ICWAI Group II

Applied Indirect Taxation

Central Excise
Objective Type Questions and Answers and others for June 2011 Examination
All objectives are from different chapters of Central Excise Act
1. Fill in the Blanks (Answers are underlined)
i. In case of transfer of business, the successor in business is liable (liable/not liable) for the
excise dues of the predecessor.
ii. W. e. f. 10-9-2004, a manufacturer producing both exempt as well as non-exempt services,
not maintaining separate accounts would pay excise duty at 10%. Education cess is not
payable (payable/not payable) on the same.
iii. Value of software loaded on computer at the time of clearance from factory, is required to be
excluded [excluded/included] for purpose of valuation of computer, under Section 4 of
Central Excise Act.
iv. Captive consumption means goods consumed in the factory of the manufacturer.
v. Goods covered by Central Excise tariff but fully exempt from duty are excisable [excisable/not
excisable] goods.
vi. Ownership of raw materials is not relevant (relevant/not relevant) for excise duty liability.
vii. Affixing brand name, labeling or re-labeling and repacking from bulk back to small pack of
readymade garment is (is/is not) manufacture.
viii.Compressing and bottling gas is not (is/is not) manufacture.
ix. Goods under Central Excise must be movable (movable/immovable) and marketable
(marketable/ packaged).
x. CETA specifies some process (process/operations) as amounting to manufacture. This will be
said to be manufactured even if (even if/unless) as per court decisions they do not
amount to manufacture.
xi. Processing can amount to manufacture if a new (new/existing) and identifiable
(identifiable/similar) product known in the market emerges.
xii. Job work is not manufacture.
xiii.Waste and Scrap will not be excisable unless it is specified in CETA.
xiv. Goods ware removed by the manufacturer without payment of excise duty on premise that
the goods are exempt. Later in transpires that such goods are excisable at 15% (all
inclusive). The manufacturer has invoiced at Rs. 11,500. The assessable value is Rs.
10,000.
xv. At present deduction is (is/is not) available on the basis of equalized freight and Central
Excise.
xvi.Captive consumption is chargeable to duty, value is determined on the basis of cost + 10 %.
xvii.
A registered dealer has procured some goods from depot of a manufacturer. The
registered dealer is first stage dealer ('first stage dealer'/'second stage dealer'). Invoice of
second stage dealer is not required (required/not required) to be authenticated by
Inspector of Central Excise.
xviii. A service provider is providing both taxable and exempt services and he is unable to
bifurcate the common input services used for providing exempt output services. In such
case, has Cenvat credit of input services is restricted to 20% (10%, 20%, 33%, 40%) of
service tax payable on his output taxable services.
xix.Cenvat credit can (can/can not) be utilized for payment of service tax on output service.
xx. Job work done under Cenvat provisions is (is/is not) exempt from service tax.
xxi.A service provider cannot avail CENVAT credit of special CVD paid u/s 3(9) of Customs Tariff
Act.
xxii.
CESTAT can grant a maximum of 3 (three) adjournments.
xxiii. Excise Department appeal against order passed by Commissioner (Appeals) can be filed
when it is authorized by committee of two Commissioners, [Committee of two
Commissioners/Committee of two Chief Commissioners /Chief Commissioner/Board i.e.
CBE& C]
xxiv. In case of Central Excise and Customs, appeals must be filed within 60 days from the date
of communication of order.
xxv.
Appeals under Central Excise and Customs must be filed within 60 days from the date of
communication order.
xxvi. The adjudicating authority cannot review the order passed by it earlier.
xxvii. If duty is not paid fully on due date, assessee is liable to pay the outstanding amount
along with interest on unpaid amount @ 13 % per month on outstanding amount, till
payment of duty.
xxviii. W.e.f 1-11-2004, assessees paying duty of Rs. 1 crore or more per annum through PLA,
should file Annual Financial Information Statement for the preceding financial year by 30th
November of succeeding year in Form ER-4.
xxix. Where an assessee has opted provisional assessment of central excise duty, if differential
duty is found to be payable on finalization of assessment, the rate of interest chargeable
under Section 11AA or 11AB is 13%. The time limit for finalization or provisional
assessment is 6 months. The said time limit for finalization of provisional assessment can
be extended for a further period of 6 months.

-2xxx.
xxxi.

