study of central excise in tata steel
DESCRIPTION
A summer training project report by Ritesh MishraTRANSCRIPT
“Study of Central Excise and Service tax in TATA STEEL Ltd. Jharia Division”
Summer Training ReportSubmitted in Partial Fulfillment of the requirements for the
PG Diploma in Management
PGDM
Under Guidance of: By:
C.A Pushkar Sharma Mr. Ritesh Mishra
Roll No. Pg/16/063
Submitted to: Mr. Amit Kishore Sinha
School of Management Sciences Varanasi
DECLARATION
I Ritesh Mishra declare that the Summer Training Project on “Study of Central Excise and
Service Tax in TATA STEEL Ltd. Jharia Division” is the original work done by me. I have
followed all the guidance and instruction issued by the institute time to time for the preparation
of this project. The completion of all the information and data are accurate to the best of my
knowledge.
Ritesh Mishra
PG/16/063
ACKNOWLEDGEMENT
Here I take the opportunity to express my gratitude to all of them, who in some
or the other way helped me to accomplish this Project. The project study cannot
be completed without their guidance, assistance, inspiration and co-operation.
For successfully accomplishment of task apart from hard work the most
important requisite is the right direction and guidance. And for a student these
become the major part for the study. In Tata Steel Ltd. Jamadoba, Dhanbad, this
right direction and guidance is provided by my guide and all the executives of
the branch, in form of necessary information and exhibits that give me a great
help in completing my work.
First of all I would like to thanks Tata Steel Ltd. for giving me such a great
opportunity of studying such a vast topic as well as challenging topic i .e. “Study
of Central Excise and Service Tax in TATA STEEL Jharia Division”.
A special thanks to CA Pushkar Sharma (Manager, Cental Accounts )
under whom I conducted this study, for his able guidance in getting my project
completed. And I also thanks to MR. C.H Diwakar(General Manager ), CA
Shahzad Qaiser (Head Central Accounts ) CA Ashish Bansal (Manager, Cental
Accounts ) ,and employees who helped me to understand practically my topic
time to time in making project report. Only because of employees I learned so
many things and with their supports I finished my project successfully.
Lastly I express my gratitude to my parents and who have been a moral support
to throughout my life. In addition I would like to thanks to the School of
Management Sciences Varanasi to give me permission for training so that I will
get practical knowledge in my particular topic i .e. Study of Central Excise &
Service Tax in Tata Steel
PREFACE
Management i.e. managing available resources to get the desired result in a proper way. Apart
from theoretical studies we need to get a practical exposure of those theories by working as a
part of organization during our summer training. Training is a period in which a student can
apply his theoretical knowledge in practical field. Basically practical knowledge and theoretical
knowledge have a very broad difference.
So this training has high importance as to know how both the aspects are applied together.
The study of management acquires most crucial position in the business administration. In order
to be successful, it is necessary to give priority to the management in an organization. But it
can’t be denied that the study of management would be more educational, materialistic and even
more interesting, if it is to be paired with the work in organization as an employee.
The training session helps to get details about the working process in the organization. It has
helped me to know about the organizational management and discipline, which has its own
importance. The training is going to be a lifelong experience.
Management in India is heading towards a better profession as compared to other professions.
The demand for professional managers is increasing day by day. To achieve profession
competence; manager ought to be fully occupied with theory and practical exposure of
management. A comprehensive understanding of the principle will increases their decision-
making ability and sharpens their tools for this purpose. During the curriculum of management
programmers a student has to attain a practical exposure of an organization on live project in
addition to his/her theoretical studies. This report is about the practical training done at “TATA
STEEL Ltd. (Jharia division)”, Dhanbad during the curriculum of PGDM from SMS,
Varanasi.
TABLE OF CONTENT
UNIT NO. CHAPTER HEADING PAGE NO.1 INTRODUCTION
A. Industry Profile 1-6
B. Company Profile 7-25
2 EXPERIENTIAL LEARNING 26-28
3 INTRODUCTION
A. Study of Central Excise and Service Tax 29-31
B. Objective of the Study 31
4 CENTRAL EXCISE
A. Act & Duty 32-38
B. Tariff 39
C. Rules 39-40
D. Valuation 40-47
5 SERVICE TAX 48-54
6 CENVAT CREDIT 55-65
7 FINDINGS AND LIMITATION 66-67
8 CONCLUSION AND SUGGESTION 68
9 BIBLIOGRAPHY 69
INTRODUCTION
INDIAN COAL INDUSTRY
History
The first coal mining operation commenced in 1774 in the Raniganj coalfield on the banks of
River Damodar. The introduction of steam locomotives and WW-I stimulated demand for coal,
and production peaked at 18 million tons (mts) during the 1920s.
Till independence, the Indian coal industry witnessed sporadic phases of growth. Since the
private sector followed unscientific methods, productivity was low. The Indian government took
steps to correct this and improve the working conditions in the nation’s coal industry. National
Coal Development Corporation (NCDC), comprising of railway owned collieries, was
established. In the early 1970s, all privately owned coal producing companies were nationalized
under the Coal Mines (Nationalisation) Act.
Size
The Indian coal industry is the world’s third largest in terms of production and fourth largest in
terms of reserves. Around 70% of the total production is used for electricity generation and the
remaining by the steel, cement and other heavy industries. Coal is also used as fuel for domestic
purposes. As a result of exploration carried out up to the depth of 1200m by the Geological
Survey of India, Central Mine Planning & Design Institute Limited and Mineral Exploration
Corporation Limited etc, a cumulative total of 267.21 Billion tonnes of Geological Resources of
Coal have so far been estimated in the country as on 1.4.2009.
Coal and Steel
Coal is used as a raw material for the production of steel. Coking coal requirement in steel
production is expected to touch over 85.34 Million Metric Tons in 2011-12. High coking coal
demand by the Indian steel industry and low reserve base has boosted the import of coking coals.
Steel Industry is the second largest user of Coal after the Electricity Industry. More than 600
million tons of Coal were used to produce more than 1 Billion Tons of Steel. Coal is an essential
raw material along with iron in the production of steel which is one of the useful metal products
used by man today. Coking Coal is a solid carbonaceous residue derived from low-ash, low-
sulfur bituminous coal. Metallurgical coke is used as a fuel to smelt Iron in the Furnace. This
Cast Iron which is produced is further refined to make Steel. Around 0.63 tonnes of coke
produces 1 tone of Steel
Types of Coal
ANTHRACITE
Anthracite is the highest rank coal and is characterized buy low volatile matter (always less than
10%) and high carbon content. It has a semi- metallic luster and is capable of burning without
smoke. Semi- anthracite is coal midway between low volatile bituminous coal and anthracite.
BITUMINOUS
Bituminous coal is that coal which in rank is between sub-bituminous coal and semi- anthracite.
Volatile matter on dry ash free basis range from between 10% and 14% to 40% and over.
Usually divided into three sub groups- low volatile medium volatile and high volatile.
SUB-BITUMINOUSCOAL
Sub- bituminous coal is the next highest coal in rank after lignite. Typical bed moisture levels are
10-20%, and calorific value also enters in to the classification scheme.
LIGNITE
Lignite is a low rank coal containing high moisture. Generally a coal is considered to be a lignite
if it contains greater than 20% bed moisture (classification schemes for lignite are generally
based on calorific value). Other characteristics of lignite are low reflectance, high volatile matter
as high oxygen and low carbon and low carbon level and often the presence of some woody
structure. In general the term is synonymous with brown coal.
PEAT
Peat is the first stage in the conversion of vegetable matter to coal. Bed moistures are high, often
greater than 75% and plant remains are clearly visible.
ASH
The inorganic residue after the incineration of coal to constant weight under standard conditions.
Is less than the mineral matter because of the chemical changes occurring during incineration,
with most important differences being loss of water of hydration, loss of carbon dioxide, and loss
of sulphurous gases from sulphides.
Top 5 States in Coal resources
1. Jharkhand- 76712million tones (mts)
2. Orissa- 65227mts
3. Chhattisgarh- 44483mts
4. West Bengal- 28327mts
5. Madhya Pradesh- 20981mts
Top 3 Coal Mining Companies in India
1. Coal India Limited. (CIL)
2. Neyveli Lignite Corporation
3. Singareni Collieries Company Limited (SCCL)
Others Coal Mining Companies in India
1. TATA STEEL
2. Bharat Coaking Coal limited
3. Central Mine Planning and Design Institute Limited
4. Eastern Coalfields Limited
5. Gujarat Mineral Development Corporation Limited
6. Mahanadi Coalfields Limited
7. North Eastern Coalfields
8. Northern Coalfields Limited
9. Western Coalfields Limited
10. South Eastern Coalfields Limited
A Review of Major Coal Mining Coampanies
Coal India Limited. (CIL)
Chairman cum Managing Directors- Shri N C Jha
Coal India Limited (CIL), a holding company, was set up on 1st November, 1975 to streamline
the working of the coal industry in a manner conducive to more efficient administration and
rapid stepping up of coal production. The company has under it seven producing subsidiaries and
one planning and design subsidiary. The coal mines in the north eastern region are directly
managed by the holding company. Dankuni Coal Complex, a coal carbonisation plant in West
Bengal, is also directly under the holding company.
Market Share
Company is the largest coal producing company in the world, based on its raw coal production of
431.26 million tons in fiscal 2010.Company is also the largest coal reserve holder in the world,
based on its reserve base as of April 1, 2010. Company had a total of 18,862.9 million tons of
Total Reserves, and a total of 64,218.0 million tons of Total Resources, as on April 1, 2010.
Size
As of March 31, 2010, company operated 471 mines in 21 major coalfields across eight states in
India, including 163 open cast mines, 273 underground mines and 35 mixed mines (which
include both open cast and underground mines).
Products
Company produce non-coking coal and coking coal of various grades for diverse applications.
Non-coking coal represents a substantial majority of raw coal production. Most of co’s coal
production is from open cast mines. Company continue to expand its raw coal production
capacities.
Current Projects
As of March 31, 2010, 45 projects (comprising 22 capacity expansion projects for existing
mines and 23 new mine projects) had received relevant investment approval (of its Board and the
board of directors of relevant Subsidiary companies) and were in various stages of mine planning
anddevelopment:
(i) 25 projects, with an aggregate estimated capacity of 47.51 million tons per annum were at
various stages of implementation and are expected to become operational by the end of fiscal
2012; and
(ii) 20 longer gestation projects,with an aggregate estimated capacity of 33.27 million tons per
annum, are expected to become operational during the 12th Five Year Plan period (2013-2018).
Neyveli Lignite Corporation
Chairman cum Managing Director- Shri A.R Ansari
Neyveli Lignite Corporation Limited is a Government of India Undertaking established on 14th
November, 1956 engaged in Mining Lignite and using the same for Power Generation. Neyveli
Lignite Corporation Limited (NLC) is a public sector unit having operations at Neyveli in Tamil
Nadu. The Government of India’s holding stands at 94%.
Size
The company has 4 mines with a combined capacity of 30.6 million tonnes of lignite per annum
(MTPA), and 3 thermal power stations, with a combined generation capacity of 2,740 MW per
annum.
Products
The main core activity of NLC is Lignite Excavation and power generation using lignite
excavated. NLC is having three lignite mines named as Mine I, Mine II and Mine IA. Also raw
lignite is being sold to small scale industries to use it as fuel in their production activities.
NLC is generating power in its Thermal Power Station I, Thermal Power Station -II and in
Thermal Power Station I Expansion. All the southern states are beneficiaries of this power
generation project.
Key Highlights
The company is implementing a mine-cum-power project at Barsinger (Rajasthan) at an
aggregate revised capital cost of Rs 18 bn.
A joint venture between Mahanadi Coalfields Ltd, Hindalco and NLC, having an equity
participation of 70:15:15, respectively, has been established for mining coal from Talabira II and
III coal blocks. NCL also has proposed to enter into a JV with Uttar Pradesh Rajya Vidyut
Utpadan Nigam Ltd for setting up a coal-based power plant of 2,000 MW capacity in Uttar
Pradesh, at an estimated cost of Rs 100 bn.
As part of a diversification programme, the company has decided to venture into the green
energy business by setting up wind-based power project, with an initial capacity of 50 MW, in
Tirunelveli district in Tamil Nadu.
SINGARENI COLLIERIES COMPANY LIMITED
Chairman cum Managing Director- Shri S.Narsing Rao
Singareni Collieries Company Limited (SCCL), incorporated as a public limited company in
1920, became a Government Company in 1956 when Government of Andhra Pradesh acquired
major share holding. The share capital of the company is held by Government of Andhra Pradesh
and Government of India in the ratio of 51:49 respectively.The loan capital is provided entirely
by the Government of India. The assistance is governed by a Tripartite Agreement between
Government of India, Government of Andhra Pradesh and Singareni Collieries Company
Limited. The last such agreement for the period 1990-97 was signed in October, 1994 covering
the period from 01.04.1990 to 31.03.1997. A tripartite agreement for 9th Five Year Plan period is
in advanced stage of finalization.
Size
The Company manages the coal mining operations in Andhra Pradesh. The reserves stretch
over 350 sq.kms of Pranahita-Godavari Valley of Andhra Pradesh with proven deposits of 8791
million tonnes as on April 2010. The mining activities are concentrated in four districts of
Andhra Pradesh viz. Khammam, Adilabad, Karimnagar and Warangal. . It currently operates 14
open-pit and 36 underground mines in four districts, employing about 78,000 people.
Market Share
The authorised capital of SCCL as on 31.03.2001 was Rs.1800 crores and the paid-up capital
on that date was Rs.1733 crores. The total turn-over of the company was Rs. 2743 crores in the
year 2010-11.
