ICAI Question Paper Nov 2009 Indirect Tax Law CA
Final –Group II : Indirect Tax Laws –
This Paper has 29 answerable questions with 0 answered.
Total No. of Questions — 9] [Total No. of Printed Pages — 3
Time Allowed : 3 Hours Maximum Marks : 100
Answers to questions are to be given only in English except in the cases of candidates who have opted for Hindi medium. If a candidate who has not opted for Hindi medium, answers in Hindi, his answers in Hindi will not be valuedAnswer all QuestionsPART — A
1. (a) Determine the total amount of excise duty payable under section 4 of the Central Excise Act, 1944 from the following information:
- Price of machinery excluding taxes and duties
- Installation and erection expenses
- Packing charges (primary and secondary)
- Design and engineering charges
- Cost of material supplied by buyer free of charge
Pre–delivery inspection charges 5,50,000
(a) Cash discount @ 2% on price of machinery was allowed as per terms of contract since full payment was received before dispatch of machinery.
(b) Bought out accessories supplied along with machinery valued at Rs. 6,000.
(c) Central excise duty rate 16% and educational cess as applicable @ 3%.
Make suitable assumptions as are required and provide brief reasons.
(b) XYZ Co. is engaged in the manufacture of water pipes. From the following details for the month of May, 2009, compute the available Cenvat credit under the Cenvat Credit Rules, 2004 :
Cenvat paid on purchases as detailed below:
Water pipe making machine
Spare parts for the above machine
Grease and oil
Provide explanation for treatment of various items.
(c) Small & Company, a small scale industry, provides the following details. Determine the eligibility for exemption based on value of clearances for the financial year 2009–10 in terms of Notification No. 8/2003–CE dated 1.3.2003 as amended:
Particlars Rs. (Lakhs)
(i) Total value of clearances during the financial year 2008–09 (including VAT Rs. 50 lakhs) 870
(ii) Total exports (including for Nepal and Bhutan Rs. 200 lakhs) 500
(iii) Clearances of excisable goods without payment of duty to a unit in Software Technology Park 20
(iv) Job work under Notification No. 84/94-CE dated 11.4.94 50
Job work under Notification No. 214/86-CE dated 25.3.86 50
(v) Clearances of excisable goods bearing brand name of Khadi and Village Industries Board (sic). 200
Make suitable assumptions and provide brief reasons for your answers where necessary.
2. (a) I Ltd. was a manufacturer of excisable goods such as polyester yarn. A ground plan of the factory was provided by the assessee to the jurisdictional Central Excise Officer and the same was approved. The ground plan showed the area in which the manufacturing is carried out as also the areas occupied for purpose of storage godowns, cycle sheds, canteen as well as the housing complex for staff and workers. The assessee had a captive power plant in the approved area. The electricity generated was supplied to the housing complex as well as for use in the manufacturing activity. I Ltd. claimed Cenvat credit on the duty paid on furnace oil used for generation of electricity as it was used within the factory and was covered by the expression “for any other purpose” in rule 2(k) of the Cenvat Credit Rules, 2004. The Central Excise Department wanted to deny the Cenvat credit on the duty paid on furnace oil for generation of electricity which in turn is supplied to the housing complex on the ground that it was not used in relation to manufacture of the final product. Examine, with the help of a decided case law, if the stand of the Department is correct in law. 5 (0)
(b) The assessee manufactured compressors and filters and removed them as “stand alone” items. He also manufactured and removed safety valves and filters on payment of duty.
The assessee also supplied bought out items like V belts, motor, pulley etc. to their buyers. The Excise Department relying on rule 2(a) of the General Interpretative Rules for classification has decided to include the value of safety valves and filters together with value of bought out items in the value of compressors for purposes of duty under section 4 of the Central Excise Act, 1944. Write a brief note, with any decided case law, whether the stand taken by the Department is correct.
(c) The assessee’s premises were searched by the Anti Evasion wing of the Excise Department. A show cause notice was issued alleging that the assessee had cleared goods without the cover of duty paid invoice and without accounting the same in the stock register. The assessee was required to pay the duty demanded with interest. The assessee filed an application before the Settlement Commission to put an end to the litigation and buy peace. The application was dismissed by the Settlement Commission on the ground that the petitioner in its petition had not admitted the entire duty liability. The assessee’s contention is that Department is yet to substantiate the allegations made in the show cause notice and the dismissal order is not correct in law. Briefly discuss, with a note, whether the action of the Settlement Commission is correct in law. 5 (0)
3. (a) Explain briefly the concept of “excisable goods” as amended by the Finance Act, 2008. 2 (0)
(b) Explain briefly, how the value of goods will be ascertained for purpose of excise duty where the assessee sells the goods partly to a related person and the balance to unrelated third parties. 2 (0)
(c) What are the situations in which duty can be remitted under rule 21 of Central Excise Rules, 2002. 2 (0)
(d) Briefly mention any four categories of persons who are exempted from obtaining registration under rule 9(2) of the Central Excise Rules, 2002. 2 (0)
(e) Write a short note on the principle of “unjust enrichment” under Central Excise Law. 2 (0)
PART — B
4. (a) Determine the taxable turnover, input tax credit and net VAT payable by a works contractor from the details given below on the assumption that the contractor maintains sufficient records to quantify the labour charges. Assume output VAT at 12.5%:
Particlars Rs. (Lakhs)
(i) Total contract price (excluding VAT) 100
(ii) Labour charges paid for execution of the contract 35
(iii) Cost of consumables used not involving transfer of property in goods 5
(iv) Material purchased and used for the contract taxable at 12.5% VAT (VAT included) 45
The contractor also purchased a plant for use in the contract for Rs. 10.4 lakhs. In the VAT invoice relating to the same, VAT was charged at 4% separately and the said amount of Rs. 10.4 lakhs is inclusive of VAT. Assume 100% input credit on capital goods.
