1

Guidance Note on Excise

2

Index

S. No. Contents Page

No.

1. Objective 5-

6

2. Claim of Cenvat on Input 7-11

3. Payment of Excise Duty 12-15

On Dispatches

Personal Ledger Account

4. Maintenance of Records 16-

21

Daily Stock Register (R.G.-1)

Sample Issued

3

Index

S. No. Contents Page No.

Goods Received as Sales Return

5. Job Work 22-26

Goods Sent for job work

Goods received for Job Work

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Index

S. No. Contents Page

No.

6. Reconciliation between Accounts 27-27

& Excise

7. Export & Deemed Export Sales 28-28

8. Statutory Requirements 29-41

9. Flow Charts 42-44

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1. Objective

1.1 Ensure that

• Proper records are maintained and

systems & procedures are being followed in

accordance with the provisions of The

Excise Act, 1944 & Rules there under.

• Funds are not blocked in the Personal

Ledger Account and proper claim has been

made for CENVAT. 

 

 

 

  

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1.2 Identify the bottlenecks in the above

procedure & analyze the reasons

there of.

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2. Claim of CENVAT on Input

2.1 Ensure that

• All the Excisable materials received in the factory

premises have been entered in the CENVAT

register.

• Proper CENVAT have been claimed on the same

day of preparation of Goods Inward Note.

• CENVAT is claimed for correct value.

• CENVAT is claimed on the Original CENVAT

Document.

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• Credit is not taken twice on same invoice.

• Credit is not taken without receipt of

material.

• Credit is not taken on forged and fake

documents.

2.2 Verify

• CENVAT documents i.e. transporter copy of

invoice, Bill of Entry etc. with RG 23A and C

Part-II.

2.3 Ensure that

• CENVAT credit has been reversed for

Rejection/shortage of raw material received.

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• CENVAT credit on capital goods has

been taken upto 50% in current financial year in

which Capital goods are received and balance

50% in any subsequent financial year.

• Upto 100% CENVAT credit has been

availed on capital goods purchased & sold in the

same year of receipt .

• 100% CENVAT credit on the additional

duty leviable under Section 3(5) of the Customs

Tariff Act in respect of Capital Goods has been

availed on receipt of such Capital Goods in the

factory,

10

• Credit of CENVAT has been claimed by the

assessee properly on input directly obtained

by the job worker instead of assessee.

• There is proper control over pending 50 %

CENVAT credit on capital goods.

• Credit of CENVAT has been claimed

correctly on input received as captive

consumption.

• CENVAT credit has been taken on all inputs

including samples / free of cost material

received.

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2.4 Credit on Service Tax

• Ensure that

• After utilizing credit of Service tax for payment of Service tax

liability, unutilized credit of Service tax should be utilized for

payment of Excise Duty on monthly basis.

• A proper detail of Service tax payable, paid & credit utilized

thereof has been prepared to keep control over service tax

credit

• Payment of education cess is made by utilization of education

cess only.

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3. Payment of Excise Duty

3.1 On dispatches

3.1.1 Two types of excise duty is liable on the

material to be dispatched-

• Basic duty.

 

• Special Excise Duty.

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3.1.2 Ensure that

• Amount payable for duty have been

adjusted

against available CENVAT credit and not

debited to Personal Ledger Account if

CENVAT credit is available.

• Valuation of material dispatched for captive

consumption has been done at current

market price or price for which material is

being sold to other customers .(As per

Notification 64/95 C.E. dated 16.03.1995)

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3.2 Personal Ledger Account

3.2.1 Verify the

• Details of payment made in Personal Ledger

Account from Accounts Departments.

• Justification for depositing amount in Personal

Ledger Account.

3.2.2 Ensure that

• Amount has been deposited in Personal

Ledger Account on or before due dates, if

required.

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• Payment through PLA for one calendar

month is 5th of the following month, if

payment is made by electronic mode then

6th of the following month. For month of

March duty is payable by 31st March.

3.2.3 Verify the

• Date of deposit of cheque on Treasury – 6

challan.

• If the Excise Duty is not paid by the due

date, interest is payable along with the outstanding

amount at the rate of 13% p.a. till the date of

actual payment.

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4. Maintenance ofRecords

4.1 R.G.I- Daily stock register for finished

goods

4.1.1 Ensure that

• All finished goods have been entered in

Daily Stock Register on daily basis,with

quantity mentioned in column 3 of Daily

Stock Register with daily production

report.

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• All material dispatched have been entered

in Daily Stock Register. Verify the total of

quantity and value for a day with the

concern column of Daily Stock Register.

• A separate Daily Stock Statement is

maintained for each item.

• Goods should leave the factory after Tax

invoice is prepared.

• Tax Invoice should be prepare accordance to

Rule 11of Central Excise Rules 2002.

• Finished Goods dispatched as per Daily

Stock Register reconcile with the Gate

Records.

