CENTRAL EXCISE RULES, 2002

RULE 1 : SHORT TITLE, EXTENT AND COMMENCEMENT :

Central Excise Rules applies to whole of India.

RULE 2 : DEFINITIONS :

2(b) Assessment:- Assessment includes, assessment by the
department under Rule 6 proviso/Self-assessment by the assessee under Rule
6/Provisional assessment under Rule 7.

2(c) Assessee:- Means person liable for payment of duty assessed
i.e., producer/manufacturer of excisable goods/Private Warehouse for storing
excisable goods/authorized agent of the above.

RULE 3 : APPOINTMENT AND JURISDICTION OF CENTRAL
EXCISE OFFICERS:

Our country is divided into a number of Zones for administration of
Central Excise Law. The following is the hierarchy of Central Excise officers

ZONES
(Headed by Chief Commissioner)

COMMISSIONERATES
(Headed by Commissioners)

DIVISIONS
(Headed by Deputy/Assistant Commissioners)

RANGES
(Headed by Superintendents of Central Excise also known as Range officers)

RULE 4 : DUTY PAYABLE ON REMOVAL :

4(1) Duty is payable by the producer/manufacturer/storer (ware
house) on monthly basis through PLA or by debiting to CENVAT A/c.

4(2) Normally duty is payable by the producer/manufacturer of
excisable goods, but in the case of Khandasari Sugar Factory Molasses,
Procurer has to pay the duty, as though manufactured by him.

4(4) Normally goods will not be allowed to remove without payment
of duty. However, in exceptional circumstances, having regard to nature of
goods and shortage of storage space in the factory, Commissioner may permit
storage of goods outside the factory without payment of duty subject to
certain conditions.

RULE 5 : DATE FODE DETERMINATION OF DUTY AND TARIFF
VALUATION

5(1) Date of removal from factory/warehouse is the relevant date for
Tariff rate and Tariff value for all goods except Khandasari Molasses.

5(2) Date of receipt in the factory of procurer is the relevant date for
Khandasari Molasses

Explanation: For goods captively consumed, the date of removal is DATE OF
ISSUE.

RULE 6: ASSESSMENT OF DUTY

Self Assessment procedure/Self Removal procedure (SRP) : Assessee
shall assess the amount of duty payable in respect of all goods other than
Cigarettes.

Provision: In the case of Cigarettes, assessment shall be done by the
Superintendent or Inspector of Central Excise before removal, so as to have a
Physical Control on the removals.

RULE 7: PROVISIONAL ASSESSMENT

7(1) When assessee is unable to determine Value or Tariff rate and
he applies in writing with reasons, AC/DC shall fix the Assessable value and
Tariff Rate and allow payment of duty on provisional basis.

7(2) Assessee must execute a bond (Form B-2) for paying the
differential duty (Final duty payable (-) duty paid on provisional basis) duly
supported by surety for the amount determined by the AC/DC.

Value of the Bond to be executed = 3 times of estimated differential duty
liability.

Security/Bank Guarantee has to be given for 25% of Bond amount.

7(3) Time Limit for Assessment : Final assessment order should be
passed by the AC/DC within a period of 6 months from the date of
provisional assessment order.

Proviso to Rule 7(3): Extension of Time Limit : upto 6 months by the
CCE. Further extension (without any time limit) by the CCCE.
7(4) If final duty payable is more than the duty paid on provisional
basis, assessee shall pay interest for the differential amount at the rate
notified by the Central Government U/s 11AB (13% p.a.) from the first day
of the month succeeding the month for which final amount is determined till
the date of payment thereof.

7(5) {Sec. 18(4) of Customs Act} : If final duty payable is less than
the duty paid on provisional basis, Government shall pay interest on the
consequential refund amount at the rate notified by the Central Government
U/s 11BB (6% p.a.) from the first day of the month succeeding the month for
which refund is determined till the date of refund.

7(6) {Sec. 18(5) of Customs Act} : The refund so granted shall be
credited to Consumer Welfare Fund.

Proviso to Rule 7(6) : The refund shall be paid to the applicant, if
(a) the duty paid by the assessee has not been passed on, or (b) the duty borne
by the buyer has not been passed on.

