ICAI Question Papers Indirect Tax Laws
CA Final – Group II : Indirect Tax Laws
This Paper has 23 answerable questions with 0 answered.
Total No. of Questions — 9] [Total No. of Printed Pages — 3
Time Allowed : 3 Hours Maximum Marks : 100
Answer all Questions.
PART — A
1. (a) Compute the assessable value and amount of excise duty payable under the Central Excise Act, 1944 and rules made thereunder from the following information:
Particulars No. of
units Price at
per unit Price at
unit Rate of
(i) Goods transferred from factory to depot on 8th February 1,000 Rs.200 Rs.220 10%
(ii) Goods actually sold at depot on 18th February 750 Rs.225 Rs.250 8%
(b) M/s Royal Industries started its production activities on 15th March, 2010. In the month of March, 2010, 1,000 units of raw material were purchased at Rs.150 per unit, paying excise duty @ 8%. 800 units of raw material were consumed in manufacturing process and finished output was sold for Rs.1,40,000 (excluding excise duty @ 8%). For simplification, you may ignore the conversion cost and assume the rates of excise duty to be inclusive of education cess.
Pass the Journal entries in the books of the assessee and show the balances in Balance Sheet as on 31.3.2010.
(c) Mahesh Ltd., which is engaged in manufacturing of excisable goods, started its business on 1stJune, 2009. It availed SSI exemption during the financial year 2009-10. The following are the details available to you:
(i) 12,500 kg of inputs purchased @ Rs. 1,190.64 per kg (inclusive of Central excise duty @ 8.24%) 1,48,83,000
(ii) Capital goods purchased on 31.5.2009 (inclusive of excise duty @ 14.42%) 80,09,400
(iii) Finished goods sold (at uniform transaction value throughout the year) 3,00,00,000
The suggested answers for Indirect Tax Laws (Paper 8) are based on the provisions as amended by the Finance Act, 2009 and notifications/circulars issued up to 31.10.2009 which are relevant for May 2010 examinations.
You are required to calculate the amount of excise duty payable by M/s Mahesh Ltd. in cash, if any, during the year 2009-10. Rate of duty on finished goods sold may be taken as 12.36% for the year and you may assume the selling price exclusive of central excise duty.
There is neither any processing loss nor any inventory of input and output. Out input ratio may be taken as 2:1.
2. (a) An assessee classified his product as per Central Excise Tariff subject to nil rate of duty. The Department contended that when the entries in the Harmonized System of Nomenclature (HSN) and the Central Excise Tariff are not aligned, reliance should be placed upon HSN for the purpose of classification of goods under the said Tariff. Relying upon the HSN for the purpose of classification of the impugned product, the Department classified it under another heading attracting 8% duty. Do you think that Department’s plea is valid in law? Discuss briefly, with reference to a decided case law, if any. 5 (0)
(b) M/s Evasions Unlimited, manufacturing excisable goods, paid the differential duty, suo motu, to the Department as the prices of the said goods were revised with retrospective effect. The Revenue took the view that the assessee was liable to pay interest on differential duty under section 11AB of the Central Excise Act, 1944 and penalty thereof. The assessee replied that there was no question of charging interest and penalty as the payment of differential duty was made by it at the time of issuing supplementary invoices to the customers.
Discuss, with reference to a decided case law, if any, whether the view taken by the Revenue is justifiable.
(c) An assessee made an application under section 32E of the Central Excise Act, 1944 to the settlement commission. The settlement commission was not satisfied saying that the applicant had not made a true and full disclosure of his duty liability and the manner in which same was arrived at was also not correct and rejected the application. The assessee contended that obligation to make truthful disclosure of duty liability would arise only after the application was admitted and not before that. Is plea taken by the assessee acceptable in law? Explain in brief, with the help of a decided case law, if any. 5 (0)
3. (a) Differentiate between “non-excisable goods” and “non-dutiable goods”. 3 (0)
(b) Under Excise Audit, 2000, the selection of unit for audit is based on ‘risk factors’. Explain in brief the term ‘risk factors’ giving any two examples. 3 (0)
(c) Explain the validity of the following statements with reference to the Central Excise Laws, as amended:
(i) Records seized by Department during investigation but not relied upon in the show cause notice should be returned within 30 days of issue of show cause notice.
(ii) Special audit under section 14A and 14AA can be done by a cost accountant only.
(iii) Authority of Advance Ruling under the Income Tax Act, 1961 will be authority for purposes of Central excise also.
(iv) High Court is empowered to condone delay in filing appeal and cross objection filed under sections 35G and 35H of the Central Excise Act, 1944, beyond the prescribed period.
4. (a) Mr. Happy, a service provider, has provided services of Rs. 1,00,00,000. Out of this, Rs. 70,00,000 are taxable output services and Rs. 30,00,000 are exempt output services. Mr. Happy has opted not to maintain separate inventory and accounts and pay prescribed amount on value of exempt output services.
Service tax paid on his input services, excluding education cess and secondary and higher education cess (EC & SAHEC) is Rs. 6,00,000 which does not include any service specified in rule 6(5) of the CENVAT Credit Rules, 2004. Rate of service tax, excluding EC and SAHEC, is 10%. Calculate the total amount payable including service tax, EC and SAHEC by Mr. Happy by GAR-7 challan.
(b) The particulars regarding sale, purchase etc. of Shubham Udyog for the last quarter of the year 2009 -10 are as under:
1. Purchases of raw material within the State
(i) taxable @ 1% 40,00,000
(ii) taxable @ 4% 60,00,000
(iii) taxable @ 12.5% 10,00,000
2. Sale of goods manufactured from raw material purchased @ 4% tax rate
(i) Taxable sale within the State (tax rate 4%) 20,00,000
(ii) Exempted sale within the State 10,00,000
(iii) Sale in the course of Inter-State trade or commerce (tax rate 4%) 10,00,000
3. Sale of raw material purchased @ 1% tax rate 44,00,000
4. Goods manufactured from the raw material purchased @ 12.5% tax rate were given on lease. The deemed sale price of such goods is Rs. 12,00,000, taxable @ 12.5%.
You may assume that input tax credit of tax on raw material used in manufacture of leased goods is available immediately. Compute the amount of Value Added Tax (VAT) payable by M/s Shubham Udyog for the relevant quarter. There was no opening or closing inventory.
How can he utilise the balance of input tax credit available, if any?
5. (a) The term ‘business auxiliary service’ was inserted by Finance Act, 2003 which came into force on 1.7.2003. The Parliament by Finance Act, 2008 inserted an explanation in the relevant sub-clause (ii) of section 65(19) stating that for the purpose of this sub-clause –
“Service in relation to promotion or marketing of service provided by the client includes any service provided in relation to marketing of games of chance, organised, conducted or promoted by the client, in whatever form or by whatever name called, whether or not conducted online, including lottery, lotto, bingo.”
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