P. NADIMUTHU Dr. P. NATARAJAN

AN ANALYTICAL STUDY OF CENTRAL EXCISE DUTY WITH SPECIAL REFERENCE TO CENTRAL EXCISE COMMISSIONERATE, TIRUCHIRAPPALLI

A thesis submitted to Bharathidasan University for the Award of the Degree of DOCTOR OF PHILOSOPHY IN ECONOMICS

By P. NADIMUTHU (Reg.No.023811/Ph.D.2/Economics/P.T./Re.regn./April 2010)

Research Supervisor Dr. P. NATARAJAN Assistant Professor, Rajah Serfoji Govt. College (Autonomous) Thanjavur.

DEPARTMENT OF ECONOMICS A.Veeriya Vandayar Memorial Sri Pushpam College (Autonomous) Poondi – 613 503 Thanjavur

SEPTEMBER 2011 Dr. P. NATARAJAN, M.A., M.Phil., M.Ed., Ph.D., M.B.A., Assistant Professor, P.G. and Research Department of Economics, Rajah Serfoji Govt. College (Autonomous) Thanjavur – 613 005.

CERTIFICATE

This is to certify that the thesis entitled “AN ANALYTICAL STUDY OF

CENTRAL EXCISE DUTY WITH SPECIAL REFERENCE TO CENTRAL

EXCISE COMMISSIONERATE, TIRUCHIRAPPALLI” submitted to

Bharathidasan University, Tiruchirapalli, for the award of the Degree of

DOCTOR OF PHILOSOPHY IN ECONOMICS is a bonafide record of

research work carried out by Thiru P. NADIMUTHU, under my guidance and

supervision in the Department of Economics, A.Veeriya Vandayar Memorial

Sri Pushpam College (Autonomous), Poondi, Thanjavur, Tamil Nadu, India.

I further certify that no part of the thesis has been submitted anywhere else for the award of any degree, diploma, associateship, fellowship or other similar titles to any candidate.

Place: Thanjavur,

Date : (P. NATARAJAN) Research Adviser.

DECLARATION

I hereby declare that the work embodied in this thesis has been originally carried out by me under the supervision of Dr. P. NATARAJAN, Assistant

Professor, P.G. and Research Department of Economics, Rajah Serfoji

Government College (Autonomous), Thanjavur and this work has not been submitted either whole or in part for any other degree or diploma at any

university.

Date:

( P. NADIMUTHU ) Research Scholar.

ACKNOWLEDGEMENT

I first thank to the living legend Shriman K. Thulasiah Vandayar, Secretary and Correspondent, A.Veeriya Vandayar Memorial Sri Pushpam College (Autonomous), Poondi, Thanjavur District.

I express my profound sense of gratitude to my research supervisor Dr. P.Natarajan, M.A., M.Phil., M.Ed., Ph.D., M.B.A., Assistant Professor of Economics, Rajah Serfoji Govt. College (Autonomous), Thanjavur, for his excellent guidance and this thesis could not have been completed without his inspiring valuable suggestions, constant help and encouragement throughout the period of the study, I am highly indebted to his attention and guidance.

I thank Dr. S. Chinnaiyan, M.A., M.Phil., Ph.D., Principal, A.Veeriya Vandayar Memorial Sri Pushpam College (Autonomous), Poondi, Thanjavur District, for having granted permission to me to do Ph.D. programme.

I am grateful to Dr. R. Rajendran, Co-ordinator, Department of Economics, A.Veeriya Vandayar Memorial Sri Pushpam College (Autonomous), Poondi, Thanjavur District, and other faculty members in the Department of Economics, for the interest they have shown and encouraged me throughout this work. I am highly indebted to Sri Shyam Raj Prasad, Commissioner, P. Devaraj, Deputy Commissioner, Shri Pappu Elangovan, Deputy Commissioner of Central Excise (Retd.), Tiruchirappalli, for his constant encouragement and personal interest in my topic of research. My special thanks to Mrs. S. Vetriselvi, Superintendent, Central Excise – Division, Thanjavur, for her encouragement.

I express my sincere thanks to Mr. Gopalakrishnan, Statistical Section, Central Excise Commissionerate, Tiruchirappalli, for his kind co-operation that he has extended throughout my study.

I extend my whole hearted gratitude to Dr. M. Govinda Rao, Director, Dr. R. Kavita Rao, Professor, Dr. Pinaki Chakraborthy, Professor, National Institute of Public Finance and Policies, New Delhi.

I extend my sincere thanks to Dr. A. Ganesan, Librarian and Staff members of Library, A.Veeriya Vandayar Memorial Sri Pushpam College, Poondi, Mr. Sivachidambaram, Librarian, NIPFP, New Delhi, The Librarian, ICSSR Documentations Centre, New Delhi, H.T. Parekh Library, Institute of Financial Management & Research (Chennai), Madras School of Economics, for their timely help to collect theories and review of literature.

I sincerely thank to Dr. G. Rajendran, Associate Professor of Economics, Gurunanak College, Chennai and Dr. R. Palanivelu, Reader, Department of Economics, A.V.V.M. Sri Pushpam College, Poondi, who have acted as Doctoral Committee Members and help me for my research work. I express my thanks to Mr. G. Santhakumar, Mr. S. Thennarasu and Mr. C. Ravindran, Research Scholars, Rajah Serfoji Govt. College, Thanjavur. I express my appreciation to Sri Balaji Computers, Madurai, for his neat execution of computing and typing of my research work. On personal note, I deeply acknowledge the enthusiasm, encouragement and support rendered to complete my research work by my father Mr. K. Perumal, my father-in-law Mr. A. Vairakkannu, my wife Mrs. V. Sivagamasundari, son N. Nanda Kishore and my daughter N. Prapthi.

P. NADIMUTHU.

CONTENTS

CHAPTER PAGE

I INTRODUCTION 1

II REVIEW OF LITERATURE 11

III CENTRAL EXCISE DUTIES IN INDIA 39

IV CENTRAL EXCISE COMMISSIONERATE – AN OVERVIEW 75

V PERFORMANCE EVALUATION OF CENTRAL 144 EXCISE REVENUE REALISATION OF TIRUCHIRAPPALLI COMMISSIONERATE – DIVISION-WISE

VI PERFORMANCE EVALUATION OF CENTRAL 169 EXCISE REVENUE REALISATION OF TIRUCHIRAPPALLI COMMISSIONERATE – COMMODITY - WISE

VII SUMMARY OF FINDINGS AND 216 SUGGESTIONS

BIBLIOGRAPHY

APPENDIX

Contributions by the Research Scholar

LIST OF TABLES

TABLE NO. TITLE PAGE NO.

5.1 Gross Revenue, Rebate and Net Revenue – Tiruchirappalli - I Division 147

5.2 Average and Stability of Gross Revenue, 149 Rebate and Net Revenue – Tiruchirappalli - I Division

5.3 Trend and Growth of Gross Revenue, Rebate 150 and Net Revenue – Tiruchirappalli - I Division

5.4 Gross Revenue, Rebate and Net Revenue – 151 Tiruchirappalli - II Division

5.5 Average and Stability of Gross Revenue, 154 Rebate and Net Revenue – Tiruchirappalli - II Division

5.6 Trend and Growth of Gross Revenue, Rebate 155 and Net Revenue – Tiruchirappalli - II Division

5.7 Gross Revenue, Rebate and Net Revenue – 156 Thanjavur Division

5.8 Average and Stability of Gross Revenue, 159 Rebate and Net Revenue – Thanjavur Division

5.9 Trend and Growth of Gross Revenue, Rebate 160 and Net Revenue – Thanjavur Division

5.10 Gross Revenue, Rebate and Net Revenue – 161 Karur Division

5.11 Average and Stability of Gross Revenue, 163 Rebate and Net Revenue – Karur Division

5.12 Trend and Growth of Gross Revenue, Rebate 164 and Net Revenue – Karur Division

TABLE NO. TITLE PAGE NO.

5.13 Gross Revenue, Rebate and Net Revenue – 165 Karaikal Division

5.14 Average and Stability of Gross Revenue, 167 Rebate and Net Revenue – Karaikal Division

5.15 Trend and Growth of Gross Revenue, Rebate 168 and Net Revenue – Karaikal Division

6.1 Gross Revenue, Rebate and Net Revenue – 172 Cement

6.2 Average and Stability of Gross Revenue, 173 Rebate and Net Revenue – Cement

6.3 Trend and Growth of Gross Revenue, Rebate 174 and Net Revenue – Cement

6.4 Gross Revenue, Rebate and Net Revenue – 175 Petroleum Products

6.5 Average and Stability of Gross Revenue, 176 Rebate and Net Revenue – Petroleum Products

6.6 Trend and Growth of Gross Revenue, Rebate 177 and Net Revenue – Petroleum Products

6.7 Gross Revenue, Rebate and Net Revenue – 179 Chemical & Chemical Products

6.8 Average and Stability of Gross Revenue, 180 Rebate and Net Revenue – Chemical & Chemical Products

6.9 Trend and Growth of Gross Revenue, Rebate 181 and Net Revenue – Chemical & Chemical Products

6.10 Gross Revenue, Rebate and Net Revenue – 182 Paper and Paper Products

TABLE NO. TITLE PAGE NO.

6.11 Average and Stability of Gross Revenue, 183 Rebate and Net Revenue – Paper and Paper Products

6.12 Trend and Growth of Gross Revenue, Rebate 184 and Net Revenue – Paper and Paper Products

6.13 Gross Revenue, Rebate and Net Revenue – 186 Boiler Components and Machinery

6.14 Average and Stability of Gross Revenue, 187 Rebate and Net Revenue – Boiler Components and Machinery

6.15 Trend and Growth of Gross Revenue, Rebate 188 and Net Revenue – Boiler Components and Machinery

6.16 Gross Revenue, Rebate and Net Revenue – 189 Sugar

6.17 Average and Stability of Gross Revenue, 190 Rebate and Net Revenue – Sugar

6.18 Trend and Growth of Gross Revenue, Rebate 191 and Net Revenue – Sugar

6.19 Gross Revenue, Rebate and Net Revenue – 193 Iron and Steel

6.20 Average and Stability of Gross Revenue, 194 Rebate and Net Revenue – Iron and Steel

6.21 Trend and Growth of Gross Revenue, Rebate 195 and Net Revenue – Iron and Steel

6.22 Gross Revenue, Rebate and Net Revenue – 196 Cigarettes and Chewing Tobacco

TABLE NO. TITLE PAGE NO.

6.23 Average and Stability of Gross Revenue, 197 Rebate and Net Revenue – Cigarettes and Chewing Tobacco

6.24 Trend and Growth of Gross Revenue, Rebate 198 and Net Revenue – Cigarettes and Chewing Tobacco

6.25 Gross Revenue, Rebate and Net Revenue – 200 Articles of Iron & Steel

6.26 Average and Stability of Gross Revenue, 201 Rebate and Net Revenue – Articles of Iron & Steel

6.27 Trend and Growth of Gross Revenue, Rebate 202 and Net Revenue – Articles of Iron & Steel

6.28 Gross Revenue, Rebate and Net Revenue – 203 Parts of Motor Vehicles

6.29 Average and Stability of Gross Revenue, 204 Rebate and Net Revenue – Parts of Motor Vehicles

6.30 Trend and Growth of Gross Revenue, Rebate 205 and Net Revenue – Parts of Motor Vehicles

6.31 Company-wise Revenue Realisation through 208 Personal Ledger Account (PLA)

6.32 Average and Stability of PLA Revenue – 213 Top 10 Assesses

6.33 Trend and Growth of PLA Revenue 214 Realisation – Top 10 Assesses

LIST OF FIGURES

FIGURE NO. TITLE PAGE NO.

5.1 Gross Revenue, Rebate and Net Revenue – 148 Tiruchirappalli - I Division

5.2 Gross Revenue, Rebate and Net Revenue – 153 Tiruchirappalli - II Division

5.3 Gross Revenue, Rebate and Net Revenue – 158 Thanjavur Division

5.4 Gross Revenue, Rebate and Net Revenue – 162 Karur Division

5.5 Gross Revenue, Rebate and Net Revenue – 166 Karaikal Division

6.1 Company-wise Revenue Realisation through 212 Personal Ledger Account (PLA)

LIST OF ABBREVIATIONS

AED - Additional Excise Duty

BHEL - Bharath Heavy Electronic Limited

CBEC - Central Board of Excise & Customs

CEA - Central Excise Act

CETA - Central Excise Tariff Act

CGR - Compound Growth Rate

CPCL - Chennai Petroleum Chemical Limited

EOU - Export Oriented Unit

MRP - Maximum Retail Price

NECD - National Calamity Contingent Duty

PLA - Personal Ledger Account

SEZ - Special Economic Zone

SRP - Self-Removal Procedure

VAT - Value Added Tax

WCO - World Customs Organisation

CHAPTER I

INTRODUCTION

CHAPTER I

INTRODUCTION

The income of the Government through all sources is known as public

revenue which includes the taxes, prices of goods and services supplied by public

enterprises, revenue from administrative activities, such as fees, fines, etc. There

are two sources of public revenue namely, tax revenue and non-tax revenue. The

revenue obtained through various taxes is known as tax revenue, while income

received from administration, commercial enterprises, gifts and grants in aid are

known as non-tax revenue. Taxes are imposed by the Government on the people

and it is compulsory on the part of the pay taxes, without expecting any direct

benefit. It is a compulsory charge imposed by the government with out any

reference to the service rendered to tax payer. According to Prof. Tassiq, “The

essence of a tax, as distinguished from other charges by government, is the

absence of a direct quid pro qno between the tax payer and the public authority”.

Excise duty is an indirect tax and levied on all excisable goods which are

produced or manufactured in India. But power to impose excise duty on certain goods like alcoholic liquors, opium and narcotics is granted to State and such

excise is called state excise. The Act, Rules and rates for State excise are different

from each State. The Central Excise is levied uniformly all over India in 2

accordance with the provisions of Central Excise Act, 1944 which came into force on and from February 28, 1944.

Central excise is a major source of revenue of the Central Government and it is more than the amount of income tax. Before the enactment of Central Excise

Act, 1944 several Acts were used to levy and collect excise duty. In fact, there were 16 such enactments. The manufacturers as well as the excise officers had faced many problems to deal with all such enactments. With an aim to minimize such problems all these Acts were consolidated into a single Act which was known as Central Excises and Salt Act, 1944. This Act is still in force in another name ‘Central Excise Act’.

In a developing country like India, taxation for economic development should aim at fully mobilizing the available resources. Tax collections represent collective savings of the economy. Where private savings are inadequate, it becomes necessary to rely more and more on collective savings. But care has to be taken to ensure that increased taxation does not affect the incentive of capital accumulation and business investment.

In the Indian fiscal system the Centre enjoys more powers in levying taxes than the States. It has many elastic sources of revenue. It has a wide national tax base. The important Central taxes are income tax, corporate tax, wealth tax, customs duties and excise duties.

1.1. TAX REVENUE

It is the most important source of revenue and different writers have placed it under different classes and have called it with different names. Prof. Adam

Smith speaks of the source as “Revenue from the People”. Contemporary writers speak of it as “that taking of the revenue from the society by the power of sovereign”, Prof. Adams calls it “derivative revenue”.

Taxes are the dues that the citizens of a nation pay for the privileges of membership in an organized society. Taxation is the process of securing funds compulsorily from the public to meet government expenditure without any direct tax payer and the public authority. By taxation, internal resources are canalized from the private and uneconomic avenues of expenditure into more productive channels of the economy.

The science and art of creating the tax structure involves choice of tax bases, determination of tax rates and other elements of tax structure such as exemptions and deductions to make the tax structure serve the objectives of the government. A good tax system must bring in adequate revenue, reduce the inequalities, mitigate the economic fluctuations, impose minimal restraints on the development and trade and involve minimum waste and inconvenience for both the tax payers and the government.

The most common method of financing government activities is by taking resort to the fruitful device of taxation. In every country, the largest part of the public revenue is raised through taxation. Taxes may be imposed on person’s wealth, they may be direct or indirect and they may be of different rates and nature. According to Dalton, “A tax is a compulsory contribution imposed by a public authority irrespective of the exact amount of service rendered to the tax payer in return and not imposed as a penalty for any legal offence”.

1.2. ROLE OF TAXATION IN INDIA

Taxation can be a powerful engine of forced savings in India. Taxation

may be used to achieve the following objectives:

(i) To curtail consumption and, thus transfer resources from consumption

to investment;

(ii) To increase the incentives to save and invest;

(iii) To transfer the resources from the hands of public to the hands of the

government in order to make public investment possible;

(iv) To modify the pattern of investment into socially desirable manner;

(v) To reduce economic inequalities; and to make equitable distribution of

incomes and wealth in the society;

(vi) To mobilize economic surplus; and to increase national output and

income.

1.3 STATEMENT OF THE PROBLEM

The study of public finance is acquiring an important place in the modern

economic analysis. The functions and responsibilities are changing day by day.

The days of Lassiz-faire have gone. In those days, the primary aim of the Central

Government was to raise funds, so as to meet the financial requirements for the

maintenance of law and order. It becomes necessary to identify new sources of

new taxes. There are many studies on the principles and the manner of distribution 6

of resources between the Union and the States, but there are only very limited

studies relating sources of tax revenue of the Central Government with special

reference to excise duties.

Central excise revenue is the biggest single source of revenue for the

Government of India. The Union Government tries to achieve different socio- economic objectives by making suitable adjustments in the scope and quantum of levy of Central Excise duty. The scheme of Central Excise levy is suitably adapted and modified to serve different purposes of price control, sufficient supply of essential commodities, industrial growth, promotion of small scale industries and like authority for collecting the Central Excise duty. Hence, the present study is undertaken to analyse the central excise duties with special reference to Central Excise Commissionerate of Trichirappalli.

1.4 OBJECTIVES OF THE STUDY

The major objective of the present work is to analyse performance evaluation of the Central Excise Commissionerate of Trichirappalli in terms of responsiveness of the tax revenue through central excise duties during a period of

10 years, from 2000-01 to 2009-10. The specific objectives of the study are the following.

a. To study the structure and performance of Central Excise

Commissionerete of the Union Government.

b. To anlayse the stability of tax revenue through central excise duties of

Trichirappalli Commissionerate on the basis of division-wise, product

and company-wise.

c. To analyse the trend and growth of tax revenue through central excise

duties of Trichirappalli Commissionerete on the basis of division-wise,

product and company-wise.

d. To offer some important suggestions based on the findings of the study.

1.5 METHODOLOGY

In view of considerable data from survey research secondary sources collected and presented in this research report, ‘descriptive research’ is considered as the most appropriate for the present study. Hence the study has been descriptive and analytical. The research problem and the tool have been formulated and framed accordingly.

Secondary Data

The study depends on only the secondary data available on standard text books of related topic, leading journal and published documents, records and 8

Annual Reports of the Central Excise Commissionerate, Economic Survey, and

Reserve Bank of India Bulletin.

Period of Study

The secondary data were collected during the period from 2000-01 to

2009-10.

Tools of Analysis

In order to analyse the average and stability (fluctuations) of tax revenue through central excise duties of Trichirappalli Commissionerate on the basis of division-wise, product and company-wise during the study period, the arithmetic mean and coefficient of variation were computed.

To analyse the trend and growth of tax revenue through excise duties of

Trichirappalli Commissionerate on the basis of division-wise, product and company-wise, the Linear and semi-log trend equations were fitted and compound growth rate (CGR) was also computed.

1.6 LIMITATIONS OF THE STUDY

The findings emerging from this study are subject to the following limitations.

1. This study covers only a period of 10 years (from 2000-01 to 2009-10).

The conclusions arrived at in this study are applicable to this period

only.

2. This study is intended to analyse the revenue performance through

central excise duty of the Central Government of India only. No attempt

has been taken to make any comparative study with the fiscal

performance of other taxes.

3. This study, by and large, utilises the time series data on Central

Finances, published by the Reserve Bank of India Bulletin for various

years. The conclusions arrived at in this study are subject to the veracity

and limitations of those data.

1.7 CHAPTER SCHEME

The present thesis has been organised in seven chapters.

The first chapter is an introductory one dealing with the importance of tax system of the Central Government, statement of the problem, objectives, limitations and chapter scheme.

The second chapter gives an account of a review of related studies and methodology adopted in the present research work. 10

The third chapter describes the structure and performance of Central Excise

Commissionerete of Central Government.

The fourth chapter is concerned with the stability, trend and growth of tax revenue through excise duties of Tiruchirappalli Commissionerete on the basis of division-wise.

The fifth chapter analyses the stability, trend and growth of tax revenue

through excise duties of Tiruchirappalli Commissionerete on the basis of

commodity-wise and company-wise.

The final chapter summarises the findings and salient conclusions

emerging from this study.

CHAPTER II

REVIEW OF LITERATURE

CHAPTER II

REVIEW OF LITERATURE

This chapter is devoted to present a brief review of related literature concerning the study relating to taxation of Government of India and to explain the methodology adopted for this study. While Section A of this chapter deals with the review of literature, Section B discusses the methodology.

SECTION A

2.1 REVIEW OF LITERATURE

In this section, an attempt is made to present a brief review of important studies relating to taxation of the Central Government.

Sahota has purported that the discretionary changes in any given year are capable of affecting the degree of built-in elasticity. However, he has eliminated the effects of legislative changes only for the respective year and not for the subsequent years. Increase in the yield due to increase in tax rates or extension of the base are subtracted from the actual amount of that year and decrease in the yield due to reduction in tax rates or contraction of the base are added to the final account of the year. Hence, forward, the changed tax rate structure and the altered base form a part of the overall tax measure so that for subsequent years the new 12

rates and the new base are allowed to yield their relative influence on the elasticity

of the tax. Symbolically, Sahota’s method to get adjusted tax revenue (T’K) is

th T’K = TK - DK where k = 1, 2, ….n., TK refers to the actual tax revenue in the k

year and DK refers to the effects of discretionary changes and D1 is taken to be

zero. Thus, the cumulative effect of discretionary changes on the tax yields of the

future years had not been taken into account and this is a serious limitation of the

study.

The Indian Institute of Public Opinion has worked out the indices of

growth with 1950-51 as the base year to compare the growth pattern of central and states, taxes over a period of thirty five years from 1950-51 to 1984-85. The study revealed that the indices of growth of central taxes and state taxes were estimated at 57.2 and 55.3 respectively which have been roughly the same and consequently the ratio of central to state tax revenue has remained constant at 2.1. It is claimed that the close correspondence has arisen because of similar needs to raise the revenue for the public expenditure. Disaggregation of the total tax revenue into direct and indirect taxes reveals the fact that the sharp rise in total tax revenue is largely due to the growth of indirect taxes since the index of growth for direct and indirect taxes are 21.9 and 76.1 respectively.

Dalvi and Ansari have measured the extent of responsiveness of different tax revenues in India with respect to changes in prices and incomes. The effect of 13

the discretionary measures of the concerned governments on the growth of the total revenues has also been quantified. The findings reveal the fact that over the period from 1950-51 to 1980-81, the Central tax revenues have grown at a slower rate than those of the State revenues. For augmenting additional revenues the centre has relied more heavily on the discretionary measures. The analysis further shows that the value of elasticity coefficients of a number of taxes was less than unity. For increasing the level of tax yield, improvement in the quality of tax administration together with proper adjustment of taxable basis for price inflation are necessary. Furthermore, in the interest of fiscal harmony between the Centre and the States, there is a need for the centre to ensure a proper level of utilisation of the sharable tax bases.

Guhan discussing the budgetary trends of the Sixth and the Seventh

Budgetary Plans has shown that the indirect taxes and administered prices have increased the revenue of the Government. Borrowings and deficit financing are important tools to cover the current account gap. Other responsible factors for filling the gap are intractable expenditures, a very high degree of tax evasion, unresponsive revenue growth from taxes and surpluses of public sector enterprises. The implications of the above elements affect inflation, industrial costs and prices, export competitiveness, income distribution and inflows from borrowings. The author suggests that fiscal policy should control the monetary impact of the Government’s financial operations. Tax structure and its 14

enforcement should be reformed. He concludes that there is a need for adequate

expenditure policy, efficient functioning of public enterprises and seriousness to take up the political and administrative constraints in the policy implementation.

Tripati Rao in his analysis of fiscal policy in India has stated that the financing difficulties were due to the constraints in tax and non-tax revenue collections. The pattern of public expenditure has shifted towards revenue expenditure which doubled to 23 per cent of GDP in the late eighties outstripping the rise in current revenue. Non-plan expenditure doubled to 13.5 per cent in

1991. The total subsidies increased to a margin of 14.4 per cent of GDP in 1995.

Fiscal deficit rose to 6.1 per cent in 1997-98 and it is estimated to be around 5.8 per cent. Therefore, this calls for more meaningful deliberation of fiscal operation. Fiscal prudence is not just containment of public expenditure but importantly altering the pattern of public expenditure in terms of public investment and a more productive use so as to supplement the private sector in boosting the economy.

Charles Y. Mansfield analysed the elasticity and buoyancy of tax system using Paraguay as an example over the period 1962-1970 applying the formula developed by Prest. The results obtained by him showed that during the period

1962-1970, the tax ratio of Paraguay rose significantly, even though the built-in- elasticity of the tax system was slightly more than unity and tax to tax base 15

elasticities of major taxes were substantially less than unity. Balanced against

these unfavourble factors were important discretionary changes, mainly rising

rates of indirect taxes, such as import and stamp duties and the adoption of new

sales tax falling mainly on imported goods. These discretionary changes resulted

in a buoyancy of 1.69 for total taxes, a much higher figure than the built-in elasticity of tax revenue to income. Another important favourable influence on both elasticity and buoyancy was the relatively high base to income elasticity of most major taxes.

Reddy has examined various measures of tax effort made by all the Indian

States with a view to arrive at a reliable indicator of comparative tax effort by the different states. He has used the following three measures to estimate the actual tax effort of states using the average for the year 1970-72. They are

1. Per capita tax as a per cent of per capita income.

2. Per capita tax and non-tax revenue as a per cent of per capita income.

3. Per capita tax and non-tax revenue as a per cent of per capita income

net of direct taxes paid to the centre.

Sury has addressed some of the measurement problems in the estimation of elasticity and buoyancy of tax system taking India as a case. The study has reviewed the existing practices of calculating tax elasticity and buoyancy and the measurement problems therein. Based on Indian experience, it has proposed a 16

modified methodology to disentangle the effects of expected automatic changes

from the unexpected automatic changes while calculating the tax elasticity. The

study has also stressed that the modified methodology would enable the

Government to take effective steps in realizing the effects of tax structure on

resource mobilisation.

Bharadwaj and Nimbur have examined the Roy Bahl’s model tax effort.

The study has attempted at a reformulation of the basic Roy Bahl model

incorporating not only the time element in an essential way, but also providing technological upper limits to tax effort. The reformulated Roy Bahl model combining the theory of tax effort and tax ratio analysis provides guidelines to carry out manipulations at the policy level.

Purohit has made an empirical analysis of buoyancy and elasticity coefficients of the State taxes during the period from 1960-61 to 1970-71 using the data available in the Annual Reports on Currency and Finance published by the Reserve Bank of India. He has worked out the responsiveness of the tax structure using the adjusted values of tax revenue. Buoyancy and income elasticity coefficients have been worked out by him using Double Log Regression model for the total tax revenue, land revenue, agricultural income tax, stamp duty, and registration fees, sales tax, general sales tax, sales tax on motor spirit, 17

passenger and goods tax, motor vehicle tax, entertainment tax, State excise and electricity duty.

According to his study, the tax system as a whole was found to be income elastic and possessing built-in flexibility. The buoyancy and elasticity coefficients were positive for all the major tax revenues except for the land revenue. The values of the coefficients were found to be greater than one for stamp duty and registration fees, sales tax, general sales tax, sales tax on motor spirit, passenger and goods tax, motor vehicle tax, entertainment tax, State excise and electricity duty. Agricultural income tax was found to be income inelastic while land revenue possessed negative coefficients. This study leads to the following conclusions:

(i) The tax resources assigned to the states are elastic though the

elasticity depends upon the structure of the tax to a very great

extent.

(ii) The development of the state might affect the base elasticity causing

an upsurge in the income elasticity of the taxes.

(iii) With the development of the State it was also possible to have

higher revenues and greater elasticity owing to the administrative

factor.

That indirect taxes are generally believed to be regressive, is the result of

the study of tax incidence by R.J. Chelliah and R.N. Lal. The study shows that

indirect taxes as a proportion of household expenditure record a steady increase

with a rise in expenditure levels. If the results of the study of Chelliah and Lal are

to be accepted then the inevitable conclusion to which one would arrive at is that

the indirect tax structure in India is regressive. However, a recent study by

E. Ahamed and N. Stern raises serious doubts about the validity of the earlier

study.

Ahamed and Stern find that certain indirect taxes are progressive but this is

not true of all taxes. Moreover for urban areas the burdens of most of the taxes

were found to be proportionate to expenditure levels.

Chelliah and Sinha have studied the tax effort in India taking 15 State

Governments as a sample. The study has made use of the State level data relating to the period (from 1973-74 to 1975-76). It has followed the representative tax

system approach to estimate the tax efforts of the State Governments for all the

taxes except motor vehicle tax. The study has observed that there are wide

variations in the tax effort of the State Governments among various taxes. Tamil

Nadu is found to occupy the fourth rank among the Indian States under study.

Dhesi and Ghuman have compared the responsiveness of the State taxes in

the Punjab and Haryana during the period 1969-70 - 1977-78, based on the 19

information collected from the Statistical Abstracts and Budget Speeches of

Finance Ministers and the RBI Bulletins. Though the tax system of both States are elastic, the overall elasticity of tax revenue of Haryana (1.47) is higher than that of the Punjab (1.23). Moreover the larger difference between buoyancy

(1.60) and elasticity (1.47) of Haryana tax system reflects the bold discretionary measures taken by the State to mobilize additional tax revenue.

Sury estimated buoyancy and elasticity coefficients for the excise revenue in India for the period 1950-51 - 1980-81 and two sub-periods 1950-51 - 1964-65 and 1965-66 - 1980-81. He used the methodology developed by Prest and

Mansfield using Proportional Adjustment Method. The data needed for the study had been collected from the Budget Memorandum of the Central Government of

India. The conclusions of this study indicated that for the sub-periods, the excise revenue grew much more than proportionally to national income but at a less proportion during the whole period of the study. According to this study, the wide difference between the overall elasticity and buoyancy estimates indicated the need for significant revenue changes in discretionary effects. The low overall elasticity of the system was due to low value of tax-to-base elasticities in this study. This was attributed to excise evasion inefficient revenue collection procedures, a plethora of excise concessions, exemptions and abundance of low revenue items in the excise tariff.