COMPANY OVERVIEW
TATA STEEL LIMITED
HISTORY
Tata Steel Limited, incorporated in 1907 by Shri Dorabji Tata, is India's largest private sector
steel company belonging to the Tata Group. The company manufactures finished steel, both long
and flat products like hot and cold rolled coils and sheets, galvanized sheets, tubes, wire rods,
construction re-bars rings and bearings. The company markets its products in brands like "Tata
Steelium, Tata Tiscon, Tata Pipes, etc. The company is among the lowest cost producers of steel
in the world. Its main plant is located in Jamshedpur, having a manufacturing capacity of 5
MTPA (million tonne per annum) while its processing units, captive iron ore and coal mines are
located in the states of Orissa, Jharkhand, Maharashtra, Gujarat and West Bengal. With its head
office located in Mumbai, the company functions through a network consisting of trading arms
and operation and projects sites spread across countries in the continents of Asia, Europe and
America. Apart from Steel there are six Strategic Business Units or divisions for Bearings, Ferro
Alloys and Minerals, Rings and Agrico, Tata Growth Shop, Tubes, and Wires. It operates in
more than 20 countries and has a commercial presence in over 50. In the past few years, Tata
Steel has invested in Corus (UK), Millennium Steel (renamed Tata Steel Thailand) and NatSteel
Asia (Singapore). With these, the company has created a manufacturing and marketing network
in Europe, South East Asia and the Pacific-rim countries. Tata Steel is among the lowest cost
producers of steel in the world and one of the few select steel companies in the world that is
EVA+ (Economic Value Added). Its captive raw material resources and the state-of-the-art 4.9
MTPA (million tonne per annum) plant at Jamshedpur, in Jharkhand State, India give it a
competitive edge. With the acquisition of Corus, Tata steel has become the fifth largest steel
maker in the world. Soon the Jamshedpur plant will expand its capacity from 4.9 MTPA to 7
MTPA by 2008. The Company plans to further enhance its capacity, manifold through organic
growth and investments. It’s associated / a subsidiary constitutes about 24 MTPA making its
total capacity about 29 MTPA which is the fifth largest in the world. Out of this the steel
business comprising of Flat Products, Long Products, RM Division, CSI Division, and Shared
Services constitutes 85% of its business. The rest comprising of Tubes, Bearings, Agrico
Products constitutes the rest 15% business. Tata Steel was established by Indian businessman
Jamshedji Nusserwanji Tata in 1907 (he died in 1904, before the project was completed). Tata
Steel introduced an 8-hour work day as early as in 1912 when only a 12-hour work day was the
legal requirement in Britain. It introduced leave-with-pay in 1920, a practice that became legally
binding upon employers in India only in 1945. Similarly, Tata Steel started a Provident Fund for
its employees as early as in 1920, which became a law for all employers under the Provident
Fund Act only in 1952. Tata Steel's furnaces have never been disrupted on account of a labour
strike and this is an enviable record.
ACHIEVMENTS
Tata Steel formerly known as TISCO (Tata Iron and Steel Company Limited) is the world's
seventh largest steel company, with an annual crude steel capacity of 31 million tonnes. It is the
largest private sector steel company in India in terms of domestic production. Ranked 258th on
Fortune Global 500, it is based in Jamshedpur, Jharkhand, India. It is part of Tata Group of
companies. Tata Steel is also India's second-largest and second-most profitable company in
private sector with consolidated revenues of 132,110 crore (US$ 29.99 billion) and net profit of
over 12,350 crore (US$ 2.8 billion) during the year ended March 31, 2008. Tata steel in the 8th
most valuable brand according to an annual survey conducted by Brand Finance and The
Economic Times in 2010. Its main plant is located in Jamshedpur, Jharkhand, with its recent
acquisitions, the company has become a multinational with operations in various countries. The
Jamshedpur plant contains the DCS supplied by Honeywell. The registered office of Tata Steel is
in Mumbai. The company was also recognized as the world's best steel producer by World Steel
Dynamics in 2005. Tata Steel annually produces 18 million tonnes of steel in India and 52.32
million tonnes overseas, making it the fifth largest steel producer in the world. It produced a
record-breaking 10.32 million tonnes of salable steel in its Jamshedpur works in 2009-10. The
company's gross revenue in that financial reporting year was 20196.24 crore. Its PBT was
621261.65 crore and PAT was 422212.15 crore in the same year. In the year 2000, the
company was recognised as the world's lowest-cost producer of steel.
BOARD OF DIRECTORS
The operations and successes of the Tata Steel Group are taken care of by its capable
management and Board of Directors. At the helm of affairs are the Company’s Directors, whose
profiles offer a brief introduction and help get acquainted with them…
NAME DESIGNATION
Ratan Tata Chairman, Non Independent & Non Executive Director
B Muthuraman Non Executive Vice Chairman
H M Nerurkar Managing Director
Nusli N Wadia Independent Non-Executive Director
S M Palia Independent Non-Executive Director
Suresh Krishna Independent Non-Executive Director
Ishaat Hussain Non-Executive Non Independent Director
Jamshed J Irani Non-Executive Non Independent Director
Subodh Bhargava Independent Non-Executive Director
Jacobus Schraven Independent Non-Executive Director
Andrew Robb Independent Non-Executive Director
Kirby Adams Non-Executive Non Independent Director
Mr. Ratan Tata Chairman
VISION & MISSION
The long journey of Tata Steel has seen the Company re-define its performance parameters in a
number of ways to become the global steel industry benchmark for value creation and corporate
citizenship. It ensures a total commitment to its ethical business practices and a people oriented
vision.
VISION
We aspire to be the global steel industry benchmark for Value Creation and Corporate
Citizenship We make difference though:
Our people, by fostering team work, nurturing talent, enhancing leadership capability and
acting with pace, pride and passion.
Our offer, by becoming the supplier of choice, delivering premium products and services,
and creating value for our customers.
Our innovative approach, by developing leading edge solutions in technology, processes
and products.
Our conduct, by providing a safe working place, respecting the environment, caring for our
communities and demonstrating high ethical standards.
MISSION
Consistent with the vision and values of the founder Jamsedji Tata, Tata Steel strives to
strengthen India’s industrial base through the effective utilization of staff and materials. The
means envisaged to achieve this are high technology and productivity, consistent with modern
management practices.
Tata Steel recognizes that while honesty and integrity are the essential ingredients of a
strong and stable enterprise, profitability provides the main spark for economic activity.
Overall, the Company seeks to scale the heights of excellence in all that it does in an
atmosphere free from fear, and thereby reaffirms its faith in democratic values.
VALUES
Trusteeship
Integrity
Respect for the individual
Credibility
Excellence
PRODUCTS:
Raw Materials: With a century of experience in sourcing raw material through scientific
research & development and sustainable mining, Tata Steel’s three main areas of raw material
operations are iron-ore, chromites and coal. The Company’s long-term strategy has been
designed to have greater control over raw material resources and achieve its security across
global operations. A pioneer in prospecting, discovering and mining iron ore, coal and other
minerals, Tata Steel has nearly a century of experience in scientific and sustainable mining; mine
planning, development and research. Company-owned and operated mines and collieries have
since its inception, met most of the raw material needs of the Company’s Steel Works. The Raw
Materials Division of Tata Steel raises over 14 million tonnes of ores from its captive collieries,
iron ore mines and quarries spread over the states of Jharkhand and Orissa. The Company’s Raw
Materials operations in India are mainly spread in three broad areas – iron-ore, chromite and
coal. The chromite and manganese mines and their operations have been amalgamated under the
‘Ferro Alloys & Minerals Division’ that acts as a separate profit centre. Iron-ore and coal being
the two key raw materials for steel making, efficient and scientific mining operations give the
Company a competitive edge in steel production.
IRON ORE AND COAL
Ever since the discovery of the mineral in 1903, Iron ore mining has become an integral part of
steel making at Tata Steel. The iron ore units are located in Noamundi, Joda and Katamati in the
states of Jharkhand and Orissa. Tata Steel Limited also has manganese mines and dolomite
quarries in Orissa, located around 150 kms from Jamshedpur, home to the Steel Company's
manufacturing facility. The Steel Company's iron ore units produce various grades of high
quality iron ore including rich blue dust ore. Operations at the mines, including services are
managed by Integrated Management Systems.
FERRO ALLOYS AND MINERALS
Tata Steel’s Ferro Alloys & Minerals Division (FAMD) is the market leader of chrome in India
and is among the top six chrome alloy producers in the world, with operations spanning two
continents. It is also the leading manganese alloy producer in India and is a leading supplier of
dolomite and pyroxenite. FAMD has leveraged the core strengths of Tata Steel to grow
successfully into a strategic business unit and separate profit centre within the Company.
AGRICULTURAL IMPLEMENTS
Tata Steel manufactures superior quality agricultural implements through its Agrico Division
from Tata High Carbon Steel, after using a single piece by forging. The high quality of the
products makes them the First choice in agricultural equipment procurement both in the public
and private sectors alike.
TATA AGRICO: Superior quality agricultural implements are manufactured at Tata Agrico, a
division of Tata Steel that happens to be the pioneer in this segment in the country. The product
range includes Hoes, Sickles, Crowbars, Shovels, Pick Axes, Hammers, TP Series Hoes
(Powrah), Garden Tools and Files. These implements cater to the needs of the Agricultural
sector, Horticulture Industry, Maintenance of Roads, Dams, Railway- Tracks, Collieries etc. in
India and abroad. The product offerings have been recently enhanced with the launch of three
new products (axe, rotavator blade, chaff cutter) and 21 variants in the existing product category.
FLAT PRODUCTS
Galvanised corrugated sheets under brand name Tata Shaktee has been consistently delivering
on its promises of longevity and strength. Tata Steelium, another product of the Flat Products
Division happens to be the world's first branded Cold Rolled Steel and has a strong presence in
the retail segment through exclusive shops called Steelium zones. World class steel products are
manufactured at the Flat Products Division of Tata Steel under three basic categories - Hot
Rolled Products, Cold Rolled Products and Galvanised products. With commanding brands like
Tata Shaktee and Tata Steelium under its umbrella, the Company is continuously surging ahead
in its commitment to re-define the future of Indian Steel. Integrated supply chain starting with
self-sufficiency in raw materials procurement, futuristic technology, continuous pursuit for
innovation and improvement and an exhaustive pool of highly skilled manpower are some of the
factors that have resulted in impressive performance records for this group.
LONG PRODUCTS
Thermo Mechanically Treated (TMT) rebars from the Long Products Division are produced
under the brand name ‘Tiscon’ and are the first of its kind to have been introduced in India.
Tiscon has been the first rebar in the country to be awarded the ‘Super brand’ status in the
construction rebars category. The Long Products Division of Tata Steel operates as a separate
profit centre and was the first to introduce the Thermo Mechanically Treated (TMT) rebar under
the brand name Tata Tiscon in the country.
BEARINGS
A wide variety of bearings and auto assemblies are manufactured by Tata Steel at its Bearings
Division, with a production capacity of 30 million bearing numbers per annum. Tata Bearings
and auto components happen to be the preferred choice of key players in the targeted industry
segment.
WIRES
Steel wires under the brand name Tata Wiron comprise 30% market share of the organised wire
market in India. A wide range of wires manufactured by Tata Steel’s Wire Division cater to the
needs of the various industry segments such as automobile, infrastructure, power and general
engineering.
TUBES
Pipes manufactured by the Company’s strategic business unit Tata Tubes, is the most prominent
brand in the industry today which is retailed through a wide distribution network. A deeply
thought out branding exercise was undertaken in order to unleash the power of the ‘Tata Pipes'
brand in the welded steel category.
PLANTS AND EQUIPMENT
Multidisciplinary engineering approach for design, manufacture and supply of high precision
equipment is offered to various industry sectors by Tata Steel’s Growth Shop division. Services
include erection and commissioning of all types of equipment in plants and industrial buildings
in addition to a wide variety of jobs in machining and assembly.
RAW MATERIAL TECHNOLOGY
USE OF IRON ORE FINES
Instead of using only lumps of iron ore, Tata Steel has adopted a combination of techniques for
mining, beneficiation, sintering and pelletisation of ore, resulting in reduction in the generation
of fines in the mines and increase in usage of the fines in Iron making...
IRON MAKING TECHNOLOGY
IMPROVING BLAST FURNACE PRODUCTIVITY
Reduction in the consumption of iron ore, coal and fluxes and the energy required for reducing
each tonne of hot metal is at the core of technological research in iron making. To improve the
productivity in the Blast Furnace process to over 3t /day/ m3 of furnace...
STEEL MAKING TECHNOLOGY
ELECTRIC ARC FURNACE (EAF)
The capital costs involved in EAF is lower as compared to BOF (Basic Oxygen Furnace).
Modern EAF has features such as high transformer capacity, Oxygen lances, Oxy – fuel burners,
coal injection system, bottom purge holes, water cooled boxes above the slag line, water cooled
roof, EBT (eccentric bottom tap hole), Charge hoppers with vibrators etc. to improve
productivity...
STEEL MAKING PROCESS
Tata Steel has over the years, undertaken extensive research in making the process of
steelmaking more energy efficient, economically viable and environmentally sustainable. Given
is a virtual representation of the steps involved in the Company’s steelmaking process.
TATA STEEL INTERNATIONAL GLOBAL POSITIONING
Tata Steel International Global Positioning pioneers and develops new opportunities for Tata
Steel Group. Global Positioning is a genuinely global business. It has major hubs in London,
Chicago and Hong Kong and is directly represented in all major steel consuming and producing
regions. Global Positioning is committed to building close relationships with customers and
suppliers and is able to offer one of the most comprehensive ranges of commodity steel products.
Whether in large or small quantities, Tata Steel International Global Positioning aims to supply
everything the customer needs. Tata Steel International Global Positioning brings a variety of
support services to the product package with teams providing specialist logistics, financial and
technical services. The Tata Steel Group’s growth and globalisation strategy is driven by its
business expansion while maintaining profitability and mitigating risks. The Tata Steel Group
over the years has focused on enhancing raw material security and announced major joint
ventures in various parts of the globe.
