RECORDS AND RETURNS - CBEC Manual (OLD) - Central Excise

CHAPTER 6 RECORDS AND RETURNS PART-I RECORDS 1. Introduction 1.1 Records are to be necessarily maintained in the course of any business activity. These records are also used to determine the tax liability of the assessee. Earlier, for this purpose the Government had prescribed the records to be maintained, popularly referred to as 'Statutory records'. The statutory records under Central Excise Rules, 1944 were dispensed with in the year 2000 and it was decided to rely on private records of the assessee. This was done as a measure of simplification. While framing the Central Excise Rules, 2002 (hereinafter referred to as the said Rules), CENVAT Credit Rules, 2004 and other Rules issued under Central Excise Act, 1944, the Government has continued with the policy of relying on the private records of the assessee. 2. Private records 2.1 The main features of the acceptance of private records are as below:- (i) The fact that the rules do not prescribe 'statutory records' shall not be construed that no record has to be maintained. Every assessee shall maintain private records. (ii) the rules which require certain records to be maintained, are self contained and they specify the minimum information that an assessee MUST enter in his own record; (iii) There is no format for record—keeping, except in the case of Rule 17 of the said Rules where it is provided that the 100% EOU shall maintain in proper form appropriate account relating to production, description of goods, quantity removed, duty paid and each removal shall be made on an invoice. This Format has been notified by Notification No. 59/2001-Central Excise (N.T.) Dated 6th August, 2001 and is given at Annexure-li (See Part 7). (iv) This means that the assessee is free to devise his record-keeping, depending upon his accounting requirements but shall ensure that the requirements of particular rules are met; (v) There is a specific requirement about maintenance of Daily Stock Account' in rule 10 of the said Rules. It provides that every assessee shall maintain proper records, on a daily basis, in a legible manner indicating the particulars regarding description of the goods produced or manufactured, opening balance, quantity produced or manufactured, inventory of goods, quantity removed, assessable value, the amount of duty payable and particulars regarding amount of duty actually paid. The first page and the last page of each such account book shall be duly authenticated by the producer or the manufacturer or his authorised agent. All such records shall be preserved for a period of five years immediately after the financial year to which such records pertain. (vi) There is no requirement of 'authentication' of records by jurisdictional Central Excise Officer before a book/register is brought into use by an assessee. These records (relevant for Central Excise) shall, however, be authenticated on the first and last page by the assessee in the same manner as the Daily Stock Account. They shall also be preserved for a period of five years immediately after the financial year to which such records pertain. (vii) Every assessee/dealer is statutorily required to furnish to the Range Officer, a list in duplicate, of all the records prepared or maintained by him for accounting of transactions in regard to receipt, purchase, manufacture, storage, sales or delivery of the goods including inputs and capital goods and receipt, procurement or payment of input services. The assessee shall also on demand, provide all financial records including trial balance or its equivalent. (viii) Every assessee/dealer shall, on demand make available to the Range officer duly empowered by Commissioner or the audit party deputed by the Commissioner or the Comptroller and Auditor General of India, - (a) the records maintained or prepared by him in terms of sub-rule (2) of rule 22 of the said Rules; (b) the cost audit reports, if any, under section 233B of the Companies Act, 1956 (1 of 1956); and (c) the Income-tax audit report, if any, under section 44AB of Income-tax Act, 1961 (43 of 1961), (d) for the scrutiny of the officer or audit party, as the case may be. (ix) Every assessee who is having more than one factory and maintains separate records in respect of every factory for the purpose of audit, then, he shall produce the said records for audit purposes. 2.2 Records shall mean all the records prepared or maintained by the assessee for accounting of transactions in regard to receipt, purchase, manufacture, storage, sales or delivery of the goods including inputs and capital goods. All accounts, agreements, invoice, price-list, return, statement or any other source document ,whether in writing or in any other form shall be treated as records. Source documents are those documents which form the basis of accounting of transactions and include sales invoice, purchase invoice, journal voucher, delivery challan and debit or credit note. 2.3 Every assessee should be asked to furnish the list of all records prepared or maintained by him for accounting of transactions in regard to receipt, purchase, manufacture, storage, sales or delivery of goods including inputs and capital goods and receipt, procurement or payment of input services, if they have not done it so far. If there is any modification in the list, the same may be communicated to the Department as and when such modification takes place. 