RULE 8: MANNER OF PAYMENT

8(1) Due date for payment of duty :

Kind of Assessee Month Due date for
payment of duty
General Assessees
(Monthly)
April to February 5
th
of next month
6
th
in case of e-
payment
March 31
st
March
SSI Units
(Quarterly)
1
st
, 2
nd
and 3
rd

Quarter
5
th
of the month
following the
quarter
6
th
in case of e-
payment
4
th
Quarter 31
st
March


NOTE: 1) If Excise duty paid in the previous financial year (PLA plus
Cenvat) is Rs.10.00 lakhs or more, e-payment is mandatory from the next
financial year. If it is less than Rs.10.00 lakhs e-payment is optional.
2) In respect of SSIs, payment of duty on quarterly is available only if
the Turn Over in the previous financial year is not more than Rs.400 lakhs.


Explanation to Rule 8 : Duty liability is deemed to have been discharged, only
if the amount is credited to Central Government by the specified date. Date
of deposit of Cheque in the designated bank by the assesses shall be deemed to
be the date of payment, but the cheque should be honoured in the normal
course.

8(2) Even though duty has not been actually paid at the time of
removal and Government has not got revenue, yet it is deemed to have been
paid and buyer is allowed CENVAT Credit.
8(3) Interest on defaults @ 18% p.a. from the first day after
the due date till the actual date of payment of the outstanding amount.

8(3A) Punishment for default in paying duty on a monthly basis
exceeds thirty days :

1. Forfeiture of the benefit of monthly payment till
payment of duty plus interest. (This is automatic, no
need for any orders)
2. Payment of duty on consignment basis during the
punishment period i.e., duty has to be paid at the time
of removal of goods itself.
3. Duty has to be paid only through PLA and balance in
CENVAT A/c cannot be utilized. (There is no
restriction on availing CENVAT credit, restriction is
only on utilization of CENVAT credit)
4. Removal of goods during this period without payment
of duty shall be treated as unauthorized with penal
consequences.



RULE 9: REGISTRATION

9(1) Registration is compulsory for every person who is producing,
manufacturing, trading, storing of excisable goods.

9(2) CBEC may notify categories of persons exempted from
registration.

The following persons are exempt from registration :
(1) Manufacturers of NIL duty and fully exempt goods, subject to
certain conditions viz.,

(a) Manufacturer makes prescribed declaration.
(b) No need for such declaration in respect of SSI units
with clearances of less than Rs.90.00 lakh in the last
year and in respect of new factories, with similar value
of estimated clearances for the current year.
(c) While computing the value of clearances club all the
factories of one manufacturer and club all the
manufacturers of one factory.

(2) Principal manufacturer who gets his goods manufactured by
another manufacturer subject to the condition that the latter
complies with the Act and Rules and agrees to discharge duty
liabilities.
(3) Manufacturer under Customs Warehousing procedures, subject
to the following conditions :-

(a) Finished product (FP), Intermediate product (IMP),
by-product, waste, refuse etc., are all either exported
or destroyed to the satisfaction of AC/DC in charge of
Customs Bonded Warehouse.
(b) Manufacturer files prescribed declaration.
(c) Manufacturer does not claim drawback or export
rebate.
(4) Wholesale traders and dealer, other than First stage and Second
stage dealers.
(5) Manufacturers wishing to be covered by CE (Removal of goods
at concessional rate of duty for manufacture of excisable goods)
Rules, 2001 need registration even though their products are
exempt. No need for registration, if they do not want to avail the
benefit of the said rules.
(6) 100% EOU units and Units in SEZ approved under the SEZ
Act, 2005 shall be deemed to be registered under CE Rule 9 if
they do not procure excisable goods from the domestic tariff
area or if they do not remove excisable goods to the domestic
tariff area.
(7) A single registration can be permitted by the CCE for different
premises of the same factory, if they are separated by public
road, railway line or canal subject to proper accountal of inter-
premises movement of goods.

9(3) CBEC may prescribe conditions, safeguards and procedures for
registration.

RULE 10: DAILY STOCK ACCOUNT

10(1) Assessee shall maintain Stock Account on daily basis indicating
ina legible manner name of goods, opening stock, production, inventory,
quantity removed, assessable value, duty payable/paid.

10(2) The first page and the last page of the daily stock account shall
be authenticated by the assessee or his authorized agent.

10(3) Records are to be preserved for 5 years immediately after the
financial year to which they pertain.

RULE 11: GOODS TO BE REMOVED ON INVOICE

11(1) Excisable goods other than cigarettes shall be removed from
factory/warehouse on invoice signed by assessee/agent (No need for
countersignature by Excise Officer). However, invoices for removal of
cigarettes need to be countersigned by the Inspector or Superintendent of CE.

11(2) Invoices are to be serially numbered. They shall contain details
of Registration Number, address of the concerned division, name of the
consignee, description, classification, mode of transport and vehicle
registration number, time and date of removal, rate of duty, quantity and
value of goods and duty payable.

