50 marks consisting basically the central excise,customs, promissory estoppels of fiscal laws and the related tax planning and taxmanagement

Fourth Question - This question is generally a compulsory one.

Sub-section (a) is a MCQwriting the appropriate answers from the given one

Sub-section (b) is fill up the blanks with appropriate words or figuresSub-section (c) is either brief notes or practical problem or examination of a particularsituationSub-section (d) is a descriptive question relating to certain provisions, rules etc

All four sections carry 5 marks each making up to the total of 20 marks

Three more questions are in this section one has to answer 2 questions eachcarries 15 marks each

Fifth Question

By and large this is also divided into 3 sub-question of 5 marks each.The questions are examination of certain facts, practical questions, certain rules, orelaborate and write on certain specific provisions of the act, rules etc.

Sixth Question and Seventh Question

These questions also divided into three or four sub-questions and questions are in thenature of writing brief notes, examination of facts of a given case, remedy available or


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question relating to provisions, or examination of certain real life situation and asking forcomments

Chapter 5 Introduction

---------------------------------------------------------------------------------------------------------------------

S.No Topic Brief details

Chapter 5 deals with Special features of indirect tax leviesall pervasive nature,contribution to Government revenues; constitutional provisionsauthorizing the levy and collection of duties of central excise,customs, service tax, central sales tax and VAT

Questions

could be on

Generally descriptive question are asked from this chapter

1 The ProvisionalCollection of Taxes

Act 1931

The necessity of Provisional Collection of Taxes Act 1931 thatbudget provisions in respect of imposition or increase in duty of

excise and customs will take effect immediately if a declaration isinserted in the bill that it is expedient in public interest to haveimmediate effect to the provisions of the bill. This provision is notapplicable for reduction in duty.

After the declaration is given, the new rate becomes effective onthe expiry of the day when the bill is introduced. Accordingly,every year, the declaration is given and budget provisions comeinto effect immediately. Such declaration is valid for 75 days orthe date when the finance bill is passed, whoever is earlier

If rates are reduced when the bill is passed, refund will be

granted of excise duty collected subject to provisions of refund ofunjust enrichment of section 113(2) of Central Excise actRe-structuring of tariff headings is not covered under this act.This will be effective only when bill become an act

2 Scope of taxplanning in indirect

taxes

Tax planning in indirect taxes meansa. Taking advantage of the legitimate concessions and

exemptions provided in the tax law and thus reducing thetax liability


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b. Arranging business operations such that tax liability isreduced i.e., when two methods are possible to achievean objective, select the one which results in lower taxliability

Tax planning is permissible but not subterfuges. Tax planningmay be legitimate if it is within the frame work of law, but

colorable devices cannot be part of tax planning. It is wrong tosay that it is honourable to avoid payment of tax by dubiousmethods

3 Collection of taxesby government

before finance bill ispassedlet us

examine

This is the same point discussed under serial no. 1 which as perThe Provisional Collection of Taxes Act 1931 you should beable to remember this and the provisions if related questions areasked

4 With the advent ofVAT regime the

multiplicity of ratesprevalent till then

has been reduced infour broadcategories- Elucidate

In contract to the multiplicity of rates under erstwhile Sales TaxLaws, the VAT regime has four broad rates other than the 0% forexempted goods in the nature of unprocessed agricultural goodsand goods of social importance. The four categories are as

follows:i. 1% for precious and semi-precious metalsii. 4% for inputs used for manufacturing and declared goodsiii. 20% for demerit / luxury goodsiv. Rest of the commodities are taxed at a Revenue Natural

Rate of 12.5%


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Chapter 6

Central Excise Laws

---------------------------------------------------------------------------------------------------------------------

S.No Topic Brief details

Chapter 6 deals with Basis of chargeability of duties of central excise - goods,manufacture classification and valuation of excisable goods,CENVAT; assessment procedure, exemption, payment, recoveryand refunds of duties. Clearance of excisable goods; CentralExcise Bonds; maintenance of accounts and records and filing ofreturns. Duties payable by small scale units. Set-off of dutiesconcept, meaning and scheme; Central Excise Concessions onexports; search, seizure and investigation; offences and penalty.

Adjudication, Appeal and Revision, including appearance beforeCEGAT by Company Secretary as authorized representative;settlement of cases.

