Checklist for Central Excise Compliance

The manual is divided into six parts.Each part provides explanatory notes and guidance note to facilitate personnel handling compliance.

Part one– Legal compliance to be ensured on daily basis
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Sr No.
Compliance required to be done
Provision/
Form
Time frame/ Explanatory Note
Remark of Personnel handling compliance
Verified/Audited by
(A)
(B)
(C)
(D)
(E)
(F)
1.
Removal of manufactured goods from factory to be done under cover of Invoice
Rule 11 of CER/Invoice
At the time of removal of the goods
EN – (1.1)
2.
Daily Stock Accounts to be maintained
Rule 10 of CER/ No form prescribed
Daily
EN – (1.2)
3.
Availing CENVAT Credit of the raw material/capital goods received in the factory
Rule 3&4 of CCR/ 
On receipt of the raw material (100%) / Capital goods (50% same year) remaining next fin. year EN – (1.3)
Explanatory Notes:
EN – (1.1)
The invoice shall be serially numbered and should contain the registration number, description, classification, time and date of removal, rate of duty, quantity and value, of goods and the duty payable thereon. The invoice shall be prepared in triplicate  with original  marked as ORIGINAL FOR BUYER; the duplicate copy being marked as DUPLICATE FOR TRANSPORTERS; the triplicate copy being marked as TRIPLICATE FOR ASSESSEE and
EN – (1.2)
Daily Stock Account should contained particulars regarding description of the goods produced or manufactured, opening balance, quantity produced or manufactured, inventory of goods, quantity removed, assessable value, the amount of duty payable and particulars regarding amount of duty actually paid. The first page and the last page of each account book shall be authenticated by authorised person.
EN – (1.3)
In case of receipt of input, CENVAT credit can be taken immediately on receipt. In case of receipt of capital goods CENVAT credit can be taken to the extent of 50% in the same financial year and remaining credit can be taken in the next financial year.
Guidance Note:
1. For personnel handling compliance –
a.      Please mention at what time during the day compliance is done/checked.
b.      Please specifically mention if there is any deviation, otherwise mention that compliance done. 
c.       Please give your remark in column (E).
2. For legal audit personnel –
a.      Please check at the time of audit, as to at what time during the day, daily compliance is done.
b.      Please check whether documents are maintained properly.
c.       Please also check the contents of the documents and confirm that it is maintained as per law.

 

Part two– Compliance to be done on periodical basis except daily compliance:
Sr No.
Compliance required to be done
Provision/Form 
Time frame/ Explanatory note, if any.
Remark of Personnel handling compliance
Verified/Audited by
(A)
(B)
(C)
(D)
(E)
(F)
1.
Utilization of the CENVAT credit accumulated during the previous month
Rule 3(3) CCR
Before 5th day of the month
EN – (2.1)
2
Payment of excise duty in respect of clearance made during the previous month
Rule 8 of CER. TR6 Challan
On 5th day of the month
EN – (2.2)
3
Payment of excise in respect of clearance made during March
Rule 8 of CER. TR6 Challan
On 31st March.
4
Monthly return
Rule 12 of CER/ Form ER -1
Before 10th day of month
5
Monthly return of CENVAT credit
Rule 7(5) of CCR/ Form Annexure to CCR 
Before 10th day of month
EN – (2.1)
Before payment of excise duty for the month, the CENVAT credit accumulated upto 31stday of the month is to be availed. 
EN – (2.2)
Duty on each clearance should be paid by making debit entry in the PLA. 
Guidance Note for reporting compliance:
A – For personnel handling compliance –
a.      Please intimate exceptions to the above, if any.
B – For legal audit personnel –
a.      Please check at least two months returns and periodical forms/documents on random basis.
 