AUSTRALIA
Bowen Basin Project
Location: Bowen Basin in Central Queensland.
Capacity: Mining capacity of 58 million tonnes of raw coal for 14 years.
Press Releases
Tata Steel's investment for the expansion of production at Carborough downs coal mine in
Australia.
Tata Steel acquires stake in Australian coal mines.
CANADA
Iron ore project
Location: Northern Quebec, Labrador and Newfoundland provinces.
Capacity: The DSO resource is estimated to be approximately 100 million tonnes. The LabMag
deposit consists of 3.5 billion tonnes of proven and potential mineral reserves. These reserves are
contained in the 4.6 billion tonnes of measured and indicated resources and 1.2 billion tonnes of
inferred resources.
Project Update: Tata Steel, along with NML is trying to work out an economically viable
solution to advance the project. The feasibility study for the DSO project is progressing and
production is expected to commence in 2011.
IVORY COAST
Nimba Iron ore Project
Location: Nimba Iron ore deposits in Ivory Coast..
Capacity: To be assessed.
Project Update: The project is in its initial phase that involves exploration and detailed
feasibility assessments followed by construction of the mine and beneficiation facilities.
Press Releases: Tata Steel’s joint venture in Ivory Coast for Mount Nimba Iron Ore.
MOZAMBIQUE
Key coal exploration tenements
Location : Key coal exploration tenements (the Benga and Tete licences) held by Riversdale in
Mozambique.
Capacity: Potential to extract 720 million tonnes by open-cut methods from a major coal
resource in the Benga Licence.
Press Releases
Tata Steel Signs MoU with Riversdale Mining Limited.
Tata Steel signs JV with Riversdale Mining for Mozambique Coal Project
THE NETHERLANDS
Operations: The I Jmuiden Steelworks is Corus’ largest and most cost-efficient steel making
facility, with a production capacity of 7.6mtpa.
Projects: A number of capital expenditure schemes are in progress at IJmuiden. Among them is a
€20m pilot plant that is being jointly funded with ULCOS, the European Commission and the
Dutch government. The 60,000tpa pilot plant is intended to prove the commercial and technical
viability of a new iron making process called Hisarna. If successful, the project will considerably
reduce the carbon dioxide emissions of the existing integrated steelmaking process. Hisarna
would also be more energy efficient than existing technology and use cheaper and more abundant
raw materials.
OMAN
Limestone Project
Location: Uyun region in the Salalah province.
Capacity: To be assessed.
Updates: Exploration and feasibility studies are in progress.
Press Releases: Tata Steel’s joint venture in the Sultanate of Oman For Uyun limestone.
SINGAPORE
Tata NYK Shipping Pte Ltd.
Tata NYK Shipping Pte Limited is a Singapore based 50:50 joint venture between Tata Steel and
Nippon Yusen Kabushiki Kaisha (NYK line), a Japanese shipping major.
SOUTH AFRICA
Tata Steel (KZN) (PTY) Ltd.
TSKZN is a South Africa based subsidiary of Tata Steel, in the business of producing Ferro
Chrome and Charge Chrome.
Location: Richards Bay (in uMhlathuze Municipality)
Capacity: 1,51,000 tonnes per annum.
Press Release
Tata Steel steps into South Africa.
Nine ex-cadets of TFA to represent India in South Africa.
THAILAND
Tata Steel Group’s equity in Tata Steel Thailand is 67.1%. Headquartered in Bangkok, its three
main subsidiaries are SISCO, NTS and SCSC. In the year 2008, Tata Steel Thailand registered
sales of 1.4 million tonnes. The Company’s predominant market is in Thailand and its market
share in 2008 was 31% in the long products business. The Company also has been improving
continuously in the past few years with its various initiatives focused on reducing cost, improving
productivity and quality. Production during FY 09 was at 1.07 million tonnes while sales at 1.1
million tonnes.
Tata Steel Thailand is committed to moving forward in the journey for excellence and social
accountability. The Company continuously improves its business processes and systems in
accordance with its commitment to environmental responsibilities.
UNITED KINGDOM
Corus
Corus, the European arm of the Tata Steel Group, is headquartered in London in the United
Kingdom. Corus’ crude steel capacity in the UK is in the region of 13mtpa.
Operations: Corus produces carbon steel by the basic oxygen steel making method at three
integrated steelworks in the UK at Port Talbot, Scunthorpe and Teesside (currently mothballed),
and special and alloy steels through the electric arc furnace method in Rotherham. In addition,
there are a number of downstream rolling, coating and processing facilities.
Performance: Liquid steel production in 2008-09 at 16 million tonnes was 20% lower than that
of 2007-08. Turnover for the period was Rs.1,09,570 crore (US$ 21,539m).
Projects: A number of capital expenditure schemes are in progress in the UK. Among them is the
£60m BOS gas recovery plant at Port Talbot, which is expected to significantly reduce natural
gas and electricity purchases and materially reduce carbon dioxide emissions at the site through
the utilisation of gas generated inside the Basic Oxygen Steel plant.
VIETNAM
Ha Tinh Project
Location : Ha Tinh province.
Capacity: A proposed steel complex with an estimated capacity of 4.5 million tonnes per year.
VNSteel
Press Releases
JV between Tata Steel, Vietnam Steel Corporation and Vietnam Cement Industries.
Vietnam Steel Corporation and Tata Steel sign an MoU.
JHARIA DIVISION
The Coal Mines Regulation 1957 provides a comprehensive frame work for the operation of our
underground coal mines. The operations are governed by the Mines’ act, Factory’s act, IBR,
Central & State Pollution Control Board provisions. The division has a track record of
proactively fulfilling the provisions of the statutes.
Underground coal mining is difficult & arduous operation and it requires stringent safety norms.
The division complies with the safety norms laid by the Director General of Mines Safety
(DGMS).To ensure compliance & adherence to the safety norms, the division has an Internal
Safety Organization (ISO), which directly reports to the divisional head. The division has an
Occupational Health Specialist to monitor & prevent occupation health hazards. The division
adheres to financial discipline as prescribed under various acts, such as Income tax, Sales tax etc.
The internal Audit department of Jamshedpur supervises the compliances. The division also keep
regular track of testing of equipments for Weights & Measurement and Pollution Control.
KEY CUSTOMER GROUP / MARKET SEGMENTS
Product type Customer groups Key product requirementsKey service
requirements
Clean coal
Internal (Jsr. Works)
Ash, Moisture, Standard
Deviation of ash & Cost of
the product
Timeliness &
Consistency
External (PSU
Steel Plants)
Ash, Moisture, Standard
Deviation of ash & Cost of
the product
Timeliness &
Consistency
COMPETITIVE POSITION
After nationalization of the coalmines in 1971, most of the coalmines in the Jharia coalfields were
put under Bharat Coking Coal Limited (BCCL), a subsidiary of Coal India Limited. Indian Iron
& Steel Company (IISCO) also operates two collieries for its captive consumption. The nearby
steel plants of SAIL & IISCO have the top charge batteries for coke making where the
requirement of prime coking coal is mostly met by BCCL and part by imports. BCCL has around
450 mines in the Jharia Coalfields, producing about 30 MTPA of raw coal. Out of which 10MT
from Underground and balance 20mt from opencast mines. The cost of production in open cast
mines is lower than the underground.
Jharia division of Tata Steel operates five U/G coalmines with combined annualised raw coal
production of 1.36MT. The requirement of prime coking coal at Steel Works, Jamshedpur
reduced considerably with introduction of Stamp charge batteries. The division proactively acted
and established a market for the PSU Steel Plants of SAIL/ IISCO. The cost competitiveness,
product quality consistency & timeliness provided an edge to the division in respect to BCCL and
as a result it now sells 55% of its total clean coal production to PSUs against 3% in 99-2K.
The division has continuously increased its productivity and consistently reduced the cost to
remain competitive whereas globally & locally, the underground mining are becoming
economically unviable for many of the established players in this field.
There is no immediate plan of these PSUs for conversion to Stamp charge .There exists a gap
between requirement & availability of coking coal in the country which is getting widened with
Rs-$ parity and thus providing opportunity to the division to increase its market share. Moreover
the division is always alive to its competitive strength through various cost effective & efficiency
improvement initiatives along with maintaining the it’s competitive advantage of product quality
& timeliness in its delivery.
Amendment in the Coal Mines Nationalization Act is expected in the near future. The company is
already exploring the possibility / viability of acquiring new coal leases for future growth.
FACTOR FOR SUCCESS
The manpower productivity, cost effectiveness, safety standards, consistency in quality of the
product & timeliness in delivery are some of the key parameters that determine the success of
any U/G coal mines and the division has always maintained an edge compared to PSU mines in
these areas. It is also reflected in the recent requirements indicated by the PSU steel plants for
Jharia coal.
STRATEGIC CHALLENGES
The strategic challenges are reflected in strategic objectives of the divisional scorecard. Some of
these challenges are:
To maintain safety standards specially with increasing depth and Sustainable growth of
manpower productivity of this manpower intensive existing underground mining operations, to
contain the escalating predominantly wage cost which alone amounts to almost 60 % of the cost
of production by rightsizing and rationalization of workforce through training, multiskilling etc.
Some of the other operational challenges before the division are: Suitable roof supports & other
safety protections at a depth of 400/500 meters, Availability of sand for stowing (filling the void
created by extracting the coal) for the surface protection against subsidence, developing the
workforce to suit the needs of increased level of mechanization, contain the power cost etc
Unlike in other countries, most of our properties are lying in thick seams at greater depth. The
extraction/Yield of thick coal seams at greater depths in India is conventionally very low.
Therefore, better extraction of coal from thick seam and developing a suitable method of
working with best suited strata control techniques are today key technological challenges before
the division besides consolidating & expanding the success of mechanization to other working
areas depending upon the geo-mining conditions. The division has therefore proactively acted in
all these key areas and initiated actions to meet those challenges like Roof Bolting Technique as
major strata control method, plan to increase share of mechanised production from today's 30%
etc. Due to the change in the coke making technology at Jamshedpur works, the producer of the
division will have to be sold in the open market where cost, quality, consistency & timeliness
will be key factors. The Division has the system of performance improvement through the
process of Scorecard and AQUIP. The strategic Objectives of the division are derived from the
vision and strategic goal of the company. The Strategic goals are translated into actionable
KPMs, which form the matrix in the Divisional Scorecard and are deployed at the unit level
through AQUIPs. Simultaneously, all activities are directed towards the thrust areas – cost,
customer, change & knowledge. The QMS ensures systematic evaluation & improvement of the
key process and performance measures throughout the division. The division has also initiated
TOP and completed 3 Waves covering all the operating units in which nearly 2000 ideas were
generated-out of which 218 ideas were evaluated with a total saving potential of Rs. 28 crores
As a part of systematic programme to improve upon the Quality, Quantity, Cost & Change, the
division in the year 2001-02, completed 203 CIPs projects with a saving of Rs. 938 lakh. The
organizational learning and sharing process is achieved through cross-functional team,
Knowledge Management System, dialogues, quality circle activities, internet etc.
ORGANIZATIONAL CHART
JAMADOBAGROUP
SIJUA GROUP
HR/IR ADMINISTRATION
PLANNING ENGINEERINGSERVICES
CHIEF OF JAMADOBA GROUP
CHIEF OF SIJUA GROUP
CHIEF OFHR/IR
HEAD ADMINISTRATION
CHIEF OF PLANNING
CHIEF OF ENGINEERING SERVICES
POLICIES
HUMAN RESOURCE POLICY
Tata steel is an equal opportunity employer.
Tata steel recognizes that its people are the primari source of its competitiveness
It will pursue management practices designed to enrich the quality of life of its employees,
develop their potential and maximize their productivity.
GENERAL MANAGER
CHEIF
JAMADOBACOLLIERY
DIGWADIHCOLLERY
6 & 7 PITCOLIIERY
JCPP
GROUPOFFICE
BHELATAND ACOLLIERY
SIJUACOLLIERY
BCPP
GROUP OFFICE
HR/IR
TRAINING
TSRDS
GH/DB
SECURITY
PROJECT IMPLE.
ENVIROMENT
PLANNING&SURVEY
SAFETY & ENVIROMENT
WORKSHOP SERVICE
POWER ENGINEERING
EIT
TOWN MAINTANENCE DEPARTMENT
DEPT. HEAD
GEOLOGICALSURVEY
IMP GROUP
TECHNICALGROUP
G.M’sOFFICE
MEDICALSERVICE
P& S ACCOUNTS ITS
It will aim at ensuring transparency,fairness and equity in all its dealing with its employees.
Tata steel shall strive continuously to foster a climate of opennes, mutual trust and teamwork.
In the process Tata steel shall strive to be the employer of choice by attracting the best available
talent and ensuring a cosmopolitan workforce.
QUALITY POLICIES
“Consistent with the group purpose, Tata steel constantly strive to improve the quality of life of
the communities it serves through excellence in all facets of its activities.
We are committed to create value for all our customers and key stakeholders by continually
standardizing, improving and involving all our employees.
This policy shall from the basis of establishing and reviewing the Business Objective and
Strategies and shall be communicated across the organization. The police will be reviewed to
align with business direction and to comply with all the requirements of TQM Principles.
CORPORATE SOCIAL RESPONSIBILITY & ACCOUNTABILITY POLICY
Tata Steel believes that the primary purpose of a business is to improve the quality of life of
people.
Tata Steel shall volunteer its resource, to the extent it can reasonably afford, to sustain and
improve healthy and prosperous environment and to improve the quality of life of the employees
and the communities it serves.
Tata Steel shall conduct its business ever mindful of its social accountability, respecting
applicable laws and with regard for human dignity.
