Assessment / Provisional Assessment - Central Excise Practice Manual (OLD) - Central Excise

ASSESSEMENT/ PROVISIONAL ASSESSMENT Assessment is the procedure of determining, and imposing of liability upon the income of the assessee or the tax-payer. As per Central Excise Rules the term 'assessment' includes: self assessment of duty made by the assessee and Provisional assessment under Rule 7. and 'assessee' is defined to mean 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. The particulars in ER-1/ ER-2/ ER-3 return are correctly stated. Duty has been assessed as per provisions of section 3(2) or 4 or 4A. TR-6 challans by which duty has been paid are genuine. After filing and submission of return along with the Self- assessment Memorandum scrutiny of both the return and memorandum is done by the proper officer. The officer can demand show cause notice in case he finds short payment but no assessment order will be issued. Reasons for provisional, Period for which such assessment required, Rate of duty or value to be applied by assessee for such assessment, Undertaking to appear before AC within 7 days or on such date fixed by AC and Furnish all the relevant documents. 2. Order of AC allowing provisional assessment - AC/DC than may allow payment of duty on provisional basis specifying the rate or value at which the duty will be paid on provisional basis. Order of provisional assessment is mandatory for clearances. Exceptional case: - This period can be extended by Commissioner of CE on request for reasons to be recorded in writing. Extension for further period, beyond one year, can be granted only by Chief Commissioner. Where assessee applies for provisional assessment but no action taken by revenue, assessment is to be treated as provisional as non-action cannot go against appellant [JBM Industries Ltd. V. CCE (2004)]. However, any price variation clause in the contract does not mean provisional assessment. Also, show cause notice or demand under section 11A cannot be issued before or at the stage of finalization of provisional assessment. Demand can be raised within 1 year after the provisional assessment is finalized. However demand can be raised even if assessment is provisional if there was misdeclaration. Provisional assessment will be allowed only after execution of bond. In case more duty is payable, differential amount is payable and interest is also payable. 3. Finalisation of assessment - AC/DC will make final assessment within 6 months from the date of order of provisional assessment on the basis of required details. In case less duty is payable than provisional duty, excess amount paid by the assessee will be refunded back with interest. 4. Communication of the final assessment - After the final assessment is completed, the amount payable will be communicated to the assessee. In case where assessee fails to pay differential duty within 15 days after final assessment is made, bond should be enforced after due notice to assessee. 5. Best Judgment assessment where neither self assessment nor provisional assessment can be made - Where assessee fails to provide records or information and department is unable to issue demand or in case of suppression of facts or clandestine removals, 'Best Judgment Method' may be used to raise demand. Best Judgment Assessment is done on the basis of guess work and estimate based on evidences and materials having more than mere suspicion. However burden to provide information is on the assessee. Other issues In case of provisional assessment suppression of facts and thus demand of penalty cannot be imposed. However, if charge of fraudulent evasion of duty is proved penalty is imposable. Finalisation of provisional order is appealable. Provisional assessment is provisional for all purposes (i.e. both for demand and refund) and not only in relation to reason for which it is made provisional. This means that if assessment is provisional whole assessment is provisional and therefore time limit of one year for demand/ refund will start from the date when assessment is finalized. Scrutiny of Return Scrutiny of Return is the 1 st stage of scrutiny. Under this stage all Returns shall be scrutinized as per the checklist given in Annexure-1 of Circular No. 818/ 15/ 2005-CX. This will involve checking whether the information contained in the return is complete, prima facie, valid and internally consistent with reference to the records and documents prepared by the assessee. Checking and comparison of trends of payment of duty, production, all types of clearances, value, and Cenvat utilisation will also be done to identify returns for detailed scrutiny. Scrutiny will be done and signed by the Range Superintendent. Action will be taken, for any discrepancies found, by the Range Superintendent. Scrutiny of Assessment Scrutiny of Assessment is the 2 nd stage of scrutiny where only 5% of the Returns scrutinized in the 1 st stage will be selected and scrutinized. The selection will be made on the basis of negative impact on revenue for the maximum number of parameters as mentioned in the Annexure-2 of Circular No. 818/ 15/ 2005-CX. Scrutiny will be done and signed by the Range Superintendent. Detailed scrutiny is done to ascertain the correct reason for abnormal trends exhibited by the parameters. 1. A register of scrutiny of assessment in the form in Annexure-3 of Circular No. 818/ 15/ 2005-CX should be maintained in the Range Office. 2. A monthly report shall be submitted by each Range Superintendent to the jurisdictional AC/ DC of the division about the number of returns received and scrutinized in the form in Annexure-4 of Circular No. 818/ 15/ 2005-CX. 3. Every 6 months, the DC/ AC in charge of the division will scrutinize the returns of units paying annual PLA revenue of Rs.1 crore to 5 crores. And in case of units paying annual PLA of more than Rs. 5 crore returns will be scrutinize by additional/ joint Commissioner in- charge of the division in every 6 months. 4. A report of the number of returns Scrutinized by AC/ DC with his comments shall be sent to the Commissioner latest by 15 th of the month following the month of such scrutiny. Provisional assessment Provisional assessment is made where assessee is not in a position to make self-assessment. For e.g. where assessee is unable to determine the value of excisable goods or rate of duty on account of non-availability of any document or information, he can request for provisional assessment. Provisional assessment can be requested by the assessee only and not by the department. Steps 1. Filing request for provisional assessment - For provisional assessment assessee may request AC/DC of CE giving following details: Self-assessment: 1. According to Rule 6 of the Central Excise Rules 2002, the assessee himself is required to determined duty liability at the time of removal of excisable goods and discharges the same. Exception: - in case of cigarettes, the Superintendent or Inspector of Central Excise shall assess the duty payable before removal of goods. 2. Self-assessment Memorandum forms part of the monthly/ quarterly return filed by the assessee. Assessee declares in Memorandum the following particulars: