Group Members

• Sidra Shafqat

• Noshaba Nargis

• Mina Ali

• Muhammad Idrees

• Numeerah Yousaf

• Qurat-Ul-Ain

• Muhammad Saad Khan

Federal Excise Act

HISTORY OF FEDERAL EXCISE

ACT

• It was first introduced in Britian India in 1879 through a tax on salt.

• It was grew up slowly over many years and had considerably expanded since 1934.

• Whenever a new central excise duty was introduced it required the enactment of self contained law and preparation of separate statutory rules.

• As the agglomeration of a large no of statuses and regulations was not conductive to well organized administration, therefore the present act of 1944 consolidated in a single enactment ,all the above relating to central excise duty on goods manufactured or produced and the tax on salt and embodied therein a schedule, similar to Tariff act 1934

• At the time, when act was consolidated and emended, there were only 11 items including kerosene, silver, vegetable etc

• As the industrial base expanded, new items were added to the list one in 1949,three in 1957 and so on and at present there is quite a list of commodities which are liable to duties of excise.

•Law of excise duties in Pakistan is today derived from the central excise and salt act,1944,central excise rules, notifications and circulars issued by the federal excise rules, notifications and circulars issued by the federal government and FBR and case law as expounded by the superior courts of the country.

•The federal excise act has many similarities with the sales tax act,1990,and introduces the concept of zero rating, filing of revised return ,departmental audit etc.

Muhammad Idrees

Definitions

Adjudicating Authority [ sec 2(1)]

• Adjudicating authority mean any authority competent to pass any order or make any decision under this act or the rules made thereunder, but does not include the federal board of revenue and appellate tribunal

Board [sec 2(4)]

• It means the federal board of revenue established under section 3 of the board of revenue act 2007

Chief Commission

It means a person appointed as the chief commissioner inland revenue under section 29

Commissioner [sec 2(5)]

It means a person appointed as commissioner inland revenue under section 29

Conveyance [section 2(6)] conveyance means any means of transport used for carrying goods or passengers such as aircraft, vehicle or animal, etc.

Due date [sec 2(8a)]

Due date in relation to furnishing a return under section 4 of the federal excise act, means the 15th day of the month following the end of the month, or such other date as the federal government may, by notification in the official gazette, specify

Due date [sec 2(8a)]

Due date in relation to furnishing a return under section 4 of the federal excise act, means the 15th day of the month following the end of the month, or such other date as the federal government may, by notification in the official gazette, specify

Dutiable goods [sec 2(8b)]• it means all excisable goods specified in the first schedule

except those which are exempt under section 16 of the federal excise act 2005

DUTIABLE SUPPLY [SEC 2(8C)]• It means a supply of dutiable goods made by a

manufacture other than a supply of goods which is exempt under section 16 of the federal excise act 2005

Factory [sec 2(11)]

• Factory mean any premises or any part of it in which excisable goods are manufactured or many manufacturing processes connected with the production of these goods is being carried on or is ordinarily carried on.

Officer of Inland Revenue [ sec 2(12)]• It means any person appointed by the

board as officer inland revenue under section 29 or any person (including an officer of provincial government) entrusted by the board with any of the powers of an officer of inland revenue under this act or rules made there under.

Import & export [sec 2(15)]

• Import and export mean respectively bringing into and taking out of Pakistan by sea, land, or air and shall be deemed to have always been so defined

•Kibor [sec 2(15a)]

• It mean karachi inter bank offered rates applicable on 1st day of each quarter of the financial year

Non tariff area[sec 2(17)]

• It means azad-jammu and kashmir, northern areas and such other territories or areas to which this act does not apply

Property developer or promoter sec[2(19a)]• Property developer or promoters means persons engaged

in development of purchased or leased land for conversion into residential or commercial plots or construction of a residential or commercial units for sale

Sales tax mod sec [21(a)]

• It means the manner of collection and payment of excise duties chargeable under this act specified to be collected and paid as if such duties were tax chargeable under section 3 of the sales tax act and the all the provisions of that act and rules notifications order.