2.4 Non-maintenance of daily stock account as contemplated under rules or other information mentioned in other rules mentioned above by the assessee in his private records will mean contravention of specified rules attracting appropriate penal action. If such non-maintenance of records is with intent to evade payment of Central Excise duty, the more stringent penal provisions of the Central Excise Act and Central Excise Rules shall be attracted. Trade and industry are advised to ensure that the requisite information as required under amended rules is scrupulously maintained in their identified private records to avoid any penal action. 2.5 The private records relevant for Central Excise including the Daily Stock Account maintained in compliance with the provisions of the said Rules shall necessarily be kept in the factory to which they pertain. 2.6 The manufacturer shall maintain proper records for the receipt, disposal, consumption and inventory of the input and capital goods including the relevant information regarding value, duty paid etc. from the persons whom the input and capital goods procured is recorded and the burden of proof regarding the admissibility of the Cenvat Credit shall lie upon the manufacturer taking such credit. (Rule 9 of CENVAT Rules, 2004). Similarly, the records are required to be maintained for receipt, payment or procurement of input services. PART-II RETURN 1. Introduction 1.1 The Central Excise Rules, 2002 (hereinafter referred to as the said Rules) provide that the assessee shall be required to file certain periodic returns, which relate to his tax liability and other transaction, such as relating to CENVAT credit. 2. Monthly/Quarterly Return 2.1 Rule 12 of the said Rules provides that every assessee shall submit to the Superintendent of Central Excise a monthly return in proper form, of production and removal of goods and other relevant particulars, within ten days after the close of the month to which the return relates. However, where an assessee is availing of the exemption under a notification based on the value of clearances in a financial year, he shall file a quarterly return in proper form, of production and removal of goods and other relevant particulars, within twenty days after the close of the quarter to which the return relates. The prescribed monthly return is E.R.-l Return and quarterly return is E.R.-3 Return (See Annexures-12 and 13A in Part 7). 2.2 The E.R.-1 and E.R.-3 returns are consolidated returns which give details of goods manufactured, cleared, duty paid thereon as well as details of the CENVAT credit availed on input and capital goods and input services and so utilized. 2.3 The new ER returns are effective from 27.9.2004. This simplified single page return has been made less rigorous by substantially reducing the number of details required to be furnished in the returns. Further in the new returns, details of information about the excisable goods manufactured by an assessee is required to be furnished based on six digit sub-heading ( To be changed to 8-digit, once 8-digit code is in operation) on Central Excise Tariff Act, 1985 and not on the description of the goods. This shall facilitate online filing of returns and use of automation for collection, compilation and analysis of trade statistics. (Circular No. 747/63/2003-CE dated 22.09.2003) 2.4 A First Stage Dealer or Second Stage Dealer shall submit to the Superintendent of Central Excise a quarterly return within 15 days from the close of each quarter in the format prescribed vide Notification No. 73/2003-CE(N.T.) dated 15.09.2003 (See Annexure 13B in Part 7). 2.5 As duties payable on individual consignments need not be paid at the time of removal from the factory or approved place of storage, and sum total of this duty liability can be discharged on monthly basis, duties payable and the manner in which the actual duty payments are effected by the assessee, the interest payment - if any, where duties paid beyond permitted dates etc. have been specified in the E.R.-1 and E.R.3 Return. 2.6 The assessees would continue to submit along with the E.R.