11(3) Invoices shall be in Triplicate Original for buyer, Duplicate for
transporter and Triplicate for assessee.

11(4) Only one Invoice Book may be used at a time. However, AC/DC
may permit the use of more than one under special circumstances.

11(6) Before making use of the Invoice Book, its Serial Number shall
be intimated to the Range Officer.

11(7) These provisions meant essentially for manufacturers apply
equally to goods supplied by first stage dealers and second stage dealers.

Proviso to Rule 11 (7) : If the importers invoice bears an indication
regarding non-availability of credit on special CVD, then similar negative
indications shall be made by the I/II stage dealers in their invoices.

Important points on Invoice System

1. Format of Invoices is left to the manufacturers choice.
2. The Serial number of invoice shall commence from 1
st
April
every year.
3. Handwritten serial numbers are not acceptable.
4. In respect of Computer generated invoices :
- Number generated automatically
- Same number cannot be generated more than once
- If the system is so designed, the number may be permitted
by the Department to be generated and printed at the
time of preparation of invoice.
5. Assessee can prepare more than three copies of Invoices for his
own requirements. But extra copies to be marked Not for
CENVAT purposes.
6. Duty to be rounded off (in the invoice) to the nearest rupee.
7. Duty amount to be in figures and words
8. If goods are dispatched through more than one conveyance
because of their size, prepare invoice for each consignment, but
pay duty on the first invoice called Parent Invoice.
9. Photocopy or duplicate copy of parent invoice to accompany
each conveyance
10. CENVAT credit can be taken on receipt of parent invoice and
also the entire consignment.
11. CANCELLATION OF INVOICE
1. Whenever the invoice is cancelled, intimation to this effect has
to be intimated to the jurisdictional Range Superintendent on
the same day, if not on the next working day.
2. The cancelled original invoice to accompany the cancellation
intimation.
3. Triplicate copy of the cancelled invoice to be retained by the
assessee for production to the visiting Departmental Officers.

RILE 12 : FILING OF RETURN

12(1) Monthly return is to be filed by the assessee to the
Superintendent of Central Excise by 10
th
of next month in Form ER-1
containing details of production, removal etc..
NOTE:- e-filing of returns is compulsory, where the Excise duty
(CENVAT + PLA) paid by the assessee in a financial year is Rs.10 lakh or
more.

Proviso to Rule 12(1) : In respect of SSI units availing exemption based on
annual value of clearance, Quarterly return is to be filed in Form ER-3 within
10 days aafter the close of the quarter, to which the return relates.

Assessees paying duty electronically, necessarily have to file the
returns electronically.

12(2) Assessees who paid in the previous financial year ED of Rs.100
lakh or more (CENVAT + PLA) shall also file Electronically Annual
Financial Information Statement (AFIS) for the previous financial year in
Form ER-4 by 30
th
November.

12(2A) Annual Installed Capacity Statement declaring annual
production capacity of the factory for each financial year is to be submitted in
Form ER-7 by 30
th
April of the succeeding financial year.

12(3) Based on the return the Proper Officer shall check the
correctness of duty.

12(4) The assessee shall make available all documents and records to
the Proper Officer for verification.

RULE 12-AA : JOB WORK IN BRANDED JEWELLERY

In the case of branded jewellery, either the principal manufacturer or
the job worker may, at their choice take registration, maintain accounts and
discharge duty liability. Clearance for home consumption/export may also be
directly done by the job worker under prescribed procedure.




RULE 12-BB : PROCEDURE AND FACILITIES FOR LARGE TAX
PAYER (LTU)

What is Large Tax Payer Unit (LTU) ?

LTU is a single window clearance system for all matters relating to
Central Excise, Service Tax, Income Tax and Corporation Tax, headed by
Chief Commissioner of Income Tax or Central Excise.

Assessees under Central Excise, Service Tax and Income Tax laws who
have paid;
(a) Rs. Five Crore or more through PLA or
(b) More than Rs. Ten Crore as advance tax/corporation tax,
May join the scheme by choice. They are called Large Tax Payers. LTUs are
now functioning in Bangalore, Chennai and Mumbai. For opting out of the
scheme 30 days notice is necessary and the option exercised by the assessee
will come into effect w.e.f. the first day of the following financial year.

Advantages

1. Assessment for all premises is done in one place.
2. Intermediate goods (other than petrol, HSD & LDO) may be
removed from premises to premises (under transfer challans)
without paying duty.
3. The recipient premises shall complete manufacture and remove
the goods (DTA/Export) as per rules within six months.
4. If not, the recipient premises shall pay duty as on the date of
removal from the senders premises along with interest @ 18%
p.a.
5. Self-rectification of arithmetical errors and consequent
adjustments of duty paid in excess.
6. This adjustment is subject to the principle of unjust enrichment.