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4.2 R.G.23 A & C Part II – Cenvat Register

4.2.1 Ensure that

• All the excisable Material received in the

factory premises has been entered in the

CENVAT register.

• CENVAT credit on inputs is recorded in

R.G.23A Part II on the same day of

preparation of Goods Inward Note.

• CENVAT credit on capital goods is recorded

in R.G. 23C Part II

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4.3 Preparation of INVOICES:

1. All columns with respect to sale tax particulars,

destination, mode of transport etc. should be

clearly mentioned on invoices.

2. Any alteration should be duly authorized.

3. Matching of time of removal as per invoice with

actual time as per gate records.

4. Vehicle number should be same on invoice &

gate.

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4.4 Audit of Sample Issued

4.4.1 Verify the

Record of accounts department with

records of Excise department.

4.4.2 Ensure that

• Material sent as sample is duly

approved.

• Excise duty on sample sales has

been paid.

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4.5 Goods Received as Sales Return/

Rejection.

4.5.1 Verify

• Goods Inward Note summary for

receipt of material for rectification .

• Goods Inward Notes summary with

CENVAT register maintained by

Excise Department.

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5. Job work5.1 Goods Sent for Job Work

5.1.1 Ensure that

Proper records have been maintained i.e.

challans under rule 4(5) (a) of The Cenvat

Credit rules, 2004 for goods sent for job

work.

5.1.2 Verify

• Excise records with store records and gate

records on sample basis.

5.1.3 Ensure that

• CENVAT credit has been the reversed if

goods are

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5.1.4 Verify the

Quantity produced after Job work with

Returnable Gatepass Register

not received back within 180 days.

• CENVAT credit has been availed when

above said goods are received after 180

days.

• All challans for sending material have

been entered into control register.

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• Quantity and description of material to

be send for job work has been

mentioned properly on challans

/registers

• List of material not yet received after

job work and check for delay.

• Store records for excisable material

send for job work with excise records

on sample basis.

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5.2 Material Received for Job Work

5.2.1 Ensure

• There is proper control over material

received for job work.

5.2.2 Verify the

• Excise records with store records/ gate

records on sample basis.

5.2.3 Ensure that

• Entries for job charges receivable/

received have been passed in accounts.

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5.2.4 Verify the

• Job work done as per Excise Department with

Accounts department.

5.2.5 Ensure that

• Amount has been debited / recovered for own

material used in job work done.

• CENVAT credit has been availed at the time of

receipt of material.

• Excise duty is paid for material removed after

job work same as final product is removed.

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6 Reconciliation between

Accounts and Excise

Department.

6.1 Verify that

• Monthly amount of CENVAT as per Accounts

Department with Excise Department .

• Monthly reconciliation and check pending

entries.

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7. Export & Deemed Export Sales

7.1 Ensure that

• Export sale is being made either under

rebate of duty or under bond.

• Form CT – 3 certificate has been collected

from the exporter for the deemed Export sale.

• Timely submission of ARE – 1 return as

evidence of export dispatch for each

consignment.

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8. Statutory Requirements Obligation and Form Number

Type of Assessees Last

Date

Payment of Excise Duty in Challan

Form No.- GAR-7

All assessees (other than SSIs)

5th of every month, 6th of every month for e-payment (except in month of march), for march – By 31st of March

Payment of excise duty in

Form No.- GAR -7

Assessees availing exemption based on value of clearance (SSIs)

15th of every month, 16th of every month for e-payment (except in month of march), for march – By 31st of March

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Monthly Return

Form No.– ER-1

All assessees(SSIs, Assessees availing area based exemption and assessees manufacturing processed yarn / unprocessed fabrics falling under chapter 50 to 55,58 & 60 of the tariff.)

10th of every month (for removal during the previous month)

Monthly Return

Form No.– ER-2

100% EOU for removals made in DTA

10th of every month (for removal during the previous month)

Quarterly Return

Form No. –ER-3

SSIs, Assessees availing area based exemption and assessees manufacturing processed yarn / unprocessed fabrics falling under chapter 50 to 55,58 & 60 of the tariff.

20th of every month following the particular quarter

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Annual Financial Information Statement

Form No.- ER-4

All assessees (other than those who had paid less than Rs. 1 crore from PLA for the previous financial year and ordnance factories)

20th November every year (for the previous financial year)

Annual information on Principals Input

Form No.- ER-5

All assessees (other than those who had paid less than Rs. 1 crore from PLA for the previous financial year and those manufactured goods falling under specified headings)

30th April every year (for the previous financial year)

Monthly return on principal inputs

Form No.- ER-6

All assessees (other than those who had paid less than Rs. 1 crore from PLA for the previous financial year and those manufactured goods falling under specified headings)

10th of every month (for the receipts and consumption of principals inputs during the previous month)

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Quarterly Return

Form No.- Annexure 13B in Part 7 of this Manual

All Registered Dealers 15th of the month following the particular quarter

Declaration form ( for the persons exempted from registration)

Form No.- Annexure 13B in Part 7 of this Manual

All Persons manufacturing goods which are either chargeable to nil rate of duty or fully exempted persons availing SSI exemption – If value of clearances in preceding financial year was more than Rs. 90 lakhs

For the first category, before commencement of manufacture of such goods .

