CHAPTER 3

ASSESSMENT, CLASSIFICATION, VALUATION, PROVISIONAL ASSESSMENT,
MANNER OF DUTY PAYMENT, ACCOUNT CURRENT, SCRUTINY

Part-I

Assessment
1. Assessment Defined

1.1 The expressions ‘assessment’ and ‘assessee’ have been defined in the CentralExcise (No.2) Rules, 2001 (hereinafter referred to as the said Rules). “Assessment” includesself-assessment of duty made by the assessee and provisional assessment under rule 7 ofthe said Rules. “Assessee” means any person who is liable for payment of duty assessedor a producer or manufacturer of excisable goods or a registered person of a privatewarehouse in which excisable goods are stored and includes an authorized agent ofsuch person.

1.2 Normally, duty is payable on removal of goods. Rule 4 of the said Rules providesthat every person who produces or manufactures any excisable goods, or who storessuch goods in a warehouse, shall pay the duty leviable on such goods in the mannerprovided in rule 8 of the said Rules or under any other law. No excisable goods, on whichany duty is payable, shall be removed without payment of duty from any place, wherethey are produced or manufactured, or from a warehouse, unless otherwise provided.

1.3 An exception has been provided in the said rule 4 in respect of goods fallingunder Chapter 62 of the First Schedule to Central Excise Tariff Act, 1985 (5 of 1986)produced or manufactured by a job worker. Such goods may be removed withoutpayment of duty leviable thereon and the duty of excise leviable on such goods shall bepaid by person who gets such goods, produced or manufactured on his account on jobwork as if such goods have been produced or manufactured by him, on the date ofremoval of such goods from his premises registered under rule 9. The payment of suchduty may be secured by bond or otherwise. However, where such person hasauthorised the job worker to pay the duty leviable on such goods, the job worker shallpay such duty on the date of removal of such goods from his registered premises.

1.4 There is also an exception with respect to duty payment on molasses. Wheremolasses are produced in a khandsari sugar factory, the person who procures suchmolasses, whether directly from such factory or otherwise, for use in the manufacture ofany commodity, whether or not excisable, shall pay the duty leviable on such molasses,in the same manner as if such molasses have been produced by the procurer.

1.5 For the purposes of the said rule 4, excisable goods manufactured in a factoryand utilised, as such or after subjecting to any process, for the manufacture of any othercommodity, in such factory shall be deemed to have been removed from such factoryimmediately before such utilisation.

2. Major ingredients of assessment

2.1 Before each removal, whether outside the factory of manufacture or productionor for captive consumption, duty has to be assessed on the excisable goods. The mainingredients of assessment are:

(i) Classification and rate of duty: For determining the rate of duty, classification isprerequisite. Classification means the appropriate classification code which isapplicable to the excisable goods in question under the First Schedule to CentralExcise Tariff Act, 1985 (5 of 1986). There are Section Notes and Chapter Notes, inthe Tariff which are helpful in determining the appropriate classification. In caseof difficulties, there are “Interpretative Rules” in the said Act. There is largenumber of judicial pronouncements concerning classification, which have to beapplied in relevant case. The said Tariff also prescribes the ‘Tariff Rate of duty’.Some commodities may be subject to ‘special duty of excise’ prescribed underthe Second Schedule to Central Excise Tariff Act, 1985. Thus, a reference to theSecond Schedule to Central Excise Tariff Act, 1985 should also be made to see ifthe goods are covered there. However, duty chargeable is the ‘effective rate’.Thus, if any exemption is available to any commodity, the same may beascertained and the applicable rate of duty should be determined. If suchexemption is subject to certain conditions, it shall be necessary to follow thoseconditions. Certain goods may also be subject to duty under some other Actssuch as Additional Duty of Excise (Goods of Special Importance) Act, 1957 orcertain Cess. The manufacturer or owner of goods in a warehouse is liable to payall such applicable duties on removal of excisable goods.

(ii) Valuation: Where rate of duty is dependent on value of the goods (advalorem duty), value has to be determined in accordance with the provisions ofCentral Excise Act, 1944, as follows:

(i) Value under section 4 including transaction value under this section

(ii) Value based on retail sale price under section 4A.

(iii) Tariff value fixed under Section 3.

(iii) Quantity Removed: Where duty is on value, the total value is determined bymultiplying unit value with the total quantity. The unit quantity of goods are alsorequired in cases where duty is charged at specific rate.

3. Self Assessment

3.1 As per rule 6 of the said Rules a Central Excise assessee is himself (self-assessment)required to determine duty liability at the time of removal of excisable goods anddischarge the same. In other words, the assessee should apply correct classification andvalue (where duty is ad valorem) on the quantities being removed by him and indicatethe same in the invoice (except assessee manufacturing cigarettes, in which case theSuperintendent or Inspector of Central Excise has to assess the duty payable beforeremoval by the assessee).

3.2 Assessee is also required to assess his return for a month and submit to the RangeOffice having jurisdiction over his factory within ten days of the succeeding month. Theyare also requited to submit ‘CENVAT Return’ for a month within five days of the succeeding month. A manufacturer availing exemption notification for Small ScaleIndustries is permitted to file his return of quarterly basis. Their returns have to be filed inthe following frequency: -

Return for the quarter (for months)	By 20 th day of the month
First quarter – April, May, June	July
Second quarter – July, August, September	October
Third quarter –October, November, December	January
Fourth quarter – January, February, March	April

4. Date for determination of rate of duty and tariff value

4.1 Date for determination of rate of duty and tariff value is prescribed in rule 5 of theCentral Excise (No.2) Rules, 2001. The provision is, as follows:

(1) The rate of duty or tariff value applicable to any excisable goods, otherthan khandsari molasses, shall be the rate or value in force on the datewhen such goods are removed from a factory or a warehouse, as the casemay be.

(2) The rate of duty in the case of khandsari molasses, shall be the rate in forceon the date of receipt of such molasses in the factory of the procurer ofsuch molasses.

4.2 If any excisable goods are used within the factory, ‘the date of removal of suchgoods’ shall mean the date on which the goods are issued for such use.

4.3 The rate of duty in the case of goods falling under Chapter 62 of the FirstSchedule to the Central Excise Tariff Act, 1985 (5 of 1986), produced or manufactured onjob work, shall be the rate in force on the date of removal of such goods by the personreferred to in sub-rule (3) of rule 4 from his premises registered under rule 9.

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