ICWAI Final new SyllabusNew syllabus of ICWAI final is effective from December 2008. The name of paper is ‘Indirect and Direct Tax Management’. Questions relating to indirect taxes are given below. ICWAI Final Examination New Syllabus December 2009 Indirect and Direct Tax Management (Only questions relating to indirect tax covered) Q1 (a) Fill up the blanks: (ii) Ownership of raw materials is ______ (relevant/not relevant) for excise duty. (iii) Customs duty is levied under section _____ of the Customs Act, 1962 (iv) Stock transfer to branch is not treated as inter-state sale when Form ____ is submitted (v) An authorized dealer in foreign exchange has the option to pay service tax at ___ % of the gross amount of currency exchanged, instead of paying service tax at the usual rate (vi) Duty drawback _______ (is/is not) available in respect of goods manufactured by EOU/SEZ unit. (vii) Application for IEC number must be made to ___. (One mark each) Q1(b) State with reasons, whether the following statements are true or false (answer without any reasoning will not deserve any credit): (i)Waste and scrap are always treated as excisable goods (ii) Importers can store imported goods without payment of duty in public warehouse or private warehouse (iii) Security demanded from dealer under the Central Sales Tax Act, 1956 can be satisfied in the form of surety bond (v) Duty drawback rate is fixed by the Central Government in consultation with the Board (2 marks each) Q1(c) Provide brief answers - (i) On 18.06.2009, Mr. Sakti discovers a mistake in the service tax refund pertain up to the half year ended 31.03.2009, filed on 23.04.2009. Can he rectify the mistake? (ii) As per the White Paper on State-level VAT, is a trader eligible for refund if VAT credit of input tax available cannot be utilized for any reason (iii) Enumerate any four matters covered by Foreign Trade Policy (2 marks each). Q2 (a) State the transactions which have been excluded from levy of central sales tax and those in respect of which central sales tax leviable is Nil (b) You have been appointed as Cost Auditor to conduct special audit of Cenvat credit under section 14AA of Central Excise Act, 1944. Discuss major areas where you will concentrate while conducting your audit (c) Question on income tax (8+5+2 = 13 marks) Q3 (a) State the basic principle of VAT (b) Question on income tax (c) Mr. and Mrs. Bose visited Canada and brought following goods while returning to India on 9th February, 2009 (i) Their personal effects like cloths, etc., valued at Rs. 40,000/- (ii) A personal computer bought for Rs. 36,000/- (iii) A laptop computer bought for Rs. 98,000/- (iv) Two litres of liquor bought for Rs. 2,000/- (v) A new camera bought for Rs. 38,000/-. What is the amount of customs duty payable by Mr. Bose? (6+6+3 = 15 marks) Q4(a) (i) Is ‘Duty Free Import Authorization (DFIA)’ transferable? (ii) Is any value addition required for the same? (iii) What are the conditions relating to issue of DFIA? (b) State the provisions relating to best judgment assessment in the context of service tax (c) Examine the validity of the following statements with regard to service tax - (i) The service provided by a consulting engineer engaged in providing consultancy in the discipline of computer software engineering shall be exempt under the category “Consulting engineer’s service”. (ii) Some transporters undertake door-to-door transportation of goods or articles and they have made special arrangements for speedy transportation and timely delivery of such goods or articles. Such services are known as ‘Express Cargo Service’ with assurance of timely delivery. Such ‘Express Cargo Service’ is covered under ‘courier agency service.’ (7+4+4 = 15 marks) Q5(a) Durga Steel Industries imported certain goods and kept them in warehouse. However, the goods were not removed from the warehouse at the expiration of statutory time period during which such goods were permitted under section 61 to remain in a warehouse. Durga Steel Industries sought to relinquish the title to such goods under the proviso to section 68 of the Customs Act, 1962. However, the Department contended that since the goods were deemed to be improperly removed from the warehouse (considering the over-stay of such goods in the warehouse) under section 73(1)(b), the case would not fall under section 68 and thus proviso to section 68 could not be invoked. It was submitted that before invoking the proviso to section 68, the conditions of section 68 must be fulfilled which was not done in the instant case. The Department further contended that the relinquishment is subject to discretion of proper officer and the same cannot be done where the importer has the ability to pay the impugned duty. Durga Steels contends that this relinquishment absolves the importer from total liability. Examine the correctness of the rival contentions (b) Illustrate the points of differences between pilferage of goods under section 13 and loss/destruction of goods under section 23 of the Customs Act, 1962 (c) The value of clearance from four units of Janak Corporation Limited (JCL) during 2008-09 are as follows: (in Rs lakhs) - Units