1. Assessment Defined

1.1 The expressions ‘assessment’ and ‘assessee’ have been defined in the Central Excise Rules, 2002 (hereinafter referred to as the said Rules). “Assessment” includes self-assessment of duty made by the assessee and provisional assessment under rule 7 of the said Rules. “Assessee” means any person who is liable for payment of duty assessed or a producer or manufacturer of excisable goods or a registered person of a private warehouse in which excisable goods are stored and includes an authorized agent of such person.

1.2 Normally, duty is payable on removal of goods. Rule 4 of the said Rules provides that every person who produces or manufactures any excisable goods, or who stores such goods in a warehouse, shall pay the duty leviable on such goods in the manner provided in rule 8 of the said Rules or under any other law. No excisable goods, on which any duty is payable, shall be removed without payment of duty from any place, where they are produced or manufactured, or from a warehouse, unless otherwise provided.

1.3 Omitted 24/2003 (N.T.)

1.3 There is an exception with respect to duty payment on molasses. Where molasses are produced in a khandsari sugar factory, the person who procures such molasses, whether directly from such factory or otherwise, for use in the manufacture of any commodity, whether or not excisable, shall pay the duty leviable on such molasses, in the same manner as if such molasses have been produced by the procurer.

1.4 Notwithstanding anything contained in sub-rule (1) of Rule 4, Commissioner may in exceptional circumstances having regard to the nature of goods and shortage of space at the premises of the manufacturer where the goods are made, permit a manufacturer to store his goods in any other place outside such premises, without payment of duty subject to such conditions as he may specify.

4 For the purposes of the said rule 4, excisable goods manufactured in a factory and utilized, as such or after subjecting to any process, for the manufacture of any other commodity, in such factory shall be  deemed to have been removed from such factory immediately before such utilization.

2. Major ingredients of assessment

2.1 Before each removal, whether outside the factory of manufacture or production or for captive consumption, duty has to be asseszzed on the excisable goods. The main ingredients of assessment are:

(i) Classification and rate of duty: For determining the rate of duty, classification is prerequisite. Classification means the appropriate classification code which is applicable to the excisable goods in question under the First Schedule to Central Excise Tariff Act, 1985 (5 of 1986). There are Section Notes and Chapter Notes, in the Tariff for guidance in determining the appropriate classification. In case of difficulties, there are “Interpretative Rules” in the said Act. There are large number of judicial pronouncements concerning classification; which have to be applied in relevant case. The said Tariff also prescribes the ‘Tariff Rate of duty’. Some commodities may be subject to ‘special duty of excise’ prescribed under the Second Schedule to Central Excise Tariff Act, 1985. Thus, a reference to the Second Schedule to Central Excise Tariff Act, 1985 should also be made to verify whether the goods are covered there. However, duty chargeable is the ‘effective rate’. Thus, if any exemption is available to any commodity, the same may be ascertained and the applicable rate of duty should be determined. If such exemption is subject to certain conditions, it shall be necessary to follow those conditions. Goods may also be subjected to duty under some other Acts such as Additional Duty of Excise (Goods of Special Importance) Act, 1957 or certain Cess which are required to be collected by the excise department. The manufacturer or owner of goods in a warehouse is liable to pay all such applicable duties on removal of excisable goods.

(ii) Valuation: Where rate of duty is dependent on value of the goods (ad valorem duty), value has to be determined in accordance with the provisions of Central Excise Act, 1944, as follows:

(i) Value under section 4 Value based on retail sale price under section

(ii) 4A, if applicable

(iii) Tariff value fixed under Section 3, if applicable

(iii) Quantity Removed: Where duty is on value, the total value is determined by multiplying unit value with the total quantity. The unit quantity of goods are also required in cases where duty is charged at specific rate.

3. Self Assessment (Rule 6)

3.1 As per rule 6 of the said Rules, a Central Excise assessee is himself (self-assessment) required to determine duty liability at the time of removal of excisable goods and discharge the same. In other words, the assessee should apply correct classification and value (where duty is ad valorem) on the quantities being removed by him and indicate the same in the invoice (except assessee manufacturing cigarettes, in which case the Superintendent or Inspector of Central Excise has to assess the duty payable before removal by the assessee).

3.2 Assessee is also required to check the return (in the prescribed format under form E.R.-1 and form E.R.-2) for the month for production and removal of goods and other relevant particulars including CENVAT credit for a month and submits to the Range Office having jurisdiction over his factory within ten days of the succeeding month.