Dwivedi attempted to measure the tax efforts of various Indian State

Governments using the method involving taxable capacity ratio or adjusted tax ratio approach. This method has been widely used in the IMF studies of tax effort of developing countries. In this method, the actual tax GNP ratio is compared with estimated ratio in order to find out whether a State is making adequate tax effort. For inter-State comparison of tax effort an index is formed by dividing the actual tax ratio by the estimated capacity ratio. The States are then ranked serially to show their relative position in tax performance in a group of selected States.

Through this study Dwivedi compared his results of tax effort with those obtained by Chelliah-Sinha Method. He had used the secondary data collected by him on tax revenue, State income and urbanisation from the RBI Bulletin, the

CSO publications, and the Statistical Abstracts of India for the period 1973-76.

He had classified Tamil Nadu State as a State with high tax effort index, the value of tax effort index being 1.1828 (in Chelliah-Sinha study, the index value is

1.1052). Dwivedi’s findings revealed that most of the poor States had made greater tax effort during 1973-76 than most of the richer States. On the contrary,

Chelliah-Sinha study showed that most of the richer States had made greater tax efforts than most poor States.

Ganti Subramaniyam and Balaiah have deviated from others by adopting the Divisia Index method of measuring total factor productivity for estimating 21

income elasticity of the general sales tax (1.47) and the State excise (1.43) of

Andhra Pradesh over the period 1961-80. A comparison of these results with the

estimates obtained by Prest-Mansfield Method (1.37 for both the taxes) results in

the conclusion that in view of its minimal demands on data requirements and

better functional efficiency and theoretical elegance, the Divisia Method should

be rated more efficient than the best method currently in vogue namely, the Prest-

Mansfield method.

A review of the above mentioned studies reveals the fact that in majority of

the Indian studies, proportional adjustment method proposed by Prest and

modified by Mansfield has been used for measurement of the income elasticity of tax revenue at various levels. In all these studies the additional revenue expected from the discretionary tax measures has been used as the realized additional revenue.

Chelliah tried to provide an explanation for the outline Indian experience.

In his opinion, the share of direct taxes is expected to rise with the increase in per capita income only after it has reached a certain minimum level and then grows at fairly high rate.

Seyon in his study argues that high tax rates in India are responsible for tax evasion. Therefore, in the process of restructuring the tax system there should be no legislation in reduction of the tax rates to a moderate level to promote the level 22

of investment. Accordingly, under the new economic policy the net tax

realization has been improved due to reduction in tax rates and better compliance.

Shambhat and Kannabiran examined the elasticity and buoyancy of individual taxes that constituted the total tax revenue of Tamil Nadu during 1965-

66 - 1988-89. The study has used Divisia Index method to estimate the elasticity and buoyancy of agricultural income tax, land revenue, State excise and sales tax.

All these taxes were found to be buoyant and elastic. It has been observed in the study that the discretionary measures taken by the government has a negative influence on the tax yields except for the State excise tax and sales tax. The study has emphasised the need to improve tax administration.

Sandip Sarkar in his study on corporate income and incidence of corporate taxation examined the responsiveness of corporate tax to income in India with a view to assessing justification for the imposition of value added tax. This study estimated that the corporate tax constitutes one fifth of national income. The buoyancy of corporate taxation in relation to corporate income and gross domestic products is observed to be around unity and considerable discretionary revenue measures are added to maintain corporate tax to gross domestic ratio. It calls for urgent requirement to improve the built-in flexibility of corporate taxation.

The responsiveness of the Indian tax system and the various individual taxes of different State governments were analysed by V.G. Rao for the period 23

from 1960-61 to 1973-74. Rao has worked out the elasticity and buoyancy coefficient of different taxes and has analysed the growth pattern of the Union and

State tax revenue in India. In conformity with Chelliah’s results, Rao’s study also reveals that the tax income ratio has recorded a steady upward trend since 1966-

67 and the percentage share of direct taxes to total tax revenue has fallen for the

Central as well as for the States in India.

Sundaram and Pandit have argued that indirect taxes contribute more than

77 per cent of the total tax revenue. A stage has clearly been reached where we have to rely increasingly on direct taxes. They aruge that while examining the possible changes in the system of direct taxation, revenue implications are no doubt important, but considerations of equity cannot be ignored. The consequence of the above proposal is the elimination of the Hindu Undivided

Family as well as the individual assessees as tax entities. The change in the notion of tax entity renders tax system more equitous and also generates significant additional tax revenues with the existing tax rates and provisions for exemptions and deductions.

Shankar Acharya in his paper sketches the contours of India’s tax reform story from the mid-1970s to the present and finds that enormous progress has been made in the last 30 years, judged by the standards of economic efficiency, equity, built-in revenue elasticity and transparency. However, key issues for 24

further reform include the plethora of complex exemptions plaguing customs tariff, low buoyancy of excise, integration of CENVAT with state VAT and the broad-basing of direct taxes. Sustaining programmes to deploy IT and modern risk management methods in tax administration will be critical, for the dictum ‘tax administration is tax policy’ is quite true.

Shikha Jha, P.V.Srinivasan in his paper on “Who pays more? Case of

Excise Duties in India”, had examined this issue based on the distribution of consumption expenditure. He had also analysed as to how the incidence of tax on different expenditure groups had been influenced by the commodity tax structure.

He had obtained progressivity indices for each of the excise duties (for all the 50 commodity classifications) based on household consumption data for the year

1984 –85. He had also computed the rank correlation co-efficient, which was a suitable measure to judge as to how well the tax rates were collected and for progressivity. He had studied the factors responsible for the weak relationship between progressivity and the amount of tax collected. Taking into account the demand structure for different goods he had stated that it would be possible to find the maximum attainable correlation between progressivity and revenues collected under the existing conditions of the tax structure.

Charles. Y Mansfield had analysed the buoyancy and elasticity of the tax system using Paraguays as an example for the period 1962 – 1970 applying the 25

formula developed by Prest. The results obtained by him had disclosed that in the period 1962 – 1970, paraguays tax ratio had risen significantly even though the built-in-elasticity of the tax system was only slightly more than unity and the tax- to-base elasticities of the major taxes were substantially less than unity. Balanced against these unfavourable factors were important discretionary changes, mainly rising of the rates of indirect taxes, such as import and stamp taxes and the adoption of a new sales tax falling mainly on imported goods. These discretionary changes had resulted in a buoyancy of 1.69 for the total taxes, a much higher figure than the built-in-elasticity of the tax revenues to income. Another important favourable influence on both elasticity and buoyancy was the relatively high base- to-income elasticity of most of the major taxes.

Sury had estimated the buoyancy and elasticity co-efficients for the excise revenue in India for the period 1950-51 to 1980-81 and for the two sub periods;

1950-51 to 1964-65 and 1965-66 to 1980-81. He had used the methodology developed by Prest and Mansfield using the proportional adjustment method. The data needed for the study had been collected from the Budget Memoranda of the

Central Government of India. The conclusions of the study had indicated that for the two sub-periods the excise revenue grew at a more than proportionate rate to that of the national income, but at a less than proportionate rate for the whole period of the study. According to this study, the wide difference between the overall elasticity and the buoyancy estimates had indicated the need for significant 26

revenue changes for getting discretionary effects. The low overall elasticity of the system was due to the low value of tax-to-base elasticities. The low tax-to-base elasticities in this study were attributed to the excise duty evasion, inefficient revenue collection procedures and a plethora of excise concessions and exemptions and an abundance of low revenue items in the excise tariff.

M.K. Datar had explained in union budget and flow of funds. He had looked at the budget proposals from the perspective of the likely changes in the flow of funds due to the proposed changes in the structure of tax incentive in the context of the Government’s borrowing requirements at lower interest rate due to low credit demand from private sector. When private investment picked up increase in interest rate or higher monetisation of government deficit may become inevitable. There are obvious limits on reducing interest rates and the quantum of borrowings.

The Ministry of information and Broadcasting of the government of India had stated that the main sources of revenues for the Central government are the customs duties, union excise duties the corporation tax, the income tax (excluding taxes on agricultural incomes), and the revenue from the wealth tax across the

Union. The main heads of revenue for the States are the taxes and duties levied by the State government and the grants received by the States from the union, land revenue, sales tax, state excise duties, registration and stamp duties and a share in the income tax and the union excise duties which constitute more than four-fifths 27

of the tax revenue receipts of the States; property taxes and octroi and terminal taxes are the revenue sources for the local bodies which come under local finance.

The Indian Institute of Public Opinion had worked out the indices of growth with 1950-51 as the base year to compare the growth patterns of the taxes of the Centre as well as that of the States over a period of thirty five years from

1950-51 to 1984-85. The study had revealed that the indices of growth of the

Central taxes and that of the State taxes were estimated at 57.2 and 55.3 respectively which have been roughly more or less the same and consequently the ratio of the Central to that of the State tax revenue had remained constant at 2:1.

Disintegration of the total tax revenues into direct and indirect taxes had revealed the fact that the sharp rise in the total tax revenue was largely due to the growth of the indirect taxes since the index of growth for the direct and the indirect taxes were 21.9 and 76.7 respectively.

The tax system of a country is an integral aspect of the overall economic activities of the country and it is expected to contribute a lot in the realm of attainment of the chosen social and economic objectives. The high rate of taxation in respect of both direct and indirect taxes, the low recovery rate of the taxes, double taxation, the poor implementation of the tax laws, difficult tax procedures, conflicting aims and attitudes and faulty policy decisions at the political level 28

appear to be the prime factors responsible for the failure of the taxation policy in

India.

Sonachalam had studied the trend and the changing pattern of the sales tax revenue in Tamilnadu using Reserve Bank India data over a period of sixteen years from 1957-58 to 1972-73. The package of State taxes had shown an amazing degree of elasticity and resilience. Their yield had increased by 6.4 times during the study period. But for the hesitancy of the State governments and their pursuit of non-economic motives, they would have earned much more revenues.

Accordingly, the general sales tax continued to occupy the topmost place whereas the State excises duties was pushed from the second to the fifth rank. To sum up, the change in the tax structure was towards indirect taxes. Tax shall be deemed to be elastic, if the average rate of growth of the tax revenue was greater than the rate of growth of the NSDP (Nineteen percent). In this regard, general sales tax was found to be the most elastic and the land revenue was found to be the least elastic tax. The tax burden is calculated as the ratio of the total tax revenue to the size of population. In this way there had been a five-fold increase (from Rs.10.32 in 1957-58 to Rs.50.16 in 1972-73) in the tax burden of the Tamilnadu State within a period of sixteen years.

Rajkumar and Chidambaram have attempted to measure the responsiveness of the tax yield to changes in the State income of the Tamil Nadu State during the 29

third five-year plan and an annual plan. This study was restricted to certain

specific taxes such as State excise duties, sales tax, land revenue, motor vehicles

tax and the agricultural income tax. The sales tax (1.4) and the motor vehicles tax

have been found to be highly sensitive whereas the agricultural income tax (0.66)

and the land revenue (0.56) were found to be not so sensitive to changes in the

State income. It was recommended that the States’ taxes could further be streamlined taking into consideration their sensitivity, as the tax resources allotted

to the States were insufficient to perform the extensive nation building function

assigned to them.

Dhesi and Ghuman have studied about the responsiveness of State taxes in

Punjab and Haryana during the period from 1969-70 to 1977-78. This study was

based on the information collected from the statistical abstracts and from the

budget speeches of the finance ministers and information collected from the RBI

bulletins. Though the tax systems of both the States were found to be elastic, the

overall elasticity of the tax revenues of Haryana (1-47) was found to be higher

than that of the Punjab State (1.23). Moreover, the larger difference between the buoyancy (1.60) and the elasticity (1.47) of the Haryana tax system was found to reflect the bold discretionary measures taken by that State to mobilize additional tax revenues.

Sham and Nirmala (1993) in their study examined the determinants of

main item of tax revenue of Indian states, namely total tax revenue, state own tax

revenue, share in central tax revenue, tax revenue from property and capital

transaction and tax revenue from commodities and services for the year 1988-89 from the study was carried out with the following objectives.

1. To examine the main factors governing the government tax revenue of

India during 1960-61 to 1990-91 and

2. To test whether the changes from congress to non-congress regime will have influence on public expenditure but on tax revenue.

3. They arrived at the conclusion that changes in the political party in power is not influencing significantly the selected tax revenue except taxes on property and capital transaction.

The analysis revealed that changes in political party in power exhibit significant influence only on the size of public expenditure but not on the size of public expenditure but not become to the fact that politicians are using public expenditure as an instrument by introducing populist measures to capture the vote bank in the mean while, they may not be able to use tax revenue as weapon to capture the vote bank because tax concession will be difficult due to mounting

pressure of public expenditure over a period of times. 31

The Madras Institute of Development Studies had made an attempt to review the trends of Tamilnadu’s State finance during the period 1960 to 1985 and had also dealt with the growth of the tax revenue during the same period. It had shown a very significant growth in the size of the fiscal operations by the

Tamilnadu government. It had pointed out that the aggregate receipts had risen from the level of Rs.102 crores in 1960-61 to Rs.2363 crores in 1984-85. The study had revealed that the revenue transfers from the Central government had supplemented the State’s own tax and non-tax revenues. The growth and the level of tax revenues in Tamilnadu had placed her among the highest taxed States in

India. Tamilnadu’s impressive tax-income ratio was thus the result of the high tax buoyancy on a low NSDP growth profile. The relative importance of the direct taxes on income and wealth had significantly diminished. Tamilnadu raises almost, the whole of its tax revenues through the indirect taxes of which two taxes on consumption, namely, the sales taxes and the liquor excise, had together contributed to about 77 percent of the total tax revenues. The non-tax revenues available to the State comprised grants from the Centre and the States own non- tax revenues. Compared to the other major States, Tamilnadu had relied to a very low extent on its non-tax sources, as against the sources from taxes, for raising its current revenues.

Bhatia had analysed the trends of the Indian States’ revenues during the period 1951-52 to 2001-2002 (BE) and had arrived at a number of interesting findings. He had found that the total revenue receipts had recorded an impressive increase during the plan period. The Seventh Plan recorded a figure of

Rs.2,22,686 crores by way of total revenues and the figures for the years 1992 to

97 were Rs.6,09,348 crores. He had pointed out that the revenues from the buoyant and elastic taxes had increased very rapidly. Examples of the elastic and buoyant taxes are the sales, stamps and registration fees, State excise duties, and taxes on passengers and goods and the like. States have a constituted and economic right to benefit from the growing revenue receipts of the Centre. He had stressed that the States’ own non-tax revenues has shown a steady downward trend. During the first plan, the States’ own non-tax revenue was 74.2 percent of their total non-tax revenue and in 2002 it was close to the level of 40.5 percent of the total, while the remaining 59.5 percent was got from the Centre by way of grants and the like. An important cause for this phenomenon was the poor commercial performance of the State enterprises. He had analysed the growth rate of capital budget and pointed out that it had been slower than that of the overall growth, and loans from the Central government constituted the biggest chunk in the capital receipts of the States.

Rajalakshmi had reviewed the growth and composition of the State tax revenue in Tamilnadu during the period 1960 to 95. The study had observed that 33

the total revenues had been increasing steadily year after year during the study

period. The tax revenues had increased from Rs.44147 lakhs in 1975-76 to

Rs.412697 lakhs in 1990-91. The State’s own tax revenue had risen 75 percent;

and the share in the Central taxes had registered a 25 percent rise. The study had

revealed that the burden of the indirect taxes was much more than that of the

burden of direct taxes in Tamilnadu. The direct taxes namely taxes on income and

taxes on property and capital transactions had accounted for only 7.1 percent to

12.1 percent of the total tax receipts of the Tamilnadu government, whereas in

respect of the indirect taxes that is, taxes on commodities and services the net

proceeds had varied between 87.9 percent and 92.1 percent of the tax revenue;

and the sales tax continued to be the single largest source of revenue. The study

had revealed that the share of the interest and profits and dividends had increased in the total non-tax revenues during the period 1980 to 1995.

Jose Sebastian’s comparative study of the Southern States had revealed that one of the major factors, which determine the revenue performance of the tax system, is the efficiency of the administration and the enforcement of the tax laws.

Recent studies on the relative sales tax efforts of the States have shown that among the four Southern States, Andhra Pradesh, Karnataka, and Tamilnadu have been more efficient than the Kerala state. The findings of an earlier study that the relative sales tax effort of Kerala had been less despite a tremendous increase in its potential had further strengthened Jose Sebastian’s findings. 34

According to Kavitha Rao analysed the another reveals that the attempt here has been to provide some dimension to the extent of gain loss to states from the introduction of VAT the estimates indicate that the impact. Various considerably across states while some states seem to gain consistently from such a transition in some other states the gains could convert to loses depending on the assumption on increments to value added. The estimates and based on the assumption of all states adopting uniform VAT design.

One way for the states to avoid incurring losses with introduction of VAT would be through variations in the rates and or structure of tax variations in the tax structure however are being perceived as hindrance to formation of a common national market clearly to costs of imposing lassuring such a uniformity would then have to be bore by the union government. The Union governments assurance for compensation would trigger off a negative response from the states where non collection is rewarded any methodology to distinguish between genuine losses and stack in collections would be heavily contested especially since the data bases for state are rather poor.

According to Amares examines the moral of the story is that the services tax is best levied on a comprehensive base comprising goods and services under a system of VAT, at the national level. Reviewing the situation in the US, where the sales tax is levied by the states and also municipalities Charles Mclurejk the noted 35

fiscal economist concludes. In a world of cross-border shopping, remote commerce in tangible products, and electronic commerce in however, in a federal country where the states derive the bulk of the revenue from the sales tax. It would grievously affect their fiscal autonomy if the power of sales taxation were to be taken away It would weaken tax federal fabric of the polity which a hetrogeneous country like India can ill-afford even McLure recognises the reality when the says, of course it is too late in the day to be changing tax assignments.

Thus we should attempt to make the state sales and use tax operate satisfactorily

(Mclure 1999). Therefore ways must be exploerd to see how best the service tax can be integrated in both CEN VAT and the state VATs as and when they come to replace the sales taxes.

While recommending comprehensive taxation of service, the Rao committee had envisaged a scientific scheme of dual VAT where by the tax is levied both going down to the retail (or semi who leasale stage) and the taxes retained by the respective authorities as they accure to them. This is the system operating in Canada at present in some of the provinces. However this will involve major constitutional amendments one alternative would be to allow the states to levy tax on services which are ancillary on incidental to the supply of goods while getting those which are ancillary or incidental to production or manufacture of goods administered by the centre. Tax on services which have inter state ramification (like transport and telecommunications) would have to be 36

administered exclusively by the centre so that the kind of situation that a rose in the case that went up to the Kerala High Court does not arise. this was broadly the scheme suggested in the report on the reform of Domestic Traders Taxes drawn up by the MPFP in 1994. The ultimate aim should however be to move towards a

VAT regime on a comprehensive lease both at the centre and in the state under a dual VAT model as recommended by the Rao committee. However, the states should be left free to fix their rate of tax subject to a floor.

The way the policies are being formulated there appears to be no clear conceptual frame work. It is difficult to see how a tax can be administered which does not provide any threshold where as expert panels invariably recommended an exemption limit (Rs.10 lakhs recommended by the Rao Committee) and the tax net is being widened piecemeal while one cannot except the ideal to be adopted in a pune form it should be remembered that once the system gets on the wrong track, reversing the directions will be very difficult.

According to N. J. Javier explained the consultation direct taxes makes a strong and cogent case for autonomy of tax administration transformation it into a tax payer service department and abolition of fiscal into a tax fiscal incentives it is argued in this article that government’s record with regard to genuine autonomy of even commercial and industrial public sector enterprises is dismal one is bound to have serious doubts about government granting autonomy to CBDT. Even if 37

one leaves this aspect leaves this aspect a side, for the order of transformation

required empirical evidence. Suggests that it is not possible without strong factors

positive motivation or regulatory or other external pressures for transformation to

succeed it should make business sense. CPDT beyond making a virtuous case for

good conduct does not provide transformation dynamic either for individuals or

for CBDT to become a service activity as regards incentives CBDT should have

appreciated how deep rooted these are it has herbed too much on the distortion

effect and administrative hassles of incentives, benefit of incentives is too small

part circularly for house holds that save a high proportion of their income to is an important growth driver, it might be advisable to reconsider incentives for infrastructure and housing, in part because government in the foreseeable future may not be able to create policy environment that makes infrastructure economically viable and reduced cost of housing.

Although CPDT has perhaps with a view to pressurize government, expressed its concern that the efficacy of its recommendations is likely to be vitiated. If individual components are selectively accepted or rejected, success of

the reform efforts depend on their implementation in an integrated manner it will

have to offer may be behind the scenes some options with analysis of pluses and

minuses so that government can take a more balanced decision one of the most

important things missing from the report is any discussion of the government’s

credibility with regards to consistency of tax policy unless theme are some 38

mechanisms installed to ensure that governments do not tinker with tax structure depending upon the exigencies of revenue whatever decision will be taken bearing in mind many of the points by CPDT. It can not change it in a short time CPDT expects much stronger commitments and courage from the Indian governments than demonstrated by them in the recent past, probability of a high ratio of recommendations trashed. (Mauled) to these accepted is real. Till then the field is open for commendations having easy access to the media to show how ill- educated the expert group has been. One hopes that before government takes a final decision some serious minded commentators will critically examine the relevant issues.

CHAPTER III

CENTRAL EXCISE DUTIES IN INDIA

CHAPTER III

CENTRAL EXCISE DUTIES IN INDIA

The Central Excise duties are the largest source of revenue for the country.

Approximately 30% of the total revenue receipts are collected from Central

Excise duties. The levy and collection of Central Excise duties is under the authority of Central Excise Act, 1944. Section 3 (also known as the charging section) provides for the levy and collection of Central Excise duty.

The rate and amount of duty as well as the items on which duties are levied are those which are indicated in the Central Excise Tariff Act, 1985 and the schedule therein. The taxable event for Central Excise duty as per Section 3 of

CEA (Central Excise Act) 1944 is the manufacture or production of goods.

It means that Central Excise duty is leviable as soon as the goods are manufactured or produced. The items on which the excise duty is levied are known as excisable goods.

For the purpose of administrative convenience the actual collection of duty is done at the time of removal of goods from the place of manufacture of production. The rate of duty, which is levied, is the rate of duty applicable to such goods or which is in force at the time of actual removal. 40

Additional Excise Duty (AED): - This duty is levied on certain specified

goods in terms of various other statutes such as:

• Additional Duties of Excise (Goods of special importance) ACT, 1957

• Additional Duties of Excise (Textiles and Textile Articles) ACT, 1978

Central Excise Control

Following types of control have been proscribed for the levy and collection of Central Excise duties: -

• Physical Control

• Self Removal Scheme

Physical Control

Under the physical control system the manufactured goods are removed form the place of manufacture under the supervision of the Central Excise officers on after the assessment and payment of appropriate Central Excise duty. The goods are removed on an invoice indicating the duty paid which is countersigned by the Central Excise officer. The physical control system is applicable on in respect of manufacturers of cigarettes and matches.

Self-Removal Procedure

Under the Self-Removal Procedure (SRP) the goods are removed on payment of duty and against invoices signed by the assess. The actual assessment of the duty paid is done afterwards by the Central Excise officers on monthly returns filed by the assess.

In this case much more responsibility has been vested on the assesses to pay the duty correctly and remove the goods only on payment of the duty assessed by him. However, in this system the assesses is required to file a declaration (Rule

173B of CER 1944) giving classification of the goods, tariff heading, rate of duty and the exemption notification availed of if any.

He is also required to sell the goods against an invoice at prices, which are in accordance with Section 4 of the Central Excise Act 1944. The Self-Removal

Procedure also provides that the assesses should maintain records of production, removals, raw material, MODVAT accounts, accounts of PLA.

Monthly returns are scrutinised by the Central Excise Officers so as to ensure proper payment of duty on the goods manufactured and removed.

In the record based control system of assessment more trust is given to the assesses. The records based control is applicable to 20 commodities at present vide Notification No 24/86 dated 10.02.86. Reliance is placed on the assessee’s 42

books of account, invoices, etc., which are generally accepted for purpose of assessment.

Compounded Levy Scheme

The other system of assessment and Levy is known as the Compounded levy scheme. The basic scheme provides for payment of duty on the basis of the estimated production of the commodity by the assesses over a specific period of time, the basis of which may be the number and the types of machines used for manufacture.

The advantage of this scheme is that it frees the manufacturer from observing day to day Central Excise formalities and for maintenance of detailed accounts.

The self removal scheme also has provisions for bringing duty paid goods back to the factory for purposes of repair, reconditioning etc., within a period of one year and for claiming refund of the duty originally paid (Rule 173H and

173L)

The important aspect of Central Excise law is the crucial date for determination of rate of duty. This is because the rates of duty keep changing due to issue of various exemptions and particularly so when the budget is presented to

Parliament normally at the end of February. 43

For an excise officer or assesses to calculate and determine the correctness of duty paid the crucial date is most important.

The effective date which is applicable to a particular commodity will be the rate in force on the date on which the goods are actually removed from the factory in terms of Rule 9A of the CER-1944. That is, the date on which the goods leave the factory is the crucial date for determining the rate of duty.

Types of Excise Duties in India

The Excise duties are of following types

Duties Under Central Excise Act - Basic duty is levied under Central

Excise Act Basic Excise Duty to be termed as CENVAT - Basic excise duty (also termed as Cenvat as per section 2A of CEA added w.e.f. 12-5-2000) is levied at the rates specified in First Schedule to Central Excise Tariff Act, read with exemption notification, if any. – [section 3(1)(a) of CEA].

Basic excise duty is levied u/s 3(1) of Central Excise Act. The section is termed as ‘charging section’. The duty rate is generally 10.30% w.e.f. 27-2-

2010including education and SAH cess [It was 8% w.e.f. 24-2-2009 i.e. Total

8.24%. Still earlier, it was 14% i.e. Total 14.42%].

Education cess is payable @ 2% of the basic duty and Secondary and High

Education Cess is 1% of basic excise duty. 44

Education Cess and Sah Education Cess on Excise Duty - If excise duty

rate is 8%, education cess will be 0.16% and SAH Education cess will be 0.08%.

A provisions of Central Excise Act, including those relating to refunds, exemptions and penalties will apply to education cess and SAH cess.

Excise Duty in Case of Clearances by EOU – The EOU units are expected

to export all their production. However, if they clear their final product in DTA

(domestic tariff area), the rate of excise duty will be equal to customs duty on like

article if imported in India. [proviso to section 3(1)]. Note that even if rate of

customs duty is considered for payment of duty, actually the duty paid by them is

Central Excise Duty. The rate of customs duty is taken only as a measure. The

EOU unit can sale part of their final products in India at 50% of customs duty or

normal excise duty in certain cases.

National Calamity Contingent Duty – A ‘National Calamity Contingent

Duty’ (NCCD) has been imposed vide section 136 of Finance Act, 2001 [clause

129 of Finance Bill, 2001, w.e.f. 1.3.2001]. This duty is imposed on pan masala,

chewing tobacco and cigarettes. It varies from 10% to 45%. - - NCCD of 1% was

imposed on PFY, motor cars, multi utility vehicles and two wheelers and NCCD of Rs 50 per ton was imposed on domestic crude oil, vide section 169 of Finance

Act, 2003. 45

Duties Under Other Acts - Some duties and cesses are levied on manufactured products under other Acts. The administrative machinery of central excise is used to collect those taxes. Provisions of Central Excise Act and Rules have been made applicable for levy and collection of these duties / cesses.

Duty on Medical and Toilet Preparations - A duty of excise is imposed on medical preparations under Medical and Toilet Preparations (Excise Duties) Act,

1955.

Additional Duty on Mineral Products - Additional duty on mineral products (like motor spirit, kerosene, diesel and furnace oil) is payable under

Mineral Products (Additional Duties of Excise and Customs) Act, 1958.

CESS - A cess has been imposed on certain products.

Goods

The word “goods” has not been defined under the Central Excise Act.

Article 366(12) of the Constitution defines ‘goods’ as ‘goods includes all materials, commodities and articles’. Sale of Goods Act defines that “Goods” means every kind of movable property other than actionable claims and money; and includes stocks and shares, growing crops, grass and things attached to or forming part of the land which are agreed to be severed before sale or under the contract of sale. These definitions are quite wide for purpose of Central Excise

Act. However, case law on this is well developed and as per judicial 46

interpretation, the word “goods”, for purpose of levy of Excise duty, must satisfy two requirements i.e. (a) they must be movable and (b) they must be marketable.

Goods must be movable - They must be movable. Thus, immovable property or property attached to earth is not ‘goods’ and hence duty cannot be levied on it - Kailash Oil Cake Industries v. CCE - 1993 (63) ELT 693 (CEGAT).

Duty cannot be levied on immovable property - National Radio v. CCE - 1995

(76) 436 (CEGAT).

Goods must be Marketable - The item must be such that it is capable of being bought or sold. This is the test of ‘Marketability’. The goods must be known in the market. Unless this test of marketability is satisfied, duty cannot be levied as these will not be goods. [This is also termed as 'Vendibility Test']. This view, expressed in UOI v. Delhi Cloth Mills - AIR 1963 SC 791 = 1963 (Suppl.) (1)

SCR 586 = 1977 (1) ELT (J 177) (SC 5 member Constitution bench), has been consistently followed by Supreme Court in subsequent cases and by all High

Courts. It was held that to become ‘goods’ an article must be something which can ordinarily come to market to be bought and sold.

In case of DCM, they were manufacturing ‘Vanaspati’. Raw material was groundnut and til oil. During manufacture, ‘refined oil’ got produced at intermediate stage which was consumed within factory for manufacture of

‘Vanaspati’. Excise department demanded duty on this ‘refined oil’. [During the 47

relevant period, there was no excise duty on ‘Vanaspati’, but ‘refined oil’ was excisable.] This stand was negated by Supreme Court. It was observed that process of deodorisation was not carried out on the ‘refined oil’. In the market, the product is not known as ‘refined oil’ unless it is deodorized. Applying this

‘marketability test’, it was held that the ‘refined oil’ which is not ‘deodorized’ is not ‘goods’. [Deodorisation was carried out in the manufacturing process after hydrogenation only.]

Actual sale is not necessary - Marketability is an essential ingredient in order to be dutiable. Marketability is a decisive test for dutiability. It only means

‘saleable’ or ‘suitable for sale’. It need not in fact be marketed. The article should be capable of being sold to consumers, as it is - without any thing more.

Mere mention in Tariff is not enough - Mere mention of an item in tariff is not enough. Simply because a certain article falls within the schedule (of Central

Excise Tariff), it would not be dutiable if the article is not ‘goods’ known to the market.

Duty leviable on captive consumption - Since excise is a duty on manufacture, duty is leviable even if goods are consumed within the factory and not sold. However, the goods must be marketable in the condition in which they are manufactured and further consumed within the factory. 48

However, mere fact that goods have been captively consumed (i.e.

Consumed within the factory) is no evidence of its marketability (or non-

marketability). Even transient items can be ‘goods’ provided that the article is

capable of being marketed even during that short period. Goods which are

unstable can be theoretically marketable if there was market for such transient article - but one has to take a practical view on the basis of available evidence.