-1/ E.R. 3 Return for the month, copies of the account current and relevant TR6 challans etc. The account current Extracts will give details of all the credits made through TR6 challans during the month and upto the 5th of the following month — upto which the duty liability can be discharged for the month. A summary could also be put at the end of the account current Extracts indicating the following: (a) Opening balance, after discharging the duty liability for the previous month; (b) The credits made during the month; and upto the 5th of the following month; (c) Total duty discharged through account current during the month; and (d) Closing balance in the account current after discharging duty liability for the month. 2.7 The instructions given at the end of E.R.-1/ E.R.-3 return further elaborate the manner in which it should be compiled and the information to be furnished to the Department. 2.8 Return to be filed by Hundred percent Export Oriented Units is the E.R.-2 Return, notified by Notification No. 26/2004-Central Excise (N.T.) dated 279.2004. 2.9 As per sub-rule (2) of rule 12, the manufacturers paying duty more than rupees one hundred lakhs from account current in a financial year are required to furnish an Annual Financial Information Statement, every year by 30th day of November. The format of the statement has been prescribed vide notification No. 36/2004-C.E. (N.T.) dated 1.11.2004. (See Annexure-13AA in Part 7). PART-Ill ELECTRONIC MAINTENANCE OF RECORDS AND PREPARATION OF RETURNS AND DOCUMENTS 1. Procedure 1.1 Any person may electronically maintain or generate all or any of the records, returns, invoices and other documents prescribed under the rules made under Central Excise Act, 1944, using a computer, in electronically readable format. No specific permission from the Central Excise Department is required for this purpose. Such person is also not required to give any intimation to the Department. 1.2 The Range Office, however, will record in "Scrutiny Register" or any other record indicating a person's profile, the fact that such person is electronically maintaining records or generating returns, invoices or other documents, using computer. 1.3 The records can be kept on any electronic media, such as hard disk of computers, floppies, CDs or tapes and preserved. 1.4 The records, returns and documents should be in electronically readable format. This also means that a person who uses computerized system to generate records/books of accounts, returns etc., must keep the electronic record, even when a hard copy is kept. 1.5 The printouts (hard copies) of records and documents must be taken out at the end of each month and kept in bound folders, separately for each type of record, return, documents etc. 1.6 The person should ensure that proper back-up records are also maintained and preserved so that in the event of destruction due to unavoidable accidents or natural causes, the information can be restored within reasonable period of time. All such records, returns, invoices and other documents (both electronic and hard copy, including back-ups) shall be preserved for a period of five years (counted from the first day of the financial year following the financial year to which a record, return, invoice or document pertain). 1.7 It shall be incumbent upon a person (who maintains electronic records, returns, documents etc.) to produce, on demand, the relevant records, returns or documents, in hard copy and/or in the form of tapes or floppies or cartridges or compact disk or any other media in an electronically readable format (duly authenticated by the assessee), documentation including policy and procedure manuals, instructions to record the flow and treatment of transactions through accounting system, from the stage of initiation to closure and storage to the Central Excise Officers, or the Audit parties deputed by the Commissioner or the Comptroller and Auditor General of India. Such records, returns, invoices or other documents will be produced pertaining to such period (subject to the period of preservation) as may be requested including the daily entries in electronic format relating to the current month for which the printouts are not taken out. 1.8 He shall also provide account of the audit trail and inter-linkages including the source document, whether paper or electronic, and the financial accounts record layout, data dictionary and explanation for codes used and total number of records in each field along with sample copies of documents. Whenever changes are made in the aforesaid systems adopted by the assessee, he shall inform the Central Excise Officers and submit the relevant document. 1.9 In case any person is found to be misusing this facility or not providing access to the information or if there are any other cogent reasons, the Assistant Commissioner or the Deputy Commissioner of Central Excise may, after recording such reasons and after taking into consideration the explanation tendered by the person, regarding the discrepancies, if any, prohibit a person from electronically maintaining or generating any records, returns, invoices or other documents using computer and inform the immediate superior officer.