Tata Steel shall positively impact and influence its partners in fostering a sense of social
commitment for their stakeholders.
ENVIRONMENTAL POLICY
Tata Steel’s environmental responsibilities are driven by our commitment to preserve the
environment and are integral to the way do business.
1. Tata Steel are committed to deal proactively with climate change issue by efficient use of
natural resources and energy; reducing and preventing pollution; promoting waste avoidance
and recycling measures; and product stewardship.
Tata Steel shall identify access and manage our environmental impact.
Tata Steel shall regularly monitor, review and report publicly our environmental performance.
Tata Steel shall develop & rehabilitate abandoned sites through a forestation and landscaping
and shall protect and preserve the biodiversity in the area of our operations.
Tata Steel shall enhance awareness, skill and competence of our employee and contractors so
as to enable them to demonstrate their involvement, responsibility and accountability for
sound environmental performance.
2. Tata Steel are committed to continual improvement in our environmental
performance.
Tata Steel shall set objective targets, develop implement and maintain management standards
and systems, and go beyond compliance of the relevant industry standards, legal and other
requirements.
3. Tata Steel will truly succeed when we sustain our environmental achievement and are valued
by the communities in which we work.
SAFETY PRINCIPLES & OCCUPATIONAL HEALTH POLICY
Tata steel’s safety and occupational health responsibilities are driven by our commitment to
ensure zero harm to people we work with and society at large and are integral to the why we do
business.
Safety Principles
Safety is a line management responsibility.
All injuries can be prevented.
Felt concern and care for the employee on “24 hours safety” shall be demonstrated by leaders.
Employee shall be trained to work safety.
Working safety shall be condition of employment.
Every job shall be assessed for the risk involved and shall be carried out as per authorized
procedures/checklist/necessary work permit and using necessary work permit and using
necessary personal protective equipment.
Tata Steel is committed to continual improvement in our S & OH performance.
Tata Steel shall set objective-targets, implement and maintain management standards and
systems, and go beyond compliance of the relevant industry standards, legal and other
requirements.
RESEARCH POLICY
Tata steel believes that research provides the foundation for sustained, long term, stakeholder
delight.
Tata steel shall nurture and encourage innovative research in a creative ambience to ensure that
the competitive advantages in its overall business is retained and surpassed. Towards this goal,
the company commits itself to providing all necessary resources and facilities for use by
motivated researchers of the highest calibre.
Research in Tata Steel shall be aligned to the technological initiatives necessary to evolve and
fulfil the overall business objective of the company.
EXPERIENTIAL LEARNINGS
DEPARTMENT:
The Department where I worked in is Central Accounts. Every organization must have an
Accounts department because it is a back bone of any organization. To get control over various
cost related activities, taxations, and proper utilization of funds and various other financing
activities there must be a Accounts department.
There are various departments which handle the work necessary for quick and affective
completion of any task. The figure shown below depicts the Central Accounts department which
consists of the Head Accounts which is managed by :
Manager Cost
Senior Manager
Manager Payroll
There is a team of supervisors (12 members) who assists the Managers in the day to day working.
JOB DESCRIPTION
JOB IDENTIFICATION:
JOB TITLE: TRAINEE
LOCATION: TATA STEEL JHARIA DIVISION
DEPARTMENT: CENTRAL ACCOUNTS
UNIT: PRODUCTION
JOB SUMMARY:
Study of Central Excise and Service Tax
Calculation of royalty (2010-11)
Monthly calculation of Excise duty on coal
Presentation given on Central Excise and Service Tax
HEAD ACCOUNTS
MANAGER (COST MANAGEMENT)
MANAGER (PAYROLL and SETTLEMENT)
Sr. MANAGER
TEAM OF SUPERVISORS
MY EXPERIENCE IN MY EXPERIENCE IN TATA STEEL JHARIA DIVISION:
These two months in TATA STEEL Jharia Division, Dhanbad are unforgettable for me. The
experience, which I gained during these days, was tremendous. I have made good relation with so
many people in the Central Accounts Department, where I did my project and also in other
departments too. I found everybody within the company very nice, helpful and co-operative. The
experience I have gained from my project will be very helpful to enrich and nourish my career in the
near future. Here I got a great opportunity to work in a practical environment. I also got opportunity
to visit Coal mines and see how the works is carried on under the mines.
MY LEARNINGS FROM THE PROJECT
. Some of the things which I learnt from my Summer Training are as follows:
what is CETA, Cenvat Credit, Vat
How the goods is valued in Excise,
What is the valuation rules & procedure for calculating the cost ,
What is the rules & procedure of payment the Central Excise duty.
What if duty cannot be levied within the given period of time.
Study of Service Tax by GTA under Reverse charged method
Types of taxable service under Service Tax
Input services used at TATA STEEL Jharia Devision
Output services provided at TATA STEEL Jharia Devision
To file monthly return through ER1 form
Lastly I concentrate on the Excise Audit & Powers of Excise Officer so that one can know
the broader aspect of this term.
INTRODUCTION
Government needs funds for various purposes like maintenance of law & other order, defense,
social/ health services etc. Government obtains funds from various sources, out of which one
main source is Taxation.
Taxes are conventionally broadly classified as Direct Taxes & Indirect taxes. Direct taxes are
those, which the taxpayer pays directly from his Income/Wealth/Estate etc. Indirect taxes that the
taxpayer pays indirectly while purchasing goods & commodities, paying for the services etc. In
case of indirect taxes one person pays them but he recovers the same from another person. Thus
the person who actually bears the tax burden (the ultimate consumer) pays it indirectly through
some other person, who practically, merely acts as collecting agent.
Broadly speaking, direct taxes are those, which paid after the income reaches in the hands of tax
payer. Important Direct taxes are Income Tax, Gift Tax & Wealth Tax. Import Indirect taxes are
Central Excise (Duty on manufacture), Customs (Duty on Imports & Exports), Central Sales Tax
(CST) & Service Tax.
As tax payers does not feel a direct pinch while paying indirect taxes, resistance to indirect taxes
is much less compared to resistance of direct taxes. Manufacturers/ Dealer psychology also
favors indirect taxes because they feel that they only collect the tax & not pay the tax. Indirect
taxes are easier to collect & tax evasion is comparatively less in Indirect taxes. The
manufacturer/ trader who collects the taxes in his invoice and pays it to the govt., has a
psychological feeling that he is only collecting the taxes and is not paying out of his own pocket
(though this feeling may not be always correct). It has been observed that top management takes
very keen interest in direct tax matters, while matters relating to Indirect taxes are usually
handled by lower management, though revenue implications are much higher in Indirect Taxes.
Great care is taken in making any payment and sanctioning any expenditure, while decision in
respect of debits & Credits in Cenvat Credit Account.
It was a great pleasure for me that I was assigned the most relevant title, as regards Summer
Training project, i.e.,” Study of Application of Central Excise & other Taxes &
Documentation at Tata Steel” . In this Project we are going to deal three type
of Taxes i.e., Central Excise , service Tax, Value Added Tax, all these are Indirect Taxes.
Tata Steel is the world's 6th largest steel company. It operates in 24 countries and commercial
presence in over 50 countries. Tata steel formerly known as TISCO (Tata iron and steel
company limited) is a steel company based in Jamshedpur, India. Tata steel is Asia’s first and
India’s integrated private sector steel company. The registered office of Tata steel is in Mumbai.
Central Excise
Central excise is a tax on act of manufacture or production while sales tax is an act on Sales and
for custom duty it is tax on import of goods within the customs. Central Excise duty is an
indirect tax charged on Excisable goods that are manufactured or Produced within the territorial
boundary of India, except
1) That good which are produced in Special Economic Zone.
2) Which are exempted in the tariff
3) Goods which are manufactured for Export.
Goods are Dutiable only if they are Movable, Marketable, find Place in Tariff, & manufactured
in territorial boundaries. Central Excise Act 1944 is followed for levy of duty. & the duty is
calculated by the Central Excise tariff Act 1985. Central Excise rules are extend to all over India.
Service Tax
It is a tax imposed on the services provided within the territorial boundary of India. Except-
Jammu and Kashmir and outside India. Service Tax does not have its own Act; it is managed by
Finance Act 1994. Service tax was imposed for first time on 3 services w.e.f. 1-7-1994 and now
it is 119 services including the two new services introduced in budget 2011-12.
VAT
Value Added Tax (VAT) is a general consumption tax assessed on the value added to goods and
services. It is a general tax that applies, in principle, to all commercial activities involving the
production and distribution of goods and the provision of services. It is a consumption tax
because it is borne ultimately by the final consumer.
In other words, it is a multi-stage tax, lavied only on value added at each stage in the chain of
production of goods and services with the provision of a set-off for the tax paid at earlier stages
in the chain. The objective is to avoid 'cascading', which can have a snowballing effect on prices.
It is assumed that due to cross-checking in a multi-staged tax, tax evasion will be checked,
resulting in higher revenues to the government.
OBJECTIVE
The objectives of the study as regards the summer training project are as follows:
To know the Central Excise, Service tax & VAT
To Study all related aspects & the law relating to Central Excise.
To analyze the difference between central excise tax and sales tax.
Why Excise duty is known as Central Excise Duty as others known as simply the service
tax, VAT etc.
To know CENVAT credit facility.
What is the Impact of implementation of Central Excise on Coal from 24/3/2011.
What Services are provided by the Company?
To gain the deep knowledge about the different Taxes.
To know the chargeability of Taxes, Exemptions, Extent.
To study the basics of the Indian Steel Industry.
To study the basics of the Indian Coal industry.
To know the Products those are manufactured in the Company.
Goods produced are for Captive Consumption or it is sold in market.
What are the methods of Valuation of manufactured Goods under CETA.
To Study the Input Goods on which Central Excise & VAT are charged & Input Services
on which Service Tax is charged.
To study the Taxes paid by the company in different months.
To know the documentation process & methods.
To know How to fill the Returns for different Taxes.
What will be case if there any failure of paying the duty in due time.
CENTRAL EXCISE
Excise is specified as Central Excise
The excise is charged by both the central & State Government. Central Excise includes the duty
of excise on Tobacco & other goods manufactured in India. Except – Alcoholic liquors for
human consumption, Opium, Narcotics. But it includes Medical & toilet preparation containing
Alcohol, Opium or Narcotics.
Power to impose Excise on Alcoholic liquors for human consumption, Opium, Narcotics is
granted to State Government.
Central Excise Act, 1944 (CEA)- This is the basic Act providing for charging of duty,
valuation, powers of officers, provisions of arrests, penalty etc. It has been amended from time to
time. The name of Act was Central Excise & Salt Act, 1944. The word Salt was dropped in 1996.
Basis Conditions of Excise Liability
Section3 of Central Excise Act (often called the Charging Section) states that there shall be
levied and collected in such manner as may be prescribed duties on all excisable goods
(excluding goods produced or manufactured in Special Economic Zones), which are produced or
manufactured in India. The power to levy Central Excise duty is derived from the constitution.
There are four basic conditions for levy of Central Excise duty.
1. The duty is on Goods.
2. The goods must be excisable.
3. The goods must be manufactured or produced.
4. Such manufacture or production must be in India.
Unless all of these conditions are satisfied, Central Excise Duty cannot be levied.
Goods manufactured in SEZ are Excluded Excisable Goods- As per section 3(1) of CE
Act goods manufactured or produced in SEZ are excisable goods, but no duty is chargeable.
They are termed as excluded excisable goods. Goods under particular chapter head & subhead to
prescribe duty to be charged on that particular product.
Goods
The word goods has not been defined under the Central Excise Act. Article 366 (12) of the
Constitution defines goods as goods includes all materials, commodities and articles. As per
judicial interpretation, for purpose of levy of Excise Duty, an article must satisfy these
requirements to be goods i.e.
Goods must be movable
Goods must be Marketable.
Goods must be in the tarrif.
What are “Goods”
Some examples will clarify the legal position
Gases, Stream are goods as it is a tangible property. It is marketable. Under the Excise Act,
Stream is goods as it can be weighted, measured & marketed.
In case of Electrical energy, generation or production coincides almost Instantaneously with
its consumption. Sale, Supply and consumption takes place without any hiatus. Electricity is
movable property though it is not tangible.
Drawing, Designs etc are Goods drawing & designs relating to machinery or technology are
goods even if payment is made for technical advice or information technology, which is
intangible asset.
Information transferred by e-mail is not goods as no movement of movable property is
involved.
Intermediate Goods will be goods if these are marketable, even if they are consumed within
the factory of manufacture.
Machinery will be goods if it is in marketable condition at the time of removal from factory
of manufacture, even if subsequently, it is to be fastened to earth.
Excisable Goods
Goods excisable even if exempt from Duty-‘ Excisable’ goods do not become non-excisable
goods merely because they are exempt from duty by an exemption notification.
Dutiable & NON-Dutiable Goods
Excisable goods are all those goods specified in the Central Excise Tariff Act, 1985. Excisable
goods may be dutiable or non-dutiable. Dutiable goods are those goods which attract duty as per
the Tariff. Non-dutiable goods are excisable goods on which no duty is payable, either because
of Nil rate of duty because of exemption. Thus all dutiable goods are excisable goods but all
excisable goods need not be dutiable goods. Even where goods are non-dutiable, excise
provisions are applicable, even if no duty is payable.
Goods not included in CETA are “non-excisable goods”
Some goods like wheat, rice, flowers, horses, Soya beans etc are not mentioned in Central Excise
Tariff at all and hence they are non excisable goods. Similarly waste and scrap will be excisable
goods only if specifically mentioned in CETA.
Meaning of ‘goods’ on which appropriate duty has been paid
If an exemption notification uses the words on which appropriate duty has already been paid, it
means that on which excise duty has, as a matter of fact been paid and has been paid at
appropriate correct rate. Thus it cannot cover goods on which in fact, no duty has been paid.
Goods manufactured in SEZ are excluded excisable goods
As per section3 (1) of CE Act, duty is leviable on all excisable goods (except goods
manufactured or produced in Special Economic Zone)
Goods are “duty paid” even if Cenvat availed on those goods
It has been held that inputs do not cease to be duty paid even if Cenvat Credit is taken on such
inputs, i.e. the inputs do not become non-duty paid, even if Cenvat Credit is taken.
Manufacture
Section2 (h) Manufacture includes any process
(I)Incidental or ancillary to the completion of manufactured product or
(ii) which is specified in relation to any goods in the Section or Chapter notes of the 1st schedule
to the Central Excise Tariff Act, 1985 as amounting to manufacture or
(iii) Which in relation to goods specified in 3rd schedule to the CEA, involves packing or
repacking of such goods in a unit container or labeling or re-labeling of containers or declaration
or alteration of retail sale price or any other treatment to render the product marketable to
consumer, and the word manufacture shall be understood accordingly and shall include not only
a person who employs hired labour in the production or manufacture of excisable goods but also
any person who engages in their production or manufacture on his own account.
Identity of Original Article should be lost
Commonly, manufacture is end result of one or more processes and when the change occurs to a
point where commercially it can be identified as a new separate article, manufacture is said to
have taken place.
Assembly can be manufacture
Assembly of various parts and components may amount to manufacture if new product emerges,
which is movable and marketable. Assembly of computers from duty paid bought out parts
amounts to manufacture. Assembly of components of air conditioner in car does not amount to
manufacture as the parts are fitted at various places and at no point of time a car air conditioner
as a separate and distinct commodity comes into existence. Similarly, fitting of air-conditioner
kit in a car does not amount to manufacture.
What is not a Manufacture?
Affixing sticker of manufacturer etc on imported goods is not manufacture .[ However now if the
product is covered u/s 4A, it may be deemed manufacture as defined in section 2(f)(iii) and
excise duty may be payable. In case of imported goods, corresponding CVD may become
payable.
Changing color of an article is not manufacture.
Changing and repairs of old Ornaments is not manufacture.
Conversion into different variety is not manufacture.
Conversion of round bar to bright bar is not manufacture.
Cutting and polishing of granite Stones amount to manufacture.
Cutting and polishing of raw & Uncut diamond which yield polished diamond is not
manufacture as polished diamond is not a new article or thing.
New model from old machine is not manufacture.
Powdering is not manufacture.
Repairing, reconditioning, re-making or re-processing will not amount to manufacture if no
new product emerges even if some parts are inter-changed.
Testing, inspection and packing of items manufactured by others is not.
Upgradation / modification and Purification are not manufacture.
Diesel bus to CNG bus conversion is not manufacture.
Dilution of duty paid product by adding water is not manufacture, even if different item
having different concentration is given different name.
Printing of color & logo done on glass bottle does not amount to manufacture.
Supplying two or more items together is dutiable
Sometimes two types of goods are supplied together in different packing. These are to be mixed
at the user s end before use. Normally this procedure is adopted when the item has limited shelf
life after mixing the two items.
Manufacturer
The liability to pay duty is on Manufacturer or Producer . Duty cannot be recovered form his
purchaser. Hence, Excise demands, if any are always raised on manufacturer and recovered from
manufacturer. Hence, it is essential to decide who is to be termed as manufacturer.
Brand Owner is not the Manufacturer-
Some large units get their goods manufactured from others under their Brand Name, instead of
manufacturing it themselves. They usually control quality & may even supply the design e.g
Bajaj Electrical get many electrical goods manufactured from small scale units under their brand
names. In these cases it will not be treated as Manufacturer even if they exercise quality control
or allow using their Brand Name.
Nature of Excise Duty
Indian Constitution has given powers to Central Govt. and State Govt. to levy various taxes &
duties. Powers of Central & State Govt. are enlisted in 7th Schedule to our constitution.
Meaning of word levy -
Levy means imposition of tax. Once a tax or duty is imposed, it has to be quantified (assessed)
and then collected. Once a duty is levied it has to be collected. [Otherwise, what is the point in
imposing the duty, if it is not to be collected]. It cannot be collected unless the duty is quantified
(assessed). Hence, normally, levy should cover imposition, collection & assessment. However,
constitution specially uses the words levy and collection. Duty is levied as soon as taxable event
occurs, but collection can take place any time- before, at the time or even after the taxable event.
Assessee and Assessment
Assessment means determining the tax liability. Duty is paid by the manufacturer on his own
while clearing goods from the factory/warehouse, on self assessment . The assessee himself has
to determine classification and valuation of goods and pay duty accordingly.
Who is assessee - Rule 2 (C) of Central Excise is basically an invoice based self assessment,
except in case of cigarettes. Rule 6 of Central Excise Rules [earlier rule 173F] states that the
assessee shall himself assess the duty payable on excisable goods, provided that in case of
cigarettes, the superintendent or Inspector of Central Excise shall assess the duty payable before
removal of goods. The assessee has to submit monthly return in ER-1/ER-2/ER-3 form. The
return has to be along with Self Assessment Memorandum , where Assessee declares that a) the
particulars in ER-1/ ER-2/ ER-3 return are correctly stated. b) Duty has been assessed as per
provisions of section 4 or section 4A of CEA (c) TR-6 challan by which duty has been paid are
genuine. TATA STEEL Jharia division submit monthly return in ER-1 form
Person liable to pay excise duty
Once duty liability is fixed, the duty can be collected from a person at the time and place found
administratively most convenient for collection. In was held that duty can be collected from
those who are neither producers nor manufacture but can be collected at later stage.
Duty Liability in case of Manufactured Goods Rules 4(1) of Central Excise Rules makes it
clear that excise duty is payable by the manufacture or producer of excisable goods. In case
where goods are allowed to be stores the goods. Rule 4(1) makes it clear that duty is payable
by person who produces or manufactures excisable goods.
Duty liability in case of Goods stored in Warehouse Rule 20 of CE Rules permit
warehousing of certain goods in warehouses without payment of duty. In such cases, the duty
liability is on the person who stores the goods.
Duty liability even when goods not sold or free replacement given during warranty period.
Duty is payable even when (a) Goods are used within the factory (b) Goods are captively
consumed within factory for further manufacture.(TATA STEEL Jharia division) (c)
Goods are given as free replacement.
Duty payable when an assessee is liable to pay sales tax and the question whether he has
collected it from consumer or not is of no consequence. His liability is by virtue of being an
assessee under the act. Excise duty should be considered as a manufacturing expense and
should be considered as an element of cost for inventory valuation, like other manufacturing
expenses. Excise duty cannot be treated as a period Cost.
Types of Excise Duty
Basic Excise Duty to be termed as Cenvat
Basic excise duty (also termed as Cenvat as per section 2A of CEA added w.e.f 12-5-2000) is
levied at the rates specified in 1st Schedule to Central Excise Tariff Act.
Special Duty of Excise
Some commodities like pan masala, cars etc. are leviable with special duty[section 3(1)(b) of
CEA]. These items are covered in Schedule II to Central Excise Tariff.
Education Cess
A new levy education Cess has been imposed w.e.f 9-7-2004 on all goods on which excise duty
is payable. Rate is 2%
National Calamity Contingent Duty (NCCD)
A duty has been imposed vide section 136 of finance Act, 2001. This duty is imposed on Pan
masala, chewing tobacco and cigarettes. It varies from 10% to 45%, NCCD of 1% was imposed
on Polyester Filament Yarn, motor cars multi utility vehicles and two wheelers and NCCD of Rs
per ton was imposed on domestic crude oil, vide section 169 of Finance Act,2003 w.e.f 1-3-
2003.
Education Cess
The National Common Minimum Programme (NCMP) adopted by congress led UPA (United
Progressive Alliance) Government after its formation, had mandated imposition of Education
Cess to finance universalized quality basic education. Accordingly, Education Cess of 2% has
been imposed which is payable on central excise, customs, service tax & income tax. In case of
excise duty, calculation of Cess is easy. If excise duty rate is 16% Education Cess will be 0.32%.
If excise duty is 24% Cess will be 0.48%.
Treatment of Education Cess in Excise Duty
Cenvat Credit Rules states that credit of education Cess paid on input can be utilized only for
payment of education Cess on final product and /or output services. The credit cannot be used for
payment of basic duty. It is necessary to show education Cess separately in Invoice & separate
accounting is necessary. Since account head is different, its separate indication in TR 6 challan is
also necessary. It is not necessary to pay Education Cess on Pre-budget stocks. If assessee has
already paid Education Cess, he can get refund only if he proves that he has not recovered the
same from his customer.
Central Excise Tariff Act, 1985(CETA) –
Since it is essential to prescribe different duties for different types of productions, it is necessary
to classify the items under various heads. Central Excise Tariff Act, 1985 classifies all the goods
under 96 chapters & specific code is assigned to each item. This classification forms basis for
classifying the goods under particular chapter head & subhead to prescribe duty to be charged on
that particular product. Some of them mainly used by TATA STEEL are as follows:-
(Chapter 27)- Mineral Fuels, Mineral Oils and Products of their Distillation; Bituminous
Substances; Mineral Waxes Central Excise Duty and Tariff.
(Chapter 72 -83 ) - Section XV-Base Metals and Articles of Base Metal
(Chapter 84 - 85 ) - Section XVI-Machinery and Mechanical Appliances; Electrical
Equipment; Parts thereof; sound Recorders and Reproducers, Television Image and Sound
Recorders and reproducers, Television Image and sound Recorders and Reproducers, and
Parts and Accessories of such article
Excise duty on Coal
In Budget 2011,Finance Minister announced Excise duty on Coal, Coke and Coal Tar w.e.f
24.03.11
Two option has been provided in the Budget 2011 for Coal producer.
Excise duty at the rate of 1% without availing the CENVAT credit on input and input
services.
Excise duty at the rate of 5% availing the CENVAT credit on input and input services.
Central Excise Rules -
In India, excise duty is levied in accordance with the provisions of Central Excise Act,1944. The
Act empowers the Central Government to make rules in pursuance of the Act. Accordingly, the
following set of rules has been framed:-
CENVAT Credit Rules 2004.
Central Excise valuation (Determination of Price of Excisable Goods) Rules 2000.
The Central Excise Rules, 2002(sec 143 of the Finance Act 2002.
The Central Excise (Settlement of case) Rules, 2001.
The Central Excise (Removal of Goods at concessional Rate of Duty for Manufacture of
Excisable Goods) Rules,2001.
Consumer Welfare Fund Rules1992.
The Central Excise (Advance Ruling) Rules 2002.
Central Excise(Compounding of Offence) Rules,2005
Valuation under Central Excise
Excise duty is payable one of the following basis:
Specific duty, based on some measure like weight, volume, length etc.
Duty as % of Tariff value fixed under Section 3(2).
Duty based on Maximum Retail Price printed on carton after allowing deductions section 4A
of CEA (added w.e.f 14/05/1997.)
Compounded Levy Scheme.
Duty as % based on assessable Value fixed under Section 4(ad valorem duty
Specific Duty- It is the duty payable on the basis of certain unit like weight, length, volume,
thickness etc. For example, duty on Cigarette is payable on the basis of length of the Cigarette,
duty on sugar is based on per Kg basis etc. In such cases, calculation of duty payable is
comparatively easy. In view of the simplicity, many goods were earlier covered under ‘Specific
Duty’. However the disadvantage is that even if selling price of the product increases, revenue
earned by Government does not increase correspondingly. Frequent revisions of rates have to be
done, which is a slow & time consuming process.
Tariff Value-
In some cases, tariff value is fixed by Government from time to time. This is a Notional Value
for purpose of calculating the duty payable. Once tariff value for a commodity is fixed, duty is
payable as percentage of this tariff value and not the Assessable Value fixed u/s 4. This is fixed
u/s 3(2) of Central Excise Act. Government can fix different tariff value and not the Assessable
value fixed u/s 4. When tariff value is prescribed under the law, that value will from the basis for
assessment (and not any other value). Government cannot fix any tariff value at its whim &
caprice. The tariff value can be fixed on the basis of wholesale price or average price of various
manufacturers as the Government may consider appropriate.
Value based on Retail Sale Price
Section 4A of CEA empowers Central Government to specify goods on which duty will be
payable based on “Retail Sale Price”.
As per Weights & Measures Act, retail sale price indicated on the retail package should be
inclusive of all taxes. However in case of Drugs, the retail price to be indicated is required to be
exclusive of taxes but according to new amendment by Finance Minister that from October 8,
2006 the Retail Sale Price of drugs will come inclusive of all taxes.
The Provisions for valuation on MRP basis are as follows-
The goods should be covered under provisions of Standards of weights & Measures Act or
Rules [Section 4A(1)]
Central Government has to issue a notification in Official Gazette specifying the
commodities to which the provision is applicable & the abatements permissible. Central
Government can permit reasonable abatement (deductions) from the Retail Sale Price
[Section 4A(3)]
The retail Sale price should be the maximum price at which excisable goods in packaged
forms are sold to ultimate consumer. It includes all taxes, freight, transport charges,
commission payable to dealers & all charges towards advertisement, delivery, packing,
forwarding charges etc. If under certain law, MRP is required to be without taxes & duties
that price can be the retail Sale price.
If more than one retail sale price is printed on the same packing, the maximum of such retail
sale price will be considered.
MRP provisions are overriding provisions-Section 4A(2) uses the words notwithstanding section
4, hence when section 4A is applicable, provisions of section 4 for determination of assessable
value are not applicable.
Increase in retail Price after clearance from Factory-
If retail price declared on the package at the time of removal is subsequently altered to increase
the price; such increased retail price will be retail price for purpose of Section 4A. It may be
noted that the provision applies only when retail price is increased after Clearance. However as
per section 2(f)(ii) putting label of altered price will be deemed manufacture and hence excise
duty will become payable.