3.3 The following persons are permitted to file their returns on quarterly basis. Manufacturers

(a) availing exemption notification based on value of clearances in a financial year, or

(b) Manufacturing processed yarns or unprocessed fabrics falling under Chapter 50-55, 58 or 60, or

(c) Manufacturing ready made garments falling under chapter 61 or 62 who were eligible for exemption prior to 1.4.2003 based on value of clearances in a financial year

Their returns ( in the prescribed format under form E.R.-3 ) have to be filed in the following frequency: –

Return for the quarter (for months) By 20th day of the month
First quarter – April, May, June July
Second quarter – July, August, September October
Third quarter –October, November, December January
Fourth quarter — January, February, March April

4. Date for determination of rate of duty and tariff value

4.1 Date for determination of rate of duty and tariff value is prescribed in rule 5 of the Central Excise Rules, 2002. The provision is as follows:

(1) The rate of duty or tariff value applicable to any excisable goods, other than khandsari molasses, shall be the rate or value in force on the date when such goods are removed from a factory or a warehouse, as the case may be.

(2) The rate of duty in the case of khandsari molasses, shall be the rate in force on the date of receipt of such molasses in the factory of the procurer of such molasses.

4.2 If any excisable goods are used within the factory, ‘the date of removal of such goods’ shall mean the date on which the goods are issued for such use.

4.3 Omitted Notification No.24/2003 (N.T.)

PROVISIONAL ASSESSMENT

1. Introduction

1.1 Provisional assessment is resorted to in the event the duty can not be determined at the pointnf clearance of the goods.

2. Guidelines and procedure for provisional assessment:

2.1 Wherever an assessee finds that final assessment is not possible, (in situations mentioned in rule 7 of the Central Excise Rules, 2002 (hereinafter referred to as the said Rules) he will make a detailed request in writing to the Divisional Deputy/Assistant Commissioner of Central Excise, indicating:-

(a) Specific grounds/reasons, and the documents or information, for want of which final assessment cannot be made.

(b) Period for which provisional assessment is required.

(c) The rate of duty or the value or both, as the case may be, proposed to be applied by the assessee, for Provisional Assessment.

(d) Undertakes to appear before the Assistant/Deputy Commissioner of Central Excise within 7 days or such date fixed by him, and furnish all relevant information and documents within the time specified by the Assistant/Deputy Commissioner of Central Excise in his order, so as to enable the proper officer to finalise the provisional assessment.

2.2 On receipt of the request, the Deputy/Assistant Commissioner of Central Excise will examine it, if necessary, in consultation with the concerned Range Officer, to ascertain whether provisional assessment is necessary at all. If the reasons/ grounds are not sufficient, he may ask the assessee to appear before him on an appointed day and time, and if he is satisfied that provisional assessment is not necessary, he may pass a reasoned order rejecting the same and also ordering the rate of duty or the value, to be applied by the assessee.

2.3 Where the Deputy/Assistant Commissioner of Central Excise is satisfied with the genuineness of the assessee’s request, he will issue a specific order directing provisional assessment clearly stating:-

(a) the grounds on which Provisional Assessment has been ordered.

(b) the rate and /or value, as the case may be, at which duty has to be provisionally paid.

(c) the amount of differential duty for which bond is to be executed covering the period, if any, during which assessee paid duty  provisionally under the deeming provisions, after applying the rate and/ or value specified in (b) above.

(d) The amount of security or surety as may be fixed by Assistant/ Deputy Commissioner keeping in view the instructions issued by the Board from time to time.

2.4 – The assessee is required to mark the E.R.1, E.R.2, E.R. 3 (monthly/quarterly return)and documents covered under Provisional Assessment as “PROVISIONALLY ASSESSED” vide Order No dated ” There is a declaration in E.R.-1/E.R.-2/E.R.-3 wherein the assessee has to mention that the goods under ‘provisional assessment’.

2.5 Notwithstanding ‘self-assessment’, all cases of provisional assessment have to be finalised by the Deputy/Assistant Commissioner of Central Excise, within a maximum period of 6 months. All the cases where provisional assessment cannot be finalised within 6 months must be submitted to Commissioner with the request letter of the assessee (through Deputy/Assistant Commissioner of Central Excise) indicating the reasons for non-finalisation and amount of differential duty for future clearances, before the expiry of the above-said period. If the Commissioner is satisfied with the reasons, he may extend the period, or otherwise direct the method to be adopted for finalisation of the assessment. For extending the period beyond one year from the date of provisional assessment, the request letter of the assessee should be put up to the Chief Commissioner in the same manner through Commissioner with his comments. The time limit of finalising the provisional assessment shall be applicable even to cases ordered for provisional assessment prior to 1st July, 2001.