Show cause notice issued by an officer beyond his power will be invalid.
An assessee can claim refund of excise duty within 1 year from relevant date u/s 11B of
Central Exercise Act, 1994.
xxxii. In addition to departmental audit, C & AG carries out selective audits which is termed as
Central Revenue Audit (CERA).
xxxiii. SSI units paying duty under notification No. 9/2003-CE have to pay excise duty on
monthly (monthly/ quarterly/half yearly) basis. They have to file return within the
prescribed time on quarterly (monthly/quarterly/half yearly/yearly) basis. [Note - The said
notification is rescinded.]
xxxiv. A SSI unit is eligible for exemption up to Rs. 150 lakhs. However, if its turnover in the
previous financial year was more than Rs. 400 lakhs, it is ineligible for exemption from
duty in current year.
xxxv. SSI unit whose turnover exceeds Rs. 90 lakh per annum have to furnish declaration in
prescribed form for central excise purposes.
2. True and False/Correct and Incorrect
i. Delay in filling appeal can be condoned but condonation is not a matter of right.
Ans. True, delay in filing appeal can be condoned by the Appellate Authority on showing
sufficient reason for such delay. However, such condonation is not a matter of right.
ii. There is provision for payment of Central Excise Duty "under protest".
Ans. True. There is no legal provision with regard to payment under protest in Central Excise Act,
1944. However the reference of payment under protest is (liven only under the Refund Section
11B of the Central Excise Act, 1944. The proviso to the said section provides that the time limit
prescribed under the said '.actions is not applicable in case where such payment was made
under protest.
iii. On 14.3.2010, Central Excise or customs authorities can make a provisional attachment of
property of a person to whom a show cause notice has been issued.
Ans. True. As per provision of Sec. 11 DDA of the Central Excise Act an Sec.28BA of the Customs
Act, Central Excise or customs authorities ca make a provisional attachment of property of a
person to whom a show cause notice has been issued.
iv. In exceptional circumstances, goods can be cleared from factor without payment of excise
duty and stored in any other premises.
Ans. True. Commissioner, subject to conditions, can permit storage of goods ii any other
premises outside the factory without payment of duty.
v. Central excise authorities cannot raise demands contrary to the approved classification/price
list retrospectively.
Ans. False. As per Sec.11A, the demand contrary to the approved classification/price list can be
raised retrospectively within the specified time.
vi. According to Central Excise Act, 1944, 'Assessment' includes self assessment of duty and also
provisional assessment.
Ans. True. Sec.2(b) of the Central Excise Rules defined 'assessment'. 'Assessment' includes self
assessment of duty and also provisional assessment.
vii. Cenvat credit on capital goods can be availed in full in the year of purchase.
Ans. False. 50% credit is available in the year of purchase and balance credit is available in the
subsequent financial year.
viii. Installation/use of capital goods is a pre-requisite for taking CENVAT credit.
Ans. False. Cenvat credit of capital goods is available when such goods are received in the
factory.
ix. Goods mentioned in Central Excise tariff but fully exempt from excise duty are not "excisable
goods".
Ans. False. Such goods is considered as excisable goods.
x. Waste and scrap are always treated as excisable goods.
Ans. False, waste and scrap are treated as excisable goods if they are covered by CETA and they
are marketable.
xi. Excise duty is payable on all sample, even if given free.
Ans. True. Excise duty is payable on all manufactured goods even though they are distributed
freely.
xii. Brand owner is considered as manufacturer under Central Excise.
Ans. False. Brand owner is not considered as manufacturer under the Central Excise law. The
actual manufacturer is liable under the excise law.
xiii. Parts used for repair or replacement during warranty period are excisable.
Ans. True. The Supreme Court in the case of ECE Industries Ltd. vs. CCEx. 2004 (164) ELT 236
(SC) has held that parts used for repair, replacement during the warranty period are excisable. If
some spare parts are supplied as free replacements for defective parts, excise duty is payable on
such spare parts.
xiv. Repacking of an already manufactured product would amount to manufacture in Excise Law.
Ans. True. In respect of goods specified in Third Schedule to Central Excise Act, repacking will be
deemed as 'manufacture'.
xv. Trade discount is permissible as deduction from assessable value for Central Excise, only if it
is given before removal from factory. Discount given later is not allowable as deduction.
Ans. False. Trade discount is permissible as deduction from assessable value for Central Excise,
even if it is given after removal from factory.
xvi. In case of CIF contract, the assessee will be entitled to deduction of outward insurance and
freight while calculating assessable value.

