Page 86 - DCOM308_DCOM502_INDIRECT_TAX_LAWS

Unit 5: Clearances of Excisable Goods

The cascading effect of duty can be illustrated by the following example: Notes
Particulars Under non-CENVAT Under CENVAT
Under CENVAT
Particulars
Under non-CENVAT
(A) Raw material say X 100 100
100
(A) Raw material say X
100
Add Excise Duty @ 16 % 16 16

Add Excise Duty @ 16 %
16
16
Total 116 116
116
Total
116
Credit allowable Nil 16
Credit allowable
16
Nil
Net Cost of X 116 100
100
116
Net Cost of X
(B) Value Addition 100 100
100
100
(B) Value Addition
Product Y 216 200
216
200
Product Y
Add Excise duty @16% 34.56 32
Add Excise duty @16%

34.56
32
Total cost 250.56 232
250.56

Total cost
232
Credit available - 200
Credit available
200
-

(B) Value Addition 100 100
(B) Value Addition
100
100
Product Z 350.56 300
350.56
300

Product Z
Add Excise duty @16% 56.09 48
56.09
Add Excise duty @16%

48
Total cost 406.09 348

406.09
Total cost
348
Credit available - 48
48
-

Credit available
Net Cost of Z 406.09 300
Net Cost of Z 406.09 300
From the above it becomes clear that the person who purchases product X he pays 116 but
under CENVAT he gets a credit of 16, so his cost is simply 100 the person who buys product
Y he pays 240.56 under Central Excise and 232 under CENVAT. However he gets CENVAT
credit of 32 and his net cost remains only 200. In case of product Z this difference increases to
as high as 106.09.
The present scheme allows instant CENVAT credit to be taken on duties, such as Excise Duty,
Special Excise Duty, additional Duty of excise and Countervailing Duty paid on inputs and
capital goods received in a factory for the manufacture of any dutiable final product except
matches.
Self Assessment
Fill in the blanks:
11. The .................................. of Customs or other duly appointed officer shall examine the
goods with the particulars.
12. The value of any ..................................goods shall, for the purposes of clause (b) of sub-
section (1) of section 4 of the Act, be determined in accordance with these rules.
13. Where the excisable goods are not sold by the assessee at the time and place of removal
but are transferred to a ..................................
14. Where the excisable ..................................are not sold by the assessee but are used for
consumption by him or on his behalf in the production or manufacture of other articles.
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