2.6 Finalisation of provisional assessment means finalisation of an issue/ground and thereafter finalisation of each E.R.-1/E.R.-2/E.R.-3. The amount will be communicated to the assessee at the earliest. The amount of each differential duty shall be paid along with interest at the rate specified by the Central Government by Notification Issued under Section 11AA or 11AB of the Act from the first day of the month succeeding the month for which such amount is determined, till the date of payment thereof.

2.7 If the assessee is in a position to ascertain the duty himself, he may pay the duty on his own at the earliest and in that case he will not have to incur interest on account of time taken by the Department to finalise assessment and communicate the amount.

2.8 Where any refund becomes due to the assessee, order shall be passed for such refund, but disbursement shall be subject to .further verification about incidence of such duty. The assessee will be required to • submit proof to the Assistant/deputy Commissioner of Central Excise that the duty incidence was borne by him (assesse4 if the assessee fails to produce such proof/evidence. the Assistant/Deputy Commissioner of Central Excise will pass an order for depoP’ the ;7. mount in Consumer Welfare Fund in the  prescribed manner. Otherwise, the refund shall be give along with interest at the rate specified by the Central Government by Notification Issued under Section 11 BB of the Act from the first day of the month succeeding the month for which such refund is determined, till the date of refund.

2.9 Though it is incumbent upon the assessee to ensure that the bond amount and corresponding securities are sufficient, the Divisional as well as the Range Officer wilL also keep a strict_vigit on such Gases-with the help of ‘Provisional Assessment Register’.

2.10 The Assistant/Deputy Commissioner of Central Excise will be held responsible to ensure that bonds for proper amount i.e., equal to the difference between the amount of duty as may be finally assessed and the amount of duty provisionally assessed are taken, in case of general bonds and that these are backed by proper (25%) security/ bank guarantee of the bond amount.

2.11 The format of bond for provisional assessment has been specified in Notification No. 56/2001-Central Excise (N.T.) dated 3.7.2001 (Annexure-5).

3. Initiation of Provisional Assessment by Department

3.1 Rule 7 of the said Rules does not provide for the Department, suo moto, issuing directions for resorting to provisional assessment. Therefore, when the Central Excise Officers, during scrutiny or otherwise, find that self-assessment is not in order the assessee may be asked for all necessary document, records or other information for issue of duty demand for differential duty, if any, after conducting inquiry. Where the assessee fails to provide the records or information and Department is unable to issue demand, ‘Best Judgment’ method may be used to raise demand based on collateral evidences. The burden will be on the assessee to provide information for appropriate re-determination of duty, if any.

4. Application of new provisions

4.1 The provisions of Provisional Assessment relating to interest clause and statutory time limit are prospective. In other words, these provisions shall be applicable only to those cases of provisional assessment, which are ordered on or after 1st July, 2001.

5. Use of Provisional Assessment Monitoring Systems (PAMS) Software

5.1 A software has been developed for monitoring of Provisional Assessment cases namely, Provisional Assessment Monitoring Systems (PAMS) which operates on a central server to be accessed by the officer authorize in this behalf This software was launched on 8th November, 2002 and the Directorate General of Systems has also communicated the procedure to use this software to all Commissionerates and Divisions. This  software is designed to capture the details of new Provisional Assessment cases. Simultaneously it was requested by DG (Systems) that the details of all pending provisional assessments should also be entered on the system so that a proper monitoring system can be evolved.

5.2 No provisional assessment shall be permitted by any officer without entering the required details on the system and generating the unique identifier number through the system. -Once-the requisite details are entered in the system, it shall generate a unique identification number and a draft sanction letter. This draft sanction letter generated by the system may be taken as a reference and suitable amendments if needed, may be made by the field officer. However, whenever amendments are made, intimation thereof detailing the nature of amendment may be sent to ADG (Systems), South Zone, Chennai. It is reiterated that in all sanction letters, the unique identifier number generated by the system should be quoted invariably.

(Circular No. 715/3112003-CX. Dated 19.05.2003)

PROVISIONAL ASSESSMENT

1. Introduction

1.1 Provisional assessment is resorted to in the event the duty can not be determined at the pointnf clearance of the goods.