Cost of returnable container not to be added-
Some times, goods are sold in returnable containers against refundable deposits (e.g. soft drinks,
mineral water etc.). The cash deposit is for safe return of the container. In such case, the cost of
container having repeated use is amortized over the expected durability of the container. The
security deposit is not an additional consideration for sale of the particular product. Hence, in
case of goods covered under MRP provisions, cost of such durable containers is not required to
be added for valuation, unless audit of accounts reveals that cost of reusable containers has not
been amortized & has not been included in the value of product.
Transaction Value
Fixing specific duty or tariff value is possible only for few selected items like Sugar, pan-masala,
consumer goods, Cigarette etc. Generally, it is not practicable to fix specific duty or tariff value
for numerous products produced. Similarly, paying duty on the basis of MRP is possible only in
respect of a few selected commodities. In other cases, Central Excise is payable on the basis of
value. This is called “ad valorem duty”. The assessable value is arrived at on the basis of Section
4 of the Central Excise Act & duty is payable on the basis of such value.
Assessable Value
Assessable value is the Value on which duty is payable as a percentage. Generally, “by Value”,
we understand the Price as mentioned in Bill or Invoice. However for excise purposes, it is not
possible to fully rely on such price as
a) Duty is payable even if goods are not sold.
b) It is desirable to have uniform policy in fixing the AV.
c) Chances of manipulation in such price should be minimum.
As per new section 4 w.e.f 1st July,2000, excise duty is payable on basis of transaction value. If
the requirements given below are not satisfied, valuation will be done as per Valuation Rules,-
section 4(1)(b)
The goods should be sold at the time & place of removal.
Buyer and assessee should not be related.
Price should be the sole consideration for the sale.
Each removal will be treated as a separate transaction & value for each removal
will be separately fixed.
Time and Place of removal
Section 4(1) (a) states that transaction value shall be assessable value when goods are sold be
assessee, for delivery at the time, in case of sale from depot/ place of consignment agent, time of
removal shall be deemed to the time at which the goods are cleared from factory.
Goods must be sold at the time & Place of removal
Transaction Value is relevant for valuation only when goods are sold at the time & place of
removal. As per Section 2(h) of CE Act, Sale & Purchase within their grammatical variations &
cognate expressions, means any transfer of goods by one person to another in the ordinary course
of trade or business for cash or deferred payment or other valuable consideration. It is noted that
consideration can be paid by or to third party also.
What is Not Sale at the time of removal-
In view of aforesaid requirement, following are not sale of goods at factory gate for purpose of
Central Excise.
a) Transfer to depot/branch as there is no sale at the time & place of removal.
b) Job work or processing-as here there is no sale of goods. Moreover, the job charges receive
cannot be treated as consideration. Thus though there is transfer of possession it cannot be said it
is for valuable consideration. Assessee & Buyer should not be related-Excise is payable only at
the manufacturing stage & once the goods enter the trade no exercise is payable for further sales
in wholesale or retail. Thus to reduce excise burden an unscrupulous manufacturer may sell
goods at lower price to some person related to him & then subsequently the goods will be sold at
a higher price.
Price must be Sole consideration Price should be sole consideration of sale. Price is the
consideration given for purchase of a thing. Consideration in layman s terms means in return
consideration is the inducement to the contract. It is the reason or material cause of a contract.
Transaction Value as Assessable Value
New section 4(3) defines transaction value as the price actually paid or payable for the goods,
when sold & includes in addition to the amount charged as price any amount that the buyer is
liable to pay to or on behalf of the assessee by reason of or in connection with the sale, whether
payable at the time of sale or at any other time, including but not limited to any amount charged
for or to make provisions for advertising or publicity, marketing & selling organization expenses
storage, outward handling, servicing, warranty, commission or any other matter but does not
include the amount of duty of excise, sales tax & other taxes, if any actually paid or actually
payable on such goods.
Sale to a Related Person
Transaction value can be accepted as Assessable Value when buyer is not related to buyer. As
per section 4(3)(b) persons shall be deemed to be related if
(I) They are inter-connected undertakings.
(II) They are relatives.
(III) Amongst them, buyer is a relative & a distributor of assessee or a sub-distributor of such
distributor, OR
(IV) They are so associated that they have interest, directly or indirectly in the business of each
other.
The definition of related person includes inter connected undertakings . Only25% control is
enough to make to buyer & assessee as inter connected undertakings. This would have affected
many assessees. However, the provisions in respect of interconnected undertaking have been
made almost ineffective in valuation rules. Now the inter connected undertakings will be treated
as related person only if they are holding and subsidiary or they are related person under any
other clause. If they are not treated as related person, price charged by assessee to buyer will be
accepted as Transaction Value .
Interconnected Undertaking
Section 2(g) of MRTP Act gives definition of interconnected undertaking. It is possible to have
inter-connected between two Companies, two firms, a company & a firm, a Company & a trust
etc. If any of the following connection exists, the two undertakings would be deemed to be
interconnected undertaking.
(I) If one owns or controls another.
(II) If both are owned by partnership firms there is one or more common partners
(III) If both are owned by companies & a) If one company manages another of, b) If one
company is subsidiary of another, or c) If both body corporate are under the same management
or d) If one body corporate controls another in any other manner.
Valuation when sale is through related Person-
If sale is made through related person price relevant for valuation will be normal transaction
value at which the related buyer sales to unrelated buyer.
Valuation in case of Captive Consumption
This method of valuation is used by TATA STEEL Jharia division
In case of Captive Consumption, valuation shall be done on basis of cost of production plus 10%
[It was 15% up to 5-8-2003].
Captive Consumption means goods are not sold but consumed within the same factory or another
factory of same manufacturer. The rule may also be helpful if goods are to be transferred to job
worker for job work & then brought back for further processing inputs on payment of duty to job
worker. The job worker can avail Cenvat Credit of duty paid on inputs & there is hardly any
incentive to avoid any payment of duty. Thus the formula for determining value is simple. If the
Cost of production based upon general principles of costing of a commodity is Rs 10,000 per
unit, the assessable value of the goods shall be Rs 11,000 per Unit.
Part Sale & part Consumption-
CBE&C, vide its circular No.643/34/2002-CX dated 1-7-2002, has clarified that if same goods
are partly sold by assessee & partly consumed captive, goods sold have to be assessed on basis of
transaction value & goods captive consumed should be assessed on basis of rule8.
Captive Consumption by related Person
In case goods are supplied to a related person but consumed by the related person & not sold,
valuation will be done on the basis of cost of production plus 10%
Valuation of Samples
CBE&C has clarified that in case of samples distributed free, valuation should be done on basis
of rule 11 along with rule 8, i.e. Cost of Production plus 10%.
Principles of Cost Analysis
Institute of Cost & Works Accountants of India has issued Cost Accounting Standard titled Cost
of Production for Captive Consumption. The standard deals with determination of cost of
production for captive consumption.
Formula of Cost
Cost of Production will include various cost components as defined in Cost Accounting
Standard-1.The cost is classified as follows.
Analysis of Overheads for Cost of Production-
Overheads shall be analyzed into variable & Fixed Overheads. The variable production
overheads shall be absorbed in production cost based on actual capacity utilization.
Valuation of WIP
Stock of work-in-progress shall be valued at cost on the basis of stages of completion as per the
cost accounting principles. Similarly, stock of finished goods shall be valued at cost. In case the
cost for a shorter Period is to be determined, where the figures of opening & closing stock are
not readily available, the adjustment of figures of opening & closing stock may be ignored.
Joint Products, Scrap and Waste-
A production process may result in more than one product being produced simultaneously. In
case joint produced, joint costs are allocated between the products on a rational & consistent
basis. In case of by-products, the net realizable value of scrap or waste is treated as a by-product.
Abnormal Costs to be excluded- Abnormal & non-recurring costs are those arising due to
unusual unexpected occurrence of events, such as heavy break down of plants, accident, market
conditions restricting below normal level.
Depreciation to be added
This standard as well as classification of cost and classification of overheads make it clear that it
is required to be treated as Overheads .
Relevant provisions of Central Excise Rules
INVOICING-
A- Invoice generated through system in Triplicate(only) (Trough SAP)
i) ORIGINAL FOR BUYER
II) DUPLICATE FOR TRANSPORTER (Truck)
III) TRIPLICATE FOR ASSESSEE
Direct Material Cost + Direct Labor Cost + Direct Expenses = Prime Cost.
Prime Cost + Production Overheads + Administration Overheads + R&D Cost
(Apportioned) = Cost of Production
Cost of Production + Selling Cost + Distribution Cost = Cost of Sales.
B- Extra copies of INVOICE can be made but not for “CENVAT PURPOSES”.
C- TRIPLICATE copy shall be retained in bound book from each Dispatch location.
Invoice shall be serially numbered and should contain the following details :-
• Registration Number
• Name of the consignee
• Mode of transport
• Vehicle Number
• Rate of duty
• Qty & value of goods.
The invoice shall be prepared in triplicate.
Intimation of serial number to the range excise officials in the beginning of the financial
year.
Production Records
A- Daily stock Account formerly known as RG1 Register : For accounting of production,
despatch, captive consumption of excisable goods.
B-Separate RG1 Register to be maintained for each commodity.
C- Entries to be made on a daily basis and rows to be filled up as nil in case of no
transaction for that day.
D- The first & last page of each such record shall be authenticated by authorized person.
E- Records should be preserved for 5 years immediately after F.Y.
F- Non maintenance of Daily Stock account attract Panel Action
Cancellation of Invoice
• 1. Intimation of the cancelled invoice should be sent to the range superintendent within
24 hours.
• 2. Cancelled invoice should also be sent along with the intimation.
SERVICE TAXGeneral background
It is a tax imposed on the services provided within the territorial boundary of India.
Except Jammu and Kashmir and outside India.
Service tax was imposed for first time on 3 services w.e.f. 1-7-1994 and now it is 119 services
including the two new services introduced in budget 2011-12.They are-
Services by air-conditioned restaurants having license to serve liquor; and
Short-term accommodation in hotels/inns/clubs/guest houses etc.
Taxable event in service tax
It is imposed under section 66 of Finance Act, 1994.
Service tax is payable when advance is received.
Rate of service tax
General rate of service tax is 10.30% (including education cess 2% and SAH education cess
1%) w.e.f. 24-2-2009
Person liable to pay service tax
Liability of service provider
Service tax is payable by service provider. In few cases, tax is payable by service receiver, under
reverse charge method
Reverse charge
In case of Goods Transport Agency (GTA), Import of Service, Sponsorship service and Agent of
mutual fund and insurance, service tax is payable by service receiver.
Value for purpose of service tax
Service Tax is payable on gross amount charged for taxable service provided or to be
provided
Exemption and Payment of Service Tax
NOT EXEMPTED
EXEMPTED SERVICE PROVIDER
LESS THAN RS 10 LAKH
UNDER BRAND NAME
BY RBI TO RBI
SEZREVERSE CHARGE METHOD
SERVICE TAX
Tax is payable on reimbursement of expenses which are part of service
Service tax not payable if amount received only as agent of service receiver Value on basis of
similar service or cost
If value is not ascertainable, valuation can be on basis of similar service or on basis of value
which shall not be less than cost.Gross amount charged is inclusive of service tax and then
tax should be calculated by making back calculations.
Classification of service
Service to be classified according to terms specified in various sub-clauses of section 65(105).
Rules for classification of service
If at first sight a taxable service is classifiable under two or more sub-clauses of section 65(105),
classification shall be effected as per following rules –
(a) Specific description to be preferred over a general description [section 65(2)(a)]
(b) Classification should be as per essential character in case of composite services [section 65(2)
(b)]
(c) Service which appears earlier in list of section 65(105), if service cannot be classified on
above basis [section 65(2)(c)]
Exception in case of port and airport services
Payment of service tax
Service tax payable on receipt basis
Service tax is not payable on basis of amounts charged in the bills/invoice, but only on
amounts actually received during the relevant period,
Exception in case of associated enterprises
If partial amount is received, tax will be payable on pro rata basis.
A person liable to pay service tax can pay any amount in advance towards future service tax
liability
GAR-7 challan and e-payment
Tax is payable by GAR-7 challan using appropriate accounting code. E-payment is compulsory
to those who are paying service tax of more than Rs 10 lakhs per annum. For others, e-payment
is optional.
Mandatory interest for late payment of service tax is 18%
Returns under service tax
Half yearly return
Every person liable to pay service tax has to submit half yearly return in form ST-3 in triplicate
within 25 days of the end of the half-year [Rule 7]. Late fees upto Rs 2,000 are payable if return
is filed late.
Self Assessment
Assessment is basically self assessment. Provisional assessment is permissible.
Export and Import of Service
Export
No tax on export of service
Refund if tax paid on exported service
Conditions to treat a service as ‘export’ (e.g. immovable property outside India, service
performed outside India, recipient is located outside India)
Import
Tax is payable by recipient of services under method of ‘reverse charge’.
Tax only if service is received in India
Conditions to treat a service as ‘import’(e.g. immovable property India, service performed in
India, recipient is located in India)
Penalties and Appeals
Penalties
Penalty for late payment of service tax
If service tax is not paid or belatedly paid, penalty will be minimum Rs. 200 per day or @ 2%
per month, whichever is higher.
No penalty can be imposed if service tax and interest is paid before show cause notice, except in
case of fraud, suppression of facts etc.
Heavy penalty for contravention of rules
Appeals
Appeal against order of authority lower than Commissioner lies with commissioner
(Appeals), by assessee or as well as by department .
Further appeal lies with High Court and Supreme Court. Appeals can be filed both by
assessee and department.
GTA (Goods Transport Agency)
Meaning- GTA means any person who provides service in relation to transport of goods by road
& issuing consignment note.