For the second category , once value of clearances reaches Rs.90 lakhs

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•Penal Provisions

Grounds Provision / rules

Quantum of interest/ Penalty/ Other

• Contravention of Sec. 8 (Restriction on possession of maximum amount of excisable goods as stipulated by notification) or rule made to prohibit transit of excisable goods or specification of persons requiring registration (incl. attempt to commit / abetment)

• Evasion of duty payment (incl. attempt to commit/ abetment)

Section 9 • Imprisonment upto 7 years and fine if duty involved exceeds Rs.1 lakh

• Imprisonment for not less than 6 months when special and adequate reasons absent

• Other cases: Imprisonment upto

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• Removal of excisable goods violating Act/ rules

• Possession, transport, deposit, concealment, sale, etc of goods liable to confiscation

• Contravention of provisions in relation to Cenvat credit

• Failure to give required information or supply of false information

3 years or fine or both• Second/ subsequent conviction under this section – Imprisonment upto 7 years and fine imprisonment for not less than 6 months when special and adequate reasons absent.

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Duty not paid, short paid, not-levied, short levied or erroneously refunded

Section 11A

• Penalty of 25% of duty if duty paid in full or in part with interest within 30 days of receipt of Show Cause Notice.

Delay in payment of duty – after expiry of 3 months from passing order demanding duty

Section 11AA

• Interest @ 15%

Delay in payment of duty Section 11AB

• Interest @ 13%

• No Interest if duty

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paid in full foregoing right t appeal when duty becomes due on issue of Order under section 37B

Duty not paid , not levied, short paid, short levied, or erroneously refunded due to fraud, collusion, willful misstatement or suppression or facts with intent to evade duty payment.

Section 11AC

• Penalty equal to duty

• 25% penalty if duty and interest within 30 days from communication of adjudication order

Interest on delayed refund

Section 11BB

• Interest @ 6% payable by Department if amount not refunded within 3 months from receipt of refunded claim

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Interest on amounts collected in excess of duty.

Section 11DD

• Interest @ 15%

Publication of names and particulars of persons relating to nay proceedings or prosections under Central Excise Tax in public interest.

Section 37E

• No publication relating to penalty till appeal is filed/ disposed.

Failure to pay duty by due date

Rule 8

Of Central Excise Rules 2002

• Interest from first day after due date till payment of dues

• Default more than 30 days – Consignment wise payment of duty without utilizing

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Cenvat Credit till payment of dues with interest.

• Removal of goods in contravention of Central Excise Rules / Notifications issued under such rules. • Non – accountal of excisable goods• Manufacture without applying for registration Certificate.• Contravention of any provision under Central Excise Rules / notifications issued under such rules

Rule 25

Of Central Excise Rules 2002

• Confiscation of goods

• Penalty upto duty amount or Rs. 2,000 whichever is greater

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Possession, transport , deposit, keeping, concealing, etc of confiscable goods

Rule 26

Of Central Excise Rules 2002

• Penalty upto duty amount or Rs. 2,000 whichever is greater

Issue of excise invoice without delivery of goods or abetment in making such invoice or issue of (incl. abetment) such document by which ineligible benefit like Cenvat credit is likely to be taken or has been taken

Rule 26

Of Central Excise Rules 2002

• penalty upto such ineligible benefit or Rs. 5,000 whichever is greater

Breach of rules for which no penalty is separately provided

Rule 27

Of Central Excise Rules 2002

• Penalty upto Rs. 5,000 and confiscation of goods.

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Recovery of Cenvat credit taken wrongly or erroneously refunded

Rule 14

Of Central Credit Rules 2004

• Interest payable along with such credit amount and provisions of section 11A and section 11AB applicable

Cenvat credit wrongly availed or in contravention of Cenvat Credit Rules, 2004 in case of inputs and capital goods

Rule 15

Of Cenvat Credit Rules 2004

• Penalty of Rs. 2,000 or upto duty amount whichever is greater and confiscation of goods

• Penalty under Section 11AC also payable if credit availed due to fraud, collusion, suppression, etc with intent to duty payment.

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Cenvat credit wrongly availed or in contravention of Cenvat Credit rules, 2004 in case of input services

Rule 15

Of Cenvat Credit Rules 2004

• Penalty upto Rs.2,000• Penalty as per Section 78 of Finance Act,1994 also payable if credit availed due to fraud, collusion, suppression, etc with intent to evade tax payment

Breach of Rules for which no penalty is separately provided

Rule 15A

Of Cenvat Credit Rules 2004

• Penalty upto Rs. 5,000

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Flow Charts