situated at - Noida-110, Kolkata-90, Salem-120, Chennai-140. JCL sought your advice as a consultant whether benefit under Excise Notification No. 8/2003 shall be available to JCL during 2009-10. You are required to indicate your advice in this context (6+5+4 = 15 marks) Q7 (b) M/s ABC Services Ltd. a service provider for the first time made an agreement on 22nd May, 2008 with XYZ Ltd. to provide different services covered under Business Auxillary Services at a price of Rs. 80 lakhs ( inclusive of service tax) per annum. They are not providing any other services except as above. As per terms of contract executed by ABC Services Ltd., an advance of 15% of contract price has been received for the services to be provided which would be adjusted against final bill in the end of the year. The bills raised and amount received (in Rs lakhs) are given as follows – (1) Advance 15% of Contract price for service to be provided - Bill dated 01.06.2008 for Rs 12 lakhs – Amount received Rs 12 lakhs on 01.06.2008 - 12 lakhs (2) 1st Bill for June 2008 for service provided - Bill dated 08.07.2008 for Rs 25 lakhs. Amount received on 20.07.2008 Rs 12 lakhs (3) 2nd Bill for July 2008 for service provided – Bill dated 05.08.2008 – Rs 12 lakhs –Amount received on 18.08.2008 – Rs 25 lakhs. Service tax due as per provision has been deposited in due time. Total gross value of services provided was Rs. 37 lakhs after which the contract was terminated with mutual consent. On closure of the contract amount of advance of Rs. 12 lakhs has been refunded to M/s XYZ Ltd. Please explain the following assuming service tax payable is 10.3% (and figures are expressed in Rs. in lakhs) -(i) What action should be taken by ABC Services Ltd. on execution of agreement on dated 22nd May, 2008? (ii) Can ABC Services Ltd. avail threshold limit for the year 2008-09, if so what is the amount? (iii) Service tax payable on the advance of Rs. 12 lakhs for which no service has been provided. How much advance is taken for computation of service tax? (iv) What is the value of services taken for computation and the amount of service tax paid through designated branches and on which dates? (v) What will happen to the service tax, if any, excess deposited for which no service was provided due to termination of contract and refund of the amount thereof? (9 marks) Q7(c) Please specify the relevant date for determination of rate of customs duty in respect of following goods imported/exported: (i) In the case of entry for export under section 50 of the Customs Act, 1962. (ii) If bill of entry is presented before the date of entry inward of Vessel. (iii) In case of goods imported by Postal Parcel (3 marks) Q8(a) M/s XYZ Ltd. sold machinery to Mr. K at a price of Rs. 5 lakhs on 15th June, 2008 and the same was removed from the factory at Kolkata. The rate of excise duty applicable is 10.3% on the date of removal. Mr. K. refused to take delivery of the machine when it reached his destination. In the meantime, M/s. XYZ Ltd. increased the prices of the similar type of machinery to Rs. 6 lakhs with effect from 16th June, 2008. The machinery as refused by Mr. K. has been sold on 20th June 2008 to Mr. L at the revised price of Rs. 6 lakhs. The excise duty including education cess is 12.36% applicable with effect from 10th June, 2008. Explain the following with reasons: (i) What is the value to be taken as assessable value? (ii) What is the rate of excise duty applicable and duty payable on above transaction? (iii) The Central Excise Officer is demanding duty on the price of Rs. 6 lakhs at the time of sale to Mr. L. Is he right in his approach? (iv) Does cost of production have any bearing on the assessable value? (8 marks) INDIRECT AND DIRECT TAX MANAGEMENT June 2009 Final Question No. 1 is compulsory. Answer any five from the rest. (Portion relating to indirect taxes) Q 1(a) Fill up the blanks (iv) Where a service provider renders taxable as well as exempt service and some input services are used partially for the taxable services, one of the options available to the service provider is that he pays an amount equal to ______% value of exempted services (v) Simple labeling or relabeling without any repacking _______ (is/is not) “deemed manufacture” for central excise purposes (vi) The term “excisable goods” for central excise purposes ______ (will/will not) include articles capable of being sold (vii) The customs duty payable on project imports is _________ %. (viii) The maximum amount of penalty leviable under section 117 of the Customs Act, 1962 is Rs. __________. (ix) In the bill raised on the client, the service provider _________ (is/is not) bound to show the service tax separately (1 each) Q 1(b) State with reasons, whether the following statements are true or false (mere conclusion will not deserve any credit): (iii) Service tax on GTA will have to be paid by cash/cheque/e-payment only, and not though Cenvat Credit (iv) The Central Government is authorized to issue notification specifying that excise duty in respect of certain notified products is leviable on the basis of production capacity of the factory (v) No anti-dumping duty is payable