Part three– (1) Event based legal compliance & (2) Export Procedure:
(1)
Sl No.
Event
Provision/ Form 
Treatment to be given/ Explanatory Note, if any
Remark of Personnel handling compliance
Checked by
(A)
(B)
(C)
(D)
(E)
(F)
1.
Removal of input as such or after being partially processed
Rule 4 of CCR
At the time of removal of goods pay amount equal to the Cenvat credit availed at the time of receiving the goods
2.
Removal of capital goods as such (without any use)
Rule 4 of CCR
Take credit of remaining 50% (if returned within the same financial year of receipt) and pay duty equal to the credit taken
3.
If final product is brought back to factory and send back without any manufacturing process 
Rule 16 of the CER
Take credit of the duty paid at the time of removal and again pay same amount of duty at the time of clearance
4.
If final product is brought back to the factory and send back after carrying out some manufacturing process
Rule 16 of the CER
Take credit of the duty paid at the time of removal and pay duty at the rate applicable at the time of the clearance of the goods
5.
Goods cleared for exports brought back to factory
CBEC Manual
Re-entry within six months, Original documents should accompany, intimation to department in D-3 form within 24 hours.
Guidance Note for reporting compliance:
A – For personnel handling compliance –
a.      If for the above events same procedure followed please mention “ Complied by following same procedure”. If some different procedure is followed, please mention the procedure followed.
B – For audit personnel –
a.      Please check procedure followed for different situations and study its legal basis with the help of complying authority. Report import highlights.
(2)

Export Procedures

5.

Export under Bond without payment of duty

Rule 19(1) of CER, Notification No. 10/04(NT),  42/01(NT)/ Forms CT-1 & ARE-1
For procedure see
EN – (3.2.1)
6

Export on payment of duty under rebate claim of input duty – Under this procedure after export, after export of the goods rebate of duty paid on inputs used for the manufacture of export goods can be claimed.

Rule 18 of CER, Notification no. 41/2001 (NT)/ Form ARE-2
For procedure see
EN – (3.2.2)

Export on payment of duty under rebate claim of duty paid on export goods – Under this procedure, at the time of the export excise duty can be paid and then claimed as rebate.

Rule 18 of CER/Notification No. 40/2001 (NT)/Form ARE-1
For procedure see
EN – (3.2.3)
6.
Receipt of inputs without payment of duty for Export manufacturing
Rule 19 (2) of CER, Notification No. 43/2001/Provisions of RGC
For procedure see
EN – (3.2.4)
EN – (3.2.1)
Conditions and procedures for export of excisable goods under Bond without payment of excise duty
1. Conditions: –
A.    A general bond in the Form Annexure-I or a letter of undertaking in the Form specified in Annexure-II in lieu of a bond to be filed with the Assistant Commissioner of Central Excise, and
B.      goods to be exported within six months from the date of clearance from the factory. The time may be extended by the Assistant Commissioner on case to case basis, and
C.     When the export is from a place other than registered factory or warehouse, the excisable goods are in original packed condition and identifiable as to their origin;
2. Procedure: –
(a)   Obtain certificates in Form CT-1 specified in Annexure-III issued by the Superintendent of Central Excise
(b)   debit in bond account should not exceed the credit available therein at any point of time;
(c)    the goods may be removed without payment of duty after furnishing the letter.
(d)   For the sealing of goods intended for export at the place of despatch present the goods with four copies of application in the Form A.R.E.-1 to the Superintendent.
EN – (3.2.2)
Following procedure is to be followed for export under claim for rebate of the duty paid on inputs:
1.                  A declaration to be filed with Central Excise department describing the finished goods proposed to be manufactured along with their rate of duty leviable and manufacturing/processing formula with. The declaration shall also contain the tariff classification, rate of duty paid or payable on the materials so used.
2.                  The Department shall verify the correctness of the ratio of input and output mentioned in the declaration If, after verification, the Department is satisfied that there is no likelihood of evasion of duty, he may grant permission to the applicant for manufacture or processing and export of finished goods.
3.                  The goods shall be exported on the application in Form A.R.E. 2.
4.                  The claim for rebate of duty paid on materials used in the manufacture or processing of goods shall be lodged only with the Assistant Commissioner of Central Excise or Deputy Commissioner of Central Excise having jurisdiction of the place approved for manufacture or processing of such export goods.
EN – (3.2.3)
Conditions & Procedure:
i.                    The excisable goods shall be exported after payment of duty.
ii.                  The excisable goods shall be exported within six months from the date of clearance.
iii.                the market price of the goods shall not be less than the amount of rebate of duty claimed or Rs. 500 whichever is lower.
Procedure –
(a)   For the sealing of goods four copies of application in the Form ARE-I are to be presented to the Superintendent or Inspector of Central Excise.  He shall seal each package or the container and endorse each copy of the application.
(b)   The Superintendent shall return the original and duplicate copies of application to the exporter.
(c)    The triplicate copy of application shall be sent either to the officer with whom rebate claim is to be filed or to the Excise Rebate Audit Section.
(d)   The exporter may prepare quintuplicate copy of application for claiming any other export incentive.
(e)    The claim of the rebate of duty shall be lodged along with original copy of the application.
EN – (3.2.4)
Procedure for obtaining inputs without payment of duty for export processing:
1.      Make an application in the Form (Annexure I). Separate application required for each supplier.
2.      A bond is to be executed as directed by the excise department.
3.      The application to be countersigned by the Assistant Commissioner.
4.      One copy of the application received from the department to be forwarded to the manufacturer/supplier of inputs.
5.      Procedure to be followed by the supplier –
a.      On the basis of the application countersigned by the excise department, the supplier shall avail the benefit of the exemption notification.
b.      Declare ratio of input and output and rate of duty payable on excisable goods to be procured without payment of duty
c.       The supplier shall record on the application the removal details, such as No. and date of invoice, description, quantity and value of subject goods and amount of excise duty paid at concessional rate.
d.      Proper account to be maintained indicating the quantity and value of subject goods, the quantity of subject goods consumed for the intended purpose, and the quantity remaining in stock, invoice wise.
e.       a monthly return in Return in the format Annexure II to be filed by the tenth day of the following month.
f.        Any waste arising during the manufacturing process shall be removed on payment of appropriate duty.
g.      The goods shall be exported on the application in Form A.R.E. 2.
Guidance Note for reporting compliance:
1.      For personnel reporting compliance – If the procedure followed is the same as mentioned earlier, please indicate in column no. (F) that same procedure followed. If a different procedure is followed, please mention that.
2.      For legal audit personnel –
Please study with the help of complying authority the procedure followed and highlight the important details

Part four – Records to be maintained :

Sl No.
Register/ record to be maintained 
Provision/ Form
Manner & time of making entry/ maintaining the record/ Explanatory note, if any
Remark of the personnel handling compliance
Daily stock Account
Rule 10 of CER/ No form prescribed (Old RG – 1)
Description of goods manufactured, opening balance, quantity produced or manufactured, inventory of goods, quantity removed, assessable value, the amount of duty payable and particulars regarding amount of duty actually
Cenvat Credit Account
Part V para 1.5 of CEM/ Rule 7(4) of CCR.
(Old RG 23A)  
Record of receipt, disposal, consumption and inventory of inputs and capital goods with information about value, duty paid, person from whom purchased.
Cenvat credit documents
Rule 7 (1) of CCR
Any of the following documents in original to be maintained –
a. an invoice issued by (I) a manufacturer, (II) and importer, (III) a first stage dealer or a second stage dealer.
Personal Ledger Account
Part V para 2.2 CEM/ Form Ann. 8  CEM 
EN –(4.1)
EN – (4.1)
Each credit and debit entry in PLA is to be made on separate lines and assigned a running serial number for the financial year. PLA must be prepared in triplicate. Credit in the PLA can be made by making cash payment into the Treasury/or Authorised Bank.
Guidance Notefor reporting compliance:
1. For personnel reporting compliance –
Please certify that the records are maintained as per the statutory requirement and entries are passed within the statutory period. 
2.      For legal audit personnel –
Please study with the help of complying authority complete system of day to day maintenance of the records. Highlight the important details.
Part five– Specific procedural compliance:
A.    Cenvat Credit:
Sl No.
Description
Comments, if any, of the personnel handling compliance/ Explanatory Note No. (If any)

CENVAT Credit

1
CENVAT credit (Credit of duty paid on inputs) is available to the manufacturer of final product. The final product means excisable goods manufactured or produced from inputs. The Scheme allows CENVAT Credit to be taken of duties such as Excise Duty, SED, ADE, CVD and educational cess paid on inputs and capital goods received in a factory (Rule 3 of CENVAT credit Rules, 2002.
The CENVAT credit can be utilized to pay Excise duty on any final product, inputs cleared as such or after partially processed and capital goods removed as such. All raw materials or inputs are covered except Light Diesel oil, High Speed Diesel and Motor Spirit. Similarly, capital goods including pollution control equipment, components, spares, accessories, moulds and dies and paints, packaging material and greases/coolants are eligible goods on which credit can be availed
CENVAT credit can be taken on the basis of following documents (Rule 7) –
1.      An invoice of the manufacturer, importer or a first stage dealer or second stage dealer.
2.      A supplementary invoice
3.      Bill of entry

Refund of CENVAT credit accumulated due to export

Refund of CENVAT credit accumulated due to export – (Rule 5 of CCR, Notification 11/2002) – Refund applicable on fulfilment of following conditions –
4.      The goods are exported in accordance with the Central Excise Rules, 2002.
5.      The claims for refund submitted not more than once in any quarter in a calendar year. If average export clearances of dutiable goods in value terms is seventy per cent or more in the preceding three months, the claims may be on monthly basis.
6.      An application in Form A to be filed with Assistant Commissioner of Central Excise along with the Bill of Lading or Shipping Bill.
7.      The refund is allowed only where a manufacturer is not in a position to utilize the credit of the duty on inputs allowed against goods exported during the quarter or month.
8.      Apart from this there is no provision for the refund of accumulated CENVAT credit.

Job work

Job work is allowed in accordance with the Notification No. 214/1986 – The notification prescribes following conditions and procedure:
1.   Manufacturer to file an undertaking that the goods shall be used in relation to manufacture of a dutiable final product or a final product for export.
2.   Manufacturer maintains proper records to show that the goods sent for job work are used for the manufacture of dutiable goods or export goods etc.
3.   After filing the undertaking manufacturer can send raw material or semi finished raw material for processing to the job worker
4.   After receipt of the goods back from job worker, the manufacturer can use the goods for the manufacture of the final product and then clear the same on payment of duty or for exports etc.
5.   Sub Rule 5 of Rule 4 of CCR envisages that manufacturer can avail CENVAT credit even on the inputs and capital goods that are sent to the job worker provided the inputs or capital goods are received back within a period of 180 days from job worker’s place.
6.   In case goods are not received back within a period of 180 days, the manufacturer has to reverse the duty but again can take credit once goods are received back. 

Valuation

The objective of the provisions of Section 4 of the Central Excise Act and the Valuation Rules is to arrive at the true and correct transaction value or if it is not possible then to arrive at the nearest ascertainable value thereof:
Section 4 of CEA envisages that on fulfilment of the following conditions the transaction value of the goods will be taken as excisable value:
a.      Goods are sold by the assessee
b.      For delivery at the time and place of removal,
c.       The assessee and the buyer of the goods are not related,
d.      Price is the sole consideration for the sale.
For details about transaction value please see EN-(5.1)

Warehousing

In respect of certain goods, provision has been made to store the goods in warehouses without payment of duty. For the details of procedure about warehousing, please see EN – (5.2) 
EN – (5.1)
‘transaction value’ means the price actually paid or payable for the goods, when sold, and 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 provision for, advertising or publicity, marketing and 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 and other taxes, if any, actually paid or actually payable on such goods.
Following are the main inclusion in Transaction value:
    1. Packing Charges also packing supplied by the buyer to the supplier.
    2. Design and engineering charges
    3. Consultancy charges relating to the manufacturing
    4. Compulsory after sale service/warranty services
    5. Loading and handling charges
    6. Any additional consideration flowing from the buyer to the seller is to be included.
Exclusion from Transaction Value:
      1. Taxes are to be excluded from the transaction value
      2. Trade discount and cash discount can be excluded
      3. Outward handling, freight and insurance 
EN – (5.2)
 Warehousing procedure to be followed –
  1. Warehouse to be registered by Excise Commissioner.
  2. Consignor to send goods with application [Earlier AR-3] with invoice to consignee.
  3. On arrival at destination, rewarehousing certificate will be sent duly countersigned by Range superintendent to his counterpart at the end of consignee.
  4. If rewarehousing certificate is not received within 90 days, consignor shall pay the duty.
9.      Proper accounts shall be maintained at the warehouse. He will be responsible for payment of duty, penalty etc.
Guidance Note for reporting compliance:
1.      For personnel reporting compliance –
This part contains important details of statutory provisions. If the same is followed, please inform the same. In case of any different observation or different practice, please intimate the same. 
2.      For legal audit personnel –
Please study with the help of complying authority complete system of excise treatment in case of different situation. Highlight the necessary details.
Part six
Details needed from complying authority:
 Name of the Company
Factory location
Central Excise Registration Number
Functional Head
Complying authority’s name
Details of the final products (As per excise registration certificate)
Sl No.
Technical name of product
Chapter and Heading No
Current excise duty rate
1
2
3
4
5
6
Details of Inputs
Sl No.
Technical name of product
Chapter and Heading No
Current excise duty rate
1
2
3
4
5
6
7

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