Every thing that is sold is not 'marketable' - 'Marketability' implies regular market for a product. Occasional, stray or distress sales do not mean that the product is 'marketable'.

Marketability to be decided on the basis of the state in which it is produced

- The commodity which is sought to be made liable to excise duty must be a commodity that is marketable as it is, and not a commodity that may, by further processing, be made marketable

Excisable Goods

Other essential requirement is that the goods must be ‘excisable’. Section

2(d) of Central Excise Act defines Excisable Goods as ‘Goods specified in the

Schedule to Central Excise Tariff Act, 1985 as being subject to a duty of excise and includes salt’. ‘Goods’ includes any article, material or substance which is capable of being bought and sold for a consideration and such goods shall be deemed to be marketable [Explanation to section 2(d) of CEA]. Thus, unless the 49

item is specified in the Central Excise Tariff Act as subject to duty, no duty is

leviable.

Goods ‘excisable’ even if exempt from duty - ‘Excisable goods’ do not

become non-excisable goods merely because they are exempt from duty by an

exemption notification.

Goods not included in CETA are ‘non-excisable goods’ - Some goods like wheat, rice, cut flowers, horses, soya beans etc. Are not mentioned in Central

Excise Tariff at all and hence they are not ‘excisable goods’, though they may be

‘goods’. These are ‘non-excisable goods’. Similarly, ‘waste and scrap’ will be

‘excisable goods’ only if specifically mentioned in CETA

Mere mention in CETA not enough - Mere mention in the Excise Tariff will not attract duty, unless these are ‘goods’ i.e. Unless test of marketability is satisfied. Further, the ‘excisable goods’ are liable to duty only if they are

‘manufactured’ or ‘produced’.

Goods excisable even if duty is nil – If by virtue of an exemption notification, the rate of duty is reduced to NIL, the goods specified in the tariff would still be regarded as excisable goods on which NIL rate of duty was payable.

Goods removed under bond are not 'exempted goods' - Under Central

Excise, the term 'exempted goods' has specific meaning. 'Exempted goods' means those exempted under notification issued u/s 5A of CEA. Goods removed under 50

bond without payment of duty are neither goods 'exempt from duty' nor 'goods chargeable to Nil rate of duty'

Goods manufactured in SEZ are ‘excluded excisable goods’ – As per section 3(1) of CE Act, as made effective w.e.f. 15-8-2003, duty is leviable on all excisable goods (except goods manufactured or produced in Special Economic

Zone). Thus, goods manufactured or produced in SEZ are ‘excisable goods’ but no duty is leviable, as charging section 3(1) excludes those goods. Thus, the goods manufactured in SEZ are not ‘exempted goods’. They can be termed as ‘excluded excisable goods’.

Meaning of 'Goods which have suffered duty' - In some cases, the wording used is 'goods which have suffered duty / tax'. In such case, it has been held that actual payment of tax / duty is necessary. Goods cannot be said to have 'suffered tax' when no tax is paid.

Manufactured or Produced Goods

Excise is a duty on “manufacture or production” of goods. Excise is mainly levied on goods manufactured or produced. Thus, definition of ‘manufactured’ or

‘produced’ is important because excise is a duty on manufacture and if there is no manufacture, there is no liability of payment of Central Excise duty.

Difference between Sales Tax and Excise - Central Excise duty has to be distinguished from Sales Tax. The Sales Tax is a tax on sales and hence can be 51

imposed only when there is a sale. On the other hand, excise duty is a duty on manufacture and the duty liability is fastened immediately after goods are manufactured ; whether these are sold or not is immaterial. For example, if a

Company manufactures a machine or fabricates some furniture within the factory for its own use, there will be no sales tax on the machine or furniture manufactured as it is not sold. However, the machine or furniture will be liable to excise duty as it has been manufactured. However, for administrative convenience, the payment of duty may be deferred till removal of goods from the factory.

Produced - The word produced is used to cover items like tobacco, tea, coal, ores etc. Which are produced, but no manufacturing process may be carried out. Every ‘manufacture’ can be characterised as ‘production’, but every

‘production’ need not amount to manufacture. When the word ‘produced’ or

‘production’ is used in juxtaposition with the word ‘manufacture’, it takes in bringing into existence new goods by a process which may or may not amount to manufacture. It also takes in all by-products, intermediate products and residual products, which emerge in the course of manufacture of goods. Thus, waste, scrap and by-products are dutiable even if they are not manufactured, as they are

‘produced’.

Thus, the word 'produced' covers (a) Items like coffee, tea, tobacco, coal, dairy products, ores etc. Which are 'produced' (b) The word 'produced' can also 52

cover live products like horse, fish, flowers etc. Which are 'produced' (c) By-

products, scrap etc. Which are not really 'manufactured' but they do get 'produced'

(d) It will obviously cover goods 'manufactured'.

Manufacture - Section 2(f) of Central Excise Act merely states that

“manufacture” includes any process - (i) incidental or ancillary to the completion

of manufactured product or (ii) which is specified in relation to any goods in the

Section or Chapter notes of the Schedule to the Central Excise Tariff Act, 1985 as

amounting to manufacture, or (iii) which, in relation to goods specified in third

schedule to the CEA, involves packing or repacking of such goods in a unit container or labelling or re-labelling of containers or declaration or alteration of retail sale price or any other treatment to render the product marketable to consumer. [clauses (ii) and (iii) are called deemed manufacture]. - - Thus, definition of ‘manufacture’ is inclusive and not exhaustive. However, there is ample case law on this issue. ‘Manufacture’ means : (a) Manufacture as specified in various Court decisions i.e. New and identifiable product must emerge or (b)

Deemed Manufacture.

‘Manufacture’ as defined by Courts, takes place only when the process results in a commercially different article or commodity. Following would be instances when ‘manufacture’ has taken place (a) manufacture of table from wood

(b) conversion of pulp into base paper (c) conversion of sugarcane to sugar. 53

Deemed Manufacture – Deemed manufacture is of two types – (a) CETA specifies some processes as ‘amounting to manufacture’. If any of these processes are carried out, goods will be said to be manufactured, even if as per Court decisions, the process may not amount to ‘manufacture’ [section 2(f)(ii)] (b) In respect of goods specified in third schedule to Central Excise Act, repacking, re- labelling, putting or altering retail sale price etc. Will be ‘manufacture’. The goods included in Third Schedule of Central Excise Act are same as those on which excise duty is payable u/s 4A on basis of MRP printed on the package.

[section 2(f)(iii) w.e.f. 14-5-2003] - - These provisions are discussed later in this chapter.

Deemed manufacture - Section 2(f), which defines ‘Manufacture’ has two deeming provisions. Deemed manufacture is of two types – (a) CETA specifies some processes as ‘amounting to manufacture’. If any of these processes are carried out, goods will be said to be manufactured, even if as per Court decisions, the process may not amount to ‘manufacture’ [section 2(f)(ii)] (b) In respect of goods specified in third schedule to Central Excise Act, repacking, re-labelling, putting or altering retail sale price etc. Will be ‘manufacture’. The goods included in Third Schedule of Central Excise Act are same as those on which excise duty is payable u/s 4A on basis of MRP printed on the package. [section 2(f)(iii) w.e.f.

14-5-2003]. 54

Thus, the process may not amount to manufacture as per principles evolved by Courts, but these will be liable to excise duty if it is defined as amounting to manufacture under CETA, or if the product is included in third schedule to Act and any of specified process (like re-packing, re-labelling, alteration of retail sale price etc.) Are carried out. - - This is called 'deeming provision' or a 'legal fiction'.

E.g. Process like labelling, re-labelling, re-packing is not 'manufacture' as no new product emerges. However, it will be 'deemed manufacture' and duty will be payable if the process is specified in Central Excise Tariff as 'amounting to manufacture' in relation to any goods. This amounts to charging excise duty on product which is not really manufactured as defined by Courts.

Both repacking and labelling required and product should be made marketable – In many ‘deemed manufacture’ provisions, the wording used is

‘labelling or re-labelling of containers and repacking from bulk packs to retail packs or the adoption of any other treatment to render the products marketable to the consumer’. Since the word used is ‘and’, it can be argued that mere labelling without re-packing is not ‘deemed manufacture’, as activities of labelling/re- labelling and re-packing in small packs are inter-dependent and not mutually exclusive.

Mere re-packing is not manufacture – The words used in many ‘deeming provisions are ‘repacking from bulk packs to small packs’. Thus, mere re-packing is not ‘deemed manufacture’. If goods returned are re-packed, such re-packing is 55

from one retail pack to another retail pack and hence cannot be termed as

‘manufacture’. - - Similarly, if goods returned for rectification are re-packed, it is not ‘any other treatment to render the product marketable’, as the product was already marketable.

When 'repacking and labelling'’ will amount to manufacture - In some cases, goods are bought in bulk and sold in retail. This will not amount to

'repacking'. Generally, the expression 'packing' is considered as a package containing pre-packed commodity and quantity of the product contained therein is also pre-determined. - . - Activity of simply transferring material from one container to another may not come under the description 'repacking and labelling'

Deemed manufacture in case of goods covered under MRP provisions - In respect of goods specified in third schedule to Central Excise Act, any process which involves packing or repacking of such goods in a unit container or labelling or re-labelling of containers including the declaration or alteration of retail sale price on the container or adoption of any other treatment on the goods to render the product marketable to consumer will be ‘manufacture’. [section 2(f)(iii) effective from 14-5-2003].

The goods included in Third Schedule of Central Excise Act are same as those on which excise duty is payable u/s 4A, i.e. On basis of MRP printed on the package. Thus, in case of goods on which duty is payable on basis of MRP, if any 56

of the process as specified (like labelling, re-labelling, repacking in unit container, alteration of MRP etc.), it will be ‘manufacture’ and duty will become payable. - -

Some times, a manufacturer of goods (which are covered under MRP provisions) clears goods from factory in bulk without putting MRP at the time of clearance.

Duty is paid on basis of section 4. The goods are packed and labeled and MRP is put either by the buyer who buys the goods or in some godown or depot or C&F

Agent of the manufacturer. Now, the process carried out by the buyer or by C&F

Agent or at such depot or godown of manufacturer will be ‘manufacture’. Such depot/buyer/C&F Agent/godown will have to be registered under Central Excise as ‘manufacturer’. It will have to pay duty on the basis of MRP, but will get

Cenvat credit of duty paid at the time of clearance from the factory.

Though the section provides that alteration of Retail Sale Price shall be

‘deemed manufacture’, rule 23(7) of Standards of Weights and Measures

(Packaged Commodities) Rules, 1997 reads as follows – ‘The manufacturer/packer shall not alter the price on wrapper once printed and used for packing’. - - Thus, in any case, alteration of MRP printed on wrapper is not permissible.

Incidental or ancillary process - Section 2(f), which defines ‘Manufacture’ states that “manufacture” includes any process which is incidental or ancillary to the completion of manufactured product. Incidental means occasional or casual process. Ancillary means auxiliary, i.e. It is integral part of manufacturing. 57

Manufacture is not complete unless all ancillary and incidental processes are

complete. In border line cases, there can be ambiguity whether a particular

process is incidental or ancillary process. For instance, painting or polishing may

be essential process for manufacture of furniture. However, a machinery may be

said to be finished without painting. It has been held that quality checking is not a

process ancillary or incidental to manufacture, unless it is legally mandatory.

Manufacturer

The liability to pay duty is on ‘Manufacturer or producer’. Duty cannot be

recovered from his purchaser. Hence, Excise demands, if any, are always raised

on manufacturer and recovered from manufacturer. Hence, it is essential to decide who is to be termed as ‘Manufacturer’.

Who is the 'manufacturer' - The definition of ‘manufacture’ u/s 2(f) is not exhaustive. Hence, the word ‘Manufacturer’ has to be understood in its natural meaning, i.e. ‘Manufacturer’ is a person who actually manufactures or produces excisable goods, i.e. One who actually brings into existence new and identifiable product.

Person who transforms commodity into another commodity having a distinct name and character is the manufacturer.

Central Excise Tariff Act (CETA)

There are thousands of varieties of manufactured goods and all goods cannot carry the same rate or amount of duty. It is also not possible to identify all products individually. It is, therefore, necessary to identify the numerous products through groups and sub-groups and then to decide a rate of duty on each group/sub-group. This is called ‘Classification’ of a product, which means determination of heading or sub-heading under which the particular product will be covered.

Excise is a duty on excisable goods manufactured or produced in India.

Unless all these factors are in existence, there can be no duty liability. The liability of payment of excise is on the Manufacturer. Once the liability of payment is established, the next question is what is the amount of duty payable.

The two step process is (a) Correctly classify the goods (b) Find its assessable value.

The Central Excise Tariff Act, 1985 (CETA) classifies all the goods under

96 chapters (chapter 77 is blank) and specific code is assigned to each item. There are over 1,000 tariff headings and 2,000 sub-headings. This classification forms basis for classifying the goods under particular Chapter head and Sub-head to prescribe duty to be charged on that particular product. Salient features of the tariff are as follows. 59

As international trade increased, need was felt to have universal standard system of classification of goods to facilitate trade flow and analysis of trade statistics. Hence, International convention of Harmonised System of

Nomenclature (HSN), called Harmonised Commodity Description and Coding

System, was developed by World Customs Organisation (WCO) (That time called as Customs Cooperation Council). Indian Customs adopted this nomenclature w.e.f. 28.2.1986.

This is an International Nomenclature standard adopted by most of the

Countries to ensure uniformity in classification in International Trade. HSN is a multi purpose 8 digit nomenclature classifying goods in 5019 groups of goods. It contains 241 headings at 4 digit level and 5019 at 6 digit level. Thus, Customs

Tariff uses 8 digit nomenclature. Central Excise Tariff is also of 8 digit w.e.f. 28-

2-2005.

WCO in its various committees discusses classification of individual products and gives classification opinion on them. Though their opinion is not binding in legal sense, it provides a useful guideline for classifying goods.

Customs Tariff is fully aligned with HSN. Central Excise Tariff (CETA) is also based on HSN. Though CETA generally follows HSN pattern, it is not a copy of HSN. CE Tariff is aligned upto four digit level and at six digit level, proper enumeration and sub-division of products is done in view of the goods that enter 60

the trade, our experience with the concept of manufacture and the level of growth

of the indigenous industry.

CETA contains two schedules - CETA consists of two schedules - the

first schedule gives basic excise duties (i.e. Cenvat duty) leviable on various

products, while second schedule gives list of items on which special excise duty is

payable. Second schedule contains only few items. It has been clarified that the

tariff headings given in second schedule will be interpreted in the same way as

those in first schedule. Items included in second schedule are already covered and

included in first schedule. Hence, our discussions in this chapter are in respect of first schedule only.

Sections and Chapters of CEA – Central Excise Tariff is divided in 20 sections. (21 sections in case of Customs Tariff). A ‘section’ is a grouping of a number of Chapters which codify a particular class of goods. Each of the sections is related to a broader class of goods e.g. Section I is ‘Animal Products’, Section

VII is ‘Plastics and Articles thereof’, Section XI is ‘Textile and Textile Articles’,

Section XVII is ‘Vehicles, Aircrafts, Vessels and associated transport equipment, etc. Section Notes are given at the beginning of each Section, which govern entries in that Section. These notes are applicable to all Chapters in that section.

Section divided in Chapters - Each of the sections is divided into various

Chapters and each Chapter contains goods of one class. For example, Section XI 61

relates to Textile and Textile Articles and within that Section, Chapter 50 is Silk,

Chapter 51 is Wool, Chapter 52 is Cotton, Chapter 53 is other vegetable textile fabrics, Chapter 61 is Articles of Apparel and so on.

There are 96 chapters out of which chapter 77 is blank. In Customs Tariff, there are 99 chapters out of which only one i.e. Chapter 77 is blank, which is kept reserved for future use.

Chapter Notes - Chapter Notes are given at the beginning of each Chapter, which govern entries in that Chapter.

Groups and Sub-groups within the Chapter - Each chapter is further divided into various headings depending on different types of goods belonging to same class of products. For instance, Chapter 50 relating to Silk is further divided into 5 headings. 50.01 relates to Silk worm cocoons, 50.02 relates to raw silk,

50.03 relates to silk waste, 50.04 relates to silk yarn and 50.05 relates to woven fabric of silk. The headings are sometimes divided into further sub-headings. For example 5004.11 means silk yarn containing 85% or more by weight of silk or silk waste, 5004.19 means containing less than 85% by weight of silk or silk waste.

Grouping of Goods - The tariff is designed to group all goods relating to same industry and all the goods obtained from the same raw material under one

Chapter in a progressive manner as far as possible. So far as practicable, Goods 62

are classified beginning with raw materials and ending with finished products within the same chapter. Pattern of arrangement is in following sequence –

Natural products, raw materials, semi finished goods and fully manufactured goods / article / machinery etc. - Chapter 4 Para 5 of CBE&C’s Customs Manual,

2001.

Eight Digit Classification – All goods are classified using 8 digits system.

In above example, first two digits i.e. ‘50’ related to the Chapter Number, next two digits e.g. 01 or 02 relate to heading of the goods in that chapter> Next two 2 digits indicate sub-heading and last two digits indicate tariff heading. Thus, a 4 digit code is called as ‘heading’ and 6 digit code is called as ‘sub-heading’ and 8 digit code is called 'tariff entry'. - - In case of Customs, 8 digit classification code has been adopted w.e.f. 1-2-2003. Excise adopted 8 digit classification w.e.f. 28-

2-2005.

The same classification will be used by DGFT (Director General of

Foreign Trade) and DGCIS (Director General of Commercial Intelligence &

Statistics). The additional 2 digits are to facilitate and provide flexibility in international trade. The common classification will reduce transaction costs and reduce diversion of classification among different agencies.

Coding of Single, Double, triple and quadruple dashes - Single dash (-) at the beginning of description indicates a group, while two dashes (- -) at the beginning indicate a sub-group. The single dash (-) indicates sub-classification of 63

article covered by the heading, while double dash (- - ) is the sub-classification of the preceding article which has single dash (-) i.e. it is a sub-sub-classification.

Triple dash (- - -) and four dashed (- - - -) are used for further classification

Special Provisions in Customs Tariff – Though most of goods are classified as per above system, special classification is used in certain cases - *

All goods imported under ‘project imports’ - 98.01 * All laboratory chemicals in packs less than 500 gms or 500 ml - 98.02 * All baggage of passengers or member of crew - 98.03 * Goods for personal use imported by post or air - 98.04 * Stores on board of vessel or aircraft – 98.05. Thus, those goods will be classified in these headings, irrespective of actual classification as per the Customs Tariff.

Rules for Interpretation of CETA

Rules for Interpretation of Schedule are given in the Tariff itself. These are termed as ‘General Interpretative Rules’ (GIR).

Abbreviation ‘%’ in Column 4 indicates that duty is charged ‘ad valorem’ on the value of goods as calculated in section 4 of Excise Act.

Rule 1 of Rules for interpretation of the Schedule states that classification shall be determined according to the terms of the headings and any relative section or chapter notes and, provided such headings or Notes do not otherwise require, according to other provisions of the rules. It has been held that these rules 64

are required to be applied only if classification is not possible on basis of tariff

entry read with Chapter notes and section notes.

Use for Interpreting Import Policy – Rule of Interpretation cannot be

used to interpret provisions of import policy.

Rules to be Applied Sequentially – The Rules are to be applied

sequentially. - Chapter 4 Para 7 of CBE & C’s Customs Manual, 2001.

Classification is to be first tested in light of Rule 1. Only when it is not possible to

resolve the issue by applying this rule, recourse is taken to Rules 2, 3 and 4 in

seriatim. - Chapter 3 Part II Para 2.1 of CBE&C’s Customs Manual, 2001.

These rules are briefly explained below : Titles are for reference - The titles of sections and chapters are provided

for use of reference only, and have no legal importance for purposes of

classification. (Rule 1)

Section Notes and Chapter Notes have overriding effect - Classification

is to be determined only on the basis of description of the heading, read with

relevant section or chapter notes. Since these notes are part of the Act itself, these

have full statutory (legal) backing. Tribunal has (very rightly) held that coverage

of respective headings has to be determined in the light of respective section notes

and chapter notes. In this sense, Section Notes and Chapter Notes have an overriding force over the respective headings and sub-headings. 65

If the description read with section or chapter notes is not enough to correctly classify the goods, following further rules have been provided :

Classification of Incomplete Goods - Any reference to complete goods also includes incomplete or un-finished goods, if such incomplete or un-finished goods have the essential characteristic of finished goods. [Rule 2(a)]. Some illustrations in HSN Explanatory notes are - * a machine or apparatus normally incorporating an electric motor is classified in the same heading even if presented without motor. * Passenger coach not fitted with seats will still be a passenger coach * Motor vehicle not yet fitted with wheels, battery or tyres * Bicycles without saddles and tyres * Photographic camera without an optical element *

Electric supply metre without its totalling device.

Un-assembled finished goods - Rule 2(a) further provides that the heading will also include finished goods removed un-assembled or disassembled i.e. in

SKD or CKD packs. [Rule 2(a)]. This provision is essential because some times, goods cannot be despatched in fully assembled condition. These are despatched in

SKD (semi knocked down) or CKD (completely knocked down) condition and assembled at site. As we saw in previous chapter, in such cases, assembly at site does not amount to manufacture. The goods are, in fact, fully manufactured in the factory itself. These are sent in SKD or CKD condition only for convenience of transport. 66

Classification of Mixture or Combinations - Any reference in heading to

material or substance will also include the reference to mixture or combination of

that material or substance with other materials or substance e.g. ‘Article of Gold’

will include an Article which is made partly of Gold. Reference to goods of a

given material or substance shall also include reference to goods consisting

wholly or partly of such material or substance. [Rule 2(b)]. In Himson Textile

Engg v. CCE 1997(95) ELT 519 (CEGAT), it was held that if rule 2(a) covers the

goods in dispute, resort cannot be had to rule 2(b). In Union Carbide v. CC

1995(79) ELT 521 (CEGAT), it was held that interpretative rule 2(b) does not

deal with composite goods made of different materials and the relevant rule for

the same is rule 3(b).

Rule in case of Conflict between various headings - While applying the aforesaid rules, some conflict may arise e.g., (a) a mixture or combination containing more than one material may be classifiable under more than one headings by applying rule 2(b). If it contains two items A and B, one classification may be on the basis of ‘A’ and other on the basis of ‘B’, (b) There may be two descriptions which may both seem possible. In such cases, following rules apply.

Specific Description preferable over general heading - The heading which provides most specific description shall be preferred to heading providing a general description. [Rule 3(a)]. 67

When an article has, by all standards, a reasonable claim to be classified

under an enumerated item in the tariff schedule, it will be against the very

principle to deny it the parentage and consign it to be an orphanage of the

residuary clause.

Classification as per Essential Character - If Mixture and Composite of

goods consisting of different materials cannot be classified based on above rule, it

should be classified as if they consisted of the material or component which gives

it their essential character [Rule 3(b)] e.g. if a set consists of drawing instruments

(90.17), pencil (96.09) and pencil sharpener (82.14), put up in a leather case

(4201.90); the set will be classifiable under 90.17 i.e. drawing instrument.

Some times, a floppy diskette is attached to a book. Such diskette is

supplementary or accessory to the book, which either explains contents of book or

supplies some freeware or some tutorials. On the other hand, a manual is supplied

along-with software. The manual gives instructions as to how to use the software.

In the former case, the 'essential character' of the goods is 'book', while in later case, the 'essential character' is 'software'. Hence, the goods will be classified according to 'essential character' as per rule 3(b). - CBE&C circular No. 528/10

6/93-Cus (TU) dated 24-8-1993.

If both are specific - Later the better - If two or more headings seem equally possible and the dispute cannot be resolved by any of the aforesaid rules, 68

if both the headings appear equally specific, the heading which occurs last in numerical order is to be preferred (i.e. later the better). [rule 3(c)].

Akin Goods - Last Rule of classification - If the classification is not possible by any of the aforesaid rules, then it should be classified under the heading appropriate to goods to which they are most akin. This is only a last resort and a desperate remedy to resolve the dispute as the matter of classification cannot be kept hanging indefinitely [rule 4].

Goods can be compared at the same level only - Sub-Headings can be compared only at the same level [Rule 5]. This means that if one heading contains

5-6 sub-headings, these sub-headings can be compared with each other. However, sub-heading under one heading cannot be compared with sub-heading under a different heading. Thus, first heading has to be decided and then one of the sub- headings within that heading has to be selected

Principles of Classification

We have so far seen provisions of Classification as stipulated in Central

Excise Tariff Act. Though these provisions are quite elaborate, they are not always adequate to correctly classify a product. Some principles have been evolved by Courts and Tribunals over the years. 69

Trade Parlance Theory - Criteria for classifications are given in the CETA.

However, basic principle of classification, devised over one hundred twenty five years ago, as per this principle, a word in statute should be construed in its popular sense and not in the strict or technical sense. ‘Popular sense’ means that which people conversant with the subject matter with which the statute is dealing, would attribute to it. Legislature does not suppose our merchants to be naturalists, geologists or botanists.

PRINCIPLE APPLIES TO TARIFF ALSO - Headings and sub-headings in

Central Excise Tariff should be understood not in strict technical sense but in their popular sense, i.e. the meaning assigned to them by those trading and using the product.

Statutory definition overrides Trade parlance - The ‘trade parlance’ is relevant only when Statute does not define the words. If words are defined in the

Statute, ‘trade parlance’ is not relevant.

Technical term must be understood in technical sense only - If the legislature has adopted a technical term, then that technical term has to be understood in the technical sense and not on basis of market parlance.

DEPARTMENT IS OF SAME VIEW – In case of difficulty in understanding the scope of the headings / sub-headings, reference should be made to supplementary texts like the Explanatory Notes to HS. - - WCO (World 70

Customs Organisation) gives classification opinion on classification of individual

products. Such information, though not binding in nature, provide a useful

guideline for classifying the goods..

End Use relevant only in limited cases - Generally, a product can be used for various purposes and it is not correct to classify the goods on the basis of its final use.

End use to be considered if classification is related to function of goods - If the tariff demands, classification can and should be as per end use. Articles of

Plastic are classifiable under Chapter 39.26. However, a plastic article specially designed as automobile part will be classified as ‘Part of Motor Vehicle’ and not as ‘Article of Plastic’. If an article has alternate uses, its predominant use is highly relevant.

Summary of decisions - In the opinion of author, there cannot be any general and universal rule that end use can be considered or cannot be considered.

It depends on nature of goods, description used in tariff and other relevant factors.

It was observed that it cannot be said that in no case the end use or function is relevant for classification. (i.e. in suitable cases, end use can be considered).

Machinery independent even if it can be attached to another - A machinery can be independent even if it is connected to another machinery. Mere fact that a 71

machinery can be connected to another machinery does not change its character to accessory.

Condition at the time of import/clearance relevant - Condition of the material at the time of importing is a material factor for purpose of classification as to the head under which goods will be classified.

Exemption Notification/ Valuation principles cannot determine classification - Classification of a product is to be decided on basis of relevant heading and section and chapter notes. Classification cannot be decided on basis of exemption notification - CCE v. Roha Dyechem (P.) Ltd. - (1989) 22 ECC 140

- quoted with approval in CCE v. Gujarat State Fertilisers Co. Ltd. - (1996) 13

RLT 222 = (1996) 83 ELT 624 (CEGAT 3 member bench).

Other aspects of classification

Steps of classification - Following are the steps of classification.

(1) Refer the heading and sub-heading. Read corresponding Section Notes and Chapter Notes. If there is no ambiguity or confusion, the classification is final and you do not have to look to classification rules or trade practice or dictionary meaning.

(2) If meaning of word is not clear, refer to trade practice. If trade understanding of a product cannot be established, find technical or dictionary 72

meaning of the term used in the tariff. You may also refer to BIS or other standards, but trade parlance is most important.

(3) If goods are incomplete or un-finished, but classification of finished product is known, find if the un-finished item has essential characteristics of finished goods. If so, classify in same heading. Rule 2(a).

(4) If ambiguity persists, find out which heading is specific and which heading is more general. Prefer specific heading.- Rule 3(a).

(5) If problem is not resolved by Rule 3(a), find which material or component is giving ‘essential character’ to the goods in question. - Rule 3(b).

(6) If both are equally specific, find which comes last in the Tariff and take it - Rule 3(c).

(7) If you are unable to find any entry which matches the goods in question, find goods which are most akin. - Rule 4.

In case of mixtures or sets too, the procedure is more or less same, except that each ingredient of the mixture or set has to be seen in above sequence. As per rule 2(b), any reference to a material or substance includes a reference to mixtures or combinations of that material or substance with other material or substance. 73

Classification of Parts - Classification of parts is subject to notes in

Sections and Chapters. Question of classification of parts is relevant for parts of machinery, electrical equipment, vehicles, instruments, arms, furniture and toys.

Broadly, parts suitable solely for a particular machine generally fall in the same heading number in which main item falls. However, there are many exceptions.

Parts of General Use - Parts of general use are defined as (a) tube and pipe fittings, stranded wire, ropes, cables, chains, nails, screws, bolts, springs (other than clock springs) of base metal i.e. Iron and Steel, Copper, Aluminium, Tin,

Nickel, Lead, Zinc etc. or of plastic (b) Padlocks, locks; mountings and fittings suitable for furniture, doors, windows etc.; clasps, buckles, eyelets; sign-plates, name plates; frames of pictures; mirrors; of Iron and Steel, Copper, Aluminium,

Tin, Nickel, Lead, Zinc etc. or of plastic.

These parts are to be classified in their respective heading and not as part of the machine or equipment e.g. a bolt used in a vehicle will be classified as

‘bolt’ and not as ‘motor vehicle part’.

Part of part is part of whole - A part of part is part of whole e.g. tyre is a part of cycle. ‘Valve’ is a part of the tyre. Hence, ‘valve’ will be treated as part of

‘cycle’. 74

Ayurvedic, Unani, Homoeopathic medicines - Ayurvedic, unani, siddha and homoeopathic medicines prepared strictly as per formulae in authoritative texts are fully exempt from duty, if these are sold under the name as per text book.

CHAPTER IV

CENTRAL EXCISE COMMISSIONERATE – AN OVERVIEW

CHAPTER IV

CENTRAL EXCISE COMMISSIONERATE – AN OVERVIEW

4.1 INTRODUCTION

Excise duty is an indirect tax and levied on all excisable goods which are produced or manufactured in India. But power to impose excise duty on certain goods like alcoholic liquors, opium and narcotics is granted to State and such

excise is called state excise. The Act, Rules and rates for State excise are different

from each State. The Central Excise is levied uniformly all over India in

accordance with the provisions of Central Excise Act, 1944 which came into force

on and from February 28, 1944.