Schedule sec[2(22)]

• It means schedule appended to the federal excise 2005

Services[2(23)]• Services means services, facilities and

utilities leviable to excise duty under the federal excise 2005 .

Supply sec[2(23a)]• It include sale, lease or other disposition of goods and shall include such transaction as the federal govt may notify in the official gazette from time to time

Tariff Area sec[2(24)]

• Tariff area means area other then non tariff area .

Zero rated sec[2(26)]• It mean duty of federal excise leaved and charged at the rate of zero percent under section 5 of the federal excise act 2005

Numeerah Yousaf

Levy collection and payment of

duty

1 The Federal excise duty specified in the first schedule to be levied on following categories

a.It is levied and collection on all goods, produced or manufactured in Pakistan

b.Goods imported into Pakistan

c.Goods imported or manufactured in non-tariff areas and are brought to tariff areas as notified by federal government in official gazette

a.Services produced in Pakistan including the services originated outside but rendered in Pakistan at the rate of sixteen percent

2 Duty in respect of goods imported in Pakistan shall be levied and collected in the same manner and at the same time as if it were a duty of customs payable under customs Act 1969 and provisions of said Act shall apply.

3 the board may by notification in official gazette in lieu of levying and collecting duties of excise on goods and services on following basis

a. on production capacity of plants , machinery, undertakings, establishments or installations producing or manufacturing such goods

b. on fixed basis , as it may deem fit on any goods or class of goods or on any services, payable by any establishment or undertaking producing or manufacturing such goods or rendering such services.

Filing of Return and payment of Duty section 4

• For every month, a registered person shall furnish not later than the due date a true and correct return in such manner and form as may be prescribed by the Board by notification in official Gazette

• Duty due for the dutiable supplies made or services rendered during a month shall be deposited by the registered person in the designated branch of the bank at time of filing of his return under sub - section (1)

• If during any month, there is a change in the rate of duty a separate return showing the application of different rates of duty shall be used in respect of each portion of such month

• A registered person may subject to approval of Commissioner Inland Revenue having jurisdiction , file a revised return within one hundred and twenty days of filing of return under sub-section(1) to correct any omission or wrong declarartion made.

• Every amount of duty due from any person on any other account shall also be deposited on prescribed return in the bank branch designated and used in same manner.

• The Board may, by rules made under this act prescribe a composite return.

Zero rate duty and drawback of duty section 5

• The goods exported out of Pakistan or such goods as may be by a notification in official gazette specified by Federal government shall be charged to duty at rate of zero per cent and adjustment of duty in terms of section 6 shall be admissible on such goods.

• The board may by notification in official gazette prohibit the payment drawback , refund or adjustment of duty upon the exportation of goods or class of goods to any specified foreign port or territory.

Adjustment (Section 6)

• adjustment of duty of excise shall be admissible only if a person registered under this act holds a valid proof to the effect that he has paid the price of goods purchased by him including amount of duty and received the price of goods sold.

Default Surcharge

• If a person does not pay the duty due or any part thereof within the prescribed time or claims a refund of duty or drawback or makes an adjustment which is not admissible to him he shall in addition to duty due pay the default surcharge at rate of KIBOR plus three percent per annum of the duty due.

Applicable of value and rate of duty

The value and the rate of duty applicable to any goods or services are

a. In case of goods on date on which goods are supplied for export or for national or local consumption.

b. In case of goods produced or manufactured outside the area to which this Act has been applied and brought to such area for sale or consumption the date on which the goods are brought to those areas.

c. In case of services on date on which the services are provided.

Collection of excess duty section 11

• Every person who for any reason whatever has collected or collects any duty which is not payable as duty or which is in excess of duty actually payable and the incident of which has been passed on to consumer shall pay the amount so collected to federal Government and all provisions of this act or rules made thereunder shall apply for recovery of such amount and claim for refund of any such amount paid or recovered shall admissible.