-3Ans. True. Assessable value shall be computed at the place of removal. Any expenditure incurred
beyond that point is deductible.
xvii. Charges for training the buyer in use of the machinery supplied are includible in assessable
value.
Ans. False. Assessable value shall be computed at the place of removal. Any expenditure
incurred beyond that point is deductible.
xix. Dharmada (Charity) charged in invoice is required to be included to be included while
calculating Assessable Value for purpose of Central Excise.
Ans. True. Dharmada (Charity) charged in invoice shall be included while calculating Assessable
Value.
3. State whether following are eligible as inputs for Cenvat
(i) Safety appliances used by workmen; (ii) Light Diesel Oil (LDO) used in manufacture; (iii) Dies;
(iv) PAns used to manufacture capital goods within the factory.
Ans.
(i) Safety appliances used by workmen: Yes
(ii) Light Diesel Oil (LDO) used in manufacture: No
(iii) Dies: No, as it is considered as capital goods
(iv) PAns used to manufacture capital goods within the factory: Yes
4. Multiple Choice Questions
In order to attract excise duty under the Central Excise Act, 1944, goods must be (a) Movable, (b)
Movable or immovable, (c) Immovable, (d) None of the above
Ans. (a) Movable
5. Expand the following abbreviations - EPCGS, NCCD, CCCE, DFRC,
Ans.
EPCGS - Export Promotion Capital Goods Scheme
NCCD - National Calamity Contingent Duty
CCCE - Chief Commissioner of Central Excise
DFRC - Duty Free Replenishment Scheme
6. Short Notes
A. Surrender of registration certificate/deregistration under the Central Excise Act,
1944
Ans. Every registered person, who ceases to carry on the operation for which he is registered,
shall de-register himself by making a declaration in the form specified in Annexure-III and
depositing his registration certificate with the Superintendent of Central Excise. However, it is to
be noted that registration will not be cancelled if some demands are pending.
B. Manufacturer under the Central Excise Act, 1944.
Ans. Manufacture [Sec. 2(f)]
Duty of excise is leviable on manufacture or production of goods in India. Hence, meaning of this
term is important. But Central Excise Act provides an inclusive definition of the term
'manufacture' which results in discrepancies and litigation. However, through various decisions,
the meaning of these terms is well settled. First of all, we discuss about the definition of
manufacture as provided in the Act Manufacture includes any process:
1. incidental or ancillary to the completion of a manufactured product; and
1. which is specified in relation to any goods in the section or chapter notes of the First Schedule
to the Central Excise Tariff Act, 1985 as amounting to manufacture; or
2. which in relation to the goods specified in the Third Schedule, involves packing or repacking of such goods in a unit container; or
labelling or re-labelling of containers including the declaration or alteration of retail sale
price on it; or
adoption of any other treatment on the goods to render the product marketable to the
consumer.
In brief, the definition stipulates that manufacture will include any process specified in First or
Third Schedule of the CETA. It provides the artificial meaning of manufacture (i.e. deemed
manufacture), however such activity may not be considered as manufacture in common
parlance.
Hence, judicial decisions are necessary to understand the meaning of 'manufacture'
-"Manufacture implies a change, but every change is not manufacture and yet change of an
article is the result of treatment, labour and manipulation. But something more is necessary and
there must be transformation, a new and different article must emerge having a distinctive name
and character or use" -Prominent Edition of Words and Phrases which is also upheld by the Apex
Court in Union of India vs. Delhi Cloth and General Mills.
C. Tariff value under Central Excise Act, 1944.
Ans. In this case, value of excisable goods is fixed' (notionally) by Central Government by giving
notification in the Official Gazette. However, tariff value (such notional value) shall be fixed for
only those articles, which is chargeable to duty ad-valorem under Central Excise Tariff Act, 1985.
Hence, this type of duty have features of both specific as well as ad-valorem. It is the simplest
method of charging duty ad-valorem as value is fixed. For e.g. pan masala, readymade garments,
etc.