Questionscould be on

- Short notes and Descriptive questions manufacture captive consumption such related issues

- Practical questions based on facts- Last three exams (June and December 2010 & June

2011_ practical question on determination of assessablevalue. Computation of cenvat credit, cenvat exemption etc

- One needs to get familiarized on this

1 Manufacture underCentral Excise Act

1944

Section 2(f) of the act provides an inclusive definition of termmanufacture. Manufacture includes any process incidental orancillary to the completion of a manufacture product. The termincidental and ancillary to the completion of a manufacturedproduct can be elaborated as manufacture of any productthrough a series of manufacturing process taking place insequence. At a particular stage, after the necessary processesare completed, the product emerging may be functional nevertheless, a few process which take place to render the


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product which is already functional to become on which is alsosaleable, are those of which can be considered and incidentaland ancillary to the completion of manufacture of product.The scope and meaning of the term which has been leftundefined in the act has crystallized as a consequence of thevarious judicial decisions and it has come to be settled that a

product can be treated as manufactured only if it emerges as aresult of change on the inputs and such changes have brought innew characteristics or use or name as against, the inputthemselves. Mere value addition through a process would nottantamount to manufactureSupreme court held in Union of India V Delhi Cloth and GeneralMills and others is a landmark judgment and it saysmanufacture implies a change but every change is notmanufacture, and yet every change of an article is the result oftreatment, labour and manipulation. But something more isnecessary and there must be a transformation, a new anddifferent article must emerge having distinct name, character or

useSome specific chapters in central excise talks about deemed manufacture for examplechapter 38 says labeling, relabeling, packing bulk into retailmaking it saleable in the marketare deemed to be manufacture. Similarly in another chapter 68, printing, decorating andornamenting are recognized as manufactureyou should know about this.

Manufacturing and processingProcessing not defined in CEA. A process is an operation or an activity which may or may notresult in production, manufacture. For excise purposes mere process is not enough to call itmanufacture or production. Such process / process should bring into existence an excisableentity preferably with a distinct name, character or use. The process is manufacture as it isdistinct excisable item. Hence every manufacture is a process and not necessarily vice-versa.The definition of the term manufacture under section 2(10 states that a process, which is

incidental to the manufacture of the product, is also manufacture under law. If the process is nointegral to or connected with manufacture, it will not be incidental

2 Captiveconsumption

Captive consumption means goods are not sold but consumedwithin the same factory or another factory of same manufacturer.In case of captive consumption, valuation shall be done on thebasis of cost of production plus 10% (Rule 8 of valuation rules).Cost of production is required to be calculated as per Cost

Accounting Standards 4 (CAS-4)

3 Self removalprocedure

The assessee can maintain his own private records as long asthe requirements as specified in the rules are satisfied. Therecords should be kept in the factory to which they pertain. Therecords should be preserved for 5 years immediately after the

financial year to which such records pertain. Non maintenance ofrecords as per specified rules will mean contravention ofspecified rules and will attract penal provisions.The DSA (daily stock account) and even other records pertainingto central excise shall be pre-authenticated by assessee on firstand last page of the book / register. Pre authentication is notpossible in case of

a. Records maintained on computer


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b. Records maintained in loose leaf formThere is no statutory requirement that the records are to bemaintained in book form only. Invoices issued by assessee arealso required to be pre-authenticated as per rule 11(5) of centralexcise.Every assessee and first stage dealer and second stage dealer

submit a list in duplicate, of all records prepared and maintainedby him for the following as per rule 22(2)

(i) All records prepared and maintained for accountingtransaction in regard to receipt purchase,manufacture, storage, sale or delivery of goodsincluding inputs and capital goods

(ii) All the records prepared an maintained for accountingtransaction in regard to payment of input services andtheir receipt and procurement and

(iii) All the financial records and statements including trailbalance or its equivalent.