RULE 12-CC : POWER TO IMPOSE RESTRICTION IN CERTAIN TYPES
OF CASES :

To prevent evasion and default in payment of ED, Board may provide
for certain measures including restriction on manufacturers and I/II Stage
Dealers and suspension of registration as well.

Following are the measures prescribed by the CE Manual :

For money values of offences exceeding Rs.10 lakhs,

Punishment : (i) Payment of ED on consignment basis
(ii) Payment of ED by debit to PLA only
(iii) Physical control

RULE 15 : SPECIAL PROCEDURE FOR PAYMENT OF DUTY

Government may specify certain goods (e.g.) Stainless Steel
Pattis/Pattas, Aluminium circles in respect of which the assessee can opt for
paying duty on the basis of factors relevant for production i.e., production
capacity instead of on actual removals. For this purpose compounding rates
and procedure shall be notified by Government.
Eg: In respect of Stainless Steel Pattis/Pattas Compounding rate is
Rs.30,000/- p.m., and no Cenvat credit is allowed on Inputs/Capital Goods.

RULE 16 : CREDIT OF DUTY ON GOODS RETURNED TO THE
FACTORY

16(1) If the goods manufactured are removed from a factory after
paying duty get returned to any factory for being remade, refund,
reconditioned or for any other reason (The word any indicates that the
return need not be to the factory of production of the returned goods. For
purposes of repairs the goods may be sent to any factory), the assessee shall
account for the returns in his records and take CENVAT credit as if the
returned goods are inputs.

16(2) If the processes on the returned goods do not amount to
manufacture, the manufacturer shall pay an amount equal to the CENVAT
credit taken initially. (when there is no manufacture, excise duty doe not
accrue and hence, CENVAT credit is not permissible. Therefore, the
CENVAT credit taken initially has to be returned by paying an equivalent
amount). In any other cases, ie., where the processes on the returned goods
amount to manufacture, the manufacturer shall pay duty (on the remade
goods) at the rate and on the value applicable on the date of removal (of the
remade goods) {Duty paid originally is availed as CENVAT credit, when
goods come back for remaking, Duty is paid when the remade goods are
removed. Hence no double taxation}

16(3) In case the assessee expresses difficulty in following any one of
the two methods mentioned above, the Commissioner may permit the entry of
goods into the factory and availment of CENVAT credit thereon either by
special order on case to case basis or by general order. He may also impose
conditions for safeguarding the interests of Revenue.

RULE 17: REMOVAL OF GOODS BY 100% EOU TO DTA

17(1) Removal from EOU to DTA shall be made under Invoice
following Rule 11 procedure and after paying duty by debiting CENVAT A/c
or PLA on a monthly basis as laid down in CE Rule 8.

17(2) The Unit shall maintain Daily Stock Account in Form AC-1
showing description of goods, Opening Stock, Quantity manufactured,
clearances to DTA, clearances for Export, Invoice No. and date, Closing
Stock, Duty paid etc.

17(3) The unit shall submit monthly Return in Form ER-2 to the
Superintendent of CE by the 10
th
of next month in respect of excisable goods
manufactured in the Unit and Inputs/Capital Goods received in the unit.

17(4) By scrutinizing the returns, CEO checks the correctness of ED.

17(5) On demand, assessee shall produce all documents and
information.

RULE 18: REBATE OF DUTY

When goods are exported the Excise Duty paid on the exported goods
or the Excise Duty paid on the materials used in the manufacture of the
exported goods can be allowed as rebate by Central Government through
Notifications, subject to conditions, limitations and procedures specified in
the Notification.

Explanation : Export includes Stores supplied to :- (i) a Ship
proceeding to a foreign port (ii) a Foreign going aircraft.

NOTE : In view of the exemption from duty available to the goods
manufactured in NE states, etc., Export Rebate under Rule 18 is not
admissible to them.

Procedure:
Export goods are cleared from factory in Form ARE-1 in quintuplicate
(Fifth copy is optional) duly covered by invoice as per Rule 11.

There are two options for clearance (i) Sealing by Excise Officer and
(ii) Self-sealing (by exporter)

Procedure at the place of Export : If sealing is done by Range Officer,
Customs simply verifies that the seal is intact. Goods are not examined. But
in the case of self-sealing by the exporter, Customs examines the goods.
Thereafter Customs endorses certificate of exportation on all the copies.