-4Different tariff values may be fixed for (a) Different classes or descriptions of the same excisable goods; or
(b) Excisable goods of the same class or description (i) Produced or manufactured by different classes of producers or manufacturers; or
(ii) Sold to different classes of buyers.
D. Valuation in case of job work under Central Excise Act, 1944
Ans. Valuation in case of job work [Rule 10A]: Where the excisable goods are produced or
manufactured by a job-worker, on behalf of a person (hereinafter referred to as principal
manufacturer), then, -(i) in a case where the goods are sold by the principal manufacturer for
delivery at the time of removal of goods from the factory of job-worker, where the principal
manufacturer and the buyer of the goods are not related and the price is the sole consideration
for the sale, the value of the excisable goods shall be the transaction value of the said goods sold
by the principal manufacturer;
(ii) in a case where the goods are not sold by the principal manufacturer at the time of removal
of goods from the factory of the job-worker, but are transferred to some other place from where
the said goods are to be sold after their clearance from the factory of job-worker and where the
principal manufacturer and buyer of the goods are not related and the price is the sole consideration for the sale, the value of the excisable goods shall be the nor mal transaction value of
such goods sold from such other place at or about the same time and, where such goods are not
sold at or about the same time, at the time nearest to the time of removal of said goods from the
factory of job-worker.
E. Cenvat credit where inputs are partially used for manufacture of dutiable
goods/taxable services.
Ans. Cenvat credits of inputs and input services is not available if final product or output service
is exempt from duty/tax.
The Cenvat credit shall not be allowed on such quantity of input or input service which is used in
the manufacture of exempted goods or for provision of exempted services, except in the
following circumstances:
a. When separate books of accounts maintained - Where a manufacturer or provider of output
service avails of Cenvat credit in respect of any inputs or input services, and manufactures
such final products or provides such output service which are chargeable to duty or tax as
well as exempted goods or services, then, the manufacturer or provider of output service
shall maintain separate accounts for receipt, consumption and inventory of input and input
service meant for use in the manufacture of dutiable final products or in providing output
service and the quantity of input meant for use in the manufacture of exempted goods or
services and take Cenvat credit only on that quantity of input or input service which is
intended for use in the manufacture of dutiable goods or in providing output service on which
service tax is payable.
b. When separate books of accounts are not maintained The manufacturer of goods or the
provider of output service, opting not to maintain separate accounts, shall:
i. the manufacturer of goods shall pay an amount equal to 5% of value of the exempted
goods and the provider of output service shall pay an amount equal to 6% of value of the
exempted services; or
ii. the manufacturer of goods or the provider of output service shall pay an amount
equivalent to the CENVAT credit attributable to inputs and input services used in, or in
relation to, the manufacture of exempted goods or for provision of exempted services
F. 'Input service' for purpose of Cenvat Credit as applicable to a manufacturer.
Ans. "Input service" means any service,
(i) used by a provider of taxable service for providing an output service; or
(ii) used by the manufacturer, whether directly or indirectly, in or in relation to the manufacture
of final products and clearance of final products upto the place of removal, and includes services
used in relation to setting up, modernization, renovation or repairs of a factory, premises of
provider of output service or an office relating to such factory or premises, advertisement or
sales promotion, market research, storage upto the place of removal, procurement of inputs,
activities relating to business, such as accounting, auditing, financing, recruitment and quality
control, coaching and training, computer networking, credit rating, share registry, and security,
inward transportation of inputs or capital goods and outward transportation upto the place of
removal.
G. Monetary limits of adjudicating authorities, Officers of Central Excise, Customs and
service Tax.
Ans. Following are the monetary limits of adjudicating authorities, Officers of Central Excise,
Customs and service Tax:
Authority
Issue of SCN and
Remission of duty for
demand of duty
loss of goods
Commissioner
Without limit
Without limit
Additional Commissioner
Between Rs. 20 lakh - Rs. 50 lakh
Rs. 5,00,000
Joint Commissioner
Between Rs. 5 lakh - Rs. 50 lakh
Rs. 5,00,000
DC/AC
Upto Rs. 5 lakh
Rs. 1,00,000
Superintendent
N.A.
Upto Rs. 10,000
7. Distinguish between CENVAT on Capital Goods and on Inputs for production.
Ans.
CENVAT on Capital Goods
CENVAT on Inputs

-5-

Credit is available only for specified article

[given in Rule 2(b)]
50% credit is available in the current year and
remaining 50% credit shall be available in the
next year.
There is no such provision for capital goods.
Capital goods have to be brought into the
factory.

Credit is available for all inputs except certain

specified article like diesel and petrol.
100% Credit is available as soon as inputs are
received.
Credit can be refunded if the final product is
exported and no duty drawback is claimed
Inputs can be sent directly to the place of work.