Central excise is a major source of revenue of the Central Government and

it is more than the amount of income tax. Before the enactment of Central Excise

Act, 1944 several Acts were used to levy and collect excise duty. In fact, there

were 16 such enactments. The manufacturers as well as the excise officers had

faced many problems to deal with all such enactments. With an aim to minimize

such problems all these Acts were consolidated into a single Act which was

known as Central Excises and Salt Act, 1944. This Act is still in force in another

name ‘Central Excise Act’.

4.2. CHIEF FEATURES OF CENTRAL EXCISE DUTY

(a) It is an indirect tax.

(b) Central excise duty is levied on all excisable goods produced or manufactured in India (except goods produced or manufactured in special economic zone).

(d) Such duty is levied and collected uniformly throughout India in

accordance with the provisions of a specific Act known as Central Excise Act,

1944.

(e) Taxable event of Central excise is manufacture or production i.e.

charge is fixed at the time of occurrence of manufacture or production.

(f) Though taxable event is manufacture or production, duty is payable

on the date of removal i.e. clearance from factory.

(g) Excise duty is payable by the manufacturer or producer of excisable

goods in certain cases.

Who is liable to pay Excise Duty? (a) Every manufacturer is liable to pay excise duty.

(b) Warehouse keeper is liable to pay excise duty if goods are cleared from

factory without payment of duty.

Manufacturing

The true test of excise is manufacturing. It implies a change. Every change

is a result of labor, money and manipulation. Though after a series of process

something not new emerges, excise duty liability may come into picture. Another

concept of manufacturing is known as deemed manufacturing and defined as

packing, re-packing, labeling, re-labeling, and adaptation of any other mean to

render product marketable and given in Central Excise Tariff Act.

Excisable Goods

According to section 2(d) of the Central Excise Act, 1944 , ‘excisable

goods’ means goods specified in First Schedule and Second Schedule to the

Central Excise Tariff Act, 1985 as being subject to duty of excise and salt. It is

important to mention here that excisable goods do not become non-excisable

goods merely because they are exempt from duty by an exemption notification.

4.3 IMPORTANCE OF CENTRAL EXCISE DUTY

Central excise revenue is the biggest single source of revenue for the

Government of India. The Union Government tries to achieve different socio-

economic objectives by making suitable adjustments in the scope and quantum of levy of Central Excise duty. The scheme of Central Excise levy is suitably adapted and modified to serve different purposes of price control, sufficient 78

supply of essential commodities, industrial growth, promotion of small scale industries and like Authority for collecting the Central Excise duty.

Article 265 of the Constitution of India has laid down that both levy and collection of taxes shall be under the authority of law. The excise duty is levied in pursuance of Entry 45 of the Central List in Government of India Act,1935 as adopted by entry 84 of List I of the seventh Schedule of the Constitution of India.

Charging section is Section 3 of the Central Excises and Salt Act,1944.

Liability to pay Central Excise Duty

Section 3 of the Central excises and Salt Act,1944 provides that there shall be levied and collected in such manner as may be prescribed, duties of excise on all excisable goods other than salt which are produced or manufactured in India at the rates set forth in the schedule to the Central excise Tariff Act,1985.it is therefore clear that as soon as the goods in question are produced or manufactured, they will be liable to payment of Excise duty. However for

convenience duty is collected at the time of removal of the goods. While Section 3

of the Central Excises and salt Act,1944 lays down the taxable event, Rules 9 and

49 of the Central excise Rules,1944 provides for the collection of duty.

4.4. BRIEF HISTORY AND DEVELOPMENTS

Central Excise duty is an indirect tax levied on goods manufactured in

India. The tax is administered by the Central Government under the authority of 79

Entry 84 of the Union List (List 1) under Seventh Schedule read with Article 226 of the Constitution of India.

The Central Excise duty is levied in terms of the Central Excise Act, 1944 and the rates of duty, ad valorem or specific, are prescribed under the Schedule I and II of the Central Excise Tariff Act, 1985. The taxable event under the Central

Excise law is ‘manufacture’ and the liability of Central Excise duty arises as soon as the goods are manufactured. The Central Excise Officers are also entrusted to collect other types of duties levied under Additional Duties (Goods of Special

Importance) Act, Additional Duties (Textiles and Textiles Articles) Act, Cess etc.

Till 1969, there was physical control system wherein each clearance of manufactured from the factory was done under the supervision of the Central

Excise Officers. Introduction of Self-Removal procedure was a watershed in the excise procedures. Now, the assessees were allowed to quantify the duty on the basis of approved classification list and the price list and clear the goods on payment of appropriate duty.

In 1994, the gate pass system gave way to the invoice-based system, and all clearances are now effected on manufacturer’s own invoice. Another major change was brought about in 1996, when the Self-Assessment system was introduced. This system is continuing today also. The assessee himself assesses his Tax Return and the Department scrutinises it or conducts selective audit to ascertain correctness of the duty payment. Even the classification and value of the 80

goods have to be merely declared by the assessee instead of obtaining approval of the same from the Department.

In 2000, the fortnightly payment of duty system was introduced for all commodities, an extension of the monthly payment of duty system introduced the previous year for Small Scale Industries.

In 2001, new Central Excise (No.2) Rules, 2001 have replaced the Central

Excise Rules, 1944 with effect from 1st July, 2001. Other rules have also been notified namely, CENVAT Credit Rules, 2001, Central Excise Appeal Rules,

2001etc. With the introduction of the new rules several changes have been effected in the procedures. The new procedures are simplified. There are less numbers of rules, only 32 as compared to 234 earlier. Classification declaration and Price declarations have also been dispensed with, the CENVAT Declaration having been earlier dispensed with in 2000 itself.

4.5. ADMINISTRATION OF CENTRAL EXCISE

The Central Excise law is administered by the Central Board of Excise and

Customs (CBEC or Board) through its field offices, the Central Excise

Commissionerates. For this purpose, the country is divided into 10 Zones and a

Chief Commissioner of Central Excise heads each Zone. There are total 61

Commissionerates in these Zones headed by Commissioner of Central Excise. 81

Divisions and Ranges are the subsequent formations, headed by Deputy/Assistant

Commissioners of Central Excise and Superintendents of Central Excise, respectively.

For enforcing the central excise law and collection of Central Excise duty the following types of procedures are being followed by the Central Excise

Department:

a. Physical Control – Applicable to cigarettes only. Here assessment

precedes clearance which takes place under the supervision of

Central Excise officers;

b. Self-Removal Procedure – Applicable to all other goods produced or

manufactured within the country. Under this system, the assessee

himself determines the duty liability on the goods and clears the

goods.

Tax payers' assistance and responsiveness

The CBEC have issued instructions from time to time for rendering assistance to the taxpayers in the Commissionerates of Central Excise and

Divisional Offices. These offices are duty bound to provide necessary guidance to the public in all matters concerning Central Excise Law, procedure, tariff and exemptions etc. 82

The Commissioners of Central Excise are required to post knowledgeable officers of appropriate rank, senior Inspector or Superintendent to be in-charge of

"Tax-payers' Assistance Unit" in each Commissionerate and Divisional headquarter. The officer will have easy access to the Deputy/Assistant

Commissioners, Additional/Joint Commissioners and Commissioner to seek their advice and guidance on the spot in case of genuine doubts.

The "Tax-payers' Assistance Unit" in addition to rendering advice to the assessees, should also help them in meeting the officer concerned for necessary guidance, and clarification, where required.

In order to have a responsive tax administration, the Board has decided that all intimations, declarations and queries received from the Members of trade and industry should be replied to in a time bound manner and with a sense of responsibility and accountability. In order to achieve this, the following directions have been issued to the Central Excise field formations:

a. All declarations, intimations, etc. when send by FAX, e-mail, by

post or by Courier shall be accepted by the field formations.

b. Appointments should be given on e-mail on request from the trade;

c. All queries by e-mail should be accepted and the replies sent by e-

mail; 83

d. Any query received from the trade must be answered within a

maximum of four weeks from the date of receipt

e. To make e-mail an effective mode of communication between the

Department and the public, e-mail connectivity should be provided

to all offices in the field formations and properly maintained and

wide publicity of the e-mail address should also be given.

REGISTRATION

For the administration of the Central Excise Act, 1944 and the Central

Excise (No.2) Rules, 2001 (hereinafter referred to as the ‘said Rules’) manufacturers’ of excisable goods or any person who deals with excisable goods, with some exceptions, are required to get the premises registered with the Central

Excise Department before commencing business.

Persons requiring registration

In accordance with Rule 9 of the said Rules and Notifications issued under rules 18 and 19 of the said Rules, as the case may be, the following category of persons are required to register with jurisdictional Central Excise Officer in the

Range office having jurisdiction over his place of business/factory:

i. Every manufacturer of excisable goods (including Central/State

Government undertakings or undertakings owned or controlled by

autonomous corporations) on which excise duty is leviable . 84

ii. Persons who desire to issue CENVATABLE invoices under the

provisions of the CENVAT Credit Rules, 2001.

iii. Persons holding private warehouses.

iv. Persons who obtain excisable goods for availing end-use based

exemption notification.

v. Exporters manufacturing or processing export goods by using duty

paid inputs and intending to claim rebate of such duty or by using

inputs received without payment of duty and exporting the finished

export goods.

Separate registration is required in respect of separate premises except in cases where two or more premises are actually part of the same factory (where processes are interlinked), but are segregated by public road, canal or railway-line.

The fact that the two premises are part of the same factory will be decided by the

Commissioner of Central Excise based on factors, such as:

1. Interlinked process – product manufactured/produced in one premise are

substantially used in other premises for manufacture of final products.

2. Large number of raw materials are common and received/proposed to be

received commonly for both/all the premises

a. Common electricity supplies.

b. There is common labour /work force 85

c. Common administration/ works management.

d. Common sales tax registration and assessment

e. Common Income Tax assessment

f. Any other factor as may be indicative of inter-linkage of the

manufacturing processes.

This is neither an exhaustive list of indicators nor each indicator is necessarily in each case. The Commissioner has to decide the issued from case to case.

Separate Registration is required for each depot, godown etc. in respect of persons issuing Cenvat invoices. However, in the case liquid and gaseous products, availability of godown should not be insisted upon.

Registration Certificate may be granted to minors provided they have legal guardians i.e. natural guardians or guardians appointed by the Court, as the case may be, to conduct business on their behalf.

Exemption from Registration

The Central Board of Excise and Customs (CBEC), by Notification No.

36/2001-CE (NT) dt.26.6.2001, has exempted specified categories of persons/premises from obtaining registration, as follows:

1. Persons who manufacture the excisable goods, which are chargeable to nil

rate of excise duty or are fully exempt from duty by a notification. 86

2. Small scale units availing the slab exemption based on value of clearances

under a notification. However, such units will be required to give a

declaration (Annexure-1)once the value of their clearances touches Rs.90

lakhs.

3. In respect of ready-made garments, the job-worker need not get registered

if the principal manufacturer undertakes to discharge the duty liability.

4. Persons manufacturing excisable goods by following the warehousing

procedure under the Customs Act, 1962 subject to the following

conditions:

a. The said excisable goods and any intermediary or by-product

including the waste and refuse arising during the process of

manufacture of the said goods under the Customs Bond are

either destroyed or exported out of the country to the

satisfaction of the Assistant Commissioner of Customs or the

Deputy Commissioner of Customs, in-charge of the Customs

Bonded Warehouse;

b. the manufacturer shall file a declaration in the specified form

annexed hereto in triplicate for claiming exemption under

this notification; 87

c. no drawback or rebate of duty of excise paid on the raw

materials or components used in the manufacture of the said

goods, shall be admissible.

d. The person who carries on wholesale trade or deals in

excisable goods (except first and second stage dealer, as

defined in Cenvat Credit Rules, 2001).

e. A Hundred per cent Export Oriented Undertaking, or a unit

in Free Trade Zone or Special Economic Zone licensed or

appointed, as the case may be, under the provisions of the

Customs Act, 1962.

f. Persons who use excisable goods for any purpose other than

for processing or manufacture of goods availing benefit of

concessional duty exemption notification.

The Drugs and Cosmetics Rule 1945 recognises the concept of loan licence in the manufacture of P or P medicines. As a result the system of accepting the said concept is still prevalent under excise law. In such cases the procedure prescribed under Notification no.36/2001-CE (NT) dated 26/6/2001 has to be followed. The principal manufacturer who has under-taken to comply with the procedural formalities will have to maintain separate accounts in respect of goods manufactured on his own account and goods manufactured on behalf of the loan licensee. However, the principal manufacturer has to aggregate the clearances 88

made by him together with clearances made on behalf of the loan licensees with regard to eligibility as well as exemption limit. In other words the clearances made on behalf of the loan licensee have to be clubbed with that of the principal manufacturer (by the manufacturer from one or more factories and from the factory by one or more manufacturers).

Application for Registration

Under authority of Section 6 of the Central Excise Act, 1944 read with rule

9 of the said Rules, the CBEC has prescribed the format for Application as well as

Registration Certificate. The application has to be made to the jurisdictional

Central Excise Officer.

The application for registration should be signed by:

1. The applicant or by his authorised agent having general power of attorney.

The Range Officer shall have power to call the original documents to

verify ‘power of attorney’. Such document shall not be retained by the

Range Officer but be returned immediately after verification.

2. In case of unregistered partnership firms, by all partners.

3. In case of registered partnerships, by the managing partner or other partner

so authorised in the Partnership Deed. 89

When a manufacturer who is exempt from the registration is required to file a declaration, the same will be filed with the Assistant Commissioner of the jurisdictional Central Excise Division.

Fling of Declaration in lieu of registration

The manufacturers who are exempted from the operation of Rule 9 by virtue of Notification no. 36/2001-Central Excise (NT) dt.26/6/2001 have to file a declaration with the Assistant Commissioner of the respective Divisions. Such declarations received from the assessee will have to be filed separately, tariff head-wise in the Divisional office. The details should be entered in the register to be maintained in the Divisional office in the enclosed proforma. Genuine delay in filing the required declaration need not be viewed seriously and the assessee may be allowed to enjoy the exemption from the operation of Rule 9 as well as from the payment of duty provided the conditions stipulated in the respective exemption Notifications have been duly fulfilled.

Procedure of Issue of Registration Certificate

Under the section 6 of the Central Excise Act, 1944 read with rule 9 of the said Rules, the CBEC, by notification, has specified the format for Application as well as Registration Certificate (Annexure 2 and 3, respectively). The format of application is common to manufacturers, private warehouse holders, and registered dealers issuing CENVATABLE invoice and persons who obtain goods 90

by availing end-use based exemptions, including manufacturers or processors of export goods.

In the application for Registration, the applicant has to submit ground plan.

Under the Central Excise (No.2) Rules, 2001, there is no stipulation of any specified marked area for storing the finished goods (traditionally called the

‘bonded store room’). Thus there is no need for marking such area in the ground plan. The only verification that the jurisdictional officers should conduct that the premises mentioned in the application for registration, are genuine and are intended for the purposes for which the application has been made. Assessee, however, shall be responsible for proper storage and accountal of goods manufactured in his factory at any point of time.

The verification shall be made by the Inspector or Superintendent of

Central Excise having jurisdiction over the premises (Range Officer) in respect of which the applicant has sought registration, within 5 working days of the receipt of application. As per the rules/notification, the registration certificate shall be issued within 7 working days. The Range Officer (Superintendent) either himself or through the Sector Officer (Inspector) shall verify whether the declared address and operations (intended) are genuine and the declarations made in the application are correct. If found in order, he will endorse the correctness of the same and append his dated signature on the office copies of the Registration application and the copy of the application with the registrant. If any deviations or variations are 91

noticed during the verification, the same should be got corrected. Any major discrepancy, such as fake address, non-existence of any factory etc. shall be reported in writing to the Divisional Officer within 3 working days and the Range

Officer shall initiate action to safeguard revenue.

Issue of Registration Certificate

All Registrations of each type should be numbered in a single series for the

Range as a whole , commencing with serial no. 1 for each calendar year . The issuing authority should make every effort to complete all formalities and grant the Registration Certificate within 7 days of receipt of application in his office.

Every Registration Certificate granted / issued by the registering authority shall be under his signature. He should also countersign the ground plan accompanying the

Registration Certificate. The Registration Certificate and the duplicate copy of the plan should be returned to the registered person who shall exhibit his Registration

Certificate or a certified copy thereof in a conspicuous part of the registered premises. The Registering authority in a permanent file shall keep the application as well as the ground plan.

In case of partnership firms, the Registration Certificate which is granted in the name of the said firm [which is registered or not under the Partnership Act] shall contain the names of all the partners.

The Registration Certificate or a certified copy thereof is required to be exhibited in a conspicuous part of the registered premises. 92

Period of Validity of Registration

Once Registration Certificate is granted, it has a permanent status unless it is suspended or revoked by the appropriate authority in accordance with law or is surrendered by the person or company concerned. If the person who applies for

Registration with the department is an individual, then the Certificate would cease to be valid in the event of the death of the said individual. Any other person(s) who wish(es) to continue with the operations for which the deceased person was registered, he would then have to apply afresh. (See notification no. 35/2001-

Central Excise (N.T.) dated 26th June, 2001.).

In the case of limited company, death of a director would not affect the status of Registration, since Registration is issued to the body corporate recognizing the same as a legal person. In the case of partnership firms also normally no difficulty would arise with regard to succession, since the surviving partners will continue either in the same name or with the change of name the business. However, in the case of proprietary business when the proprietor dies, the successor in estate has to apply for a fresh Registration. Ordinarily fresh

Registration would be issued to the person who happens to be in the actual possession of the business. However, grant of fresh Registration to the successor in estate shall not be regarded that the Government has accepted the said person as the legal successor/heir to the deceased. 93

Surrender, Cancellation, Suspension or Revocation of Registration

Registration Certificate may be surrendered as per application in prescribed form in Notification No. 35/2001-CE (N.T.) dated 26.6.2001 [Annexure-4]. This is subject to compliance of the statutory obligations under the excise law, particularly the payment of all dues to the Government including the duty on finished excisable goods lying in the factory/warehouse. In case of mis- declaration regarding compliance, the surrender of registration shall not be valid.

Registration Certificate may be cancelled by the Registering authority when the registered person voluntarily surrenders the Certificate due to closure of business.

As per rule 17 of the said Rules Registration Certificate may be revoked or suspended by the Deputy/Assistant Commissioner of Central Excise, if the holder or any person under his employ has committed a breach of any condition of the

Central Excises Act or the rules made thereunder or has been convicted of an offence under Section 161 read with Section 109 or Section 116 of the Indian

Penal Code [45 of 1860].

Suspension or revocation of the Registration is a heavy punishment since it amounts to suspending or stopping the business and could result in grave damage to the person concerned. Hence this penalty should be resorted to only in cases where there is persistent misdemeanor involving serious loss of revenue.

10.4 Though technically, a Registration Certificate can be suspended or revoked by the issuing authority, the power to revoke or suspend the Registration is vested only with the Deputy/Assistant Commissioner. In case of suspension or revocation, the Range Officer should refer the matter to the Deputy/Assistant commissioner who will pass appropriate orders after affording a reasonable opportunity. Appeal against this order lies with the Commissioner[Appeals] and this should be specifically spelt out in the order -in-original of the

Deputy/Assistant Commissioner(Preamble).

Lost Registration Certificates

When a Registration Certificate is reported to be lost, the registered person shall submit a written application to the Range Officer for issuing a DUPLICATE

REGISTRATION CERTIFICATE. The same shall be issued after making necessary entries in the record or logs in the computer data.

An importer who intends to issue invoice under Cenvat Credit Rules, 2001, will have to Register himself in the manner specified earlier

CLASSIFICATION

The Central Excise duty is chargeable at the rates specified in the schedule to the Central Excise Tariff Act, 1985. The said schedule is divided into 20 sections and 96 Chapters. There are no Chapters with numbers 1,6,10,12 and 77.

As such there are effectively 91 Chapters. Each Chapter is further divided into headings and sub-headings. In order to determine the applicable rate of duty in 95

respect of a particular item, the positioning of that item under a particular head or sub-head is essential. The positioning of an item in the appropriate heading/sub- heading is called classification. The classification of an item is generally decided in view of how it is described in commercial parlance. However a deviation from this principle is made when the trade meaning or commercial nomenclature does not fit into the scheme of the statute.

Interpretative Rules for classification.

The Central Excise Tariff Act, 1985 incorporates five Rules of interpretation, which together provide necessary guidelines for classification of various products under the schedule. As regards the Interpretative Rules, the classification is to be first tested in the light of Rule 1. Only when it is not possible to resolve the issue by applying this Rule, recourse is taken to Rules 2,3

& 4 in seriatim. The provision of the individual Rule is as follows:

i. Rule 1 This rule provides that section and Chapter titles are only for

the ease of reference and, therefore, do not have any legal bearing

on the classification of goods, which is determined according to the

terms of headings and relevant section or Chapter notes and

according to the other interpretative rules if such headings or notes

do not otherwise require. Thus goods are to be classified in terms of

the heading and relative sections or Chapter notes without recourse

to any interpretative rules. It is only when the goods cannot be 96

classified on this basis, the assistance is to be sought from the

interpretative rules.

ii. Rule 2(a) This rule provides classification of an article referred to in

a heading, even if that article is incomplete or unfinished, or is

presented in an unassembled or disassembled form. An important

condition to be satisfied for classification in this manner is that in its

incomplete or unfinished state, the article has the essential character

of the complete of finished article. Some of the important aspects

which are relevant in this regard are functional aspect, physical

aspect and the degree of completion of the product.

iii. Rule 2(b) This rule relates to mixture or combination of materials or

substances, and goods consisting of two or more materials or

substances. According to this rule headings in which there is a

reference to a material or substance also apply to that material or

substance mixed or combined with other materials or substances.

This rule does not apply where specific provisions exist in the

headings or the sections or chapter notes excluding such

classification.

iv. Rule 3 This rule lays down three steps for classifying the goods

which are, prima facie, classifiable under several headings. The

sequential order of the steps contemplated are - 97

a. most specific description;

b. essential character; and

c. heading which occurs last in numerical order;

This rule applies when goods are prima facie classifiable

under 2 or more headings.

In the first step, {Rule 3(a)} the general guidelines are that a

description by name is more specific than the description by

character and a description which identifies the goods clearly

and precisely is more specific than the one which is less

complete.

The second step [Rule 3 (b)] relates only to mixtures,

composite goods consisting of different materials or

components and goods put up in sets. This rule finds

applicability if rule 3(a) does not help. In all such cases the

goods are to be classified as if they consist of material or

components which gives them their essential character.

When goods cannot be classified with reference to Rules 3(a)

and 3(b), they are to be classified in terms of Rule 3(c)- in the

heading which occurs last in numerical order among those

which equally merit consideration. This is a fall back

provision for resolving the matter when no heading can be 98

regarded as providing a more specific description than the

others and when it is not possible to identify the material or

component which gives the concerned goods their essential

character.

v. Rule 4 When goods cannot be classified in accordance with rules

1,2, & 3, then they are to be classified in a heading of a product,

which is most akin to the goods in question. Kinship can, of course,

depend on many factors such as description, character, purpose etc.

vi. Rule 5 This rule postulates that the classification of any product

under a sub-heading is to be contemplated after the product

concerned has been properly classified under its proper four digit

Chapter heading. The classification in the sub-heading of a heading

is determined mutatis mutandis in accordance with the principles

applicable to classification in the four digit headings.

Powers of the C.B.E.C. to issue orders of classification of goods.

Section 37B of the Central Excise Act, 1944 empowers the Central Board of Excise & Customs to issue orders, instructions and directions, for the purpose of uniformity in the classification of goods or with respect to the levy of excise duties on such goods.

VALUATION

Value under the Central Excise Act, 1944

Value of the excisable goods has to be necessarily determined when the rate of duty is on ad-valorem basis. Accordingly, under the Central Excise Act,

1944 the following values are relevant for assessment of duty. Transaction value is the most commonly adopted method.

i. Transaction value under Section 4.

ii. Value determined on basis of maximum Retail Sale Price as per

Section 4A.

iii. Tariff value under Section 3.

Transaction Value

Section 4 of the Central Excise Act, as substituted by section 94 of the

Finance Act, 2000(No.10 of 2000),has come into force from the 1st day of July

2000. This section contains the provision for determining the Transaction value of the goods for purpose of assessment of duty.

For applicability of transaction value in a given case, for assessment purposes, certain essential requirements should be satisfied. If any one of the said requirement is not satisfied, then the transaction value shall not be the assessable value and value in such case has to be arrived at under the valuation rules notified for the purpose. The essential ingredients of a Transaction value are: 100

1. The goods are sold by an assessee for delivery at the time of place of

removal. The term "place of removal" has been defined basically to mean a

factory or a warehouse;

2. The assessee and the buyer of the goods are not related; and

3. The price is the sole consideration for the sale.

The definition of "transaction value" needs to be carefully taken note of as there is fundamental departure from the erstwhile system of valuation that was essentially based on the concept of ‘Normal Wholesale Price’, even though sales were effected at varying prices to different buyers or class of buyers from factory gate or Depots etc. had to be determined.

The new section 4 essentially seeks to accept different transaction values which may be charged by the assessee to different customers, for assessment purposes so long as these are based upon purely commercial consideration where buyer and the seller have no relationship and price is the sole consideration for sale. Thus, it enables valuation of goods for excise purposes on value charged as per commercial practices rather than looking for a notionally determined value.

Transaction value would include any amount which is paid or payable by the buyer to or on behalf of the assessee, on account of the factum of sale of goods. In other words, if, for example, an assessee recovers advertising charges or publicity charges from his buyers, either at the time of sale of goods or even subsequently, the assessee cannot claim that such charges are not to be included in the 101

transaction value. The law recognizes such payment to be part of the transaction

value that is assessable value for those particular transactions. Certain other

elements which are included in the Transaction value are, as follows:

i. Receipts/recoveries or charges incurred or expenses provided for in connection

with the manufacturing, marketing, selling of the excisable goods. In other words,

whatever elements which enrich the value of the goods before their marketing and

were held by Hon’ble Supreme court to be includible in "value" under the

erstwhile section 4 would continue to form part of section 4 value even under new

section 4 definition. ii. If in addition to the amount charged as price from the buyer, the assessee

recovers any other amount by reason of sale or in connection with sale, then such

amount shall also form part of the transaction value. For example if assessee splits

up his pricing system and charges a price for the goods and separately charges for

packaging or warranty, the packaging charges will also form part of assessable

value as it is a charge in connection with production and sale of the goods

recovered from the buyer. In this context, it may be clarified that it is immaterial

whether the warranty is optional or mandatory. Since the value can be different

for different transactions, wherever warranty charges are paid or payable to the

assessee, in those transactions warranty charges shall form part of the assessable

value. In those transactions where warranty charges are not recovered, the

question of including warranty charges in transaction value does not arise. 102

iii. Interest for delayed payments are a normal practice in industry. Interest under

a financing arrangement entered between the assessee and the buyer relating to the

purchase of excisable goods shall not be regarded as part of the assessable value

provided that:

a. the interest charges are clearly distinguished from the price

actually paid or payable for the goods;

b. the financing arrangement is made in writing; and

c. where required, assessee demonstrates that such goods are

actually sold at the price declared as the price actually paid or

payable. iv. Discount of any type or description given on any normal price payable for any

transaction will not form part of the transaction value for the goods, e.g. quantity

discount for goods purchased or cash discount for the prompt payment etc. will

therefore not form part of the transaction value. However, it is important to

establish that the discount has actually been passed on to the buyer of the goods.

The differential discounts extended as per commercial considerations on different

transactions to unrelated buyers if extended can not be objected to and different

actual prices paid or payable for various transactions are to be accepted. Where

the assessee claims that the discount of any description for a transaction is not

readily known but would be known only subsequently – as for example, year end

discount – the assessment for such transactions may be made on a provisional 103

basis. However, the assessee has to disclose the intention of allowing such

discount to the department and make a request for provisional assessment. v. The definition of transaction value mentions that whatever amount is actually

paid or actually payable to the Government or the relevant statutory authority by

way of excise, sale tax and other taxes, such amount shall be excluded from the

transaction value. In other words, if any excise duty or other tax is paid at a

concessional rate for a particular transaction, the amount of excise duty or tax

actually paid at the concessional rate shall only be allowed to be deducted from

price. vi. As per commercial practice, the price for the goods charged, normally includes

the cost of packing charges. However, at times separate charge may be billed for

special packing, as per customer’s requirements. Whereas in the context of

erstwhile section 4 certain disputes often arose whether certain packing in relation

to particular goods is secondary or primary and whether its value is to be added

for assessment purposes, under the new section 4, such issues are no longer

relevant. Any charges recovered for packing are obviously charges recovered in

relation to the sale of the goods under assessment and will form part of the

transaction value of the goods. In short, it is immaterial whether packing is

ordinary or special. Whatever amount is charged from the buyer for packing and if

not already included by the assessee in the price payable for the goods will be

included while determining the transaction value of the goods. 104

Where the assessee includes all their costs incurred in relation to manufacture and marketing while fixing price payable for the goods and bills and collects an all inclusive price –as happens in most cases where sales are to independent customers on commercial consideration - the transaction price will generally be the assessable value. Nevertheless, there could be situations where the amount charged by an assessee does not reflect the true intrinsic value of goods marketed and total value split up into various elements like special packing charges, warranty charges, service charges etc. These cases would require to be scrutinised carefully to ensure that duty is paid on correct value. The definition of

"transaction value" makes it clear that all the elements of cost which the assessee incurred till the sale/marketing as aforesaid, continue to be included in the assessable value even under new section 4.

The term "place of removal" has been defined in the same manner as was defined in the erstwhile section 4 prior to its amendment in 1996. If, therefore, the transaction value is with reference to delivery at the time and place of removal, such transaction value will be the assessable value.

Valuation Rules

In those cases where any of the three requirements mentioned in para 2 above is missing, the assessable value shall be determined on the basis of the Central Excise Valuation (Determination of Price of Excisable Goods) 105

Rules, 2001 notified under Section 4(1)(b) by notification No. 45/2000-CE (NT), dated 30.6.2000.

Salient features of the new valuation rules are mentioned below:

If the assessee and the buyer are not related persons and the price is also the sole consideration for sale but only the delivery of goods is made by the assessee at a place other than the factory/warehouse, then the assessable value shall be the "transaction value" without the addition of the cost of transportation from the factory/warehouse upto the place of delivery. However, exclusion of cost of transportation is allowed only if the assessee has shown them separately in the invoice and the exclusion is permissible only for the actual cost so charged from his buyers. If the assessee has a system of pricing and sale at uniform prices inclusive of equated freight for delivery at factory gate or elsewhere, no deductions for freight element will be permissible.