Qurat-ul-Ain

Determination of value for purposes of Duty (Section 12)

1. Where any goods are liable to duty under this act at a rate dependent on their value, duty shall be assessed and paid on the basis of value as determined .

2. Services that are liable to duty at a rate dependent on the charges therefore, the duty shall be paid on total amount of charges for the services including the ancillary facilities or utilities.

3. Goods are chargeable to duty at the import stage and duty is assessed and paid on the value determined.

4. If goods are chargeable to a duty on the basis of retail price, it will be paid on the retail price fixed by the manufacturer inclusive of all duties, charges and taxes, other than sales tax levied and collected.

5. The Board may fix the minimum price of any goods or class of good for the purpose of levying and collecting duty on goods shall be paid accordingly:

• Provided that, where the price, at which the goods and class of goods are sold, is higher than the price fixed by the Board, the duty will be levied and collected at such higher price.

Registration (Section 13)

1. Any person engaged in the production or manufacture of goods or rendering services liable to duties of excise and required to obtain registration regardless of his annual turnover or volume of sales.

2. If person is already registered under the Sales Act,1990, not required to take separate registration for excise purpose and his sales tax registration shall be deemed to be a registration for the purpose of this Act.

Recovery of unpaid Duty or of Erroneously Refunded duty or Arrears of Duty, etc.

(Section 14)

1. If any person has not levied or paid any duty or amount of duty has been refunded erroneously, such person will be given a notice requiring him to show cause for payment.

1. The officer of Inland Revenue, empowered to consider objections of the person, determine the amount of duty payable. He have to pay amount determined along with default surcharge and penalty.

2. Any amount of duty levied and penalty imposed is due from any person, this amount will be recovered in a manner prescribed.

3. Business or activity having liability to pay duty under this Act is sold, or liquidated, the amount of unpaid duty shall be the first charge on the assets of the business.

Short Paid amount Recoverable[Section-14A]Where a registered person pays the amount of duty less than the duty due shall be recovered from that person by stopping removal of any good from his business premises.

Federal Government may, declare modification and alternations that will be applicable in respect to duties levied.

Application of the Custom Act,1969, to Federal Excise Duties [Section 15]

Exemptions

1.All goods imported, produced or manufactured in Pakistan and services provided here except those specified in First schedule.

2.The Federal Government may exempt any goods or services from the whole or any part of that duty leviable.

1.Omitted

2.The Federal Government or the Board may, exempt any person from payment of the whole or part of the default surcharge.

3.The federal Government shall place before the National Assembly all notification issued in financial year.

Records [Sections 17]

1.Every person registered will maintain record of:1.Clearances and sales

2.Goods purchased

3.Goods cleared

1. Invoices, Bills, Agreements

2. Production, Stocks and inventory

3. Imports & Exports

4. As Specified by the Board.

1. For any person Board may specify:1. To keep any other record for the purposes of

this act.

2. To use electronic fiscal cash register

3. The procedures or software for electronic maintenance of records.

Invoices [Section 18]

1.A person registered shall issue serially numbered invoices, containing the following particulars:1.Name, address and registration number of

the seller.

2.Name, address and registration number of the buyer.

3.Date of issue.

1.Description and number of goods & services

2.Value exclusive of excise duty

3.Amount of excise duty

4.Value inclusive of excise duty

2.A registered person making taxable supplies not required to issue a separate invoice for excise purposes.

3.The Board may modify invoices for different persons

4.The Board may specify goods for which a copy of invoices would be carried with conveyance

5.The Board may specify goods or services for which invoices would be issued electronically.

Muhammad Saad Khan

Offences and penalties

•Offences penalties fines and allied matters:

(1)Any person who fails to file shall pay a penalty of five thousand rupees in case of non-filing of return and ten thousand rupees or five percent of the duty involved whichever is higher.