The assessee, first stage dealer and second stage dealer is

required to submit to his range officer duly empowered bycommissioner or audit party or audit persons of C & AG thefollowing for security:

a. Records maintained or prepared in terms of rule 22(2) asdescribed above

b. Cost audit report under section 239B of Companies Actc. Income tax audit report under section 44AB of IT act

rule 22(3) of central excise rules

4 Provisions relatingto cenvat credit

a. The cenvat credit in respect of capital goods received in afactory or in the premises of the provider of outputservices at any point of time in a given financial year shallbe taken o0nly for an amount not exceeding 50% of the

duty paid on such capital goods in the same financialyear. As per proviso, the cenvat credit in respect of capitalgoods shall be allowed for the whole amount of the dutypaid on such capital goods in the same financial year. Ifsuch capital goods are cleared as such in the samefinancial year. Further the cenvat credit of additional dutyleviable under sub-section 5 of section 3 of custom tariffact in respect of capital goods shall be allowed fullyimmediately on receipt of the capital goods in the factoryof a manufacturer.

b. The balances of cenvat credit may be taken in anyfinancial year subsequent to the financial year in which

the capital goods were received in the factory of the mamanufacturer or in the premises of the provider of outputservice, if the capital goods, other than componentsspares and accessories, refractory and refractorymaterials .moulds, dies and goods falling in the firstschedule to the central excise tariff act are in thepossession of the manufacturer of final products orprovider of output services in such subsequent years.


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5 Provisions relatingto computerization

of records

Any assessee can electronically maintain or generate all or anyof records, returns, invoices and other documents prescribedunder excise rules using a computer in electronically readableformat. No intimation is required to be given to the departmentHowever, range office will record in Scrutiny register or any otherrecord indicating assesses profile, that the assessee is maintain

records or generating returns invoices or other documents, usingcomputerThe records on computer can be kept on any electronic mediasuch as hard disk, floppies, CDS or taps and preserved. Properelectronic records as well as hard copies should be preserved for5 years following the year in which a record / return, invoices ordocument pertains.

6 Related personunder the CentralExcise Act 1944

It should be noted that the assessable value for excise dutywould be the transaction value when buyer is not related. Ifbuyer is related, then the assessable value would be determinedhaving regard to the related party transaction. The term relatedparty is defined under clause (b) to sub-section (3) of section 4 of

the Central Excise Act. As per this, persons shall be deemed tobe related if

i. They are inter connected undertakingsii. They are relativesiii. Amongst them, the buyer is a relative and distributor

of the assessee, or a sub-distributor of suchdistributor or

iv. They are so associated that they have interest directlyor indirectly, in the business of each other.

Explanation, in this clausea. Inter connected undertaking shall have the meaning

assigned to it in clause(g) of section 2 of the MRTP Act

b. Relative shall the same meaning assigned underCompanies Act 1956

7 Doctrine of unjustenrichment underCentral Excise Act

1944

If the manufacturer had charged excise duty from his buyer, it isclear that he has passed on the burden to the buyer and hasalready recovered duty from the customer. In such cases,refunds of excise duty paid to the manufacturer will amount toexcess and undeserved profit to him. It will not be equitable torefund of excise duty to him, as he will get double benefit-firstfrom the customer and second from government. This is calledunjust enrichment. Refund if any should be paid to customerswho have borne the burden of duty. However in majority of thecases, it is not practicable to identify individual co9nsumer and

make a refund to him. At the same time. The duty is illegallycollected and hence cannot be retained by government and insuch cases the refund due is transferred to a Consumer WelfareFund (instead of paying to the manufacturer) to be used foractivities of protection and benefit of consumers

The manufacturer has to prove for getting the refund that he has borne the burden of exciseduty. Case law CCE vs. Allied Photographicheld unjust enrichment doctrine would apply to

refund even when duty is paid under protest


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Get familiarized with the consumer welfare fund under this act which has been formed undersection 126 of CEAquestion could be on the utilization of the fund

8 Exempted good andNil rated goods

Exempted goods means goods exempted by a notification undersection 5A of the Central Excise Act. But goods removed underbond are not exempted goods. Exempted goods are basically

leviable goods. Fully exempted goods may become dutiable atthe time of removal if the exemption is withdrawn by that time.For example in Wallace Floor Mills Co Lt vs CCE, when the goodwere manufactured and packed they were fully exempted fromduty. At the time of removal of goods from factory the exemptionwas withdrawn. The supreme court held that the goods aredutiable and hence duty is payableBut same is not the case with NIL rated goods. When gods carryNIL rate at the time of manufacture, they continue to be nil andno duty is payable n them unless, there is subsequent change inthe tariff rate. Subsequent change may have immediate effect byvirtue of Provisional Collection of taxes Act 1982