Where, ‘any person’ means not only a natural person but also a juristic or artificial person. So it
will include a natural person, partnership firm, HUF, BOI, Corporate bodies, Charitable
institution, Government undertakings/ enterprises, cooperative societies etc.
For GTA it is mandatory to issue consignment note. Consignment note must be serially
numbered & must contain following particulars-
a) The name of the consigner & consignee.
b) Registration no. of the goods carriage in which the goods are transported.
c) Details of the goods transported.
d) Details of the place of origin & destination.
e) Person liable for paying the service tax, whether consigner , consignee or GTA.
It may be noted that, no specific form has been prescribed for the purpose of issuing
consignment note.
Goods must be carried in ‘goods carriage’.
Goods Carriage- Any motor vehicle constructed or adapted for use solely for the carriage of
goods or any motor vehicle not so constructed or adapted when used for carriage of goods.
Vehicles which are exclude from this are-
a) Vehicles running on fixed rails like railways, tram, trolleys, etc.
b) Vehicles of special type which is used within factory or any enclosed premises.
c) Vehicles having less than 4 wheels fitted with an engine capacity of not exceeding 25
cubic cm.
d) Hand carts, bullock carts, animal driven vehicles, hand rickshaws etc, as they are not
mechanically propelled vehicles.
Certain Specified persons are liable to pay service tax-
Where the consignor or consignee of goods is ‘specified persons’ the person liable to pay service
tax shall be any person who pays or liable to freight through GTA.
Specified Persons-
a) Any registered factory or governed by Factories Act.
b) Any company registered under Companies Act.
c) Any statutory corporation.
d) Any registered society.
e) Any co-operative society.
f) Any dealer of excisable goods registered under the Central Excise Act/ Rules.
g) Any body corporate established by law.
h) A partnership firm.
NOTE-
a) When the consignor & the consignee are not the specified
person then the GTA is liable to pay Service Tax.
b) A manufacturer having credit balance in his Cenvat Account cannot utilise the credit in
payment of Service Tax. Service Tax must be paid in cash or cheque for which he is
liable from the place of removal.
c) The rate of Service Tax is 10.3%.
d) In case of GTA the service receiver (Specified Person) has to pay Service Tax only on
25% of the freight paid or to be paid, because 75% of the freight has been exempted
without any condition. w.e.f 1/3/2008. As per PARA 7 of CIRCULAR/ LETTER D.O.F
NO.334/1/2008- TRU, DATED 29-2-2008.
e) It is treated as 75% of freight is the actual expenses & only 25% is the actual service
received.
f) Simultaneously, the benefit of Cenvat credit has been withdrawn to GTA service under
Cenvat credit rule,2004. As per PARA 7 of CIRCULAR/ LETTER D.O.F
NO.334/1/2008- TRU, DATED 29-2-2008. It means that having credit balance in his
Cenvat Account cannot utilise the credit in payment of Service Tax.
g) If Service Tax paid on GTA service, the credit can be availed on the Service Tax paid.
On payment of any other duty as Output.
h) If any ancillary / intermediate Service is provided in relation to transportation of goods,
& the charges for such services are included in the Invoice issued by GTA & not by any
other person then, such service would form a part of GTA service & therefore the
exemption of 75% on total value of Invoice can be availed.
i) Full Exemption of Service Tax on Supply of necessity goods through GTA service.
j) Exemption on Taxable Service relating to Small & single Consignments. Vide Notification
No. 23/2008-ST, Dated 10-5-2008 (w.e.f 16-5-2008).
This exemption is available to all i.e GTA, Specified Persons, Non Specified Persons.
Where the gross amount charged on all consignments transported in a goods carriage does not
exceed Rs. 1500.
Where the different consignments are transported in the same goods carriage & meant for
different consignee & the gross amount does not exceed Rs. 1500 on whole.
It will benefit small scale operators operating with small or medium sized goods carriages like
Tempo for short distances.
In case, if the one service receiver is the specified person & the others are non specified
person then the GTA has to pay Service Tax on the service provided to non specified person
& not on service provided to specified person. But for exemption he will show the gross
amount not exceeding Rs. 1500 then in this case no liability of Specified person.
Where the gross amount charged on an ‘individual consignment’ transported in a goods
carriage does not exceed Rs. 750.
‘Individual Consignments’ here means all goods transported in agoods carriage for a
Consignee.
Consignments meant for same consignee cannot be split up so as to keep the freight amount
for each Bundle within the limit of Rs. 750.
When Multiple consignments transported in the same goods carriage & meant for same
Consignee & the freight in respect is Rs. 750 or Below is Exempted.
From the point of view of Service Receiver we have to only focus on the concept of
‘Individual Consignment’ i.e Exemption of Rs. 750 only.
CENVAT CREDITCenvat (Central Value Added Tax) has its origin in the system of VAT (Value Added Tax),
which is common in West European Countries. Concept of VAT was developed to avoid
cascading effect of taxes. VAT was found to be a very good and transparent tax collection
system, which reduces tax evasion, ensures better tax compliance and increases tax revenue
Cenvat Credit is a scheme where the manufacturers or the output service providers are allowed a
set off of the taxes paid on the inputs or the input services that are used while manufacturing the
final products or providing the output service.
Application
In the manufacture of product A, if raw material X & Y are used, the manufacturer is allowed to
take credit of the Central Excise Duty paid on the raw materials X & Y used in the manufacture
of the final product A. He is allowed to use thiscredit while paying duty on the final product A
If a manufacturer produced both exempted & dutiable products, the assessee has two options.
1. He needs to maintain separate accounts for the receipt, consumption & inventory of the
inputs used in the dutiable goods.
2. If separate accounts are not maintained, the assessee can take full credit on all the inputs, but
has to pay 10% on the price of the exempted goods to neutralize the credit component of the
inputs used in the exempted goods.
There are certain exceptions to this rule which can be seen in Rule 6 of the Cenvat Credit
Rules 2004.
Cenvat credit can be availed on Capital Goods, but the credit should be taken in installments,
50% can be taken in April as they fall under two financial Years.
Eligibility for Capital Goods has been provided in the Cenvat Credit Rules 2004 (for e.g, goods
falling Under Chapter Headings 82, 84, 85 & 90 etc of the schedule to the (Central Excise Tariff
Act.) If these capital goods are used in the factory of the manufacturer, the credit can be availed.
All goods except light diesel oil, high speed diesel oil & motor spirit (Petrol) which are used in
or in relation to the manufacture of final products are eligible for credit.
It is not mandatory always that the goods should be directly purchased from the manufacturer.
The goods can also be procured from the dealers who are registered with the Central Excise
Department as first stage or second stage dealers.
Relation with Service Tax
From 10th September, 2004 Cenvat Credit has been extended across goods & Services. This
means a manufacturer of final products can avail the credit of excise duty paid on the inputs, and
he can also avail the Service Tax paid on various services like insurance, telephone etc. for
payment of central excise duty on final products. Similarly, a service provider can also avail the
credit of central excise duty paid on the inputs/ capital goods/ Input Services used for providing
the out put service.
Input credit be taken on the final products / Service is not exempted. Only Credit is not allowed,
if the final Products are exempted or the output service is exempted.
Applicable Rate
Same ratio will be applicable to Service Provider if he is engaged in providing both taxable &
non taxable (or exempted) services, he can maintain separate accounts & take credit only on
those inputs / input services which are used in taxable Services, or alternatively if separate
accounts are not maintained, he is allowed to use only 20% of the credit for payment of Service
tax on taxable Service. In Other words, if the tax liability is Rs100, only Rs20 can be paid from
the Cenvat Credit account and the remaining Rs80 has to be paid in Cash.
Concept of VAT
Generally any tax is related to selling price of product. In modern production technology, raw
material passes through various stages & processes till it reaches the ultimate stage. E.g. steel
ingots are made in a steel mill. These are rolled into plates by a re-rolling unit, while third
manufacturer makes furniture from these plates. Thus, output of the first manufacturer becomes
input for second manufacturer, who carries out further processing & supply it to third
manufacturer. This process continues till a final product emerges. This product then goes to
distributor/ wholesale, who sales it to retailer & then it reaches the Ultimate consumer.
If a tax is based on selling price of a product, the tax burden goes on increasing as raw material
and final product passes from one stage to other. For example, assume that tax on a product is
10% of selling price. Manufacturer A supplies his output to B at Rs 100. Thus B gets the material
at Rs 110, inclusive of tax @ 10%. He carries out further processing & sells his output to C at Rs
150. While calculating his cost, B has considered his purchase cost of materials as Rs.110 &
added Rs 40 as his conversion charges. While selling product to C, B will charge tax again @
10%. Thus C will get the item at Rs.165 (150+10% tax). As stages of production and or sales
continue, each subsequent purchaser has to pay tax again and again on the material which has
already suffered tax. This is called cascading effect.
Cascading Effect of conventional system of taxes –
A tax purely based on selling price of a product has cascading effect, which has the following
disadvantages.
A) Computation of exact tax content difficult.
B) Varying Tax Burden as tax burden depends on number of stages through which a product
passes.
C) Discourages ancillarisation.
D) Increases cost of production
E) Concessions on basis of use is not possible.
F) Exports cannot be made tax free.
Input, Input Services & Capital Goods
Inputs which are goods are eligible for Cenvat Credit by both manufacturer as well as service
provider. Rule 2(k) defines Input means all goods except light diesel oil, high speed diesel oil
and motor spirit, commonly known as petrol, used in or in relation to the manufacturer of final
product or not and includes lubricating oils greases, cutting oils, coolants, accessories of the final
products cleared along with the final product, goods used as paint or as packing material or as
fuel or for generation of electricity or steam used in or in relation to manufacture of final
products or for any other purpose within the factory of production. Definition of Input covers
fuel used in factory in or in relation to manufacture of final products or for any other purpose.
Thus fuel will be eligible for Cenvat Credit even if electricity/Stream generated is utilized/sold
outside the factory. As explained above, the words used are for any other purpose.
Cenvat is available on Packaging Material-
Cenvat is available on packing material as per definition of input contained in Rule 2(k)(i) of
Cenvat Credit Rules.
Input Service-
Input service means any service,
(I) Used by a provider of taxable service.
(II) Used by the manufacturer, whether directly or indirectly, in or in relation to the manufacture
of final products and clearance of final products from the place of removal.
Capital Goods for Cenvat
Cenvat Credit is available on inputs as well as capital goods. Some provisions are common while
there are some specific provisions in respect of Cenvat on Capital Goods. General Provisions is
applicable to both inputs & capital goods. Following are the Capital goods,
(I) Machinery, Tools, hand tools, knives etc. falling under chapter 82.
(II) Pollution Control Equipment.
(III) Components, spares and accessories of the goods.
(IV) Moulds and dies.
(V) Refractories and refractory material
(VI) Tubes, pipes and fittings thereof used in the factory.
(VII) Storage tank.
The goods under this category is used in TATA STEEL jharia division
Capital goods should be used in the factory purpose immaterial-
In case of manufacturer; the only requirement is that the eligible capital goods should be used in
the factory for manufacture of eligible final products. Purpose for which these capital goods are
used is not relevant. Credit on capital goods is not available if it is used in another factory.
Capital goods manufactured within the factory-
As per explanation 2 to rule 2(k) of Cenvat Credit Rules, input includes goods used in
manufacture of capital goods which are further used in the factory of manufacturer. Thus if a
manufacturer manufactures some capital goods within the factory, goods used to manufacture
such capital goods will be eligible as inputs.[i.e. 100% Cenvat Credit will be available in the
same financial year]. It may be noted that capital goods manufactured within the factory and
used within the factory are exempt from excise duty vide notification No.67/95-CE dated 16-03-
1995.
Conditions for availing Credit on Capital Goods-
The conditions are Duty paying documents eligible are same for Cenvat on inputs.
Depreciation under section 32 of Income Tax Act should not be claimed on the excise portion of
the Capital Goods. Otherwise the manufacturer will get double deduction for Income Tax Act
Utilization of Cenvat Credit
Central Credit can be utilized for payment of any excise duty on:
1. Any duty on any final product manufactured by manufacturer [Rule 3(4)]
2. Payment of amount if inputs are removed as such or after partial processing.
3. Payment of amount on capital goods if they are removed as such.
4. Payment of amount, if goods are cleared after repairs under rule 16(2) of Central Excise
Rules.
5. Payment under Cenvat Credit Rule 6 of 10% amount on exempted goods or reversal of credit
on inputs when common inputs or common input services are used for exempted as well as
dutiable final products.
Time Limit for taking the Credit
Rule 4(1) of Cenvat Credit Rules states that Cenvat Credit can be taken immediately on receipt
of inputs in the factory or the premises of service provider. Department has clarified that
immediately means at the earliest opportunity when the inputs are received. However, this does
not mean that if manufacturer/Service provider does not take credit as soon as inputs are received
in the factory /premises of service provider, he would be denied benefit of Cenvat Credit. Such
an interpretation is not tenable.. Immediately does not mean within 24 hours. It is not necessary
to take credit as soon as inputs are received in the factory. However manufacturer / Service
provider should take credit at the earliest opportunity.
Duty / tax paying documents-
As soon as a manufacturer/service provider receives an input, he can avail Cenvat Credit of the
duty paid on the inputs. However, in case of input service, he is entitled to service tax credit only
when he makes payment to service tax provider. Documentary evidence is required regarding
payment of duty on inputs/ tax on input services.
Rule 9(1) of Cenvat Credit Rules prescribes that credit can be taken on the basis of
Invoice of manufacturer from factory.
Invoice of manufacturer from his depot or premises of consignment agent.
Invoice issued by registered importer.
Invoice issued by importer from his premises or consignment registered with Central Excise
Supplementary Invoice.
Bill of Entry Invoice, Bill or Challan issued by input service provider under rule 4A of Service
Tax Rules.