2. Guidelines and procedure for provisional assessment:

2.1 Wherever an assessee finds that final assessment is not possible, (in situations mentioned in rule 7 of the Central Excise Rules, 2002 (hereinafter referred to as the said Rules) he will make a detailed request in writing to the Divisional Deputy/Assistant Commissioner of Central Excise, indicating:-

(a) Specific grounds/reasons, and the documents or information, for want of which final assessment cannot be made.

(b) Period for which provisional assessment is required.

(c) The rate of duty or the value or both, as the case may be, proposed to be applied by the assessee, for Provisional Assessment.

(d) Undertakes to appear before the Assistant/Deputy Commissioner of Central Excise within 7 days or such date fixed by him, and furnish all relevant information and documents within the time specified by the Assistant/Deputy Commissioner of Central Excise in his order, so as to enable the proper officer to finalise the provisional assessment.

2.2 On receipt of the request, the Deputy/Assistant Commissioner of Central Excise will examine it, if necessary, in consultation with the concerned Range Officer, to ascertain whether provisional assessment is necessary at all. If the reasons/ grounds are not sufficient, he may ask the assessee to appear before him on an appointed day and time, and if he is satisfied that provisional assessment is not necessary, he may pass a reasoned order rejecting the same and also ordering the rate of duty or the value, to be applied by the assessee.

2.3 Where the Deputy/Assistant Commissioner of Central Excise is satisfied with the genuineness of the assessee’s request, he will issue a specific order directing provisional assessment clearly stating:-

(a) the grounds on which Provisional Assessment has been ordered.

(b) the rate and /or value, as the case may be, at which duty has to be provisionally paid.

(c) the amount of differential duty for which bond is to be executed covering the period, if any, during which assessee paid duty provisionally under the deeming provisions, after applying the rate and/ or value specified in (b) above.

(d) The amount of security or surety as may be fixed by Assistant/ Deputy Commissioner keeping in view the instructions issued by the Board from time to time.

2.4 The assessee is required to mark the E.R.-1tE.R.-21E.R.-3 (monthly/quarterly return)and documents covered under Provisional Assessment as “PROVISIONALLY ASSESSED” vide Order No…………. dated ……………. ” There is a declaration in E.R.-1/E.R.-2/E.R.-3 wherein the assessee has to mention that the goods under ‘provisional assessment’.

2.5 Notwithstanding ‘self-assessment’, all cases of provisional assessment have to be finalised by the Deputy/Assistant Commissioner of Central Excise, within a maximum period of 6 months. All the cases where provisional assessment cannot be finalised within 6 months must be submitted to Commissioner with the request letter of the assessee (through Deputy/Assistant Commissioner of Central Excise) indicating the reasons for non-finalisation and amount of differential duty for future clearances, before the expiry of the above-said period. If the Commissioner is satisfied with the reasons, he may extend the period, or otherwise direct the method to be adopted for finalisation of the assessment. For extending the period beyond one year from the date of provisional assessment, the request letter of the assessee should be put up to the Chief Commissioner in the same manner through Commissioner with his comments. The time limit of finalising the provisional assessment shall be applicable even to cases ordered for provisional assessment prior to 1st July, 2001.

2.6 Finalisation of provisional assessment means finalisation of an issue/ground and thereafter finalisation of each E.R.-1/E.R.-2/E.R.-3. The amount will be communicated to the assessee at the earliest. The amount of each differential duty shall be paid along with interest at the rate specified by the Central Government by Notification Issued under Section 11AA or 11AB of the Act from the first day of the month succeeding the month for which such amount is determined, till the date of payment thereof.

2.7 If the assessee is in a position to ascertain the duty himself, he may pay the duty on his own at the earliest and in that case he will not have to incur interest on account of time taken by the Department to finalise assessment and communicate the amount.

2.8 Where any refund becomes due to the assessee, order shall be passed for such refund, but disbursement shall be subject to .further verification about incidence of such duty. The assessee will be required to • submit proof to the Assistant/deputy Commissioner of Central Excise that the duty incidence was borne by him (assesse4 if the assessee fails to produce such proof/evidence. the Assistant/Deputy Commissioner of Central Excise will pass an order for depoP’ the ;7. mount in Consumer Welfare Fund in theprescribed manner. Otherwise, the refund shall be give along with interest at the rate specified by the Central Government by Notification Issued under Section 11 BB of the Act from the first day of the month succeeding the month for which such refund is determined, till the date of refund.

2.9 Though it is incumbent upon the assessee to ensure that the bond amount and corresponding securities are sufficient, the Divisional as well as the Range Officer wilL also keep a strict_vigit on such Gases-with the help of ‘Provisional Assessment Register’.