Make suitable assumption wherever required and show the working notes.
(b) Calculate the value of taxable service under ‘cargo handling services’ of Cargo Ltd., providing brief reasons where required with suitable assumptions based on the following information for the month of April, 2009:
Particlars Rs. (Lakhs)
(i) Total amount charged for all services 40
(ii) Receipts for services in relation to export cargo and handling of passenger baggage included in (i) above 13
(iii) Charges for storage and cleaning of empty containers of shipping lines included in (i) above 10
(iv) Charges for packing and transport of cargo included in (i) above 3
(v) Charges for handling of agricultural produce included in (i) above 2
(vi) Charges for transportation of cargo included in (i) above 5
5. (a) M/s M Construction Ltd. constructs, builds and sells premises/flats in a building. During the course of development and construction of the building, it enters into a flat purchase agreement in terms of which the buyers are allotted flats in the building. The buyers pay the consideration to M/s. M Construction in installments. The said ‘flat purchase agreement’ reflects the entire consideration for the purchase of flat. This agreement is registered and advance payments in installments are collected. The contention of M/s M Construction is that the consideration is for the purchase and sale of the entire flat/premises and the company does not carry out any construction activity. Examine, with a brief note, whether the company is liable to pay service tax in terms of the Finance Act, 1994. 5 (0)
(b) Good Luck Agencies is engaged in the purchase of lottery tickets in bulk from the State Government and sells them subsequently on behalf of the Government. However, no service tax is paid on the said activity. The Department has sought to levy service tax under the category of ‘business auxiliary service’ under section 65(19) as service in relation to promotion or marketing of service provided by the client. Discuss briefly, with a note and decided case law, if any, whether the action of the Department is correct in law. 5 (0)
6. (a) Briefly explain whether the following are chargeable to service tax under the provisions of the Finance Act, 1994: 2×2=4
(i) Service provided by a person to another person in relation to information technology software for use in course or furtherance of business or commerce. (0)
(ii) Transaction allowing another person to use goods without giving legal right of possession and control to the user of the goods. (0)
(b) Write a brief note explaining the circumstances under which expenditure or costs incurred by a service provider as a pure agent of the recipient of service shall be excluded from the value of taxable services under the Service Tax (Determination of Value) Rules, 2006. 4 (0)
(c) Briefly explain the provisions in the Service Tax Rules, 1994 relating to furnishing of list of records at the time of filing of return for the first time. 4 (0)
(d) Briefly explain the following with reference to the Service Tax Rules, 1994 and the Finance Act, 1994:- 2×2=4
(i) Gross amount charged (0)
(ii) e–payment of service tax. (0)
(e) Briefly explain the importance of VAT invoice. 2 (0)
PART — C
7. Compute the duty payable under the Customs Act, 1962 for an imported equipment based on the following information:
(i) Assessable value of the imported equipment US $ 10,100,
(ii) Date of bill of entry is 25.4.2009. Basic customs duty on this date is 20% and exchange rate notified by the Central Board of Excise and Customs is US $ 1 = Rs. 65.
(iii) Date of entry inwards is 21.4.2009. Basic customs duty on this date is 16% and exchange rate notified by the Central Board of Excise and Customs is US $ 1 = Rs. 50.
(iv) Additional duty payable under section 3(1) and (2) of the Customs Tariff Act, 1975: 15%
(v) Additional duty under section 3(5) of the Customs Tariff Act, 1975: 4%.
(vi) Educational cess @ 2% in terms of the Finance Act (No.2), 2004 and secondary and higher educational cess @ 1% in terms of the Finance Act, 2007.
Make suitable assumptions where required and show the relevant workings and round off your answer to the nearest rupee.
8 The assessee had imported capital goods under a licence with a condition to fulfill an export obligation within a certain time limit. The assessee failed to discharge the export obligation within the said time limit. Consequently, the Department invoked the bank guarantee and realized the amount. However, subsequently the assessee was able to fulfill the export obligation and the Department cancelled the bank guarantee. The assessee thereafter filed a refund claim for the amount realized by invocation of the bank guarantee by the Department. The Department rejected the refund claim on the ground that it was barred in terms of section 27(1)(b) of the Customs Act, 1962 as the assessee had not been able to establish that the incidence of duty had not been passed on by him to any other person. Examine briefly, with the help of any decided case law, whether the stand taken by the Department is correct in law. 5 (0)
9 (a) Explain briefly the expression ‘person–in–charge’ under the Customs Act, 1962. 2 (0)
(b) Explain briefly the provisions of the Customs Act, 1962 relating to the powers vested in the customs officers to take samples. 2 (0)
(c) Explain, with a brief note, how the duty is arrived under the Customs Act, 1962 where the imported goods consist of articles liable to different rates of duty. 2 (0)
(d) Write a brief note on the ‘residual method’ of determination of value of imported goods under the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007. 2 (0)
(e) Briefly state the rights of the owner of warehoused goods under the Customs Act, 1962. 2 (0