9 Special auditSection 14A

Valuation is one of the most vital important aspects ofassessment of excise duty payable. In order to ensure that dutyis being paid correctly on the assessable value a provision hasbeen made to order special audit in some specified cases videsection 14A of Central Excise Act. The audit could be orderedonly with the prior approval of chief commissioner of centralexcise

10 Central credit auditSection 14AA

As this section, a special audit of central credit availed or utilizedcan be ordered by commissioner of central excise. Such auditcan be ordered if the commissioner of central excise has reasonto believe that a cenvat credit availed or utilized or not within thenormal limits, having regard to nature of final products and type

of inputs and cenvat credit has been availed or utilized by reasonof fraud, collusion or any willful misstatement or suppression offactsSuch audit can be done by practicing cost accountant orpracticing chartered accountant to be appointed by commissionerof central excise. Expenses of and incidental of such auditincluding the remuneration payable to the cost or charteredaccountant to be paid by the central government i.e. by thecentral excise department

You could expect a question under the head distinguish between these two audits or even writeshort notes

11 Payment of duty

under protest incentral excise law

Sometimes the assessee may be compelled to pay duty which

according to him is not payable. Such payments are calledpayment under protest. Protest payment is not necessary whenprovisional assessment is allowed. Payment under protest isallowed under the excise manual released by the department

a. The assessee has to record the fact in his recordsincluding invoice, return, daily stock account etc.

b. The assessee can continue to pay under protest till theappeal filed by him is disposed off.


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c. General period of limitation of one year is not applicableto the appeals filed under this

d. If the assessee wins the case, he has to file for refund ifeligible by a separate application

A letter of protest or representation for paying duty under protestshould not constitute a claim of refund. The persons eligi9ble has

to apply for the refund separately once the appeal is decided inhis favour.

12 Compoundable levyscheme undercentral excise

Rule 15 of CE rules provide that central government may bynotification, specify the goods in respect of which the assesseeshall have option to pay duty of excise on the basis of specifiedfactor relevant to production of such goods and specified rates.Central government can specify procedure for payment,abatement allowable, interest and penalty payable etc.Under the scheme, the manufacturer has to pay prescribed dutyfor the specified period on the basis of factors relevant toproduction like the capacity of the machines used etc. aftermaking the lump sum periodic payment the manufacturer does

not have to follow any procedure of excise regarding storage andclearances of goodsThis scheme is presently applicable to stainless pattas / pattiesand aluminum circles. These articles are not eligible for SSIexemption. The scheme was applicable to panmasala andgutkha upto 30thJune 2008

13 Ad valorem rate When duty of central excise or custom is levied by applying thegiven percentage of the value of the goods, then it is known asad valorem rate. In other words ad valorem rate are the ratesbased upon the value of the goods. The incidence of levy of thiscase is different from product to product and from manufacturerto manufacturer, with goods of higher value being subject to

greater amount of duty and so on. Ad valorem, rate has in-builtelasticity and changes with the changes in the value of the item.The quantum of duty levied automatically varies as betweensuperior varieties and inferior varies of the same goods.

14 MRP based exciseduty

Central government is authorized to notify certain products s0oldin a packaged form having MRP printed on them. The packagedcommodity rules 1977 under standard of weights and measuresact require the packaged commodities to bear the maximumretain price (MRP). Out of such packaged commodities some ofthem have been notified by the government from time to time andsuch commodities notified by the government are valued undersection 4A of the CEA of 1944

15 Scheme of valuationfor MRP based

excise

a. The notified goods are necessarily to bear the MRP on itb. MRP declaration also statutorily required under SW & M

act 1976c. If the manufacturer prints MRP voluntarily, and not under

legal obligation, the valuation of such goods need not bemade under section 4A

d. The MRP is the basis for arriving assessable valuee. Rate of abatement are also notified by the government.