If the goods are not sold at the factory gate or at the warehouse but they are transferred by the assessee to his depots or consignment agents or any other place for sale, the assessable value in such case for the goods cleared from factory/warehouse shall be the normal transaction value of such goods at the depot, etc. at or about the same time on which the goods as being valued are removed from the factory or warehouse. It may be pertinent to take note of the definition of "normal transaction value" as given in the valuation rules. What it basically means is the transaction value at which the greatest aggregate quantity of 106

goods from the depots etc. are sold at or about the time of removal of the goods being from the factory/warehouse. If, however, the identical goods are not sold by the assessee from depot/consignment agent’s place on the date of removal from the factory/warehouse, the nearest date on which such goods were sold or would be sold shall be taken into account. In either case if there are series of sales at or about the same time, the normal transaction value for sale to independent buyers will have to be determined and taken as basis for valuation of goods at the time of removal from factory/warehouse. It follows from the Valuation Rules that in such categories of cases also if the price charges is with reference to delivery at a place other than the depot, etc. then the actual cost of transportation will not be taken to be a part of the transaction value and exclusion of such cost allowed on similar lines as discussed earlier, when sales are effected from factory gate/warehouse.

As a measure of simplification, it has been decided to value goods which are captively consumed on cost construction method only as there have been disputes in adopting values of comparable goods. The assessable value of captively consumed goods will be taken at 115% of the cost of manufacture of goods even if identical or comparable goods are manufactured and sold by the same assessee. The concept of deemed profit for notional purposes has thus been done away with and a margin of 15% by way of profit etc. is prescribed in the rule itself for ease of assessment of goods used for captive consumption. 107

In the case where price is not the sole consideration for the sale, but the other requirements of clause (a) of sub-section (1) of section 4 of the Central

Excise Act are satisfied, the value shall be determined in accordance with the provisions of rule 6 of the valuation rules. This provides for adding, to the transaction value the money value of any additional consideration flowing directly or indirectly from the buyer to the assessee. Such additional consideration would include the money value of goods and services provided free or at reduced cost by or on behalf of the buyer to the assessee. An Explanation has been added in the new rule only to remove any doubts with respect to its scope.

Where goods are sold through related persons, the transaction value is not applicable. The definition of related persons includes "inter-connected undertakings" as defined in the Monopolies and Restrictive Trade Practices Act,

1969. The definition of inter-connected undertaking in the said Act is comprehensive and includes two or more under-takings which are inter-connected with each other in any of a number of ways such as if one owns or controls the other, or where the undertakings are owned by firm, or if such firms have one or more common partners, etc. A provision has been made in the Valuation Rules that even if the assessee and the buyer are ‘inter-connected undertakings’, the transaction value will be "rejected" only when they are "related" in the following manner:

108

a. They are relatives.

b. The buyer is a relative and a distributor of the assessee, or

sub-distributor of such distributor.

c. They have a direct or indirect interest in the business of each

other.

In other cases, they will not be considered related.

"Transaction value" could then form the basis of valuation

provided other two conditions, namely, price is for delivery

at the time and place of removal and the price is the sole

consideration for sale are satisfied. If any of the two aforesaid

conditions are not satisfied then, quite obviously, value in

such cases will be determined under the relevant rule.

Valuation of Petroleum Products

The practice being followed is to assess the price administered petroleum products like motor spirit, HSD, SKO (domestic) and LPG to duty on the ex- storage sale prices that are fixed by the Oil Coordination Committee (OCC) from time to time. The assessable value is the same irrespective of whether the administered petroleum products are sold at the refineries or through the marketing companies.

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Tariff Value

For certain items the Government may fix a tariff value as per provisions of Section 3(3) of the Central Excise Act, 1944. In such cases the assessment of duty shall be on the basis of the tariff value.

Value on basis of Maximum Retail Sales Price

The value is based on maximum retail sale price in terms of Section 4A of the Central Excise Act, 1944. This is applicable to notified commodities. The notification issued in this regard indicates the extent of abatement to be allowed for arriving at the assessable value for determination of amount of duty

4.6. CENVAT CREDIT

CENVAT Credit Rules, 2001 (hereinafter referred to the ‘ Credit Rules’) has been notified with effect from 1st July, 2001 as an independent rule under the

Central Excise Act, 2001.

These rules seek to introduce simplified CENVAT provisions and procedures for allowing credit of duty paid on specified inputs and capital goods used in or in relation to the manufacture of specified final products, whether directly or indirectly and whether contained in the final product or not (inputs) and used (capital goods) in the factory of the manufacture of the final product.

The credit of duty so allowed can be utilized for payment of duty leviable on the final product subject to the conditions laid down in the rules. 110

Salient features

Certain definitions have been incorporated in Rule 2 of the Credit Rules itself. It may be noted that the definition of ‘capital goods’ is comprehensive and would include components, spares and accessories as also other capital goods like moulds and dies, refractories and refractory materials, etc. It has been clarified that the components, spares and accessories may fall under any Chapter but they should be components, spares and accessories of the final products. Storage tanks have been added to the list of capital goods w.e.f 1.3.2001. An explanation has been added to clarify the scope of inputs i.e. Inputs include goods used in the manufacture of capital goods which are further used in the factory of the manufacturer. Among other expressions, ‘Exempted goods’ and ‘final products’ have also been defined.

Rule 3 of the Credit Rules provides type of duties to be taken as credit with

Explanation, which clarifies to allow CENVAT credit of additional duty leviable under Section 3 of Customs Tariff Act on goods falling under 98.01 of First

Schedule to Customs Tariff Act. This Rule also provides manner of utilization of

CENVAT credit in a different situation. It also provides the manner of utilisation of credit. It also provides the manner when inputs/capital goods are removed as such.

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Rule 4 of the Credit Rules provides for different conditions for allowing

CENVAT credit in different situations for inputs and capital goods.

Rule 5 of the Credit Rules of the Credit Rules is regarding refund of CENVAT

Credit.

Rule 6 of the Credit Rules explains obligation of manufacturers of dutiable and exempted goods, especially the details of taking credit of final dutiable products and exempted products.

Rule 7 of the Credit Rules specifies documents on which CENVAT credit can be taken. An explanation to this Rule provides the meaning of "first stage dealer" and "second stage dealer". It also provides for maintenance of accounts by first and second stage dealer. Maintenance of records of manufacture of final products. The burden of proof regarding admissibility of CENVAT credit shall lie upon manufacturers taking such credit. The manufacturer of Final Product shall submit monthly return in specified proforma (Annexure 10) within 5 days from the close of each month. In respect of manufacturers availing exemption on value or quantity based in a Financial year, he shall submit by the 5th of the following quarter.

Under rule 8 of the Credit Rules, it has been provided that the manufacturers shall be allowed to transfer CENVAT credit lying unutilized in his accounts to such transferred, sold, merged, leased or amalgamated factory on account of shifting his factory to another site or factory transferred due to change 112

in ownership on sale, merger, amalgamation, lease or transfer of a factory to joint venture with specific provision for transfer of liabilities of such factory. This is being allowed only if stock of inputs as such or in process or capital goods is also transferred to new site and the same is duly accounted for to the satisfaction of the

Commissioner.

Transitional Provisions are specified in rule 9 of the Credit Rules. Any amount of credit earned by manufacturers under this Rule and remaining unutilized on that day shall be allowed as CENVAT credit under these Rules and allowed to be utilized. However, certain restrictions are imposed in this Rule.

Provisions for special dispensation in respect of inputs manufactured in factories located in specified areas of North-East region are contained in rule 10 of the Credit Rules.

Power of Central Government to notify goods for availment of deemed credit are contained in rule 11 of the Credit Rules. Accordingly, certain inputs have been so notified on which the duties of Excise or additional duties paid shall be deemed to have been paid at the prescribed rate and allow credit of such amount subject to certain conditions.

Recoveries of credit wrongly taken are governed by rule12 of the Credit

Rules. Where CENVAT credit has been taken or utilized wrongly or on account of fraud, willful mis-statement, collusion or suppression of facts etc., the same along with interest shall be recovered from manufacturers and the provision of 113

Section 11-A, 11-AA and 11-AB of the Central Excise Act, 1944 shall apply for effecting recoveries. In case of fraud etc., the manufacturers shall also be liable to pay penalty under provision of Section 11-AC.

Provisions for confiscation and penalty, for contravention of the Credit

Rules are contained in rule 13 of the Credit Rules.

Important clarifications

Once the SSI exemption limit of Rs. 100 lakhs is crossed and assessee starts paying duty, he is eligible to take CENVAT credit in respect of inputs lying in stock, on the inputs contained in finished goods lying in stock and on the inputs in process. For this purpose, it is obligatory on the assessee to quantify the amount of admissible credit on the basis of documentary evidence and records maintained for this purpose.

The CENVAT credit can be utilised for payment of duty on waste and scrap as waste and scrap are ‘final products’ within the definition given in the

Credit Rules.

Raw material used for making packing material CENVAT credit is permissible on the ‘ raw material’ so used. This is for the reason that the packing material being and input, the raw material used for making packing material is also to be construed as inputs used in or in relation to the manufacture of finished products. 114

There is no bar for a manufacturer to remove the inputs or capital goods as such for export under bond.

Manufacturer is entitled to take the CENVAT credit in a situation where capital goods were received before 1-4-2000 and also installed before that date but

MODVAT/CENVAT was not taken due to some reason prior to 1-4-2000 because even though the modvat credit was not taken by the manufacturer, the modvat credit had been "earned" by him.

CENVAT credit is required to be taken immediately on receipt of inputs in the factory. This, however, does not mean, nor is it even intended that if the manufacturer does not take credit as soon as the inputs are received in the factory, he would be denied the benefit of CENVAT credit such interpretation is not tenable.

In respect of capital goods, which are included in the project import, the

CENVAT credit shall be admissible only to the extent of an amount not exceeding

50% of the Additional Duty of Customs paid on such capital goods. However, on the other materials, which are not in the nature of capital goods, the CENVAT credit of the Additional Duty paid shall be allowed to the full extent.

Air-conditioners and refrigerating equipment and computers would be eligible to CENVAT credit as capital goods. The only condition is that the manufacturers should use them in the manufacture of final product. For example, an air-conditioner used in the office premises or a computer used in the office 115

premises of the factory shall not be eligible to CENVAT credit.

CENVAT credit shall be admissible in respect of the amount of inputs contained in any of the aforesaid waste, refuse or bye product. Similarly,

CENVAT should not be denied if the inputs are used in any intermediate of the final product even if such intermediate is exempt from payment of duty. The basic idea is that CENVAT credit is admissible so long as the inputs are used in or in relation to the manufacture of final products, and whether directly or indirectly.

If the inputs or capital goods are cleared to a job worker, they should be received back within 180 days. If they are not received, the manufacturer shall debit the CENVAT credit attributable to such inputs or capital goods, otherwise it will be an offence. However, the manufacturer shall be entitled to take CENVAT credit as and when the goods sent to the job worker are received back. If part of the goods is received back within 180 days and the rest of the goods are received back after 180 days, the obligation for debiting the credit shall arise only in respect of CENVAT credit attributable to that part which is not received within

180 days.

Provision has been made for permitting the CENVAT credit when the inputs or capital goods are purchased from the first stage dealer or from the second stage dealer. These dealers should be registered under rule 9 of the Central

Excise (No.2) Rules, 2001. The other procedural requirements in respect of first stage dealer and second stage dealer will continue as in the case of modvat rules. 116

In the case of capital goods, the CENVAT rules do not provide installation of capital goods as a pre-requisite for taking CENVAT credit. The credit can be taken as and when the capital goods are received in the factory. For example if such capital goods were received prior to 1.4.2001 but not installed up to

1.4.2001, the CENVAT credit would be admissible. However, in respect of all capital goods whether received on or after 1.4.2001 or those that were received prior to 1.4.2001 but not yet installed, the condition that CENVAT credit only up to 50% of the total admissible amount would be available in the financial year

2001-2002 would apply. The balance of the CENVAT credit in respect of such capital goods can be taken in a financial year subsequent to 2001-2002

The documents on which CENVAT credit can be taken have been prescribed to enable verification, where needed, by the department. The admissibility of the amount of CENVAT credit should be discernible from the records of the manufacturer, including the payment made to the sellers of inputs and capital goods. The basic responsibility is upon manufacturer to prove that inputs or capital goods were purchased and were used by him for the intended purpose.

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RECORDS

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, 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 and for adopting a common accounting system. While framing the

Central Excise (No.2) Rules, 2001 (hereinafter referred to as the said Rules),

CENVAT Credit Rules, 2001 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.

Private records

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 record.

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 their own record; 118

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 unit or a

unit in /FTZ/SEZ 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-11.

iv. This means that the assessee is free to device 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 119

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 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.

viii. Every assessee 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; 120

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.

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.

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 121

goods, 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.

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.

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

RETURN

The Central Excise (No.2) Rules, 2001 (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 . 122

Monthly/Quarterly Return

Rule 12 of the said Rules has 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 return is E.R.1 Return, notified by Notification No. 48/2001-Central Excise (N.T.) dated 26.6.2001.

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 fortnightly basis in respect of clearances for a fortnight, certain details for removals for each fortnight, 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 Return.

The assessees would continue to submit alongwith the E.R.1 Return for the month, copies of the PLA and relevant TR6 challans etc. The PLA Extracts will give details of all the credits made through TR6 challans during the month and 123

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 PLA

Extracts indicating the following:

a. opening balance, after discharging the duty liability for the second

fortnight of the previous month;

b. the credits made during the month; and upto the 5th of the following

month;

c. total duty discharged through PLA for the first fortnight;

d. total duty discharged through PLA for the second fortnight; and

e. closing balance in the PLA after discharging the second fortnight

duty liability.

The units in the SSI sector could suitably modify this summary, as they are required to pay duty on monthly basis.

The instructions in the form of "NOTES" given at the end of E.R.1 return further elaborate the manner in which it should be compiled and the information to be furnished to the Department.

Return to be filed by Hundred per cent Export Oriented Undertakings/Units in Free Trade Zones/Units in Special Economic Zones is the E.R.2 Return, notified by Notification No. 49/2001-Central Excise (N.T.) dated 26.6.2001

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Refund

Refund of any duty of excise is governed by Section 11B of the Central

Excise Act, 1944. By definition, refund includes rebate of duty paid on goods exported out of India or on materials used in the manufacture of goods exported out of India. The refund claim can be filed within one year from the relevant date in the specified Form [for the time being the format R-1 specified under rule 173S of the erstwhile Central Excise Rules, 1944] by an assessee or even a person who has borne the duty incidence, to the Deputy/Assistant Commissioner of Central

Excise having jurisdiction over the factory of manufacture.

The "relevant date" has been defined in the said section and refund of duty paid can be sought provided the manufacturer has not passed on the burden of duty. In case the burden of duty has been passed on, the refund can be claimed by the person who has actually paid the duty or, in the alternative, the amount can be deposited in the Consumer Welfare Fund created by the statute.

The Central Excise Act also provided for payment of interest on delayed payment of refund. As per Section 11BB, if any duty ordered to be refunded under

Section 11B has not been refunded within three months from the date of receipt of the refund application in the prescribed manner and form along with the supporting documentary evidence as laid down in the relevant rules, interest at the rate notified by the Government shall have to be paid on such duty from the date 125

immediately after the expiry of three months from the date of receipt of application till the date of refund of such duty.

Presentation of refund claim

Any person, who deems himself entitled to a refund of any duties of excise or other dues, or has been informed by the department that a refund is due to him shall present a claim in proper Form, along with all the relevant documents supporting his claim and also the copies of documents/records supporting his declaration that he has not passed on the duty incidence.

The claim will be filed with the Deputy/Assistant Commissioner of Central

Excise with a copy to the Range Officer.

The claim shall be presented in duplicate and shall be duly signed by the claimant or by a duly authorised person on his behalf and shall be pre-receipted

(with revenue stamp on original copy, where necessary).

It may not be possible to scrutinise the claim without the accompanying documents and decide about its admissibility. If the claim is filed without requisite documents, it may lead to delay in sanction of the refund. Moreover, the claimant of refund is entitled for interest in case refund is not given within three months of the filing of claim. Incomplete claim will not be in the interest of the

Department. Consequently, submission of refund claim without supporting documents will not be allowed. Even if post or similar mode files the same, the 126

claim should be rejected or returned with Query Memo (depending upon the nature/importance of document not filed). The claim shall be taken as filed only when all relevant documents are available. In case of non-availability of any document due to reasons for which the Central Excise or Customs Department is solely accountable, the claim may be admitted that the claimant in not in disadvantageous position with respect to limitation period.

Scrutiny of refund claim and sanction

The Range Officer will complete the scrutiny of the papers within 2 weeks from the date of receipt of the claim in the Range Office and send a report to their scrutiny to the Divisional Deputy/Assistant Commissioner of Central Excise.

The Divisional Office will scrutinise the claim, in consultation with Range, and check that the refund application is complete and is covered by all the requisite documents. This should be done, as far as possible, the moment refund claim is received and in case of any deficiency, the same should be pointed out to the applicant with a copy to the Range Officer within 15 days of receipt.

In the Divisional Offices, final processing of refund claims after the receipt of Range Officer’s report should be completed including the verification of the fact whether the assessee has passed on the duty incidence to their buyer (in cases where the refund claim is filed by a manufacturer or owner of warehoused goods).

The types of cases to which this provision will not be attracted are already specified in section 11B itself. Where the duty incidence has been passes on, the 127

duty refund, if otherwise admissible, will be ordered in file, but will also be ordered to be credited to the Consumer Welfare Fund. The burden of proving that the duty incidence has not been passes on, is on the claimant and the latter may be required to submit sufficient documentary proof for this purpose. It is clarified that the question of unjust enrichment has to be looked into case by case. There cannot be a general instruction indicating the documents and /or record, which the claimant should produce as a proof that he has not, passes on the duty incidence to any other person.

Claim for refund of less than Rs. 100 shall not entertained in respect of all excisable commodities.

Payment of refund

Where the claim has been admitted whether in part or in full, and claimant is eligible for refund, the Deputy/Assistant Commissioner of Central Excise should ensure that payment is made to the party within 3 days of the order passed after due audit, if any.

All claims shall be paid to the applicant by a cheque on the authorised bank with which the sanctioning authority maintains account.

On receipt of sanctioning claims from the dealing hands, the cheque shall be written out by the cashier (or his assistant) and simultaneously an entry made in the cash book. The Assistant Commissioner shall sign the cheque as well as the 128

entry in the cashbook simultaneously. A receipt of the cheque should be obtained from the payee and placed on file.

After the cheque has been signed, it shall either be delivered to the claimant or his authorised representative personally when the next calls for it or sent to him by Registered Post ‘Acknowledgement Due’ at Government cost.

Post Audit

All refund claim papers should be sent by the Divisional Deputy/Assistant

Commissioner to the Commissionerate Headquarters (to the Additional/Joint

Commissioner–Audit) within a week after the payment thereof irrespective of the amount involved. At the Commissionerate Headquarters, a special cell comprising

Deputy/Assistant Commissioner (Audit) – for immediate supervision – one superintendent, one Inspector and two Deputy Office Superintendents may be created out of the sanctioned strength of the audit staff in the Commissionerate for post -audit of these claims.

This cell may undertake examination on merits of each such claim where the amount of refund granted is Rs. 5 lakh or more. In regard to the remaining refund claims involving amounts below Rs. 5 lakh, post audit may be undertaken on the basis of random selection by the Deputy/Assistant Commissioner (Audit).

This post audit may be completed before the expiry of three months from the date of payment and where ever the grant of refund is not found to be correct, action should be taken in terms of provisions contained in Section 35E of the Central 129

Excises Act, 1944, this special Cell may work directly under the charge of

Additional/Joint Commissioner (Audit).

Monitoring and control for timely disposal of refunds

The Commissioner of Central Excise should devise appropriate control to ensure that the refund/rebate claims are expeditiously sanctioned within the time limit stipulated above

4.7. PROFILE OF TRICHIRAPPALLI COMMISSIONERATE

Role of Central Excise Commissionerate

Central Board of Excise and Customs (CBEC) implements law and procedures of Central Excise law by several regional units called Central Excise

Commissionerates, each covering assessees spread over a specific geographic area.

The Commissioner of Central Excise is the overall administrative head of the Commissionerate. Administratively, each Commissionerate is a 3-tier set-up with its Headquarters at the helm, 5 or 6 Divisions at the second level and 5 or 6

Ranges under each Division at the third and final level.

130

COMMISSIONERATE HEADQUARTERS

At Commissionerate Headquarters, the Commissioner is assisted by

Additional Commissioners, Joint Commissioners, Deputy Commissioners and

Assistant Commissioners in addition to Superintendents, Inspectors and other ministerial staff. There are normally several branches/sections viz., Technical

Section, Internal Audit Section, Headquarters Preventive Unit, Judicial Cell,

Legal Cell, Maritime Section, Prosecution Cell, Vigilance Section.

The Technical Section is the a source of supply of all developments to the departmental officers and also to the assessees/trade through issue of Circulars and Trade Notices. Individual assessee desirous of getting Trade Notices can do so by making annual subscriptions. This Section also examines doubts raised by field officers and trade and enable clarifications. This Section is also responsible for arranging face-to-face periodical meetings of Senior Central Excise Officers with various Trade Associations and Chambers of Commerce.

The Internal Audit Section is responsible for periodical audit of accounts of the registered assessees. Such audit is carried out by nominated Groups/Parties headed by Superintendents, under prior intimation. Of late a new system of audit has been introduced called EA 2000 which will be the only interaction media between the assessee and the Department in the near future. 131

The Headquarters Preventive Unit, unlike the Audit Groups, keeps secret track of duty payment records of individual assessees, engages informers, collects informations, through market and other sources, makes surprise visit to the factories, whether registered or not, and brings to book duty evasion indulged in by them.

The offence cases registered are adjudicated by the Senior Officers of the

Department who are vested with quasi-judicial powers, depending upon the duty involved in a particular offence and the Adjudication section endeavors to achieve this objective by adhering to the principles of natural justice. The officers in the level of Superintendents and Inspectors assist the adjudicating authorities. The existing powers of various Central Excise officers, as on date, are as under:-

Duty involved Adjudicating officer

Upto Rs. 5 lakhs Deputy / Assistant Commissioner

Rs. 5 lakhs to Rs. 20 lalks Joint Commissiner

Rs. 20 lakhs to Rs. 50 lakhs Additional Commissioner

Without limit Commissioner

The Legal and Judicial Cells of the Commissionerate Headquarters have also equal role to play, even though the officers of these Sections do not visit factories. While Legal cell attend to all court matters, the Judicial Cell is responsible for filing departmental appeals before the Commissioner (Appeals) 132

and Tribunal, wherever necessary against the adjudication orders passed by the

lower departmental authorities. The judicial cell is also responsible for defending the appeals filed by the parties/assessees.

The Prosecution Cell is responsible for the entire prosecution proceedings as and when sanctioned by the Commissioner against any Proprietor, firm,

Company or individual who are found guilty of an offence punishable with imprisonment in terms of Section 9 of the Central Excise Act, 1944. The responsibility of this Cell starts from arresting a person found guilty, remanding him to judicial custody to arrange for a speedy and successful trial before the competent Magisterial Court.

The Maritime Section in the Headquarters office exercises the overall control over the exports taking place from the entire Commissionerate jurisdiction.

The last but not the least, the Vigilance Cell at the Headquarters level functions as a watch-dog and in the event of any complaint against the departmental officers, this Cell conducts necessary enquiry and take disciplinary action against the erring official as warranted under the Rules. The Vigilance Cell also attends to and redress general grievance aired by the Trade. This Cell is also responsible for conducting periodical meeting of Public Grievance Committee to 133

help Trade and also the Staff Grievance Committee to attend to staff side grievance.

DIVISIONAL OFFICE:

Deputy Commissioner or Assistant Commissioner is the head of the

Division. Each Division of the Commissionerate is a mini Commissionerate within the Commissionerate in the sense, all Branches/Sections would be

available similar to Headquarters Commissionerate to cater to the respective

divisional jurisdiction. The Divisional officer maintains close contact with all

Range Offices under his control through correspondence/visits/inspections.

RANGE OFFICE:

Superintendent of central excise is the head of the Range and is assisted by

Inspectors who are allotted group of factories under his control. All the assessee-

factories, on their part, file monthly/quarterly returns of goods dispatched from

the factory and duty paid thereon and the officers are to ensure correctness of the

duty exemptions availed by the factories, CENVAT availed, duty paid by them

and data furnished in their returns. The officers in the Range are also supposed to

visit factories as per norms fixed for study of raw material consumption vis-à-vis

final products manufactured and also for examination and sealing of the export

consignment. 134

4.8 PROFILE OF CENTRAL EDCISE DIVISIONAL OFFICES, TRICHY

Trichy Customs and Central Excise Collectorate came into existence with effect from June 01, 1983 with the jurisdiction formed out of erstwhile Madurai and Madras Collectorate. Subsequent re-organisations took place with effect from

May 01, 1987 and June 01, 1991, as a consequence of which Trichy Central

Excise Collectorate had 3 Divisions

Trichy Central Excise Division was further bifurcated into two Divisions namely Trichy I Central Excise Division and Trichy II Central Excise Division w.e.f August 01, 1997. With effect from October 01, 1997, a new Division namely Cuddalore Central Excise Division was carved out of the jurisdiction of

Pondicherry Division.

Further with effect from 01-11-2002, a new Commissionerate namely

Pondicherry was formed and Cuddalore Division was attached to Pondicherry

Commissionerate. Tanjore Division was bifurcated as Tanjore Division and

Karaikal Division. Trichy II Division was bifurcated into two Divisions namely

Trichy II Division and Karur Division.

May 01, 1987 and June 01, 1991, as a consequence of which Trichy Central

Excise Collectorate had 3 Divisions in its fold namely :-

¾ Trichy Central Excise Division

¾ Pondicherry Central Excise Division

¾ Thanjavur Central Excise Division

Pondicherry Division.

Further with effect from 01-11-2002, a new Commissionerate namely

Pondicherry was formed and Cuddalore Division was attached to Pondicherry

Commissionerate. Tanjore Division was bifurcated as Tanjore Division and

Karaikal Division. Trichy II Division was bifurcated into two Divisions namely

Trichy II Division and Karur Division.

At present the following are the Divisions of Trichy Central Excise

Commissionerate with jurisdiction as mentioned below 136

Trichy I - Division

1. Trichy District (except Ward 38 – K.Sathanur, Ward 40 – Piratiyur,

Ward 45 – K.Abisekapuram, Ward 53-Uyyakondan Thirumalai and Ward

Nos.1,2,3,4,5 & 6 – Srirangam in TrichyCorporation limit, Inamkulathur Village,

Ramjee Nagar Village, Vayampatti Village, Manaparai T.K., Siruganur,

Samayapuram, Kariamanicka, Nochiam Villages, Manachanallur Taluk,

Thottiyam Taluk, Thuraiyr Taluk, Musiri Taluk, Lalkudi Taluk) and Manikandam firka of Sri Rangam Taluk of Trichy District (i.e. Viralimalai Road upto

Nagamangalam Village) 2. Mathur, Mandaiyoor, Kalamavoor,Thondamanallur

Villages of Nirpalani Firka of Kolathur Taluk of Pudukottai District.

137

RANGE JURISDICTION

City limit of Trichy consisting of ward numbers 8 to 25, 27, 39, 41,42, 44, 46, 48 to 60 except Devadanam, (Ward No.7) Sangilyandarpuram (Ward No.26) Kajapettai, Good Shed Road Range 1-A (Ward No.26) Mannarpuram (Ward No.43) Paul Complex (City)(300213) (Ward No.47) TVS Tollgate (Ward No.34) Golden Rock (Ward No.31,32) Senthaneerpuram (Ward 26, 33) 2. Manikandam Firka of Srirangam Taluk of Trichy District (Viralimalai Road upto Nagamangalam Village)

Pudukottai Road i.e. Sempattu, Gundur and Suriyur Villages of Range I - Trichy District and Mathur, Mandayur, Kalamavoor, B(300214) Thodammanallur Villages and other villages of Nirpalani Firka of Kolathur Taluk of Pudukottai District

Senthaneerpuram (Ward No. 26, 33,) Golden Rock (Ward No. 31,32) Devadanam (Ward No. 7) and Sangilyandarpurm (Ward Range I - No. 26) Kajapettai (Ward No.26) Good Shed Road “ TVS Toll C(300215) Gate (Ward No. 34) Mannarpuram (Ward No. 43) and Paul Complex (Ward No. 47)

BHEL I M/s BHEL (HPBP). Thiruverumbur. Range(300211)

M/s BHEL (SSTP) plant, all units in Thuvakudi, BHEL II - Thiruverumbur, Ariyamangalam, Kattur and Villages of Range(300212) Navalpattu Firka, Vengur Firka and Thiruverumbur Firka of Trichy Taluk of Trichy District.

Service Tax Entire Jurisdiction of Central Excise I Division, Trichy Range (300200)

138

Trichy II - Division

Lalgudi, Manapparai, Mannachanallur, Musiri, Srirangam (Except

Manikandam Firka), Thottiam and Thuraiyur Taluks of Trichy District and,

Viralimalai Firka of Kulathur Taluk of Pudukottai District

RANGE JURISDICTION

Dalmiapuram Entire Lalgudi Taluk of Trichy District. Range (300608)

Musiri Entire Musiri, Thottiyam Thuraiyur and Manachanallur Taluks Range(300604) and Andhanallur Firka of Srirangam Taluk

Viralimalai I All the units on the Eastern side of Viralimalai Madurai Road Range (300606) of Viralimalai Firka of Kulathur Taluk of Pudukottai District.

All the Units on the Western side of Trichy Viralimalai Viralimalai II Madurai Road of Viralimalai Firka of Kulathur Taluk of Range (300607) Pudukottai District.

Ward No. 38 – K.Sathanur Ward No. 40 - Pirattiyur Ward No.45 – K.AbishekaPuram Ward No.53 – Uyyakkondan Mofussil Thirumalai Ward No. 1 to 6 - Srirangam. Srirangam, Range(300609) Kuzhumani and Somarasampettai Firkas of Srirangam Taluk, Manapparai Taluk, Vaiyampatti Village, Inamkulathur Village,Ramji Nagar.

139

Karur Division

Karur District including Aravakurichi, Krishnarayapuram & Kulithalai

Taluk and D. Gudalur Village of Palayam Firka, Dindigul District.