Presentation of rebate claim : With the help of 1
st
copy claim for rebate is
made by the exporter to Rebate Sanctioning Authority (RSA), viz.,
jurisdictional CCE or CCE (Maritime).

The RSA verifies the 1
st
copy (from the exporter), the 2
nd
copy (from
Customs) and the 3
rd
copy (from Central Excise) and if they agree and are in
order, sanctions the rebate.

Documents in support of rebate claim :

1. A request in letterhead indicating rebate amount, Number and
date of ARE-1 Forms and corresponding invoices and
calculations ARE-1 form-wise.
2. Original copy of ARE-1
3. Invoices issued under Rule 11.
4. Self-attested copy of Shipping Bill
5. Self-attested copy of Bill of lading
6. Disclaimer certificate (if claimant is other than exporter)

Pre-audit is done if claim exceeds Rupees five lakhs.

Special procedure for export to Nepal : Application in the form
of Invoice (CE Series Form No.24) referred to as Nepal Invoice is
submitted in quadruplicate by the exporter to the jurisdictional Range
Officer.

RULE 19 : EXPORT WITHOUT PAYMENT OF DUTY

19(1) Any excisable goods may be exported from the factory without
payment of duty.

19(2) Any material may be removed from a factory without payment
of duty for use in the manufacture of goods, which are exported.

19(3) Export in both the cases are subject conditions, safeguards and
procedures notified by the Board.


Procedure:

Merchant-Exporter as well as Manufacturer-Exporter shall obtain
certificate in Form CT-1 from Jurisdictional Range Officer (valid for one
year). Based on this certificate they can procure goods for export without
duty upto the limit indicated therein, i.e., upto the value of bond. Debit to
bond account cannot exceed credit in bond. The manufacturer exporter shall
furnish letter of undertaking (LUT) and the Merchant-Exporter shall furnish
a general Bond (Form B-1) equal to duty with surety/security. Export shall
be made within six months from the date of clearance from factory.

Cancellation of application: If the goods are not exported, but
diverted for domestic consumption, the Department will cancel the
application (ARE-1). But the Exporter shall pay duty as specified in the
application along with interest @ 18% p.a. from the date of removal from
factory till the date of payment of duty.

Procurement of excisable goods without payment of duty for use in the
manufacture of export goods: Export shall be to any Country other than
Nepal and Bhutan. Manufacturer shall take RC under Rule 9. Provisions of
CE (Removal of goods at concessional rate of duty for manufacture of
excisable goods) Rules, 2001 shall be followed mutatis mutandis challan
movement procedure. Manufacturer shall declare tatio of input and output
and the rate of duty on the goods to be procured. The AC/DC shall
countersign the application made in this regard by the manufacturer in the
manner specified in the rules referred to above, after checking the reported
ratio before manufacture begins and after testing the samples of finished
goods thereafter. The goods procured sans duty may be sent to a job worker
for testy, repairs, etc., or for making intermediate products, without payment
of duty. The job worker shall pay duty for waste or return it to the
manufacturer along with the products made by him. The finished goods shall
be exported on application in Form ARE-2.

RULE 20 : WAREHOUSING PROVISIONS

20(1) Facility of removal of excisable goods from the factory of
production to a warehouse or from one warehouse to another warehouse may
be extended by Central Government through Notification.

20(2) Facility of warehousing is subject to conditions (including
penalty and interest), limitations (including warehousing period) and
safeguards and procedure (including dispatch, movement, receipt, accountal
and disposal of warehoused goods), that may be specified by the Board.

20(3) In respect of goods removed from factory to warehouse and
from warehouse to warehouse responsibility for payment of duty falls on the
consignee warehouse, i.e., destination warehouse.

20(4) If the goods dispatched for warehousing or re-warehousing are
not received in the consignee warehouse i.e., destination warehouse
responsibility for payment of duty falls on the consignor warehouse i.e.,
dispatching warehouse.

WAREHOUSING/RE-WARESHOUSING (CE Manual Chapter 10 Part
I)

1. Goods : The warehouses shall be registered in the specified places
and warehousing/re-warehousing is permissible in respect of the following
goods only ; (i) Coal-tar distillation products and petroleum/bituminous
substances falling under Ch.27 (ii) Certain organic chemicals falling under
Ch.29 and (iii) Following goods cleared from factory to a Customs bonded
warehouse for being supplied as Stores to a foreign going vessel or aircraft or
to a meal uplift station outside India:- Cigarettes, aerated waters, prepared
and preserved foods, aluminum foil covers, stainless steel cutlery, butter and
cheese.