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Rates of abatement may be different for differentcommodities

Also to know- Distinction between goods and excisable goods- Return of goods under rule 173H and 173L of CEA

- Audit under section 14A and 14AAwho can conduct such audit- Exempted goods and nil rated goods- Duty paid in input goods and duty paid on capital goods- Export under bondmerchant exportermanufacturer exporter

Chapter 7 Customs Laws

---------------------------------------------------------------------------------------------------------------------

S.No Topic Brief detailsChapter 7 deals with Levy of and exemption from, customs duties specific issues

and case studies; assessment and payment duties; recovery andrefund of customs duties. Procedure for clearance of importedand exported goods; drawback of duties. Transportation andwarehousing Confiscation of goods and conveyances andimposition of penalties; search, seizure and arrest, offences andprosecution provisions. Adjudication, Appeal and Revision;Settlement of Cases

Questions

could be on

- Short notes

- Distinguish between and explain, comment

- Descriptive questions and

- Practical questions

1 IEC number Importer Exporter code number IEC code is unique 10 digit

code issued by DGFT Director General Foreign Trade, toIndian companies. To import or export in India, IEC code ismandatory. No person or entity shall make any export or importwithout IEC code number

2 Procedure ofobtaining IEC

Application for IEC can be obtained from any zonal and regionaloffice of the DGFT. It also could downloaded fromwww.dgft.gov.infor.The application should be accompanied by acertificate from bank in the format 18A, self certified copy of PAN,
http://www.dgft.gov.infor/http://www.dgft.gov.infor/http://www.dgft.gov.infor/


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self addressed envelope.In case of individual certified copy of date of birth, in case of afirm notarized partnership deed and in the case of companyextract of board resolutionPrescribed fees for IEC is Rs. 250 which can be deposited in theform of DD drawn in favour of zonal DGFT.

Application submitted in duplicate and each page of applicationmust be signed by the applicant. If the application is found to bein order a ten digit number is allotted by DGFT to any bonafideperson, firm, company for carrying import /export

3 Import manifest Person in charge or vessel aircraft or vehicle has to submitimport manifest. The import manifest I n case of vessel or aircraftis required to be submitted prior to arrival of a vessel or aircraft.Import manifest has to be submitted within 12 hours of arrival atthe custom station. If the manifest could not be submitted withinprescribed time, person in charge or any person specified asresponsible by a notification is liable to penalty up to Rs. 50,000.Such penalty will not be imposed if the custom office is satisfied

that there was sufficient cause for the delay section 30 (1)Import general manifest can be submitted electronically throughfloppy where EDI facility is available

Alternatively it could be also answered as under:-Section 14 of the finance act, the value of imports and exportsshall be based on the transaction value. The custom valuation(determination of value of importer goods) Rules 2007 also dealwith the transaction value and conditions for its applicability. Italso deals with transaction value of identical goods, similar goodsand the situation where the above methods cannot be applied, italso provides for deductive value methods.Where the proper officer has reason to doubt the truth or

accuracy of the value declared in relation to the goods, he mayask he importer to furnish further information includingdocuments or other evidence and on a consideration of theinformation received should proceed to consider the valuedeclared and even after such consideration decides to reject thedeclared value, shall proceed to determine the value byproceeding in accordance with Rule r to 9If the value of identified or similar goods imported at or about thesame time in comparable quantities is significantly higher orwhere the said involves abnormal discount or reduction from theordinary competitive price, special discount, mis-declaration ofgoods in parameters such as description, quantity, quality,

country of origin, year of manufacture production etc. Theauthorities can raise doubts about the declared value. Where thedeclared value is reflecting and assessable value is re-determined by the assessing officer and he shall then issuedetailed speaking order on this.Importer may submit inter-alia chartered engineers certificate orany equivalent in the country of supply, indicating the price,current CIF value of the new machinery. If purchased now, year


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of manufacture, sale price of supplier, present condition ofmachinery, nature of conditioning or repairs carried out, if any,the cost thereof and expected life span. In the absence of properlead port certificate of local chartered engineers certificate maybe submitted.