RANGE JURISDICTION The units falling south of N.H. 7 at Pugalur and west of N.H.7 towards Karur I Dindigul Road. The units falling under Vaiyapuri Nagar and Ramanuja Range Nagar of Inam Karur Town Panchayat and including the revenue (300701) Firkas of Aravakurichi and Pallapatti within Karur District. The units falling on eastern side of N.H. 7 towards Dindigul Road (excluding the areas of Inam Karur Town Panchayat), southern side of M.G. Road to southern side of Amaravathi over bridge road via Karur II Sengunthapuram 5th Cross road, North Pradhakshanam road, New Range Street, Adhivinayakar Kovil Street and Ranimangammal street, (300702) western side of Trichy Road and northern side of Aravakurichi Road within Karur Municipal limits, Thanthoni and Vellianai revenue Firkas of Karur District and D.Gudalur village of Palayam firka of Vedasandur Taluk of Dindigul District. The units falling on eastern side of N.H. 7 towards Pugalur Road (excluding Inam Karur Town Panchayat), northern side of Erode to Karur III Karur Railway line, northern side of North Pradhakshanam road to Range northern side of Amaravathi over bridge road via New street, (300703) Adhivinayakar Kovil Street and Ranimangammal street, and eastern side of Trichy Road within Municipal limits of Karur including Sanapiratti Panchayat of Karur Taluk. The units falling on southern side of Erode to Karur Railway line in Karur IV Inam Karur Town Panchayat (excluding vaiyapuri nagar and Ramanuja Range Nagar allotted to Karur Range - I) and the units falling under Puliyur, (300704) Uppidamangalam and Mayanoor panchayats, Krishnarayapuram and Kulithalai Taluks. Service Tax The entire jurisdiction of Karur Division. Range (300700)

140

Thanjavur Division

Thanjavur District, Pudukottai District (excepting Mathur, Nirpalani and

Viralimalai Firka) and Ariyalur, Perambalur and Udayarpalayam Taluk

RANGE JURISDICTION

Thanjavur,Thiruvaiyaru, Orathanadu, Pattukottai, Thanjavur(300402) Peravurani Taluks, Ammapettai Firka of Papanasam Taluk in Thanjavur District.

Kumbakonam, Thirvidaimarudhur (Excluding Saliamangalam & Ayyampettai Firkas) Valangaiman Kumbakonam(300403) (Excluding Ammapettai Firka) Taluk of Thanjavur District.

Pudukottai Taluk (Except SIPCOT complex) Pudukkottai I(300407) Gandharvakottai Taluk, Alangudi, Aranthangi, Avudayarkoil of Pudukottai District.

SIPCOT Complex of Pudukottai Taluk, Thirumayam, Pudukkottai and KalathurTaluk (Excent Nirpalani And Viralimalai II(300408) Firka) of Pudukkottai District

Units falling in the revenue Areas of Ariyalur, Ariyalur (300411) UdayarPalayam and Perambalur Taluks of Perambalur

Service Tax Areas under Thanjavur Division Range (300400)

141

Karaikal Division

Karaikal region of Pondicherry Union Territory, Thiruvarur and

Nagapattinam Districts in Tamil Nadu.

RANGE JURISDICTION

The jurisdiction of Mela-Vanjore, Kishavanjore, Polagam, T.R. Karaikal-I Pattinam, Mudalaimedu, NinikattalaiRoad, Naravy viz. the Range(300801) areas of the Southern side of Arasalar River. The Units situated in this area will be Covered by Range I Irrespective of Chapter

Entire Karaikkal Town, Nadungadu, Thennangudi, Ambagarthur, Kurum-bagaram Sorakudy, Rayanpalayam, Karaikal-II Kottucherry Virichikudy, Thenur and Other areas situated on Range(300802) the Northern side of the Araslar River and the existing units And the new units to be Registered in this area irrespective of the Chapters.

Mayiladuthurai Mayiladuthurai, Sirkazhi, Tranquebar Taluka and Pananallur Range (300804) Firka of Thiruvadaimarudur Taluk

MRL MRL & IBP units Range(300803)

Thiruvarur, Nagapattinam, Thiruthuraipoondi, Vedaranyam, Thiruvarur Mannargudi, Needamangalam, Nannilam and Kodavasal Range (300805) Taluks of Tanjore District

142

Recent Trend in Trichy Commissionerate

Tiruchi: The Central Excise Commissionerate here has already exceeded this year\'s target of Rs.398 crore and the Central excise revenue collection during the current year has recorded a growth of about 50 per cent compared to last year with a record collection of Rs.447 crore till end of January this year, accounting

for an increase of 12 per cent of this year\'s target, said S. R. Prasad,

Commissioner of Central Excise and Service Tax, here on Thursday.

Presiding over the Central Excise Day 2011 celebrations organised by the

Commissionerate of Central Excise and Service Tax, here, Mr. Prasad said the

Commissionerate comprising eight districts and also Karaikal district in the Union

Territory of Puducherry, had achieved an overall growth of 28 per cent during the

current year.

He pointed out that the major source of revenue came from cement,

petroleum and boiler components industries. He said that the Commissionerate

had also achieved revenue of Rs.136 crore by way of service tax till the end of

January this year.

Mr.Prasad highlighted the path breaking reforms undertaken by the

Government in making tax laws simpler and assessee-friendly. The Tiruchi

Commissionerate is serving the manufacturing and service sectors by providing a

smooth tax administration ever since its formation in 1983. S.Sendamarai Kannan,

Chief Commissioner of Income Tax, who released the 28th issue of `Cauvery 143

Dhara\', the departmental tri-lingual magazine, appreciated the performance and achievements of the Tiruchi Commissionerate of Central Excise and Service Tax.

P.V.Vaidialingam, Divisional Railway Manager, spoke about the health aspects of officers and employees. He said that a compulsory intensive medical check of the officers had revealed that nearly 55 per cent were not aware that were suffering from major health problems.

Messrs Madras Cements Limited, Alathiyur in Ariyalur district and ONGC

Limited at Neravy in Karaikal district, the top two contributors for Central excise revenue were honoured at the function. Similarly, Messrs Cosmos Polymers of

Thanjavur from the small sector, BSNL, Tiruchi and Karur Vysya Bank who were the major contributors of revenue in service tax were also honoured. V.Raj,

Principal General Manager, BSNL; R. K. Kakkar, Commissioner of Income Tax,

Tiruchi; G. Madan Mohan, Senior General Manager (Admin); Madras Cements

Limited, Aathiyur, and P. Devaraj, Joint Commissioner of Central Excise and

Service Tax, participated.

CHAPTER V

PERFORMANCE EVALUATION OF CENTRAL EXCISE REVENUE REALISATION OF TIRUCHIRAPPALLI COMMISSIONERATE – DIVISION-WISE

CHAPTER V

PERFORMANCE EVALUATION OF CENTRAL EXCISE

REVENUE REALISATION OF TIRUCHIRAPPALLI

COMMISSIONERATE – DIVISION-WISE

5.1 INTRODUCTION

An attempt has been made in this chapter to evaluate the performance of

Tiruchirappalli Commissionerate with regard to the central excise realisation. To measure the performance evaluation, the factors such as gross revenue, rebate and net revenue are to be taken for the following five divisions of the Tiruchirappalli

Commissionerate:

(i) Tiruchirappalli I

(ii) Tiruchirappalli II

(iii) Thanjavur

(iv) Karur and

(v) Karaikal:

In order to analyse the performance of Tiruchirappalli Commissionerate, the average and stability (fluctuations) over a period under study, the arithmetic 145

mean and coefficient of variation were computed by using the following

formulae:1

∑ Arithmetic Mean (⎯X) = ----- ...... (5.1) n

where,

X = Value of the variable,

n = Number of years.

S.D. Coefficient of Variation (%) = ------x 100 ...... (5.2) ⎯X

where,

S.D. = Standard Deviation,

⎯X = Arithmetic mean.

To analyse the trend and growth of performance variables, the following

linear and semi-log tend equations have been fitted.2

Y = a + bt ...... (5.3)

Log Y = a + bt ...... (5.4) where,

Y = Value of variable,

1S.P. Gupta, Statistical Methods, Sultan Chand & Sons, New Delhi, 31st Revised Edition 2002, pp.285-293. 2P.S. Grewal, Numerical Methods of Statistical Analysis, Sterling Publishers Pvt. Ltd., New Delhi, 1987, p.555. 146

t = Time variable.

The above model (5.3 and 5.4) was computed by the method of least squares.

The following formula has been used to calculate compound growth rate

(CGR).

CGR (%) = [Anti log b-1] x 100 ...... (5.5)

5.2. TIRUCHIRAPPALLI - I DIVISION

Table 5.1 indicates the details of the gross revenue relalisation, rebate and net revenue through central excise duties under Tiruchirappalli I division during the period from 2000-01 to 2009-10.

147

TABLE 5.1

GROSS REVENUE, REBATE AND NET REVENUE - TIRUCHIRAPPALLI I DIVISION (` in Crores) Year Gross Revenue Rebate Net Revenue

2000-01 145.24 0.97 144.27

2001-02 187.65 1.02 186.63

2002-03 163.25 0.78 162.47

2003-04 177.53 1.08 176.45

2004-05 199.96 0.51 199.45

2005-06 120.33 2.37 117.96

2006-07 108.27 0.85 107.42

2007-08 113.98 0.63 113.35

2008-09 136.27 1.04 135.23

2009-10 192.64 1.87 190.77 Source: Office of the Commissioner of Central Excise, Trichirapalli, 2009-10.

Table 5.1 reveals that the gross revenue realization in Tiruchirappalli I

Division was Rs.145.24 crores in the year 2000-2001 and it has increased to

Rs.192.64 crores during the year 2009-10. In case of rebate or refunds was given by the Tiruchirappalli I division during the year 2000-01 was Rs.0.97 crores and it was also increased to Rs.1.87 crores in the year 2009-10. Regarding net revenue realisation in this division was Rs.144.27 crores in the year 2000-2001 increased to Rs.190.77 crores in the year 2009-10. It is found from the above analysis that 148

there was an fluctuating trend exist in Tiruchirappalli I Division Commissionerate with regard to realization of revenue.

Figure 5.1 Gross Revenue, Rebate and Net Revenue - Tiruchirappalli I Division

250

200

150

Rs. in Crores 100

0 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 Year

Gross Revenue Rebate Net Revenue

149

Table 5.2 presents the average and stability of revenue realization in

Tiruchirappalli I Division over a period under study.

TABLE 5.2 AVERAGE AND STABILITY OF GROSS REVENUE, REBATE AND NET REVENUE – TIRUCHIRAPPALLI I DIVISION Average Standard Sl. Coefficient of Particulars (` in Crores) Deviation No. Variation (%) (` in Crores) 1 Gross Revenue 154.51 34.31 22.21

2 Rebate 1.11 0.57 51.35

3 Net Revenue 153.40 34.36 22.40 Source: Computed data.

From the Table 5.2 it has been observed that the average amount of gross revenue, rebate and net revenue were Rs.154.51 crores, Rs.1.11 crores and 153.40 during the period under study. Regarding the stability, the coefficient of variation was found higher for rebate which constitute 51.35 per cent and it leads to less consistent or stability than net revenue and gross revenue which constitute 22.40 and 22.21 per cent respectively.

The computed results of trend and growth rate of revenue realization for

Tiruchirappalli I Division are given in Table 5.3.

150

TABLE 5.3 TREND AND GROWTH OF GROSS REVENUE, REBATE AND NET REVENUE – TIRUCHIRAPPALLI I DIVISION Linear Trend Compound Sl. Variable Coefficients R2 Growth Rate No. a b (%) -2.829 1. Gross Revenue 170.072 0.06 -2.090 (-0.729) 0.052 2. Rebate 0.823 0.07 3.573 (0.815) -2.881 3. Net Revenue 169.249 0.06 -2.178 (-0.743)

Figures in brackets represent t-values. * Indicates the trend coefficients are statistically significant at 5 per cent level. Source: Computed data.

It has been inferred from the Table 5.3 that the linear trend coefficient

(-2.829) of gross revenue in Tiruchirappalli I Division was negative and

statistically not significant at 5 per cent level. The compound growth rate was -

2.090 per cent. In case of rebate or refund allotted by the Tiruchirappalli I

Division, the trend coefficient was positive and not statistically significant. The

compound growth rate was 3.573 per cent. Regarding the net revenue, the trend

coefficient (-2.881) was negative and statistically not significant and compound

growth rate was -2.178 per cent.

151

5.3. TIRUCHIRAPPALLI II DIVISION

Table 5.4 presets the details of the gross revenue relalisation, rebate and net

revenue for Tiruchirappalli II Dvision during the period from 2000-01 to 2009-10.

TABLE 5.4

GROSS REVENUE, REBATE AND NET REVENUE - TIRUCHIRAPPALLI II DIVISION (` in Crores) Year Gross Revenue Rebate Net Revenue

2000-01 74.63 1.35 73.28

2001-02 81.98 2.44 79.54

2002-03 87.34 1.97 85.37

2003-04 89.86 4.39 85.47

2004-05 96.85 2.08 94.77

2005-06 93.70 4.75 88.95

2006-07 92.92 2.38 90.54

2007-08 94.21 1.36 92.85

2008-09 100.24 2.48 97.76

2009-10 124.55 3.97 120.58

Source: Office of the Commissioner of Central Excise, Trichirapalli, 2009-10.

It is observed from Table 5.4 that the gross revenue realization in

Tiruchirappalli II Division was Rs.74.63 crores in the year 2000-2001 and it has 152

increased to Rs.96.85 crores during the year 2004-05. And then it was decreased to Rs.94.21 crores during the year 2007-08 and again it was increased to Rs.124 crores during the year 2000-10. In case of rebate or refunds was given y the

Tiruchirappalli II division during the year 2000-01 was Rs.1.35 crores and it was also increased to Rs.3.97 crores in the year 2009-10. Regarding net revenue realisation in this division was Rs.73.28 crores in the year 2000-2001 increased to

Rs.120.58 crores in the year 2009-10. It is concluded from the above analysis that there was an increasing and fluctuating trend exist in Tiruchirappalli II Division

Commissionerate with regard to gross revenue, rebate and net revenue during the period under study.

153

Figure 5.2 Gross Revenue, Rebate and Net Revenue - Tiruchirappalli II Division

140

120

100

60 Rs. in Crores

0 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 Year

Gross Revenue Rebate Net Revenue

154

Table 5.5 highlights the average and stability of revenue realization in

Tiruchirappalli II Division over a period under study.

TABLE 5.5 AVERAGE AND STABILITY OF GROSS REVENUE, REBATE AND NET REVENUE – TIRUCHIRAPPALLI II DIVISION Average Standard Sl. Coefficient of Particulars (` in Crores) Deviation No. Variation (%) (` in Crores) 1 Gross Revenue 93.63 13.17 14.07

2 Rebate 2.72 1.22 44.85

3 Net Revenue 90.91 12.69 13.96 Source: Computed data.

Table 5.5 shows that the average amount of gross revenue, rebate and net revenue were Rs.93.63 crores, Rs.2.72 crores and 90.91 during the study period.

Regarding the stability of the revenue analysis, the coefficient of variation was found higher for rebate which constitute 44.85 per cent and it leads to less consistent or stability than net revenue and gross revenue which constitute 14.07 and 13.96 per cent respectively.

The computed results of trend and growth rate of revenue realization for

Tiruchirappalli I Division are given in Table 5.6.

155

TABLE 5.6 TREND AND GROWTH OF GROSS REVENUE, REBATE AND NET REVENUE – TIRUCHIRAPPALLI II DIVISION Linear Trend Compound Sl. Variable Coefficients R2 Growth Rate No. a b (%) 3.742 1. Gross Revenue 73.045 0.73 3.994 (4.771)* 0.105 2. Rebate 2.135 0.06 4.307 (0.768) 3.636* 3. Net Revenue 70.910 0.75 3.989 (4.929)

Figures in brackets represent t-values. * Indicates the trend coefficients are statistically significant at 5 per cent level. Source: Computed data.

It has been observed from the Table 5.6 that the linear trend coefficient

(3.742) of gross revenue in Tiruchirappalli II Division was positive and

statistically significant at 5 per cent level. It leads to an increase of the gross

revenue at the rate of Rs.3.742 crores per annum. The compound growth rate was

3.994 per cent. In case of rebate or refund allotted by the Tiruchirappalli II

Division, the trend coefficient was positive and not statistically significant. The

compound growth rate was 4.307 per cent. Regarding the net revenue, the trend

coefficient (3.636) was positive and statistically significant at 5 per cent level

leads to an increase annually by Rs.3.636 crores. The compound growth rate was

3.989 per cent.

156

5.4. THANJAVUR DIVISION

Table 5.7 depicts the details of the gross revenue relalisation, rebate and

net revenue for Thanjavur Division during the period from 2000-01 to 2009-10.

TABLE 5.7

GROSS REVENUE, REBATE AND NET REVENUE - THANJAVUR DIVISION (` in Crores) Year Gross Revenue Rebate Net Revenue

2000-01 177.96 0.11 177.85

2001-02 182.63 0.05 182.58

2002-03 195.27 0.47 194.80

2003-04 190.98 0.03 190.95

2004-05 193.39 0.37 193.02

2005-06 217.66 0.40 217.26

2006-07 153.41 0.65 152.76

2007-08 204.11 0.69 203.42

2008-09 211.34 0.33 211.01

2009-10 239.45 1.24 238.21 Source: Office of the Commissioner of Central Excise, Trichirapalli, 2009-10.

Table 5.7 illustrates that the gross revenue realization in Thanjavur

Division was Rs.177.96 crores in the year 2000-2001 and it was increased to

Rs.195.27 crores during the year 2002-03. And then it was decreased to 157

Rs.190.98 crores in the next year. But from the year 2004-05 it has an increasing trend upto the year 2005-06 and decreased in the next year. From the year

2007-08, the gross revenue was Rs.204.11 crores and it increased to Rs.239.45 crores in the year 2009-10. In case of rebate or refunds was given by the

Thanjavur division during the year 2000-01 was Rs.0.11 crores and it was also increased to Rs.1.24 crores in the year 2009-10. Regarding net revenue realisation in this division was Rs.177.85 crores in the year 2000-2001 increased to Rs.238.21 crores in the year 2009-10. It is concluded from the above analysis that there was an increasing and fluctuating trend exist in Thanjavur Division of

Tiruchirappalli Commissionerate with regard to gross revenue, rebate and net revenue during the period under study.

158

Figure 5.3 Gross Revenue, Rebate and Net Revenue - Thanjavur Division

300

250

200

150 Rs. in Crores 100

0 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 Year

Gross Revenue Rebate Net Revenue

159

Table 5.8 gives the details about the the average and stability of revenue

realization in Thanjavur Division over a period under study.

TABLE 5.8 AVERAGE AND STABILITY OF GROSS REVENUE, REBATE AND NET REVENUE – THANJAVUR DIVISION Average Standard Sl. Coefficient of Particulars (` in Crores) Deviation No. Variation (%) (` in Crores) 1 Gross Revenue 196.62 23.58 11.99

2 Rebate 0.43 0.36 83.72

3 Net Revenue 196.19 23.4 11.93 Source: Computed data.

It is understood from Table 5.8 that the average amount of gross revenue, rebate and net revenue were Rs.196.62 crores, Rs.0.43 crores and 196.19 during the period under study. Regarding the stability of the revenue analysis, the coefficient of variation was found higher for rebate which constitute 83.72 per cent and it leads to less consistent or stability than that of net revenue and gross revenue which constitute 11.99 per cent and 11.93 per cent respectively.

Table 5.9 presents the results of trend and growth rate of revenue realization for Thanjavur Division.

160

TABLE 5.9 TREND AND GROWTH OF GROSS REVENUE, REBATE AND NET REVENUE – THANJAVUR DIVISION Linear Trend Compound Sl. Variable Coefficients R2 Growth Rate No. a b (%) 4.303 1. Gross Revenue 172.948 0.31 2.067 (1.875) 0.091* 2. Rebate -0.070 0.58 32.341 (3.322) 4.212 3. Net Revenue 173.018 0.30 2.025 (1.838)

Figures in brackets represent t-values. * Indicates the trend coefficients are statistically significant at 5 per cent level. Source: Computed data.

It is highlighted from the Table 5.9 that the linear trend coefficient

(4.303) of gross revenue and net revenue (4.212) in Thanjavur Division were positive and not statistically significant. But in the case of rebate, the trend coefficient (0.091) was positive and statistically significant at 5 per cent level. It leads to an increase of the rebate at the rate of Rs.0.091 crores per annum. The compound growth rates for higher for rebate than gross revenue and net revenue which constitute 32.341 per cent, 2.067 per cent and 2.025 per cent respectively.

5.5. KARUR DIVISION

The details of the gross revenue relalisation, rebate and net revenue for

Karur Division under Central Excise of Trichirapalli Commissionerate during the period from 2000-01 to 2009-10 are given in Table 5.10. 161

TABLE 5.10 GROSS REVENUE, REBATE AND NET REVENUE - KARUR DIVISION (` in Crores) Year Gross Revenue Rebate Net Revenue

2000-01 293.22 0.41 292.81

2001-02 310.24 0.24 310.00

2002-03 391.33 0.12 391.21

2003-04 403.00 0.01 402.99

2004-05 283.93 0.18 283.75

2005-06 110.38 1.19 109.19

2006-07 46.98 0.00 46.98

2007-08 104.45 0.14 104.31

2008-09 156.24 0.32 155.92

2009-10 273.23 0.85 272.38 Source: Office of the Commissioner of Central Excise, Trichirapalli, 2009-10.

It is shown from Table 5.10 that the gross revenue realization in Karur

Division was Rs.293.22 crores in the year 2000-2001 and it was increased upto to the year 2003-04 which constitute Rs. 403.00 crores. And then it was decreased to Rs.46.98 crores in the year 2006-07 and then it was increased to Rs.273.23 crores in the year 2009-10. In case of rebate or refunds was given by the Karur division during the year 2000-01 was Rs.0.11 crores and it was also increased to

Rs.0.85 crores in the year 2009-10. Regarding net revenue realisation in this division was Rs.292.81 crores in the year 2000-2001 and it was decreased to 162

Rs.272.38 crores in the year 2009-10. It is concluded from the above analysis that there was an decreasing trend exist in Karur Division of Tiruchirappalli

Commissionerate with regard to gross revenue and net revenue during the period under study.

Figure 5.4 Gross Revenue, Rebate and Net Revenue - Karur Division

450

400

350

300

250

200 Rs. in Crores 150

100

0 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 Year

Gross Revenue Rebate Net Revenue

163

Table 5.11 shows the details about the average and stability of revenue

realization in Karur Division over a period under study.

TABLE 5.11 AVERAGE AND STABILITY OF GROSS REVENUE, REBATE AND NET REVENUE – KARUR DIVISION Average Standard Sl. Coefficient of Particulars (` in Crores) Deviation No. Variation (%) (` in Crores) 1 Gross Revenue 237.30 124.56 52.49

2 Rebate 0.35 0.38 108.57

3 Net Revenue 236.95 124.65 52.61 Source: Computed data.

It is portrayed from Table 5.11 that the average amount of gross revenue, rebate and net revenue were Rs.237.30 crores, Rs.0.35 crores and 236.95

respectively during the period under study. Regarding the stability of the revenue

analysis, the coefficient of variation was found higher for rebate which constitute

108.57 per cent and it leads to less consistent or stability and more variations than that of net revenue and gross revenue which constitute 52.49 per cent and

52.61 per cent respectively.

Table 5.12 depicts the results of trend and growth rate of revenue realization for Karur Division.

164

TABLE 5.12 TREND AND GROWTH OF GROSS REVENUE, REBATE AND NET REVENUE – KARUR DIVISION Linear Trend Compound Sl. Variable Coefficients R2 Growth Rate No. A B (%) -23.841* 1. Gross Revenue 368.430 0.34 -11.110 (-2.011) 0.034 2. Rebate 0.159 0.07 7.046 (0.789) -23.875* 3. Net Revenue 368.271 0.34 -11.132 (-2.013)

Figures in brackets represent t-values. * Indicates the trend coefficients are statistically significant at 5 per cent level. Source: Computed data.

It is found from the Table 5.12 that the linear trend coefficient

(-23.841) of gross revenue and net revenue (-23.875) in Karur Division were

negative and statistically significant at 5 per cent level. It leads to an decrease at

the rate of Rs.23.841 crores and Rs.23.875 crores per annum during the study

period. But in the case of rebate, the trend coefficient (0.034) was positive and

not statistically significant. The compound growth rates for higher for rebate

than gross revenue and net revenue during the study period.

5.6. KARAIKAL DIVISION

Table 5.13 presents the details of the gross revenue relalisation, rebate and

net revenue for Karaikal Division under Central Excise of Trichirapalli

Commissionerate during the period from 2000-01 to 2009-10. 165

TABLE 5.13 GROSS REVENUE, REBATE AND NET REVENUE - KARAIKAL DIVISION (` in Crores) Year Gross Revenue Rebate Net Revenue

2000-01 265.33 0.05 265.28

2001-02 291.54 0.18 291.36

2002-03 301.77 0.91 300.86

2003-04 316.78 0.02 316.76

2004-05 323.89 0.79 323.10

2005-06 326.81 0.93 325.88

2006-07 207.68 0.22 207.46

2007-08 254.34 0.34 254.00

2008-09 297.21 0.89 296.32

2009-10 315.33 0.77 314.56 Source: Office of the Commissioner of Central Excise, Trichirapalli, 2009-10.

Table 5.13 furnishes that the gross revenue realization in Karaikal Division was Rs.265.33 crores in the year 2000-2001 and it was increased upto Rs.326.81 crores during the year 2005-06. And then it was decreased immediately in the next year which constitute Rs.207.68 crores. But from the year 2006-07 it has an increasing trend upto the year 2009-10 which constitute Rs. 315.33 crores. In case of rebate or refunds was given by the Karaikal division during the year

2000-01 was Rs.0.05 crores and it was also increased to Rs.0.77 crores in the year

2009-10. Regarding net revenue realisation in this division was Rs.265.28 crores 166

in the year 2000-2001 and it was increased to Rs.314.56 crores in the year

2009-10. It is concluded from the above analysis that there was an increasing and fluctuating trend exist in Kariakal Division of Tiruchirappalli Commissionerate with regard to gross revenue, rebate and net revenue during the period under study.

Figure 5.5 Gross Revenue, Rebate and Net Revenue - Karaikal Division

350

300

250

200

150 Rs. in Crores

100

0 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 Year

Gross Revenue Rebate Net Revenue

167

Table 5.14 shows the details about the average and stability of revenue

realization in Karaikal Division over a period under study.

TABLE 5.14 AVERAGE AND STABILITY OF GROSS REVENUE, REBATE AND NET REVENUE – TIRUCHIRAPPALLI I DIVISION Average Standard Sl. Coefficient of Particulars (` in Crores) Deviation No. Variation (%) (` in Crores) 1 Gross Revenue 290.07 37.58 12.96

2 Rebate 0.51 0.38 74.51

3 Net Revenue 289.56 37.39 12.91 Source: Computed data.

Table 5.14 shows that the average amount of gross revenue, rebate and net revenue were Rs.290.07 crores, Rs.0.51 crores and Rs.289.56 respectively during the period from 2000-01 to 2009-10. Regarding the stability of the revenue analysis, the coefficient of variation was found higher for rebate which constitute 74.51 per cent and it leads to less consistent or stability and more variations than that of net revenue and gross revenue which constitute 12.96 per cent and 12.91 per cent respectively.

The computed results of trend and growth rate of revenue realization for

Karaikal Division are presented in Table 5.15.

168

TABLE 5.15 TREND AND GROWTH OF GROSS REVENUE, REBATE AND NET REVENUE – KARAIKAL DIVISION Linear Trend Compound Sl. Variable Coefficients R2 Growth Rate No. a b (%) -0.435 1. Gross Revenue 292.462 0.001 -0.257 (-0.099) 0.256 2. Rebate 0.198 0.20 26.074 (1.429) -0.492 3. Net Revenue 292.264 0.001 -0.275 (-0.113)

Figures in brackets represent t-values. * Indicates the trend coefficients are statistically significant at 5 per cent level. Source: Computed data.

Table 5.14 shows that the linear trend coefficient (-0.435) of gross revenue

and net revenue (-0.492) in Karaikal Division were negative and not statistically significant at 5 per cent level. It leads to an decrease at the rate of Rs.0.435

crores and Rs.0.492 crores per annum during the period under study. But in the

case of rebate, the trend coefficient (0.256) was positive and not statistically significant. The compound growth rates for higher for rebate than gross revenue and net revenue during the period from 2000-01 to 2009-10.

CHAPTER V I

PERFORMANCE EVALUATION OF CENTRAL EXCISE REVENUE REALISATION OF TIRUCHIRAPPALLI COMMISSIONERATE – COMMODITY - WISE CHAPTER VI

PERFORMANCE EVALUATION OF CENTRAL EXCISE

REVENUE REALISATION IN THE TIRUCHIRAPPALLI

COMMISSIONERATE – COMMODITY-WISE

6.1 INTRODUCTION

In this chapter, an attempt has been made to analyse the performance

evaluation of Tiruchirappalli Commissionerate with regard to the central excise

revenue realisation in respect of major commodity-wise. To measure the

performance evaluation, the factors such as gross revenue, rebate and net revenue

are to be taken for the following ten major commodities under the Tiruchirappalli

Commissionerate:

(i) Cement

(ii) Petroleum products

(iii) Chemicals & Chemical products

(iv) Paper and paper products

(v) Boiler components and machinery

(vi) Sugar

(vii) Iron and Steel

(viii) Cigarettes and chewing tobacco 170

(ix) Articles of iron & steel

(x) Parts of motor vehicles

In order to analyse the performance of Tiruchirappalli Commissionerate on the basis of major commodities, the average and stability (fluctuations) over a period under study, the arithmetic mean and coefficient of variation were computed by using the following formulae:1

∑ Arithmetic Mean (⎯X) = ----- ...... (6.1) n where,

X = Value of the variable,

n = Number of years.

S.D. Coefficient of Variation (%) = ------x 100 ...... (6.2) ⎯X where,

S.D. = Standard Deviation,

⎯X = Arithmetic mean.

1S.P. Gupta, Statistical Methods, Sultan Chand & Sons, New Delhi, 31st Revised Edition 2002, pp.285-293. 171

To analyse the trend and growth of performance variables, the following

linear and semi-log tend equations have been fitted.2

Y = a + bt ...... (6.3)

Log Y = a + bt ...... (6.4) where,

Y = Value of variable,

t = Time variable.

The above model (6.3 and 6.4) was computed by the method of least squares.

The following formula has been used to calculate compound growth rate

(CGR).

CGR (%) = [Anti log b-1] x 100 ...... (6.5)

6.2. CEMENT

Table 6.1 indicates the details of the gross revenue relalisation, rebate and net revenue for cement under Tiruchirappalli Commissionerate during the period from 2000-01 to 2009-10.

2P.S. Grewal, Numerical Methods of Statistical Analysis, Sterling Publishers Pvt. Ltd., New Delhi, 1987, p.555. 172

TABLE 6.1

GROSS REVENUE, REBATE AND NET REVENUE - CEMENT (` in Crores) Year Gross Revenue Rebate Net Revenue

2000-01 201.23 0.22 201.01

2001-02 296.44 0.13 296.31

2002-03 302.36 1.25 301.11

2003-04 384.12 1.46 382.66

2004-05 297.45 1.22 296.23

2005-06 346.22 1.89 344.33

2006-07 387.95 2.04 385.91

2007-08 405.36 2.36 403.00

2008-09 436.05 2.41 433.64

2009-10 218.29 1.07 217.22 Source: Office of the Commissioner of Central Excise, Trichirapalli, 2009-10.