2. Procedure for removal of goods grom a factory/warehouse :
Consignor shall prepare application for removal in quadruplicate (CE Series
Form NO.38) along with invoice (Rile 11) for the goods to be removed. He
shall send application (quadruplicate)
and also invoice (duplicate) along with the goods to the destination
warehouse. He shall send the application (quadruplicate) to his Range officer
within 24 house of removal.

On arrival the Consignee shall, within 24 hours of arrival, verify and
send the original application to his Range Officer, duplicate to Consignor and
retain the triplicate for his record. The Range officer of Consignee shall
countersign the application (Original) received by him and send it to
Consignors Range Officer (Warehousing Certificate). The Consignor shall
retain the duplicate application endorsed by the Consignee for his record.

3. Failure to received Warehousing Certificate: The Consignor
should received the Warehousing Certificate (duplicate) from the consignee
within 90 days of removal (Can be extended by the Commissioner). If not, he
shall pay appropriate duty on such goods. If the Consignors Range Officer
does not received the Warehousing Certificate (Original) from the
Consignees Range Officer within 90 days of removal, the former must issue
reminders to the latter. If Warehousing certificate is not received within a
further period of 60 days, he shall inform his AC/DC, who will ensure
warehousing or payment of duty.

4. Accountal of warehoused goods: The storer shall keep inventory of
goods. Processes carried out on warehoused goods shall also be recorded.
The first and the last page of the inventory Register shall be pre-
authenticated by the storer.

5. Responsibility of Storer: Storer is responsible for the receipt,
delivery and safety of warehoused goods. He is liable for payment of
penalty/interest leviable in respect of warehoused goods.

6. Period of Warehousing: May be warehoused for a period of three
years from the date of first warehousing. Goods should be removed from
home consumption or re-warehousing- if the RC for warehouse is
revoked/suspended Time Limit is not fixed.

7. Warehousing of own goods only: Warehouse is meant for owners
(storers) goods only. No room of Duty p[aid goods, Commissioner may
permit storage of others goods also. Commissioner may specially permit
storage of Duty paid excisable/imported goods along with non-duty paid
excisable goods.

8. Dealing with the goods: The storer may sort, separate pack/repack
the goods and also make alteration necessary for preservation, Sales etc.

EXPORT WAREHOUSING (Chapter 10 Part II)

1. Goods :- All excisable goods under first schedule to CETA may be
removed from a factory to a warehouse for export therefrom U/r 18 (export
rebate) to Nepal and for export therefrom U/R 19. i.e., Removal for export
without payment of duty, to all Countries.

2. Exporters:- Beneficiaries are Exporters of the Status Star Trading
House or Super Star Trading House, foreign reputed departmental stores and
automobile manufacturers who have signed MOU with DGFT (All and
Sundry Exporters cannot do Export warehousing)

WHAT IS STAR TRADING HOUSE/SUPER STAR TRADING HOUSE ?

Categories of Exporters :- (1) Export House (2) Trading House (3) Star
Trading House and (4) Super Star Trading House.
The rating goes up in order mentioned above, on the basis of FOB
value of Exports or Net Foreign Exchange Earned. Government may also
alter the quantum criteria. The basis for criterion is Export Turnover
average in the last three years and turnover of last year. Exports of
subsidiaries of a holding company are also considered.

For deciding this categorization in addition to physical export of
goods there are other consideration too. They are computer software export,
software services rendered at site and professional consultancy services.
Extra weightage is given to Small Scale Industries and Cottage Industry.
Agricultural exports and project exports also get extra weightage.

3. Location:- The benefit is admissible, only if the warehouses are
located and registered at Ahmedabad, Bangalore, Kolkata, Chennai, Delhi,
Hyderabad, Jaipur, Ludhiana, Mumbai and Districts of Pune, Raigad, East
Midnapore and Kancheepuram.

4. Conditions:- If diverted to domestic consumption from warehouse,
interest shall be charged at 15% p.a. on the duty payable from the date of
clearance for export from the factory till the date of payment of duty. The
exporter shall furnish a general bond (Form B-3) U/R 19.

5. Registration:- The Exporter shall apply to the Commissioner for
registration U/R 9 to establish export warehouse. T/L for approval is seven
working days. Commissioner will forward the application with his approval
to the Range Officer. The Range Officer will issue RC with Registration
Number.

6. Execution of Bond:- The Exporter shall execute before AC/DC a
general bond (B-3 bond) (CE Series Form No.39) for export of goods from the
warehouse supported by security for 25% of the bond amount. The Exporter
shall maintain a Running Bond Account (CE Series Form No. 40) in the
warehouse.