4 Custom duty

When not levied

Following circumstances custom duty is not levied

i. Under sec. 13 no duty will be levied on pilfered goodsafter uploading thereof and before the proper officerhas made an order of clearance

ii. When goods are damaged or defoliated before orduring the course of unloading

iii. When the warehouse goods are damaged before theiractual clearance from warehouse

iv. When goods are lost or destroyed due to naturalcalamity like fire, flood etc.

v. Where goods are abandoned by the importervi. If central government is satisfied that it is necessary in

the public interest not to levy import duty by issuing

the notification in the official gazette.5 Provisional

assessment ofimport duty

Section 16 of custom act provides that provisional assessmentcan be done in the following cases

a. Where the proper officer is satisfied that an importer orexporter is unable to produce any document or furnishany information necessary for the assessment of duty onthe imported goods or the export goods or

b. Where the proper officer deems it necessary to subjectany imported goods or export goods to any chemical orother test for the purpose of assessment of duty thereonor

c. Where the importer or the exporter has produced all the

necessary documents and furnish full information for theassessment or duty but the proper officer deems itnecessary to make further enquiry for assessing the duty

The proper officer may direct that the duty leviable on suchgoods may be assessed provisionally if the importer / exporterfurnish such scrutiny as the proper officer deems fit for thepayment of deficiency, if any between the duties finally assessedand the duty provisionally assessed.

6 GATT GATT came into existence after the world war with a view toprovide an international forum for the discussion on custom andother related problems so that barriers to world trade areprogressively removed

For the first time on 30thOctober 1947, an agreement signed atGeneva by 23 countries under the auspices of GATT providedsome measures of control of customs valuation procedure.These valuation provisions are given in Article VII of theagreement titled valuation for customs purpose. Article VII setsout a broad statement of principles of customs valuation whichthe GATT contracting parties had accepted. However this did notbring the desired results as it allowed continuation of existing


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valuation procedure by the contracting parties. Theimplementation of article VII of GATT which is also called GATTvaluation code came into existence. It envisaged transactionvalue to the principle yardstick to determination of custom valueand sets out at hierarchy of alternative methods which are to befollowed in case the transaction value cannot be determined

this code came into force w.e.f - 1.1.1981. It has now beenreplaced by WTO formed on 1.1.1995.

7 Antidumping duty As per sec 9A when any article is exported from any country orterritory to India at less than its normal value, then upon theimportation of such article into India, the central government may,by notification in official gazette, impose an anti-dumping duty notexceeding the margin of dumping in relation to such articleIn this section margin of dumping is in relation to an article,means the difference between its export price and its normalprice whereas export price means the price of the articleexported from the exporting country or territory and in caseswhere the export price is unrelated because of association or

compensatory, arrangement between the exporter and theimporter or a third party the export price may be constructed onthe basis of the price in which the imported article are first resoldto an independent or if the article is not sold to an independentbuyer or not resold in the condition as imported. On suchreasonable basis a may be determined in accordance with therules made under sub-section 6Normal value in relation to an article means

a. The comparable price, n the ordinary course of trade forthe article when destined for consumption in the exportingcountry or territory as determined in accordance with therule made under sub-section 6 or

b. When there are no sale of the like article in the ordinarycourse of trade in the domestic market of the exportingcountry or territory, or when because of the particularmaterial situation or low volume of the sales in thedomestic market of the exporting country or territory, suchsale do not permit a proper comparison, the normal valueshall be either

- Comparable representative price of the like article whenexported from the exporting country or territory to anappropriate third party

- The cost of production of the said article in the country oforigin along with reasonable addition for administrative,

selling and general costs and for profits.8 Remission of duty

under section 13and 23(1) under

Customs Act 1962

S.No Section 13 Section 23(1)

I Deals with pilferage Deals with loss ofdestruction of goods,except pilferage

Ii Loss must be only due topilferage

Loss or destruction may bedue to fire accident etc butnot pilferage


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Iii Is not applicable towarehoused goods

Is applicable forwarehoused goods also

Iv No duty is payable at allbut liability revives of dutyif goods are restored

Duty is payable but it isremitted by Asst.Commi. ofcustoms. Thus unlessremitted, duty has to be

paid under section 23(1)V Importer does not have to

prove pilferageBurden of proof is onimporter to prove loss ordestruction

Vi Pilferage should bebefore order forclearance is made

Loss or destruction can beany time before clearance

vii Normally duty is not paid,before examination ofgoods, refund can beclaimed if goods arefound to be pilferaged

during examination butbefore order forclearance is made

If duty is paid, then refundcan be obtained only ifremission is granted bycustom authorizes. Thusremission under section