It is shown from Table 6.1 that the revenue realization in 2003-04 was

Rs.384.12 crores as against Rs.201.23 crores during the year 2000-01. It indicated that there was an increasing trend during this period. But from the year 2004-05 the revenue realization was Rs.297.45 crores and it was increased upto Rs.436.05 during the year 2008-09 and then it was decreased to Rs.218.29 crores. Hence, it is concluded that there was a fluctuating trend was found with regard to the revenue realization under the commodity category of cement. The same trend 173

was also followed in the case of rebate or refund and net revenue realization

during the period under study.

Table 6.2 presents the average and stability of revenue realization through

the commodity category of cement over a period under study.

TABLE 6.2 AVERAGE AND STABILITY OF GROSS REVENUE, REBATE AND NET REVENUE – CEMENT Average Standard Sl. Coefficient of Particulars ( ` in Crores) Deviation No. Variation (%) ( ` in Crores) 1 Gross Revenue 327.55 78.48 23.96

2 Rebate 1.41 0.80 56.74

3 Net Revenue 326.14 77.81 23.86 Source: Computed data.

Table 6.2 reveals that the average amount of gross revenue, rebate and net revenue under the commodity category of cement were Rs.327.55 crores, Rs.1.41 crores and 326.14 during the period under study. Regarding the stability, the coefficient of variation was found higher for rebate which constitute 56.74 per cent and it leads to more variations or less consistent than the net revenue and gross revenue which constitute 23.96 per cent and 23.86 per cent respectively.

174

The computed results of trend and growth rate of gross revenue, rebate and

net revenue for the commodity category of cement in Trichirapalli

Commissionerate are given in Table 6.3.

TABLE 6.3 TREND AND GROWTH OF GROSS REVENUE, REBATE AND NET REVENUE – CEMENT Linear Trend Compound Sl. Variable Coefficients R2 Growth Rate No. a b (%) 10.339 1. Gross Revenue 270.678 0.16 3.127 (1.230) 0.191* 2. Rebate 0.352 0.52 26.889 (2.968) 10.148 3. Net Revenue 270.325 0.16 3.074 (1.216)

Figures in brackets represent t-values. * Indicates the trend coefficients are statistically significant at 5 per cent level. Source: Computed data.

It is observed from Table 6.3 that the linear trend coefficient of gross revenue and net revenue under the commodity category of cement in Trichirapalli

Commissionerate were positive and not statistically significant at 5 per cent level which constitute 10.339 and 10.148. But in the case of rebate, the trend coefficient was positive and statistically significant at 5 per cent level which constitute 0.191. It leads to an increase of the rebate at the rate of Rs.0.191 crores annually during the study period. The compound growth rate was higher for rebate than gross revenue and net revenue for the commodity category of cement. 175

6.3. PETROLEUM PRODUCTS

Table 6.4 indicates the details of the gross revenue relalisation, rebate and

net revenue for the petroleum products under Tiruchirappalli Commissionerate

during the period from 2000-01 to 2009-10.

TABLE 6.4

GROSS REVENUE, REBATE AND NET REVENUE - PETROLEUM PRODUCTS (` in Crores) Year Gross Revenue Rebate Net Revenue

2000-01 23.87 0.04 23.83

2001-02 29.41 0.01 29.40

2002-03 38.45 0.08 38.37

2003-04 47.96 1.02 46.94

2004-05 43.24 0.89 42.35

2005-06 49.96 0.47 49.49

2006-07 50.45 0.32 50.13

2007-08 53.33 0.55 52.78

2008-09 68.25 1.07 67.18

2009-10 61.56 1.12 60.44

Source: Office of the Commissioner of Central Excise, Trichirapalli, 2009-10.

176

Table 6.4 reveals that the revenue realization in 2003-04 was Rs.47.96

crores as against Rs.23.87 crores during the year 2000-01. It indicated that there

was an increasing trend during this period. But from the year 2004-05 the

revenue realization was Rs.43.24 crores and it was increased upto Rs.68.25 during

the year 2008-09 and then it was decreased to Rs.61.56 crores. Hence, it is

concluded that there was a fluctuating trend was found with regard to the revenue

realization under the commodity category of petroleum products. The same trend

was also followed in the case of rebate or refund and net revenue realization

through petroleum products under Trichirapalli Commissionerate during the

period under study.

Table 6.5 portrays the average and stability of revenue realization through

the commodity category of petroleum products over a period under study.

TABLE 6.5 AVERAGE AND STABILITY OF GROSS REVENUE, REBATE AND NET REVENUE – PETROLEUM PRODUCTS Average Standard Sl. Coefficient of Particulars (` in Crores) Deviation No. Variation (%) (` in Crores) 1 Gross Revenue 46.65 13.56 29.07

2 Rebate 0.56 0.44 78.57

3 Net Revenue 46.09 13.21 28.66 Source: Computed data.

177

It is found from Table 6.5 that the average amount of gross revenue, rebate

and net revenue under the commodity category of petroleum products were

Rs.46.65 crores, Rs.0.56 crores and Rs.46.09 croes during the period under study.

Regarding the stability, the coefficient of variation was found higher for rebate

which constitute 78.57 per cent and it leads to more variations or less consistent

than the net revenue and gross revenue which constitute 29.07 per cent and 28.66

per cent respectively.

Table 6.6 presents results of trend and growth rate of gross revenue, rebate

and net revenue for the commodity category of petroleum products in

Trichirapalli Commissionerate.

TABLE 6.6 TREND AND GROWTH OF GROSS REVENUE, REBATE AND NET REVENUE – PETROLEUM PRODUCTS Linear Trend Compound Sl. Variable Coefficients R2 Growth Rate No. a b (%) 0.510* 1. Gross Revenue 23.325 0.90 10.417 (8.304) 0.102* 2. Rebate -0.008 0.49 51.205 (2.800) 4.137* 3. Net Revenue 23.334 0.89 10.255 (8.422)

Figures in brackets represent t-values. * Indicates the trend coefficients are statistically significant at 5 per cent level. Source: Computed data.

178

It is found from Table 6.6 that the linear trend coefficient of gross revenue, rebate and gross revenue under the commodity category of petroleum products in

Trichirapalli Commissionerate were positive and statistically significant at 5 per cent level which constitute 0.510, 0.102 and 4.137. It is concluded that the gross revenue, rebate and net revenue were increased at the rate of Rs.0.510 crores,

Rs.012 crores and Rs.4.137 crores annually during the period under study. The compound growth rate was higher for rebate than gross revenue and net revenue for the commodity category of petroleum products.

6.4. CHEMICAL AND CHEMICAL PRODUCTS

The details of the gross revenue relalisation, rebate and net revenue for the chemical and chemical products under Tiruchirappalli Commissionerate during the period from 2000-01 to 2009-10 are presented in Table 6.7.

179

TABLE 6.7

GROSS REVENUE, REBATE AND NET REVENUE - CHEMICAL AND CHEMICAL PRODUCTS (` in Crores) Year Gross Revenue Rebate Net Revenue

2000-01 6.21 0.02 6.19

2001-02 6.47 0.01 6.46

2002-03 8.33 0.03 8.30

2003-04 7.21 0.04 7.17

2004-05 9.49 0.09 9.40

2005-06 10.22 0.02 10.20

2006-07 12.36 0.01 12.35

2007-08 14.87 0.04 14.83

2008-09 18.45 0.01 18.44

2009-10 11.11 0.04 11.07

Source: Office of the Commissioner of Central Excise, Trichirapalli, 2009-10.

It is understood from Table 6.7 that the revenue realization in 2002-03 was

Rs.8.33 crores as against Rs.6.21 crores during the year 2000-01. But from the year 2004-05 the revenue realization was Rs.9.49 crores and it was increased upto

Rs.18.45 during the year 2008-09 and then it was decreased to Rs.11.11 crores during the year 2009-10. Hence, it is concluded that there was a fluctuating trend was found with regard to the revenue realization under the commodity category of 180

chemical and chemical products. The same trend was also followed in the case of

rebate and net revenue realization through chemical and chemical products during

the study period.

The average and stability of revenue realization through the commodity

category of chemical and chemical products over a period under study are given

in Table 6.8.

TABLE 6.8 AVERAGE AND STABILITY OF GROSS REVENUE, REBATE AND NET REVENUE – CHEMICAL AND CHEMICAL PRODUCTS Average Standard Sl. Coefficient of Particulars ( ` in Crores) Deviation No. Variation (%) ( ` in Crores) 1 Gross Revenue 10.47 3.91 37.34

2 Rebate 0.03 0.02 66.67

3 Net Revenue 10.44 3.91 37.45 Source: Computed data.

Table 6.8 shows that the average amount of gross revenue, rebate and net revenue under the commodity category of chemical and chemical products were

Rs.10.47 crores, Rs.0.03 crores and Rs.10.44 crores during the period under study.

Regarding the stability, the coefficient of variation was found higher for rebate which constitute 66.67 per cent and it leads to more variations or less consistent than the net revenue and gross revenue which constitute 37.34 per cent and 37.45 per cent respectively. 181

The computed results of trend and growth rate of gross revenue, rebate and

net revenue for the commodity category of chemical and chemical products in

Trichirapalli Commissionerate are presented in Table 6.9.

TABLE 6.9 TREND AND GROWTH OF GROSS REVENUE, REBATE AND NET REVENUE – CHEMICAL AND CHEMICAL PRODUCTS Linear Trend Compound Sl. Variable Coefficients R2 Growth Rate No. a b (%) 1.071* 1. Gross Revenue 4.577 0.69 10.959 (4.217) 0.0004 2. Rebate 0.028 0.002 1.227 (0.150) 1.072* 3. Net Revenue 4.548 0.69 10.979 (4.200)

Figures in brackets represent t-values. * Indicates the trend coefficients are statistically significant at 5 per cent level. Source: Computed data.

It is illustrated from Table 6.9 that the linear trend coefficient of gross

revenue and net revenue under the commodity category of chemical and chemical products under Trichirapalli Commissionerate were positive and statistically

significant at 5 per cent level which constitute 1.071 and 1.072. It leads to an

increase of the gross revenue and net revenue at the rate of Rs.1.071crores and

Rs.1.072 crores per annum during the period under study. But in the case of rebate, the trend coefficient was positive and not statistically significant at 5 per cent level. The compound growth rate was higher for rebate than gross revenue 182

and net revenue for the commodity category of chemical and chemical products

under Trichirapalli Commissionerate.

6.5. PAPER AND PAPER PRODUCTS

Table 6.10 gives the details of the gross revenue relalisation, rebate and net

revenue for the paper and paper products under Tiruchirappalli Commissionerate

during the period from 2000-01 to 2009-10.

TABLE 6.10

GROSS REVENUE, REBATE AND NET REVENUE - PAPER AND PAPER PRODUCTS (` in Crores) Year Gross Revenue Rebate Net Revenue

2000-01 5.78 0.02 5.76

2001-02 6.44 0.65 5.79

2002-03 7.69 0.24 7.45

2003-04 7.47 0.69 6.78

2004-05 8.98 0.22 8.76

2005-06 9.23 0.14 9.09

2006-07 10.97 0.98 9.99

2007-08 15.24 0.77 14.47

2008-09 17.50 0.89 16.61

2009-10 2.99 0.01 2.98 Source: Office of the Commissioner of Central Excise, Trichirapalli, 2009-10. 183

It is observed from Table 6.10 that the revenue realization in 2002-03 was

Rs.7.69 crores as against Rs.5.78 crores during the year 2000-01. But in the year

2004-05 the revenue realization was Rs.8.98 crores and it was increased upto

Rs.17.50 crores during the year 2008-09 and then it was suddenly decreased to

Rs.2.99 crores during the year 2009-10 because of the increase of price for paper and paper products. Hence, it is concluded that there was a fluctuating trend was found with regard to the revenue realization under the commodity category of paper and paper products. The same trend was also followed in the case of rebate and net revenue realization through paper and paper products during the study period from 2000-01 to 2009-10.

The average and stability of revenue realization through the commodity category of paper and paper products over a period under study are given in

Table 6.11.

TABLE 6.11 AVERAGE AND STABILITY OF GROSS REVENUE, REBATE AND NET REVENUE – PAPER AND PAPER PRODUCTS Average Standard Sl. Coefficient of Particulars (` in Crores) Deviation No. Variation (%) (` in Crores) 1 Gross Revenue 9.23 4.37 47.35

2 Rebate 0.46 0.37 80.43

3 Net Revenue 8.77 4.12 46.98 Source: Computed data. 184

It is inferred from Table 6.11 that the average amount of gross revenue,

rebate and net revenue under the commodity category of paper and paper products

were Rs.9.23 crores, Rs.0.46 crores and Rs.8.77 crores during the period under

study. Regarding the stability, the coefficient of variation was found higher for

rebate which constitute 80.43 per cent and it leads to more variations or less

consistent than the net revenue and gross revenue.

The computed results of trend and growth rate of gross revenue, rebate and

net revenue for the commodity category of paper and paper products in

Trichirapalli Commissionerate are furnished in Table 6.12.

TABLE 6.12 TREND AND GROWTH OF GROSS REVENUE, REBATE AND NET REVENUE – PAPER AND PAPER PRODUCTS Linear Trend Compound Sl. Variable Coefficients R2 Growth Rate No. a b (%) 0.610 1. Gross Revenue 5.868 0.18 3.493 (1.322) 0.030 2. Rebate 0.293 0.06 1.459 (0.725) 0.580 3. Net Revenue 5.575 0.18 3.681 (1.334)

Figures in brackets represent t-values. * Indicates the trend coefficients are statistically significant at 5 per cent level. Source: Computed data.

Table 6.12 shows that the linear trend coefficient of gross revenue, rebate and net revenue under the commodity category of paper and paper products under 185

Trichirapalli Commissionerate were positive and not statistically significant at 5

per cent level. It is concluded that there was no significant change with regard to the collection of revenue realisation for paper and paper products under this commissionerate. The compound growth rate was higher for rebate than gross revenue and net revenue for the commodity category of paper and paper products under Trichirapalli Commissionerate.

6.6. BOILER COMPONENTS AND MACHINERY

Table 6.13 indicates the details of the gross revenue relalisation, rebate and net revenue for boiler components and machinery under Tiruchirappalli

Commissionerate during the period from 2000-01 to 2009-10.

186

TABLE 6.13

GROSS REVENUE, REBATE AND NET REVENUE - BOILER COMPONENTS AND MACHINERY

(` in Crores) Year Gross Revenue Rebate Net Revenue

2000-01 8.75 0.22 8.53

2001-02 8.46 0.34 8.12

2002-03 9.21 0.47 8.74

2003-04 8.97 0.87 8.10

2004-05 7.24 0.29 6.95

2005-06 10.36 1.02 9.34

2006-07 11.24 0.97 10.27

2007-08 13.97 0.74 13.23

2008-09 17.24 1.34 15.90

2009-10 11.18 0.55 10.63 Source: Office of the Commissioner of Central Excise, Trichirapalli, 2009-10.

Table 6.13 indicates that the revenue realization during the year 2001-02 was Rs.8.46 crores as against Rs.8.75 crores during the year 2000-01, showing a

decrease of Rs..0.29 crores. But in the year 2002-03 the revenue realization was increased to Rs.9.21 crores and it was decreased to Rs.7.24 crores during the year

2004-05 and then it was increased to Rs.17.24 crores during the year 2008-09 and decreased to Rs.11.18 crores in the year 2009-10. Hence, it is concluded that there 187

was a fluctuating trend was found with regard to the revenue realization under the

commodity category of boiler components and machinery The same trend was

also followed in the case of rebate and net revenue realization through boiler

components and machinery during the study period from 2000-01 to 2009-10.

Table 6.14 presents the details about the average and stability of revenue

realization through the commodity category of boiler components and machinery

over a period under study.

TABLE 6.14 AVERAGE AND STABILITY OF GROSS REVENUE, REBATE AND NET REVENUE – CEMENT Average Standard Sl. Coefficient of Particulars (` in Crores) Deviation No. Variation (%) (` in Crores) 1 Gross Revenue 10.66 2.98 27.95

2 Rebate 0.68 0.37 54.41

3 Net Revenue 9.98 2.71 27.15 Source: Computed data.

It is found from Table 6.14 that the average amount of gross revenue, rebate and net revenue under the commodity category of boiler components and machinery were Rs.10.66 crores, Rs.0.68 crores and Rs.9.98 crores during the period under study. Regarding the stability, the coefficient of variation was found 188

higher for rebate which constitute 54.41 per cent and it leads to more variations or

less consistent than the net revenue and gross revenue.

The computed results of trend and growth rate of gross revenue, rebate and

net revenue for the commodity category of boiler components and machinery in

Trichirapalli Commissionerate are furnished in Table 6.15.

TABLE 6.15 TREND AND GROWTH OF GROSS REVENUE, REBATE AND NET REVENUE – BOILER COMPONENTS AND MACHINERY Linear Trend Compound Sl. Variable Coefficients R2 Growth Rate No. a b (%) 0.709* 1. Gross Revenue 6.760 0.52 6.445 (2.935) 0.074* 2. Rebate 0.269 0.38 14.055 (2.126) 0.634* 3. Net Revenue 6.490 0.50 6.097 (2.833) Figures in brackets represent t-values. * Indicates the trend coefficients are statistically significant at 5 per cent level. Source: Computed data.

It is understood from Table 6.15 that the linear trend coefficient of gross

revenue, rebate and gross revenue under the commodity category of boiler

components and machinery in Trichirapalli Commissionerate were positive and

statistically significant at 5 per cent level which constitute 0.709, 0.074 and 0.634.

It is concluded that the gross revenue, rebate and net revenue were increased at

the rate of Rs.0.709 crores, Rs.074 crores and Rs.0.634 crores annually during the 189

period under study. The compound growth rate was higher for rebate than gross

revenue and net revenue for the commodity category of boiler components and

machinery.

6.7. SUGAR

The details of the gross revenue relalisation, rebate and net revenue for the

product sugar under Tiruchirappalli Commissionerate during the period from

2000-01 to 2009-10 are given in Table 6.16.

TABLE 6.16 GROSS REVENUE, REBATE AND NET REVENUE - SUGAR (` in Crores) Year Gross Revenue Rebate Net Revenue

2000-01 10.24 0.63 9.61

2001-02 9.48 0.97 8.51

2002-03 9.37 1.02 8.35

2003-04 10.77 1.26 9.51

2004-05 13.64 0.94 12.70

2005-06 14.33 0.63 13.70

2006-07 11.63 0.78 10.85

2007-08 15.87 1.02 14.85

2008-09 16.31 1.34 14.97

2009-10 20.17 1.87 18.30 Source: Office of the Commissioner of Central Excise, Trichirapalli, 2009-10.

190

It is found from Table 6.16 that the revenue realization during the year

2001-02 was Rs.9.48 crores as against Rs.10.24 crores during the year 2000-01,

showing a decrease of Rs.0.76 crores. But in the year 2002-03 the revenue

realization was increased to Rs.10.77 crores and it maintained upto the year

2005-06 which constitute Rs.14.33 crores and it suddenly decreased to Rs.11.63

corres in the next year. From the year 2007-08 the gross revenue was increased to

Rs.20.17 crores in the year 2009-10. Hence, it is concluded that there was a

fluctuating trend was found with regard to the revenue realization under the

commodity category of sugar. The same trend was also followed in the case of

rebate and net revenue realization through sugar during the study period from

2000-01 to 2009-10.

The details about the average and stability of revenue realization through the commodity category of sugar over a period under study are given in

Table 6.17.

TABLE 6.17 AVERAGE AND STABILITY OF GROSS REVENUE, REBATE AND NET REVENUE – SUGAR Average Standard Sl. Coefficient of Particulars (` in Crores) Deviation No. Variation (%) (` in Crores) 1 Gross Revenue 13.18 3.54 26.86

2 Rebate 1.05 0.37 35.24

3 Net Revenue 12.13 3.31 27.29 Source: Computed data. 191

It is inferred from Table 6.17 that the average amount of gross revenue was

higher than that of rebate and net revenue under the commodity category of sugar

were Rs.13.18 crores, Rs.1.05 crores and Rs.12.13 crores during the period under

study. Regarding the stability, the coefficient of variation was found higher for

rebate which constitutes 35.24 per cent and it leads to more variations or less

consistent than the net revenue and gross revenue.

Table 6.18 presents the results of trend and growth rate of gross revenue,

rebate and net revenue for the commodity category of sugar in Trichirapalli

Commissionerate.

TABLE 6.18 TREND AND GROWTH OF GROSS REVENUE, REBATE AND NET REVENUE – SUGAR Linear Trend Compound Sl. Variable Coefficients R2 Growth Rate No. a b (%) 1.048* 1. Gross Revenue 7.416 0.80 8.075 (5.761) 0.072* 2. Rebate 0.646 0.35 6.386 (2.076) 0.975* 3. Net Revenue 6.770 0.79 8.263 (5.594)

Figures in brackets represent t-values. * Indicates the trend coefficients are statistically significant at 5 per cent level. Source: Computed data.

It is found from Table 6.18 that the linear trend coefficient of gross revenue, rebate and gross revenue under the commodity category of sugar in 192

Trichirapalli Commissionerate were positive and statistically significant at 5 per cent level which constitute 1.048, 0.072 and 0.975. It is concluded that the gross revenue, rebate and net revenue were increased at the rate of Rs.1.048 crores,

Rs.0.072 crores and Rs.0.975 crores per annum during the period under study.

The compound growth rate was lower for rebate than gross revenue and net revenue for the commodity category of sugar.

6.8. IRON AND STEEL

Table 6.19 depicts the details of the gross revenue relalisation, rebate and net revenue for the product iron and steel under Tiruchirappalli Commissionerate during the period from 2000-01 to 2009-10.

193

TABLE 6.19

GROSS REVENUE, REBATE AND NET REVENUE - IRON AND STEEL (` in Crores) Year Gross Revenue Rebate Net Revenue

2000-01 4.64 0.04 4.60

2001-02 5.96 0.21 5.75

2002-03 4.22 0.64 3.58

2003-04 6.47 0.78 5.69

2004-05 6.58 0.59 5.99

2005-06 8.97 0.87 8.10

2006-07 9.35 0.94 8.41

2007-08 11.47 1.06 10.41

2008-09 13.48 1.34 12.14

2009-10 6.81 0.14 6.67 Source: Office of the Commissioner of Central Excise, Trichirapalli, 2009-10.

Table 6.19 reveals that the revenue realization during the year 2001-02 was

Rs.5.96 crores as against Rs.4.64 crores during the year 2000-01, showing a increase of Rs.1.32 crores. But in the year 2002-03 the revenue realization was decreased to Rs.4.22 crores and it was increased upto the year 2008-09 which constitute Rs.13.48 crores. It suddenly decreased to Rs.6.81 crores in the year

2009-10. Hence, it is concluded that there was a fluctuating trend was found with regard to the revenue realization under the commodity category of iron and steel. 194

The same trend was also followed in the case of rebate and net revenue realization

through iron and steel during the study period from 2000-01 to 2009-10.

The details about the average and stability of revenue realization through the commodity category of iron and steel over a period under study are shown in

Table 6.20.

TABLE 6.20 AVERAGE AND STABILITY OF GROSS REVENUE, REBATE AND NET REVENUE – IRON AND STEEL Average Standard Sl. Coefficient of Particulars (` in Crores) Deviation No. Variation (%) (` in Crores) 1 Gross Revenue 7.79 2.98 38.25

2 Rebate 0.66 0.42 63.64

3 Net Revenue 7.13 2.64 37.03 Source: Computed data.

It is portrayed from Table 6.20 that the average amount of gross revenue was higher than that of net revenue and rebate under the commodity category of iron and steel which constitute Rs.7.79 crores, Rs.7.13 crores and Rs.0.66 crores respectively during the study period. Regarding the stability, the coefficient of variation was found higher for rebate which constitutes 63.64 per cent and it leads to more variations or less stability than the net revenue and gross revenue.

195

Table 6.21 shows the results of trend and growth rate of gross revenue,

rebate and net revenue for the commodity category of iron and steel in

Trichirapalli Commissionerate.

TABLE 6.21 TREND AND GROWTH OF GROSS REVENUE, REBATE AND NET REVENUE – IRON AND STEEL Linear Trend Compound Sl. Variable Coefficients R2 Growth Rate No. a b (%) 0.723* 1. Gross Revenue 3.813 0.54 9.902 (3.070) 0.070 2. Rebate 0.272 0.25 18.292 (1.652) 0.653* 3. Net Revenue 3.541 0.56 9.773 (3.187)

Figures in brackets represent t-values. * Indicates the trend coefficients are statistically significant at 5 per cent level. Source: Computed data.

It is illustrated from Table 6.21 that the linear trend coefficient of gross revenue and net revenue under the commodity category of iron and steel products under Trichirapalli Commissionerate were positive and statistically significant at

5 per cent level which constitute 0.723 and 0.653. It leads to an increase of the gross revenue and net revenue at the rate of Rs.0.723crores and Rs.0.653 crores per annum during the period under study. But in the case of rebate, the trend coefficient was positive and not statistically significant at 5 per cent level. The compound growth rate was higher for rebate than gross revenue and net revenue 196

for the commodity category of iron and steel products under Trichirapalli

Commissionerate.

6.9. CIGARETTES AND CHEWING TOBACCO

Table 6.22 shows the details of the gross revenue relalisation, rebate and

net revenue for the product cigarettes and chewing tobacco under Tiruchirappalli

Commissionerate during the period from 2000-01 to 2009-10.

TABLE 6.22

GROSS REVENUE, REBATE AND NET REVENUE - CIGARETTES AND CHEWING TOBACCO (` in Crores) Year Gross Revenue Rebate Net Revenue

2000-01 5.33 0.08 5.25

2001-02 4.89 0.12 4.77

2002-03 4.25 0.18 4.07

2003-04 5.97 0.37 5.60

2004-05 6.37 0.74 5.63

2005-06 7.11 0.97 6.14

2006-07 8.45 1.01 7.44

2007-08 8.74 1.18 7.56

2008-09 9.95 0.97 8.98

2009-10 10.48 1.45 9.03 Source: Office of the Commissioner of Central Excise, Trichirapalli, 2009-10. 197

It is found from Table 6.22 that the revenue realization during the year

2001-02 was Rs.4.89 crores under the product category of cigarettes and chewing

tobacco, as against Rs.5.33 crores during the year 2000-01, showing a decrease of

Rs.0.44 crores. But in the year 2002-03 the revenue realization was decreased to

Rs.4.25 crores and it was increased upto the year 2009-10 which constitute

Rs.10.48 crores. Hence, it is concluded that there was a increasing trend was

found with regard to the revenue realization under the commodity category of

cigarettes and chewing tobacco from the year 2003-04. In the case of rebate, the

increasing trend was found from the year 2000-01 to 2007-08.

The details about the average and stability of revenue realization through

the commodity category of cigarettes and chewing tobacco over a period under

study are presented in Table 6.23.

TABLE 6.23 AVERAGE AND STABILITY OF GROSS REVENUE, REBATE AND NET REVENUE – CIGARETTES AND CHEWING TOBACCO Average Standard Sl. Coefficient of Particulars (` in Crores) Deviation No. Variation (%) (` in Crores) 1 Gross Revenue 7.15 2.16 30.21

2 Rebate 0.71 0.49 69.01

3 Net Revenue 6.45 1.72 26.67 Source: Computed data. 198

It is found from Table 6.23 that the average amount of gross revenue was

higher than that of net revenue and rebate under the commodity category of

cigarettes and chewing tobacco which constitute Rs.7.15 crores, Rs.6.45 crores

and Rs.0.71 crores respectively during the study period. Regarding the stability, the coefficient of variation was found higher for rebate which constitutes 69.01 per cent and it leads to more variations or less stability than the net revenue and gross revenue.

Table 6.24 presents the results of trend and growth rate of gross revenue, rebate and net revenue for the commodity category of cigarettes and chewing tobacco in Trichirapalli Commissionerate.

TABLE 6.24 TREND AND GROWTH OF GROSS REVENUE, REBATE AND NET REVENUE – CIGARETTES AND CHEWING TOBACCO Linear Trend Compound Sl. Variable Coefficients R2 Growth Rate No. a b (%) 0.681* 1. Gross Revenue 3.407 0.91 10.059 (9.104) 0.154* 2. Rebate -0.140 0.92 38.205 (9.428) 0.527* 3. Net Revenue 3.548 0.86 8.423 (6.977)

Figures in brackets represent t-values. * Indicates the trend coefficients are statistically significant at 5 per cent level. Source: Computed data.

199

Table 6.24 shows that the linear trend coefficient of gross revenue, rebate and net revenue under the commodity category of cigarettes and chewing tobacco in Trichirapalli Commissionerate were positive and statistically significant at 5 per cent level which constitute 0.681, 0.154 and 0.527. It is concluded that the gross revenue, rebate and net revenue were increased at the rate of Rs.0.681 crores, Rs.0.154 crores and Rs.0.527 crores per annum during the period under study. The compound growth rate was lower for rebate than gross revenue and net revenue for the commodity category of cigarettes and chewing tobacco.

6.10. ARTICLES OF IRON AND STEEL

Table 6.25 indicates the details of the gross revenue relalisation, rebate and net revenue for articles of iron and steel under Tiruchirappalli Commissionerate during the period from 2000-01 to 2009-10.

200

TABLE 6.25

GROSS REVENUE, REBATE AND NET REVENUE - ARTICLES OF IRON AND STEEL (` in Crores) Year Gross Revenue Rebate Net Revenue

2000-01 2.36 0.01 2.35

2001-02 4.57 0.04 4.53

2002-03 5.91 0.09 5.82

2003-04 6.14 0.11 6.03

2004-05 6.88 0.18 6.70

2005-06 6.34 0.49 5.85

2006-07 6.72 0.74 5.98

2007-08 7.04 0.87 6.17

2008-09 7.48 0.99 6.49

2009-10 4.80 0.22 4.58 Source: Office of the Commissioner of Central Excise, Trichirapalli, 2009-10.

It is found from Table 6.25 that the revenue realization during the year

2001-02 was Rs.4.57 crores under the product category of articles of iron and steel, as against Rs.2.36 crores during the year 2000-01, showing an increase of

Rs.2.21 crores. From the year 2002-03 the revenue realization was Rs.5.91 crores and it was increased upto the year 2008-09 which constitute Rs.7.48 crores and

then it suddenly decreased to Rs.4.80 crores in the year 2009-10. Hence, it is

concluded that there was fluctuating trend was found with regard to the revenue 201

realization under the commodity category of articles of iron and steel. In the case

of rebate and net revenue realization the fluctuating trend was found from the year

2000-01 to 2009-10.

Table 6.26 gives the details about the average and stability of revenue realization through the commodity category of articles of iron and steel over a period under study.