7. Warehousing Procedure:- The procedure for warehousing (Factory
to Warehouse)/Re-warehousing (warehouse to warehouse) (for movement
within India) detailed above is applicable to export warehousing also.

The Exporter obtain Form CT-2 from the CEO in-charge of
warehouse, enters his requirement (i.e., Goods to be procured for export
warehousing) therein, affords provisional debit to Running Bond Account
and send one copy to Consignor (Factory supplying goods without charging
duty) sends the other to the CEO in charge of warehouse and keeps the third
copy as office copy.

The consignor prepares ARE-3 Form (Applicable for removal from
Factory to Warehouse) and also an invoice (under Rule 8 taking into
account CT-2 certificate. i.e., NIL duty invoice). The goods are sent to the
Exporter. On receipt of goods and ARE-3 the Exporter converts the
provisional debit in Running Bond Account to actual debit.

8. Clearance of goods for export outside India:- The Exporter clears
the goods from warehouse for export without duty under Form ARE-1
following the usual export procedure. The Exporter will credit the Running
Bond Account on the basis of ARE-1 endorsed by Customs Officer (Proof of
export). If Export proof is not available within six months (180 days) from
the date of removal from warehouse, the Exporter is liable to pay duty with
interest @ 18% p.a. The Exporter obtains attested copies of ARE-1 Forms.
Based on such ARE-1s, the factory can claim refund of accumulated
CENVAT credit duly endorsing photo copies of shipping documents attested
by Superintendent in-charge of warehouse. If the exporter could not produce
ARE-1 within six months, it shall be taken that export has not taken place.
Accordingly the Department will raise demand against Exporter for non-
fulfillment of bond conditions.

9. Diversion of goods for home consumption:- Goods can be diverted
for home consumption with departmental permission, on proper invoice after
paying duty in TR-6 challan. Diversion for home consumption is permissible
even after clearance from warehouse under cover of ARE-1. When goods are
diverted for home consumption interest is payable @ 18% p.a. on the duty
amount from the date of clearance from factory till the date of payment.

10. Waiver of physical warehousing in case of exigency:- In exceptional
cases of delayed supply from factory, longer transit period, immediate export
requirement or any other genuine reason, physical warehousing may be
waived by the Officer in charge of warehouse, subject to proper record
keeping in the Warehouse Register.




RULE 21: REMISSION OF DUTY

Duty on goods lost/destroyed by natural causes and by unavoidable
accidents as also duty on goods claimed by manufacturer to be unfit for
consumption or marketing may be remitted by the Commissioner, if the
reasons are proved to his satisfaction at any time before removal and subject
to conditions he may prescribe. Grant of remission is discretionary and not
mandatory. Powers of remission are prescribed by the Central Government.

CE Manual Chapter 18 Part-I (Guidelines of Manual)

Before granting remission, it shall be ensured that the goods declared
bad are destroyed. The destruction shall be done under the supervision of
departmental officers. Clearance of such goods will be done on NIL rate of
duty invoice quoting therein remission and destruction orders.

The destruction shall be done in such a manner that the goods become
irretrievable as excisable commodity. The Officer supervising the destruction
shall endorse the fact of destruction on assessees records viz., Daily stock
register, CENVAT register etc.

REMISSION FOR STOLEN GOODS IS NOT ADMISSIBLE, AS
THE GOODS ARE AVAILABLE ELSEWHERE FOR
CONSUMPTION.

RULE 22: ACCESS TO A REGISTERED PREMISES

22(1) An Inspecting Officer deputed by the Commissioner can have
access to the registered premises for carrying out checks in the interest of
revenue.

22(2) Every assessee and First/Second Stage dealer shall furnish a list
in duplicate, of all his records, to the inspecting officer.

22(3) Every assessee and First/Second stage dealer shall show all his
records as also the cost audit reports (S.233-B of Companies Act) and the
Income Tax audit report (S.44-AB of Income Tax Act) to the Inspecting
Officers, and the audit parties of the Commissioner of Central
Excise/Comptroller and Auditor General of India (CERA) for their scrutiny.




RULE 23: POWER TO STOP AND SEARCH

Any conveyance suspected to carry excisable goods with intention to
evade Duty can be searched by any CEO.