2.10 The Assistant/Deputy Commissioner of Central Excise will be held responsible to ensure that bonds for proper amount i.e., equal to the difference between the amount of duty as may be finally assessed and the amount of duty provisionally assessed are taken, in case of general bonds and that these are backed by proper (25%) security/ bank guarantee of the bond amount.

2.11 The format of bond for provisional assessment has been specified in Notification No. 56/2001-Central Excise (N.T.) dated 3.7.2001 (Annexure-5).

3. Initiation of Provisional Assessment by Department

3.1 Rule 7 of the said Rules does not provide for the Department, suo moto, issuing directions for resorting to provisional assessment. Therefore, when the Central Excise Officers, during scrutiny or otherwise, find that self-assessment is not in order the assessee may be asked for all necessary document, records or other information for issue of duty demand for differential duty, if any, after conducting inquiry. Where the assessee fails to provide the records or information and Department is unable to issue demand, ‘Best Judgment’ method may be used to raise demand based on collateral evidences. The burden will be on the assessee to provide information for appropriate re-determination of duty, if any.

4. Application of new provisions

4.1 The provisions of Provisional Assessment relating to interest clause and statutory time limit are prospective. In other words, these provisions shall be applicable only to those cases of provisional assessment, which are ordered on or after 1st July, 2001.

5. Use of Provisional Assessment Monitoring Systems (PAMS) Software

5.1 A software has been developed for monitoring of Provisional Assessment cases namely, Provisional Assessment Monitoring Systems (PAMS) which operates on a central server to be accessed by the officer authorize in this behalf This software was launched on 8th November, 2002 and the Directorate General of Systems has also communicated the procedure to use this software to all Commissionerates and Divisions. This software is designed to capture the details of new Provisional Assessment cases. Simultaneously it was requested by DG (Systems) that the details of all pending provisional assessments should also be entered on the system so that a proper monitoring system can be evolved.

5.2 No provisional assessment shall be permitted by any officer without entering the required details on the system and generating the unique identifier number through the system. -Once-the requisite details are entered in the system, it shall generate a unique identification number and a draft sanction letter. This draft sanction letter generated by the system may be taken as a reference and suitable amendments if needed, may be made by the field officer. However, whenever amendments are made, intimation thereof detailing the nature of amendment may be sent to ADG (Systems), South Zone, Chennai. It is reiterated that in all sanction letters, the unique identifier number generated by the system should be quoted invariably.

(Circular No. 715/3112003-CX. Dated 19.05.2003)

SCRUTINY OF ASSESSMENT

1. Introduction

1.1 In view of the self-assessmerit procedure wherein the assessee himself assesses the duty liability, the responsibility of the departmental officers is to scrutinise the assessment made for verification of its correctness. In this connection, the instructions issued from time to time may be referred to.

2. Scrutiny of Assessment

2.1 The Central Excise Officers having jurisdiction over the factory/premises of the assessee is responsible for the scrutiny of returns. For this purpose, the said officer(s) may require the relevant documents. Though most of the statutory records have been dispensed with, the assessee is required to maintain private records containing all requisite information as required by different rules and also provide a list of all records maintained by him to the Range Office. The Officer responsible for scrutiny of return may require the invoices issued by the assessee, Daily Stock Account, Cenvat Account, cash ledgers, Ledger of all receipts and payments and the source documents etc. It shall be compulsory for the assessee to provide the necessary records upon receiving the “Requisition Letter’ from the Range Officer or other superior officers. He shall hand over the records under proper acknowledgement and receive them back under proper acknowledgement too. The Officer scrutinizing return may require presence of the assessee or his authorised person at mutually convenient time, for seeking certain information relating to the records.

2.2 The Superintendent of Central Excise in-charge of the Range Office, with assistance of the Inspectors in-charge of the factory of an assessee, will scrutinise all the returns. They shall, in selected cases, call all connecting documents including invoices and the records and scrutinise the correctness of assessment.

2.3 The Deputy/Assistant Commissioner of Central Excise will scrutinise the returns of the units, which pay duty-exceeding rupees one crore but less than Rs.5 crores from PLA per annum every six months. They shall requisition all connected documents including invoices and the records and scrutinise the correctness of assessment.

2.4 The Additional/Joint Commissioner of Central Excise will scrutinise the returns of the units which pay duty Rs. 5 crores or more from PLA per annum every six months They shall requisition all connected documents including invoices and the records and scrutinise the correctness of assessment.

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