TABLE 6.26 AVERAGE AND STABILITY OF GROSS REVENUE, REBATE AND NET REVENUE – ARTICLES OF IRON AND STEEL Average Standard Sl. Coefficient of Particulars (` in Crores) Deviation No. Variation (%) (` in Crores) 1 Gross Revenue 5.82 1.53 26.29

2 Rebate 0.37 0.37 100.00

3 Net Revenue 5.45 1.3 23.85 Source: Computed data.

It is understood from Table 6.26 that the average amount of gross revenue was higher than that of net revenue and rebate under the commodity category of articles of iron and steel which constitute Rs.5.82 crores, Rs.5.45 crores and

Rs.0.37 crores respectively during the study period. Regarding the stability, the

coefficient of variation was found higher for rebate which constitutes 100.00 per 202

cent and it leads to more variations or less stability than the net revenue and gross revenue.

Table 6.27 depicts the results of trend and growth rate of gross revenue, rebate and net revenue for the commodity category of articles of iron and steel in

Trichirapalli Commissionerate.

TABLE 6.27 TREND AND GROWTH OF GROSS REVENUE, REBATE AND NET REVENUE – ARTICLES OF IRON AND STEEL Linear Trend Compound Sl. Variable Coefficients R2 Growth Rate No. a b (%) 0.298* 1. Gross Revenue 4.184 0.35 6.830 (2.061) 0.088* 2. Rebate -0.114 0.53 51.317 (2.995) 0.209 3. Net Revenue 4.298 0.24 5.384 (1.574)

Figures in brackets represent t-values. * Indicates the trend coefficients are statistically significant at 5 per cent level. Source: Computed data.

It is inferred from Table 6.27 that the linear trend coefficient of gross revenue and rebate under the commodity category of articles of iron and steel in

Trichirapalli Commissionerate were positive and statistically significant at 5 per cent level which constitute 0.298 and 0.088. It is concluded that the gross revenue and rebate were increased at the rate of Rs.0.298 crores and Rs.0.088 crores per annum during the period under study. The compound growth rate was lower for 203

rebate than gross revenue and net revenue for the commodity category of articles

of iron and steel.

6.11. PARTS OF MOTOR VEHICLES

The details of the gross revenue relalisation, rebate and net revenue for

parts of motor vehicles under Tiruchirappalli Commissionerate during the period from 2000-01 to 2009-10 are given in Table 6.28.

TABLE 6.28

GROSS REVENUE, REBATE AND NET REVENUE - PARTS OF MOTOR VEHICLES (` in Crores) Year Gross Revenue Rebate Net Revenue

2000-01 1.87 0.01 1.86

2001-02 2.45 0.02 2.43

2002-03 1.98 0.01 1.97

2003-04 2.01 0.04 1.97

2004-05 3.47 0.08 3.39

2005-06 3.98 0.03 3.95

2006-07 4.68 0.11 4.57

2007-08 4.11 0.06 4.05

2008-09 6.81 0.77 6.04

2009-10 8.38 0.93 7.45 Source: Office of the Commissioner of Central Excise, Trichirapalli, 2009-10.

204

Table 6.28 shows that the revenue realization during the year 2001-02 was

Rs.2445 crores under the product category of parts of motor vehicles, as against

Rs.1.87 crores during the year 2000-01, showing an increase of Rs.0.58 crores.

Immediately it was decreased to Rs.1.98 cores in the year 2002-03. And the it was

decreased upto Rs.4.68 crores in the year 2006-07 and decreased to Rs. 4.11 cores

in the next year, 2007-08. But it was increased to Rs.8.38 crores in the year

2009-10. Hence, it is concluded that there was fluctuating trend was found with

regard to the revenue realization under the commodity category of parts of motor

vehicles. In the case of rebate and net revenue realization the fluctuating trend

was found from the year 2000-01 to 2009-10.

Table 6.29 presents the details about the average and stability of revenue

realization through the commodity category of parts of motor vehicles over a

period under study.

TABLE 6.29 AVERAGE AND STABILITY OF GROSS REVENUE, REBATE AND NET REVENUE – PARTS OF MOTOR VEHICLES Average Standard Sl. Coefficient of Particulars (` in Crores) Deviation No. Variation (%) (` in Crores) 1 Gross Revenue 3.97 2.18 54.91

2 Rebate 0.21 0.34 161.90

3 Net Revenue 3.77 1.87 49.60 Source: Computed data. 205

It is observed from Table 6.29 that the average amount of gross revenue

was higher than that of net revenue and rebate under the commodity category of

parts of motor vehicles which constitute Rs.3.97 crores, Rs.3.77 crores and

Rs.0.21 crores respectively during the study period. Regarding the stability, the

coefficient of variation was found higher for rebate which constitutes 161.90 per

cent and it leads to more variations or less stability than the net revenue and gross revenue.

The computed results of trend and growth rate of gross revenue, rebate and net revenue for the commodity category of parts of motor vehicles in Trichirapalli

Commissionerate are given in Table 6.30.

TABLE 6.30 TREND AND GROWTH OF GROSS REVENUE, REBATE AND NET REVENUE – PARTS OF MOTOR VEHICLES Linear Trend Compound Sl. Variable Coefficients R2 Growth Rate No. a b (%) 0.656* 1. Gross Revenue 0.364 0.83 17.763 (6.248) 0.084* 2. Rebate -0.258 0.56 59.816 (3.167) 0.571* 3. Net Revenue 0.623 0.86 16.460 (6.890)

Figures in brackets represent t-values. * Indicates the trend coefficients are statistically significant at 5 per cent level. Source: Computed data.

206

Table 6.30 shows that the linear trend coefficient of gross revenue, rebate and net revenue under the commodity category of parts of motor vehicles in

Trichirapalli Commissionerate were positive and statistically significant at 5 per cent level which constitute 0.656, 0.084 and 0.571. It is concluded that the gross revenue, rebate and net revenue were increased at the rate of Rs.0.656 crores,

Rs.0.084 crores and Rs.0.571 crores per annum during the period under study.

The compound growth rate was higher for rebate than gross revenue and net revenue for the commodity category of parts of motor vehicles.

PERFORMANCE OF TRICHIRAPALLI COMMISSIONERATE - TOP 10 COMPANY-WISE ANALYSIS

In this section, an attempt has been made to analyse the performance evaluation of Tiruchirappalli Commissionerate with regard to the central excise revenue realisation in respect of top 10 assessess. To measure the performance evaluation with regard to revenue realisation for the following ten major companies under the Tiruchirappalli Commissionerate:

(i) M/s. BHEL (HPBP) Tiruchirappalli

(ii) M/s. CPCL, Panagudi, Nagapattinam

(iii) M/s. O.N.G.C., Neravy

(iv) M/s. Madras Cements

(v) M/s. Tamil Nadu Newsprints Limited 207

(vi) M/s. Dalmia Cements

(vii) M/s. India Cements Limited

(viii) M/s. Chettinadu Cements

(ix) M/s. Grasim Industries Limited

(x) M/s. Cethar Vessels Private Ltd., Tiruchirappalli.

Table 6.31 presents the details about the revenue realisation through

Personal Ledger Account (PLA) of top most companies under Tiruchirappalli

Commissionerate during the period from 2000-01 to 2009-10.

TABLE 6.31 COMPANY-WISE REVENUE REALIZATION THROUGH PERSONAL LEDGER ACCOUNT (PLA) (Rs.in Crores) Tamil Madras Dalmia India Chettinadu Grasim Cethar Year BHEL CPCL ONGC Nadu Cements Cements Cements Cements Industries Vessels Newsprints 2000-01 8.69 11.36 2.31 3.55 0.89 2.33 1.65 2.33 2.52 2.44 2001-02 9.22 13.58 2.78 4.37 1.02 2.64 2.47 2.46 2.68 2.62 2002-03 6.14 15.97 4.89 4.96 1.54 3.74 3.87 2.87 3.29 3.64 2003-04 4.97 14.33 4.73 5.21 1.36 4.36 2.49 3.01 3.24 3.21 2004-05 3.98 15.29 5.98 5.53 1.39 3.08 2.76 3.72 3.30 2.85 2005-06 23.00 13.79 7.92 10.53 1.50 8.35 3.48 3.24 2.26 3.46 2006-07 36.27 17.47 8.09 9.45 1.97 7.69 3.88 3.90 2.97 3.64 2007-08 41.78 18.96 10.44 11.27 2.36 7.11 4.02 5.63 3.84 4.11 2008-09 58.69 21.54 12.97 14.62 3.89 8.83 4.68 4.89 4.28 4.97 2009-10 74.33 35.11 15.54 17.78 5.22 10.42 5.93 6.18 5.69 5.31

208 209

It is inferred from Table 6.31 that the revenue realization under

Trichirapalli Commissionerate through Personal Ledger Account of BHEL during the year 2001-02 was Rs.9.22 crores, as against Rs.8.69 crores during the year

2000-01, showing an increase of Rs.0.53 crores. From the year 2005-06 the revenue realization was tremendously increased from Rs.23.00 crores to Rs.74.33 crores in the year 2009-10.

The revenue realization under Trichirapalli Commissionerate through

Personal Ledger Account of CPCL during the year 2001-02 was Rs.13.58 crores, as against Rs.11.36 crores during the year 2000-01, showing an increase of

Rs.2.22 crores. From the year 2006-07 the revenue realization was increased from Rs.17.47 crores to Rs.35.11 crores in the year 2009-10.

The PLA revenue realization under Trichirapalli Commissionerate of

ONGC during the year 2001-02 was Rs.2.78 crores, as against Rs.2.31 crores during the year 2000-01, showing an increase of Rs.0.47 crores. From the year

2004-05 the revenue realization was increased from Rs.5.98 crores to Rs.15.54 crores in the year 2009-10.

It is found that the PLA revenue realization under Trichirapalli

Commissionerate of Madras Cements during the year 2001-02 was Rs.4.37 crores, as against Rs.3.55 crores during the year 2000-01, showing an increase of Rs.0.82 crores. But from the year 2000-01 the revenue realization has a increasing trend 210

upto the year 2005-06 which constitute Rs.10.53 crores. Immediately in the next year it was decreased to Rs.9.45 crores and then it was increased upto the year

2009-10 which constitute Rs.17.78 crores.

The PLA revenue realization under Trichirapalli Commissionerate of

Tamilnadu Newsprint during the year 2001-02 was Rs.1.02 crores, as against

Rs.0.89 crores during the year 2000-01, showing an increase of Rs.0.13 crores.

The revenue realization through Tamilnadu Newsprint was increased at more than five times during the period under study.

It is found that the PLA revenue realization under Trichirapalli

Commissionerate of Dalimia Cements Limited was increased at more than four times during the period under study. In the year 2000-01 the revenue realization through Dalmia Cements Limted was Rs.2.33 crores and it was increased upto

Rs.10.42 crores in the year 2009-10.

Table 6.31 also reveals that the PLA revenue realization under Trichirapalli

Commissionerate of India Cements Limited during the year 2001-02 was Rs.2.47 crores, as against Rs.1.65 crores during the year 2000-01, showing an increase of

Rs.0.82 crores. The revenue realization through India Cements Limited was increased at more than three times during the period under study.

211

It is observed that the PLA revenue realization under Trichirapalli

Commissionerate of Chettinad Cements Limited during the year 2001-02 was

Rs.2.46 crores as against Rs.2.33 crores during the year 2000-01, showing an increase of Rs.0.13 crores. The revenue realization through Chettinadu Cements

Limited was increased at more than two times during the period under study.

It is understood that the PLA revenue realization under Trichirapalli

Rs.10.42 crores in the year 2009-10.

The PLA revenue realization under Trichirapalli Commissionerate of

Grasim Industries during the year 2001-02 was Rs.2.68 crores as against Rs.2.52 crores during the year 2000-01, showing an increase of Rs.0.16 crores. The revenue realization through Grasim Industries under this Commissionerate was increased at more than two times during the study period.

It is inferred that the PLA revenue realization under Trichirapalli

Commissionerate of Cethar Vessels was increased at more than two times during the period under study. In the year 2000-01, the revenue was Rs.2.44 crores and it was increased to Rs.5.31 corres in the year 2009-10.

212

Figure 6.1 Company-Wise Revenue Realization Through Personal Ledger Account (PLA)

Rs. in Crores 30

0 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 Year BHEL CPCL ONGC Madras Cements Tamil Nadu Newsprints Dalmia Cements India Cements Chettinadu Cements Grasim Industries Cethar Vessels

213

Table 6.32 presents the details about the average and stability of PLA

revenue realization through the top 10 companies under Trichirappalli

Commissionerate over a period under study.

TABLE 6.32 AVERAGE AND STABILITY OF PLA REVENUE – TOP 10 ASSESSESS Average Standard Sl. Coefficient of Company ( ` in Crores) Deviation No. Variation (%) ( ` in Crores) 1. BHEL 26.71 25.09 93.93

2. CPCL 17.74 6.77 38.16

3. ONGC 7.57 4.34 57.33

4. Madras Cements 8.73 4.82 55.21 Tamil Nadu 5. 2.11 1.39 65.88 Newsprints 6. Dalmia Cements 5.86 2.94 50.17

7. India Cements 3.52 1.24 35.23

8. Chettinadu Cements 3.82 1.33 34.82

9. Grasim Industries 3.41 1.00 29.33

10. Cethar Vessels 3.63 0.95 26.17 Source: Computed data.

It is found from Table 6.32 that the average amount of PLA revenue

realization was higher through BHEL which constitute Rs.26.71 crores. It is

followed by CPCL, Madras Cements, ONGC, Dalmia Cements, Chettinadu

Cements, Cethar Vessels, India Cements and Grasim Industries. Regarding the 214

stability, the coefficient of variation was found higher for BHEL which constitutes

93.93 per cent and it leads to more variations or less stability than the revenue

realisation through other companies.

The computed results of trend and growth rate of PLA revenue realisation

through top 10 companies under Trichirapalli Commissionerate are given in

Table 6.33.

TABLE 6.33 TREND AND GROWTH OF PLA REVENUE REALIZATION – TOP 10 ASSESSESS

Linear Trend Compound Sl. Company Coefficients R2 Growth Rate No. a b (%) 7.442* 1. BHEL -14.230 0.81 35.049 (5.779) 1.771* 2. CPCL 7.995 0.63 9.340 (3.678) 1.394* 3. ONGC -0.107 0.95 22.600 (11.842) 1.509* 4. Madras Cements 0.424 0.90 19.567 (8.370) Tamil Nadu 0.394* 5. -0.056 0.74 18.936 Newsprints (4.790) 0.898* 6. Dalmia Cements 0.913 0.85 18.382 (6.828) 0.361* 7. India Cements 1.535 0.78 11.350 (5.256) 0.410* 8. Chettinadu Cements 1.568 0.87 11.253 (7.263) 0.246* 9. Grasim Industries 2.052 0.55 6.725 (3.150) 0.282* 10. Cethar Vessels 2.074 0.81 7.973 (5.843) Figures in brackets represent t-values. * Indicates the trend coefficients are statistically significant at 5 per cent level. Source: Computed data. 215

Table 6.33 reveals that the linear trend coefficient of PLA revenue

realization through all the top 10 companies under Trichirapalli Commissionerate were positive and statistically significant at 5 per cent level. It is found that the highest coefficient was 7.442 for BHEL which leads to the increase at the rate of

Rs.7.442 crores per annum during the study period and lower for Grasim

Industries which constitute 0.246 leads to the increase of revenue at the rate of

Rs.0.246 crores during the study period. The compound growth rate was higher

for BHEL which constitute 35.049 per cent and lower for Grasim Industries which

constitute 6.725 per cent.

CHAPTER V II

SUMMARY OF FINDINGS AND SUGGESTIONS CHAPTER VII

SUMMARY OF FINDINGS AND SUGGESTIONS

Central excise is a major source of revenue of the Central Government and it is more than the amount of income tax. Before the enactment of Central Excise

known as Central Excises and Salt Act, 1944. This Act is still in force in another

name ‘Central Excise Act’.

In a developing country like India, taxation for economic development

should aim at fully mobilizing the available resources. Tax collections represent

collective savings of the economy. Where private savings are inadequate, it

becomes necessary to rely more and more on collective savings. But care has to

be taken to ensure that increased taxation does not affect the incentive of capital

accumulation and business investment.

In the Indian fiscal system the Centre enjoys more powers in levying taxes

than the States. It has many elastic sources of revenue. It has a wide national tax 217

base. The important Central taxes are income tax, corporate tax, wealth tax,

customs duties and excise duties.

7.1 FINDINGS

¾ It is revealed that the gross revenue realization in Trichy I Division was

Rs.145.24 crores in the year 2000-2001 and it has increased to Rs.192.64

crores during the year 2009-10.

¾ It has been observed that the average amount of gross revenue, rebate and

net revenue were Rs.154.51 crores, Rs.1.11 crores and 153.40 during the

period under study. Regarding the stability, the coefficient of variation

was found higher for rebate which constitute 51.35 per cent and it leads to

less consistent or stability than net revenue and gross revenue which

constitute 22.40 and 22.21 per cent respectively.

¾ It is found that the linear trend coefficient (-2.829) of gross revenue in

Trichy I Division was negative and statistically not significant at 5 per cent

level. Regarding the net revenue, the trend coefficient (-2.881) was

negative and statistically not significant and compound growth rate was -

2.178 per cent.

218

¾ It is concluded from the above analysis that there was an increasing and

fluctuating trend exist in Trichy II Division Commissionerate with regard

to gross revenue, rebate and net revenue during the period under study.

¾ It is shown that the average amount of gross revenue, rebate and net

revenue were Rs.93.63 crores, Rs.2.72 crores and 90.91 during the study

period. Regarding the stability of the revenue analysis, the coefficient of

variation was found higher for rebate which constitute 44.85 per cent and it

leads to less consistent or stability than net revenue and gross revenue

which constitute 14.07 and 13.96 per cent respectively.

¾ It is observed that the linear trend coefficient (3.742) of gross revenue in

Trichy II Division was positive and statistically significant at 5 per cent

level. It leads to an increase of the gross revenue at the rate of Rs.3.742

crores per annum.

¾ It is concluded that there was an increasing and fluctuating trend exist in

Thanjavur Division of Trichy Commissionerate with regard to gross

revenue, rebate and net revenue during the period under study.

¾ Regarding the stability of the revenue analysis for Thanjavur division, the

coefficient of variation was found higher for rebate which constitute 83.72

per cent and it leads to less consistent or stability than that of net revenue 219

and gross revenue which constitute 11.99 per cent and 11.93 per cent

respectively.

¾ In the case of rebate under Thanjavur Division, the trend coefficient

(0.091) was positive and statistically significant at 5 per cent level. It leads

to an increase of the rebate at the rate of Rs.0.091 crores per annum.

¾ It is concluded from the above analysis that there was an decreasing trend

exist in Karur Division of Trichy Commissionerate with regard to gross

revenue and net revenue during the period under study.

¾ It is portrayed that the average amount of gross revenue, rebate and net

revenue through Karur Division were Rs.237.30 crores, Rs.0.35 crores and

236.95 respectively during the period under study.

¾ It is found that the linear trend coefficient (-23.841) of gross revenue and

net revenue (-23.875) in Karur Division were negative and statistically

significant at 5 per cent level. It leads to an decrease at the rate of

Rs.23.841 crores and Rs.23.875 crores per annum during the study period.

¾ It is concluded that there was an increasing and fluctuating trend exist in

Kariakal Division of Trichy Commissionerate with regard to gross revenue,

rebate and net revenue during the period under study.

220

¾ Regarding the stability of the revenue analysis for Karaikal Division, the

coefficient of variation was found higher for rebate which constitute 74.51

per cent and it leads to less consistent or stability and more variations than

that of net revenue and gross revenue which constitute 12.96 per cent and

12.91 per cent respectively.

¾ It is shown that the linear trend coefficient (-0.435) of gross revenue and

net revenue (-0.492) in Karaikal Division were negative and not

statistically significant at 5 per cent level. It leads to an decrease at the rate

of Rs.0.435 crores and Rs.0.492 crores per annum during the period under

study.

¾ It is found that the revenue realization in 2003-04 was Rs.384.12 crores as

against Rs.201.23 crores during the year 2000-01. It indicated that there

was an increasing trend during this period for the product cement under

Trichirappalli Commissionerate. But from the year 2004-05 the revenue

realization was Rs.297.45 crores and it was increased upto Rs.436.05

during the year 2008-09 and then it was decreased to Rs.218.29 crores.

¾ It is revealed that the average amount of gross revenue, rebate and net

revenue under the commodity category of cement were Rs.327.55 crores,

Rs.1.41 crores and 326.14 during the period under study.

. 221

¾ It is observed that the linear trend coefficient of gross revenue and net

revenue under the commodity category of cement in Trichirapalli

Commissionerate were positive and not statistically significant at 5 per cent

level which constitute 10.339 and 10.148.

¾ It is found that the revenue realization under the commodity category of

petroleum products in 2003-04 was Rs.47.96 crores as against Rs.23.87

crores during the year 2000-01. It indicated that there was an increasing

trend during this period. But from the year 2004-05 the revenue realization

was Rs.43.24 crores and it was increased upto Rs.68.25 during the year

2008-09 and then it was decreased to Rs.61.56 crores.

¾ It is understood that the average amount of gross revenue, rebate and net

revenue under the commodity category of petroleum products were

Rs.46.65 crores, Rs.0.56 crores and Rs.46.09 croes during the period under

study. Regarding the stability, the coefficient of variation was found

higher for rebate which constitute 78.57 per cent and it leads to more

variations or less consistent than the net revenue and gross revenue which

constitute 29.07 per cent and 28.66 per cent respectively.

¾ It is inferred that the linear trend coefficient of gross revenue, rebate and

gross revenue under the commodity category of petroleum products were

positive and statistically significant and concluded that the gross revenue, 222

rebate and net revenue were increased at the rate of Rs.0.510 crores,

Rs.012 crores and Rs.4.137 crores annually during the period under study.

¾ It is concluded that there was a fluctuating trend was found with regard to

the revenue realization under the commodity category of chemical and

chemical products. The same trend was also followed in the case of rebate

and net revenue realization through chemical and chemical products during

the study period.

¾ It is shown that the average amount of gross revenue, rebate and net

revenue under the commodity category of chemical and chemical products

were Rs.10.47 crores, Rs.0.03 crores and Rs.10.44 crores during the period

under study.

¾ It is illustrated that the linear trend coefficient of gross revenue and net

revenue under the commodity category of chemical and chemical products

under Trichirapalli Commissionerate were positive and statistically

significant at 5 per cent level which leads to an increase of the gross

revenue and net revenue at the rate of Rs.1.071crores and Rs.1.072 crores

per annum during the period under study.

¾ It is observed that the revenue realization in 2002-03 was Rs.7.69 crores as

against Rs.5.78 crores during the year 2000-01. But in the year 2004-05 the

revenue realization was Rs.8.98 crores and it was increased upto Rs.17.50 223

crores during the year 2008-09 and then it was suddenly decreased to

Rs.2.99 crores during the year 2009-10 because of the increase of price for

paper and paper products.

¾ It is inferred that the average amount of gross revenue, rebate and net

revenue under the commodity category of paper and paper products were

Rs.9.23 crores, Rs.0.46 crores and Rs.8.77 crores during the period under

study. Regarding the stability, the coefficient of variation was found

higher for rebate which constitute 80.43 per cent and it leads to more

variations or less consistent than the net revenue and gross revenue.

¾ It is concluded that there was no significant change with regard to the

collection of revenue realisation for paper and paper products under this

commissionerate. The compound growth rate was higher for rebate than

gross revenue and net revenue for the commodity category of paper and

paper products under Trichirapalli Commissionerate.

¾ It is depicted that the revenue realization under boiler components and

machinery during the year 2001-02 was Rs.8.46 crores as against Rs.8.75

crores during the year 2000-01, showing a decrease of Rs..0.29 crores. It is

concluded that there was a fluctuating trend was found with regard to the

revenue realization under the commodity category of boiler components

and machinery The same trend was also followed in the case of rebate and 224

net revenue realization through boiler components and machinery during

the study period from 2000-01 to 2009-10.

¾ It is found that the average amount of gross revenue, rebate and net

revenue under the commodity category of boiler components and

machinery were Rs.10.66 crores, Rs.0.68 crores and Rs.9.98 crores during

the period under study. Regarding the stability, the coefficient of variation

was found higher for rebate which constitute 54.41 per cent and it leads to

more variations or less consistent than the net revenue and gross revenue.

¾ It is concluded that the gross revenue, rebate and net revenue were

increased at the rate of Rs.0.709 crores, Rs.074 crores and Rs.0.634 crores

annually during the period under study. The compound growth rate was

higher for rebate than gross revenue and net revenue for the commodity

category of boiler components and machinery.

¾ It is concluded that there was a fluctuating trend was found with regard to

the revenue realization under the commodity category of sugar. The same

trend was also followed in the case of rebate and net revenue realization

through sugar during the study period from 2000-01 to 2009-10.

¾ It is inferred that the average amount of gross revenue was higher than that

of rebate and net revenue under the commodity category of sugar were 225

Rs.13.18 crores, Rs.1.05 crores and Rs.12.13 crores during the period

under study.

¾ It is concluded that the gross revenue, rebate and net revenue were

increased at the rate of Rs.1.048 crores, Rs.0.072 crores and Rs.0.975

crores per annum during the period under study. The compound growth

rate was lower for rebate than gross revenue and net revenue for the

commodity category of sugar.

¾ The analysis reveals that the revenue realization under the commodity

category of iron and steel during the year 2001-02 was Rs.5.96 crores as

against Rs.4.64 crores during the year 2000-01, showing a increase of

Rs.1.32 crores. But in the year 2002-03 the revenue realization was

decreased to Rs.4.22 crores and it was increased upto the year 2008-09

which constitute Rs.13.48 crores. It suddenly decreased to Rs.6.81 crores

in the year 2009-10.

¾ Regarding the stability, the coefficient of variation was found higher for

rebate which constitutes 63.64 per cent and it leads to more variations or

less stability than the net revenue and gross revenue under the commodity

category of iron and steel.

226

¾ It is inferred that the linear trend coefficient of gross revenue and net

revenue under the commodity category of iron and steel products under

Trichirapalli Commissionerate were positive and statistically significant at

5 per cent level which constitute 0.723 and 0.653. It leads to an increase of

the gross revenue and net revenue at the rate of Rs.0.723crores and

Rs.0.653 crores per annum during the period under study.

¾ It is concluded that there was a increasing trend was found with regard to

the revenue realization under the commodity category of cigarettes and

chewing tobacco from the year 2003-04. In the case of rebate, the

increasing trend was found from the year 2000-01 to 2007-08.

¾ It is found that the average amount of gross revenue was higher than that of

net revenue and rebate under the commodity category of cigarettes and

chewing tobacco which constitute Rs.7.15 crores, Rs.6.45 crores and

Rs.0.71 crores respectively during the study period.

¾ It is concluded that the gross revenue, rebate and net revenue were

increased at the rate of Rs.0.681 crores, Rs.0.154 crores and Rs.0.527

crores per annum during the period under study. The compound growth

rate was lower for rebate than gross revenue and net revenue for the

commodity category of cigarettes and chewing tobacco.

227

¾ It is found that the revenue realization during the year 2001-02 was Rs.4.57

crores under the product category of articles of iron and steel, as against

Rs.2.36 crores during the year 2000-01, showing an increase of Rs.2.21

crores. It is concluded that there was fluctuating trend was found with

regard to the revenue realization under the commodity category of articles

of iron and steel. In the case of rebate and net revenue realization the

fluctuating trend was found from the year 2000-01 to 2009-10.

¾ The average amount of gross revenue was higher than that of net revenue

and rebate under the commodity category of articles of iron and steel which

constitute Rs.5.82 crores, Rs.5.45 crores and Rs.0.37 crores respectively

during the study period. Regarding the stability, the coefficient of

variation was found higher for rebate which constitutes 100.00 per cent and

it leads to more variations or less stability than the net revenue and gross

revenue.

¾ It is inferred that the linear trend coefficient of gross revenue and rebate

under the commodity category of articles of iron and steel in Trichirapalli

Commissionerate were positive and statistically significant at 5 per cent

level which constitute 0.298 and 0.088. It is concluded that the gross

revenue and rebate were increased at the rate of Rs.0.298 crores and

Rs.0.088 crores per annum during the period under study. 228

¾ It is concluded that there was fluctuating trend was found with regard to

the revenue realization under the commodity category of parts of motor

vehicles. In the case of rebate and net revenue realization the fluctuating

trend was found from the year 2000-01 to 2009-10.

¾ The average amount of gross revenue was higher than that of net revenue

and rebate under the commodity category of parts of motor vehicles which

constitute Rs.3.97 crores, Rs.3.77 crores and Rs.0.21 crores respectively

during the study period.

¾ It is concluded that the gross revenue, rebate and net revenue were

increased at the rate of Rs.0.656 crores, Rs.0.084 crores and Rs.0.571

crores per annum during the period under study. The compound growth

rate was higher for rebate than gross revenue and net revenue for the

commodity category of parts of motor vehicles.

¾ It is found that the revenue realization under Trichirapalli Commissionerate

through Personal Ledger Account of all top-10 companies were having an

increasing trend during the study period.

¾ It shown that the average amount of PLA revenue realization was higher

through BHEL which constitute Rs.26.71 crores. It is followed by CPCL,

Madras Cements, ONGC, Dalmia Cements, Chettinadu Cements, Cethar 229

Vessels, India Cements and Grasim Industries. Regarding the stability, the

coefficient of variation was found higher for BHEL which constitutes

93.93 per cent and it leads to more variations or less stability than the

revenue realisation through other companies.

¾ The linear trend coefficient of PLA revenue realization through all the top

10 companies under Trichirapalli Commissionerate were positive and

statistically significant at 5 per cent level. It is found that the highest

coefficient was 7.442 for BHEL which leads to the increase at the rate of

Rs.7.442 crores per annum during the study period and lower for Grasim

Industries which constitute 0.246 leads to the increase of revenue at the rate

of Rs.0.246 crores during the study period. The compound growth rate

was higher for BHEL which constitute 35.049 per cent and lower for

Grasim Industries which constitute 6.725 per cent.

7.2 SUGGESTIONS

The study has emboldened the researcher to suggest some important measures for the better fiscal performance of the Central Government through

Central Excise duties in future. There is much scope for additional resource mobilisation through the changes in tax structure and improvement in tax administration. By improving the Centre tax-GDP ratio, for widening the tax net, the government has to tap the resources from burgeoning services sector. Though 230

the regressivity of tax system is declining, the Central Government must take efforts to make the tax system more progressive through modification of tax structure in favour of the poor. On the whole, the Central Government must take all possible steps for proper fiscal management.

7.3 SCOPE FOR FURTHER RESEARCH

The present topic has been expecting with innumerable and possible topics for further research.

1. Role of Taxation of Central Government.

2. A Comparative Study on Central Government Revenue and

Expenditure

3. Fiscal Performance of Central Government through Taxation

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