23(1) is at the discretion ofcustom authorities

9 Redemption fineand

Penalty

Redemption fineSection 125(1) of Custom act provides that wheneverconfiscation of goods is ordered the adjudication officer may giveoption to owner of good to pay fine in lien of confiscation, if theimportation or exportation of good was prohibited. However, ifimportation or exportation of goods was not prohibited, the optionto pay redemption fine shall be given to owner of goods. This iscalled redemption finePenalties

Excise authorizes are empowered to impose penalties line finesconfiscation of goods etc. which are provided in the rules. Somerules themselves provide penalty for violating those rules whichsome are general penalties. The authorities can impose penaltyfor violation of law and confiscates the goods and give option topay fine in lieu of confiscation i.e. redemption fine. Court of lawcan impose fine, imprisonment as well as confiscation of goodsGeneral penalty provisionsRules 25 of CEA rules provide provision for breach of variousrules

Get familiarized with transit of goods and transshipment of goods under customs act at timesquestion could be asked on this

10 Duty drawbackunder section 74and under section

75

s.no Section 74 Section 751 Imported goods and

exported goods assuch or after use

Imported goods are used inmanufacture of goods whichare exported

2 Re-export ofimported goods(duty drawback of

Customs, central excise dutiesand service tax drawback rules1995


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custom duties) rules1995

3 Customs duties onlyare refunded

Customs and excise duties andservice tax are refunded

4 When importedgoods are exported

as such withouthaving been used inIndia 98% of theimport duty paid atthe time ofimportation (section74(i)When importedgoods are exportedas such after havingbeen used in India,duty drawback is

granted at reducerate as notified byCG for this purposesection 74(2)

AIR (All Industry rate generally)BR(Brand Rule) when no AIR is

fixed in the DBK scheduleSBR (special brand rate) whenfixed SIR 80% greater if theactual duties incidence

11 Clearance for homeconsumption and

clearance forwarehousing

s.no Clearance for homeconsumption

Clearance for warehousing

1 When the goodslying at the place ofimportation andneeded forimmediateutilization, then

goods are clearedfor homeconsumption fromthe place ofimportation

When goods lying at the placeof importation are not neededfor immediate utilization, thenthe goods are cleared forwarehousing from the place ofimportation

2 Goods can becleared for homeconsumption uponpayment of duty only

Payment of duty is not requiredfor clearance of goods towarehouse. In fact goods arewarehoused to defer dutypayment

3 While colour shall befiled in terms section

46 of the CustomsAct. The bill of entryis assessed by theproper officer andreturned to theassessee forpayment of duty.Upon payment of

Bill of entry for warehousingyellow colour shall be filled in

terms of section 46 of thecustoms act. This bill of entry isassessed by the proper officerand returned to the assessee.The importer shall execute abond equal to twice of the dutyassessed. It shall be noted thatin this case assessment is


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duty goods aredelivered to theimporter

done not for the purpose ofpayment of duty. The objectiveof this assessment of theamount to which bond shall beexecuted

Get also familiarized with preferential rates of custom duty and lower customs duty under trade

agreementGo through the Procedural matter on preparation of bill of entry

Study the advance rulingits salient features toolike in income tax, the advance ruling is alsoin this act

Have an idea about settlement commission

12 Disallowances ofdraw back

Drawback rules provide for some dis-allowances which are asunder

i. If sale proceeds of export goods are not received withthe time stipulated by RBI

ii. If no custom or excise duty is paid on the input orservice tax is paid on the input service

iii. If import duty were obtained under advance licence

without payment of dutyiv. Goods manufactured by EOU or a unit in SEZ 9 as

they obtain inputs without payment of dutyv. If cenvat was claimedvi. In a case of negative value addition i.e. selling price of

exported goods is less than value of imported goodsvii. If wholsale market price of goods in India is less than

the amount of drawback dueviii. If drawback is less than Rs. 50ix. No drawback of sales tax, octroi or other taxes.

