Chapter-3

ASSESSMENT, CLASSIFICATION, VALUATION, PROVISIONAL ASSESSMENT,MANNER OF DUTY PAYMENT, ACCOUNT CURRENT, SCRUTINY

Part-I

Assessment
1. Assessment Defined

1.1 The expressions ‘assessment’ and ‘assessee’ have been defined in the Central Excise (No.2) Rules, 2001 (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 An exception has been provided in the said rule 4 in respect of goods falling under Chapter 62 of the First Schedule to Central Excise Tariff Act, 1985 (5 of 1986) produced or manufactured by a job worker. Such goods may be removed without payment of duty leviable thereon and the duty of excise leviable on such goods shall be paid by person who gets such goods, produced or manufactured on his account on job work as if such goods have been produced or manufactured by him, on the date of removal of such goods from his premises registered under rule 9. The payment of such duty may be secured by bond or otherwise. However, where such person has authorised the job worker to pay the duty leviable on such goods, the job worker shall pay such duty on the date of removal of such goods from his registered premises.

1.4 There is also 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.

1.5 For the purposes of the said rule 4, excisable goods manufactured in a factory and utilised, 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 utilisation.

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 assessed on the excisable goods. The main ingredients of assessment are:

(1) 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 which are helpful in determining the appropriate classification. In case of difficulties, there are “Interpretative Rules” in the said Act. There is 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 see if 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. Certain goods may also be subject to duty under some other Acts such as Additional Duty of Excise (Goods of Special Importance) Act, 1957 or certain Cess. 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 including transaction value under this section

(ii) Value based on retail sale price under section 4A.

(iii) Tariff value fixed under Section 3.

(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

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 assess his return for a month and submit to the Range Office having jurisdiction over his factory within ten days of the succeeding month. They are also requited to submit ‘CENVAT Return’ for a month within five days of the succeeding month. A manufacturer availing exemption notification for Small Scale Industries is permitted to file his return of quarterly basis. Their returns 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 (No.2) Rules, 2001. 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 The rate of duty in the case of goods falling under Chapter 62 of the First Schedule to the Central Excise Tariff Act, 1985 (5 of 1986), produced or manufactured on job work, shall be the rate in force on the date of removal of such goods by the person referred to in sub-rule (3) of rule 4 from his premises registered under rule 9.

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