No Cenvat Credit if final products/ Service exempt-
As per basic principle of VAT, credit of duty or tax can be availed only for payment of duty on
final product or output services. As a natural corollary, if no duty is payable on final product or
output services, credit of duty/tax paid on inputs or input services cannot be availed.
Maintain Separate Inventory-
Maintain separate inventory and accounts of receipt and use of inputs (expect fuel) and input
services used for exempted final products / exempted output services. In such cases, he should
not avail Cenvat Credit of the inputs and input services which are used in exempted final services
at all 6(2) of Cenvat Credit Rules.
Payment of credit means Cenvat Credit not availed-
Sometimes; assessee may take Cenvat Credit by mistake. This does not mean that he cannot
rectify his mistake and must pay 10% amount. He can rectify the mistake by reversing Cenvat
Credit.
Some services eligible even if partly used for manufacture of exempted goods/
Output services-
As per rule 6(1), proportionate Cenvat is disallowed if input/ input service is used partly in
manufacture of exempted final product or provision of exempted output services.
The services are:
Consulting Engineer, Architect, Interior Decorator, Management Consultant, Real Estate Agent,
Security Agency Services, Scientific or technical consultancy, Banking and Financial Services,
Insurance Auxiliary Services concerning life insurance business, Commissioning and
Installation, Maintenance or repair.
Exempted goods do not mean non-excisable goods-Goods which are not mentioned in Tariff are
not exempted goods as they are neither goods chargeable to Nil rate of duty.
Payment of amount on exempted final products-
If assessee opts not to maintain separate accounts in respect of inputs & input services utilized
for exempted output services, he has to pay amount of 10% of total price of exempted final
product.
When to pay the amount-
The rules does not state when the amount should be paid. It is established principle that if statute
does not provide any time limit, the thing should be done in reasonable time.
What to do if goods are not sold-
As per rule 6(3)(b) the amount is payable on total price, excluding sales tax and other taxes, if
any paid on such goods, of the exempted final product charged by the manufacturer for sale of
such goods at the time of their clearance from factory (Note that the term if any applies to taxes
& not the price ). If the goods are not sold, there is no price . In such case, correct view is that it
is not necessary to debit any amount . However, department has not accepted this view. It has
clarified that if there is no sale assessee has no option but to keep separate records of inputs &
not to take credit in respect of inputs which have been used in or in relation to manufacture of
exempted final product.
The amount should not be recovered as duty, but may be recovered as
amount-
The amount paid on exempted final product/exempted final product /exempted output services
should be shown as amount and can be recovered by the manufacturer/ service provider from
buyer.
Returns-
A manufacture has to be submit returns to Range Superintendent of
Central Excise in the prescribed forms ER-1 to ER-6 in respect of Cenvat availed, Principal
Inputs, Utilization of Principal inputs etc. Others have to submit returns as follows-
1. Quarterly return by first stage/ second stage dealer within 15 days from close of quarter [rule
9(8)]
2. Half yearly return within one month from close of half year, by provider of output services
[rule 9(9)]
3. Half yearly return within one month from close of half year, by Input Service Distributor
[rule 9(10)]
No Cash Refund-
In some cases; it may happen that duty paid on inputs may be more than duty payable on final
products. In such cases, though the Cenvat Credit will be available to the manufacturer/ Service
provider, he cannot use the same and the same will lapse. There is no provision for refund of the
excess Cenvat Credit. However, the only exception is in case of exports where duty paid on
inputs used for exported goods is refundable.
Storage of inputs outside the factory-
Inputs should be stored within the factory. If manufacturer is unable to store the inputs inside the
factory for want of space, hazardous nature of goods etc., he can store the inputs outside the
premises. The storage point will be treated as extension of the factory. Permission from
Assistant/ Deputy Commissioner is necessary.
Accounting Treatment of Inputs in Cenvat-
It needs following consideration-Since credit is available of excise duty /service tax paid while
obtaining inputs / input services, duty/service tax paid on inputs while purchase is not an expense
but an asset.
Un-availed Cenvat is not available as refund (expect when it is a case of exports).
This may happen when duty/ service tax paid on inputs is more than duty payable on final
product. Cenvat is available instantly on receipt of inputs/ payment of input service & Cenvat
Credit may be utilized even before inputs/ input services on which Cenvat is availed are actually
used in production.
Rule 4(4) of Cenvat Credit Rules provides that depreciation should not be claimed on Cenvat
Credit availed.
Credit on Inputs and Capital goods can be taken as soon as goods are received in the factory.
In case of service tax, credit can be taken as soon goods are received in the factory, only after
payment of Bill is made to the person who had provided input service.
Credit of Education Cess and NCCD can be utilized for payment of education cess and
NCCD only.
Valuation of stock of Inputs, WIP and finished goods also needs consideration.
Cenvat Credit in Service Tax
Cenvat credit when taxable as well as exempted services provided
If assessee is providing both taxable and exempt services, Cenvat credit can either be taken on
proportionate basis or 6% ‘amount’ is required to be paid on value of exempted services.
CENVATABLE Invoice as per Rule 11 of CE Rules 2002 is issued by Manufacturer
The copies of the invoices issued by a first stage dealer and a second stage dealer shall be
marked at the top as First Stage Dealer and Second Stage Dealer respectively.
The invoice shall be –
A) Serially numbered and shall contain the registration number
B) Address of the concerned Central Excise Division,
C) Name of the consignee,
D) Description & classification of goods,
E) Time and date of removal,
F) Mode of transport and vehicle registration number,
G) Rate of duty,
H) Quantity and value of goods and the duty payable thereon.
Provided that in case of a proprietary concern or a business owned by Hindu Undivided Family,
the name of the proprietor or Hindu Undivided Family, as the case may be, shall also be
mentioned in the invoice.
CENVATABLE Invoice as per Rule 11 of CE Rules 2002 is issued by First Stage Dealer &
the Second Stage Dealer
The copies of the invoices issued by a first stage dealer and a second stage dealer shall be
marked at the top as First Stage Dealer and Second Stage Dealer respectively.
The invoice shall be –
A) Serially numbered and shall contain the registration number
B) Address of the concerned Central Excise Division,
C) Name of the consignee,
D) Description & classification of goods,
E) Time and date of removal,
F) Mode of transport and vehicle registration number,
G) Rate of duty,
H) Quantity and value of goods and the duty payable thereon.
Provided that in case of a proprietary concern or a business owned by Hindu Undivided Family,
the name of the proprietor or Hindu Undivided Family, as the case may be, shall also be
mentioned in the invoice.
The same invoice is issued by the First Stage Dealer & the Second Stage Dealer the only
Difference between the invoice is-
First Stage Dealer
It is the person who is registered under Central Excise Act as First Stage dealer & purchase
Goods from Manufacturer or his agent under cenvatable Invoice as per Rules. It means transfer
of possession of goods. In this particular case the possession is being directly transferred to First
Stage dealer from the manufacturer. In First Stage Dealer Invoice Price is after the Profit margin
on the Manufacturer Invoice & then excise & different cess is charged & VAT / CST is also
charged.
Second stage dealer
It is the person who is registered under Central Excise Act as second stage dealer & purchase
Goods from the First stage dealer under cenvatable Invoice as per Rules. It means transfer of
possession of goods. In this particular case the possession is being directly transferred to Second
Stage dealer from the First Stage dealer. And in second Stage Dealer Invoice the Profit margin is
added on the Invoice issued by the First Stage dealer & then excise & different cess is charged
& VAT / CST is also charged .
NOTE-
The provisions of this Rule 11 shall apply to goods supplied by a first stage dealer or a second
stage dealer:
Provided that in case of the first stage dealer receiving imported goods under an invoice bearing
an indication that the credit of additional duty of customs levied on the goods shall not be
admissible & on the resale of the imported goods, must be indicated on the invoice issued by
him that no credit of the additional duty levied shall be admissible;
For the second stage dealer the same condition is followed & credit on the additional duty paid
on customs can’t be availed either by second stage dealer or the end user.
The invoice shall be prepared in triplicate in the following manner, namely:-
(i) the original copy being marked as ORIGINAL FOR BUYER;
(ii) the duplicate copy being marked as DUPLICATE FOR TRANSPORTER;
(iii) the triplicate copy being marked as TRIPLICATE FOR ASSESSEE.
Before making use of the invoice book, the serial numbers of the same shall be intimated
to the Superintendent of Central Excise having jurisdiction.
In a normal commercial Invoice raised by wholesaler, distributor or dealer, excise duty
will not be charged separately. In fact the dealer cannot charge excise duty in his invoice
separately as he has not paid the same.
A dealer is required to indicate in his invoice the excise duty paid on goods by the buyer.
However, this should not be separately charged to buyer. Details of excise duty paid by
the manufacturer should only be shown separately in the invoice. The amount of excise
should not be recovered from buyer separately showing it as ‘excise duty’.
CONCEPT OF TRANSIT SALE:
A registered person places an order on a manufacturer for supply and delivery of goods directly
to a consumer and the goods are accordingly transported from the manufacturer’s premises to the
user’s premises without being brought to the registered person’s premises. In such a situation
manufacturer will issue an invoice under Rule 52A. This invoice under Rule 52A will contain,
in addition to the prescribed details including the consignee’s name and address, mentioned
therein, the registered person’s name and address, on account of whose instructions the goods
have been despatched. The consignee in this case will be the end user. In such a situation the
registered person’s invoice is not required for availment of Cenvat credit.
FINDINGS AND LIMITATIONFindings:
1) Coal Mines in Jharia Division is for the Production of Coal for the Captive Consumption
& not for Sale.
2) Earlier Coal was Excisable goods & comes under Central Excise & Tariff Act 1985 but
Tariff was Nil but by Notification in Union Budget 2011 the Rate is specified as
a) 1% without CENVAT
b) 5% with CENVAT
3) For availment of Cenvat credit the material should be purchased from the registered
manufacturer, 1st stage Dealer, 2nd stage Dealer registred under Central Excise Act 1944.
4) CENVAT Credit can be availed
a) 100% credit can be availed on Input goods.
b) 100% credit can be availed on services received but only on payment made thereon.
c) 50% credit can be availed on Capital Goods & the rest 50% credit can be availed in
next year.
5) MRP Provisions are overriding i.e (Superior)
It means the provisions made by the Government in case of MRP based goods
like FMCG products then it is decided that 15% or 20% less the MRP the Excise is to be
paid as the case may be.
6) In case of incorrect MRP Government will ascertain MRP & penalty can be imposed.
7) Deemed manufacturer:
It means a Person or Firm involve in Repacking, Packing, Labelling, Relabeling is
treated as Deemed manufacture.
8) In case of Captive Consumption i.e the Case of TATA STEEL duty is payable on basis of
Cost of Production + 10% margin on that Cost.
9) In case of Sales-
a) Transaction value is not acceptable.
b) Value of similar goods is acceptable.
c) Transport Cost only up to Place of Removal is includible.
d) Money value of other consideration is acceptable.
10) Valuation in case of Sale from depot/ Branch-
Highest price on the date of removal is the assessable value.
11) Service Tax is imposed on the services provided within territorial boundary of india.
Except-
a) Services provided in Jammu & Kashmir.
b) Outside India
12) Rate of Service Tax – 10.30% (Education Cess @ 2% on 10% & SH Education Cess @
1% on 10%).
13) If advance is received against the Service is to be delivered the Service Tax is to be paid
as it is assumed that payment is only received on service provided.
14) Liability of Service Tax is in hand of service provider but in Reverse Charged method the
liability is with Service receiver.
15) Now JVAT i.e Jharkahnd Value added Tax is
a) 5% earlier it was 4% w.e.f 15/5/11.
b) 8%
c) 14% earlier it was 12.5% w.e.f 15/5/11.
CONCLUSION AND SUGGESTIONThe Words are used quite often during my summer project that is Tax Planning.
Tax Planning means
a) taking advantage of the legitimate concessions and exemptions provided in the tax law and
thus reducing the tax liability.
b) arranging business operations such that tax liability is reduced i.e when two methods is
possible to achieve an objective, select one which results in lower tax liability.
An assessee should take following precautions while deciding any tax planning idea.
(a) Disclose All Material Facts- Normally a demand of duty can be raised for a period of six
months prior to show cause notice. However, this period can be increased to five years in case of
fraud, collusion, suppression of facts or willful misstatement. Thus, all relevant facts must be
disclosed. An unexpected huge demand for past five-year period may be disastrous for the
assessee.
(b) Discuss with Excise Authorities & Experts- A plan of assessee can be discussed with
excise authorities and experts and he need not be over confident in these matters.
(c) Study Product & Pricing Policies An assessee need to study the product and pricing
policies thoroughly and ensure that these are so designed that unnecessarily heavy duty is not
paid.
(d) Interest on Late Payment Interest is payable for late payments. Thus, if payment is delayed
by filing appeal etc. and so designed that unnecessarily heavy duty is not paid.
(e) Heavy Penalty for Tax Avoidance: An assessee should remember that wrongful availing
Cenvat or contravening any provision of excise rules with intent to evade duty is offence and
penalty can be very heavy. Hence, in case of doubt, it may be advisable to make payment of duty
under protest and claim refund. However in such cases, it must be ensured that only lower duty is
charged to buyers. The extra duty should not be recovered from customers. Otherwise, even if
refund claim is sanctioned later, one will not get the amount.
BIBLIOGRAPHYwww.coalnic.in
www.cbec.in
www.coalindia.in
www.nlcindia.in
www.scclmines.com
Books Preferred:
Indirect Taxes Law & Practice Sanjeev Kumar
Indirect Taxes Law & Practice Yogendra Bangar & Vandana Bangar
Indirect Taxes Law & Practice V.S. Datey.
Central Excise manual by R K JainCentral Excise Tarrifs by R K Jain