13 Section 114confiscationwhen

Following export goods are liable for confiscation under section113.

a) I goods attempted to be exported by sea or air from anyplace other than a custom port or a custom airportappointed for the loading of such goods

b) Goods attempted to be exported by lands or inland waterthrough unspecified route

c) Goods attempted to be exported contrary to prohibitionunder custom act or any other law

d) Goods found concealed in a package which is broughtwithin the limits of a customs area for the purpose ofexportation

e) Goods which are not included or are in excess of thoseincluded in the entry made under this act

f) Goods imported without duty but being re-exported underclaim of duty drawback

g) Goods cleared for exportation which are not loaded onaccount of willful act, negligence or default, or goodsunloaded after loading for exportation without permission

h) Goods which are loaded or attempted to be loaded incontravention of the prohibition of sections 33 or section34


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i) Specified goods in relation to which any provision iscontravened.

Practical question are set in this chapter and you need to get familiarized go through the caselaws on this chapter better you could refer the past question paper also to know the type ofpractical question.

Chapter 8 - PromissoryEstoppels in Fiscal Laws

---------------------------------------------------------------------------------------------------------------------

S.No Topic Brief detailsChapter 8 deals with Principles and applicability with reference to indirect taxes.

Questions

could be on

Promissory estoppels in sales tax

Promissory estoppels plea falls where public interestintervenesexplaincomment etc

Powers of central government to exempt partly or whollyany goods subject to custom dutydoctrine of estoppels

1 Doctrine ofpromissory

estoppelsIn sales tax

The matter is raised in taxes, especially in sales tax where thegovernment provides exemption from tax by means of tax

holidays for a certain period which could be of 5 years and thenwithdraw the exemption before the expiry of 5 years.

The reason for promissory estoppels is one the ground thatcertain unit has been established expecting the tax benefits andwithdrawal before the expiry has caused damage to them.

Hence the units might be hit hard. They can go to the court of law


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against the government under Doctrine of estoppels.(the benefits granted cannot be generally withdrawn before theperiod ends without any sufficient cause or reason it may notalso get extended for a further period automatically)

2 Promissoryestoppels plea falls

where publicinterest intervenesexplaincomment

etcCase law on this----------------------

Sree SalesCorporation and

Another Vs. Unionof India decided in

1997.

Courts while recognizing the principal of promissory estoppels asan instrument of equity remedy have consistently held that the

promissory estoppels pleas fail where public interest intervenes.This means, though a concessions is extended for a fixed periodby notification or otherwise, the same can be withdrawn in publicinterest

Where it is in public interest, the Court will not interfere becausepublic interest must override any consideration of private loss ofgainDecided case law Sree Sales Corporation and Another Vs.Union of India decided in 1997.

3 Grant of Exemption

Power ofgovernment

Power to issue exemption implies power to amend the exemption

or withdraw exemption already granted. This is done generally byissue of notification /modification of notification etc.However, in some notification grant exemption for a prescribedperiod withdrawal of such notification of exemption could bedone only in exceptional circumstances. Otherwise, governmentis bound to keep up the promise made by it as per the theory ofpromissory estoppelsGovernment cannot go back from its promise simply on theground of loss of revenue and this is known as principle ofpromissory estoppels.

Chapter 9 - TaxPlanning and Management

---------------------------------------------------------------------------------------------------------------------

S.No Topic Brief detailsChapter 9 deals with scope and management in customs, with specific reference to

important issues in the respective areas.

Questions

could be on

Concept of pricing of finished excisable goods

Tax planning on this

1 Pricing of finishedexcisable goodsIn the planning oftax planning in the

central excise

Tax planning is certainly possible in pricing of finished excisablegoodsWhile it is ones duty to pay legitimate tax, it is ones right not topay taxes which are not due.

Tax planning is legitimate right of any citizenAll assessee should take certain precautions while deciding anytax planning exercise.

Supreme court held-Tax planning may be legitimate it is within the frame work of law,but colourable devices cannot be part of tax planning.

All relevant facts must be disclosed.


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Plans can be discussed with excise authorities and we need notbe over confident in these matters.Study the productStudy the pricing policiesThoroughly ensure that these are so designed that unnecessarilyheavy excise duty is not paid

Interest is payable for late payments.Thus if payment is delayed by filing appeal etc., and if appeal isdecided after a long time, there will be a very heavy liability.

Part C: International TaxationDetailed topics of syllabus

Chapter Topic Detailed syllabus

10 Basic Concepts ofInternationalTaxation

Residency issues; sou

advance tax-last minute revision notes

Documents