• (2) (a) Any parson who makes orally or signs and declaration certificate or other document required by this act or rules made thereunder

(b) Any person who counterfeits or falsifies any document which is required.

(c) Any person who fails or refuse to document required to be given.

(3) (a) Any person who illegally removes, stores, any goods in the manner other than the manner prescribed.

(b) Any person who is in any way concerned in conveying, removing, any goods with internet to defraud the Government.

(c) Any person who is in any way concerned in any fraudulent evasion of any duty of excise.

(d) Any person who claims adjustment of duty not admissible under this act or rules.

(e) Any person who is any way concerned in the manufacture of any dutiable goods.

(4) Any person who, without the approval of the commissioner, directly manipulates data stored in computer.

(5) If any person does anything whereby there might be obtained by another person any amount by way of refund or drawback of any duty in respect of any goods or services which is not lawfully payable.

(6) Any person who obstructs any officer of inland revenue or other public servant or any person acting in his aid.

(7) Where an officer under this act or rules made thereunder has been committed by a any persons, any person who at the time of the commission of the offence was a director.

(8) Where any person is liable under this act to any penalty or punishment for any act omission.

(9) Where any goods are chargeable to duty on the basis of retail price under this act retail price is not indicated on the goods in any case of cigarettes, retail price, health warning and name of the manufacturer is not mentioned in the manner specified therein.

10) Where any person is engaged in the manufacture or production of cigarettes in the manner contrary to this act.

(11) Any good in respect of which any of the provision of this act is contravened.

(12) Any person who attempts to commit any offence punishable under this act.

Appointment of special judges for trail of offences:

(1)The federal Government oppoint as many special judges as it may consider necessary

(2) A special judge shall be a person who is or has been or is qualified to as session judge.

Trail of offences by special judge:

(1)An offence punishable shall be tried exclusively by the special judge.

(2)The provisions of the code of criminal procedure ,1898 expect of that code shall apply.

(3) The code of criminal procedure,1898 shall have effect as if an offence punishable.

(4) A special judge shall take cognizance of, and have jurisdiction to try an offence to try.

(5) The federal Government may direct the transfer at any stage of the trail.

(6) In respect of a case transferred to a special judge) such judge shall not be bound to recall and rehear any witness.

Power to arrest and prosecute

(1)Any officer of inland revenue authorized by the board in this behalf who has reason to believe that any person has committed an offence

(2)Any person arrested under this act shall be produced before the special judge.

(3) After perusing the record, and after giving the prosecution an opportunity of being heard admit him to bail on his executing a bond.

(4) A judicial magistrate may after authorizing detention in such custody proper for facilitating his earliest production.

(6) When any person is arrested thus act the officer of inland revenue shall record the fact of arrest.

(7) While holding an inquiry the officer of inland revenue shall exercise the same powers as are exercisable by an officer in charge of a police station.

(8) If an officer of inland revenue after holding an inquiry he shall make a report to this effect to the commissioner and with his approval may release him.

(9) The special judge may, after the perusal record of the inquiry and hearing the prosecution, agree with such evidence.

(10) The officer of inland revenue shall maintain a register to be called Register or arrest.

(11) After completing the inquiry the officer of inland revenue shall as early as possible submit a complaint to in charge of a police station.

(12) Any magistrate of the first class may record any statement or confession during inquiry under this act.

(13) Federal Government may exercise the powers and perform the function of the officer of inland revenue.

(14) Where any person has committed an offence liable to penalty or punishment.

Power to summon persons to give evidence and procedure documents in inquiries:

(1)Any officer of inland revenue duly empowered by the board in this behalf shall have power to summon any person

(2) All person so summoned shall be bound to attend an authorized agent.

(3) Every such inquiry as aforesaid shall be deemed to be a judicial proceeding.

Officers Required to assist officers of inland revenue:

• All officers of police

•Customs

• sales tax

• the civil armed forces and

• all officers of government