CE Manual Chapter 17 Part-I (Search and Seizure)

Search and seizure provisions are to be used in exception when direct
physical intervention becomes necessary. Search should be done as per CPC,
1898 as laid down categorically by S.18 of the CE Act. It can be done by an
Officer not below the rank of an Inspector. No search warrant is required
for searching registered premises and conveyance in transit (Search Warrant
is issued by AC/DC for other places only). Search shall be done in the
presence of two independent witnesses.
S.22 of CE Act provides for punishment to (i) CEOs doing vexatious
searches, seizures etc., (ii) persons willfully and maliciously giving false
information leading to vexatious search.

RULE 24: POWER TO DETAIN GOODS OR SEIZE THE GOODS

If the CEO suspects tht duty has not been paid on goods or such goods
were removed with intention to evade duty, then he can detain or seize such
goods.

As per CE Manual Chapter 17 Part-I (Para-3), the power to release
seized goods emanates from the power to seize itself. The goods seized may
be released provisionally under bond with 25% security, by the officer
competent to adjudicate the case.

RULE 24-A: RETURN OF RECONRDS

If the records acquired by the CEO are not relied upon for the issue of
SCN, then the CEO shall return them within thirty days.

RULE 25: CONFISCATION AND PENALTY

25(1) The following contraventions attract punishment :-

(a) Removal of goods in contravention of rules.
(b) Non-accountal of goods manufactured or stored
(c) Manufacture, storage etc., without registration certificate.
(d) Contravention of Rules with intent to evade Duty.

PUNISHMENT: Confiscation of offending goods and Penalty not
exceeding the Duty on the offending goods or Rs.2000 whichever is greater.
Penalty is subject to S.11AC of CE Act.
If penalty is imposed U/s 11AC, penalty under Rule 25 will not be
imposed. This, however, does not preclude the Department from confiscating
the goods, imposing any fine in lieu of confiscation and prosecuting a person.

25(2) Orders of confiscation/penalty under Rule 25(1) shall be issued
by the CEO following the principles of natural justice, i.e., after SCN action
only.

RULE 26: PENALTY FOR CERTAIN CASES

A person knows that certain excisable goods are liable to confiscation.
Or he has reason to believe so. Despite his knowledge/belief, he deals with
such goods in any one of the following ways:
- Acquiring procession, transporting, removing, depositing,
keeping, concealing, selling, purchasing or dealing in any
other manner. Thus he has committed an offence under CE
Law and hence liable to pay a penalty not exceeding the Duty
on such goods or Rs.2000/- whichever is greater.


26(2) Persons (including abetters) issuing bogus invoices (Bill Traders)
or fabricating bogus documents that lead to ineligible benefits like
CENVAT credit, refund etc., are liable to a penalty not exceeding the
amount of such benefit or Rs.5000/- whichever is greater
.
RULE 27: GENERAL PENALTY

Rules 25,26,S.11AC et., identify certain offences and prescribe
punishment. A person may comit some breach of Rules, for which there is no
penal provision elsewhere. For such NOS offences, i.e., offences not
otherwise specified, this Rules prescribes punishment. The punishment is
Penalty upto Rs.5000/- and Confiscation of goods.







RULE 28: ON CONFISCATION, PROPERTY TO VEST IN THE
CENTRAL GOVERNMENT:

28(1) Confiscated goods shall vest in Central Government, i.e., they
become Government property.

28(2) The CEO adjudging confiscation shall take and hold possession
of the confiscated goods. Police shall render him assistance.

RULE 29: DISPOSAL OF GOODS CONFISCATED

While ordering confiscation, the Adjudicating Authority may give an
option of paying fine in lieu of confiscation. If the owner of the goods does
not opt to pay fine, then the confiscated goods shall be sold, destroyed or
disposed of in any other manner as directed by the Commissioner.

RULE 30: STORAGE CHARGES IN RESPECT OF GOODS
CONFISCATED AND REDEEMED

If the owner of the goods facing confiscation does not want to lose
them, he exercises his option to pay fine in lieu of confiscation. In such cases,
he may be required to pay storage charges as may be determined by the
Adjudicating Authority.

NOTE: In Rule 29, as the owner has not exercised any option to pay fine
in lieu of confiscation, he does not have any right on those goods. Hence, the
department is forced to dispose of the confiscated goods. In Rule 30, he has
exercised the option, department cannot dispose of the goods. However,
since the goods were in Government custody for sometime, he has to pay
storage charges for his goods.

RULE 31: POWER TO ISSUE SUPPLEMENTARY INSTRUCTIONS:

Board, CCCE, etc., are empowered to issue instructions for the
implementation of CE Law. CE Manual owes its origin to this rule.

RULE 33: TRANSITIONAL PROVISIONS

All instructions, circulars, etc., issued under the old rules shall be
deemed to be valid and issued under the new rules to the extent they are
consistent with the new rules.