by EOUs under the Customs Act, 1962, even where the goods imported are used for manufacture of goods sold in India. (vi) As per section 8(2) of the Central Sales Tax Act, 1956 in respect of inter-State of goods not falling under section 8(1), the CST rate applicable is the State Sales tax (or VAT) rate. (vii) Abatement of 30% is allowed from the gross amount charged in case of services provided in relation to chit, by whatever named called. (viii) There is no scheme for furnishing a service tax return through Service Tax Return Preparers (2 marks each). Q 3 (a) M/s. Abanti Associates is a registered dealer engaged in the manufacturing of steel in the State of Maharashtra. During the year 2008-09 the firm has procured raw materials of Rs. 25,50,320 (VAT @ 4%) and purchased plant and machinery of Rs. 20,00,000 (VAT @ 4%) and Rs. 5,00,000 (CST @ 2%) for use in the manufacturing of steel. Sales of steel materials made during the year is Rs. 40,00,000/- (VAT @ 4%) and inter-State sale is Rs. 5,29,000 (@ 2% CST). Besides above, branch transfer of Rs. 3,20,000 was made to Kolkata. Calculate the following as per White Paper on VAT Law in India. (i) Output tax (ii) Input tax credit to be availed during the year: (iii) Balance tax payable; and (iv) Input tax credit, if any, to be carried forward (b) Is a single declaration form in Form C sufficient to cover all the transactions between two dealers in a financial year under the Central Sales Tax Act, 1956? (c) Can PQR Ltd., providing taxable services from different locations and billing the clients from each location, opt for a centralized service tax registration? Explain. (d) State briefly the provisions relating to rate of exchange applicable for customs valuation [6+2+2+5 = 15 marks] Q 4 (a) M/s Akshaya Processors Ltd. supplies raw material to a job worker B Ltd. After completing the job work, the finished products of 5,000 packets are returned to M/s Akshaya Processors Ltd., putting the retail price as Rs. 20 in each packet. The product in the packet is covered under MRP provisions and 40% abatement is available on it. Determine the assessable value under Central Excise law from the following details: Cost of raw material supplied – Rs. 30,000/- , Payment made to job workers including profit – Rs. 10,000/- , Transportation charges for sending the raw material to B Ltd. – Rs. 5,000/- Transportation charges for returning the finished products factory – Rs. 5,000/- Who is liable to pay excise duty in the above situation? (b) Briefly explain: (i) What is the date of removal of excisable goods in case of captive consumption? (ii) Is it required to issue invoice for removal of goods even for captive consumption? If so, why? (c) XYZ Ltd. has availed Cenvat Credit as soon as goods enter the factory premises during 2007-08. The same has been written off fully in the books of accounts during the year 2008-09 due to obsolescence - (i) What would be the impact of such write off of inputs? (ii) What will happen if goods are subsequently used in the manufacturing of goods? (d) Discuss briefly about Cenvat Credit on exempted final products/output services. (5+3+3+4 = 15 mark) Q 5 (a) M/s Khusub, a SSI unit, can avail full benefit of exemption from payment of duty up to turnover of Rs. 150 lakhs and exercised the option to get the benefit of exemption for the year 2008-09 on 15th August, 2008. You are required to answer the following. (i) To get exemption benefit, the turnover of what will be taken? (ii) What will happen if M/s. Khusub has more than one factory? (iii) M/s. Khusub cleared goods of Rs. 90 lakhs up to 15th August, 2008. On 16th August, 2008, they cleared goods and issued invoice of Rs. 100 lakhs. Can they claim exemption of balance amount Rs. 60 lakh as a part of invoice? (b) How is the value of goods supplied by the buyer treated in customs valuation for customs duty? (c) XYZ Ltd. supplied tools, dies and moulds costing Rs. 2,00,000 to M/s Hooks Ltd., China for issue in the manufacture of goods imported. The tools, dies and moulds etc. are expected to produce 10,000 units of goods. First shipment is made for 5,000 units. How will the same be treated while arriving at transaction value for arriving at value for imposition of duty? (d) Mr. Nirvan Ltd. has imported 10,000 units of materials through Kolkata Port. The ship arrived on 15th January, 2009. After completion of customs formalities, goods were cleared for home consumption. It is found that: (i) 500 units are pilfered when they are in custody of port authorities (ii) 200 units are found deteriorated in such a condition that the goods are abandoned and right relinquished. Explain with provisions, how the above attract customs duty [5+4+2+4 = 15 marks] Q 6 (a) Discuss in brief about the options available to an exporter to procure goods from indigenous source against advance release order or back to back inland letter of credit (b) Can the valuation of goods manufactured and cleared as free samples be done on the basis of MRP for excise purpose? If Not, how should they be valued? (c) -(d) - (5+4+3+3 = 15 marks) Q 7 (a) Write a brief note on Import/Export Authorisation (b) Under the Foreign Trade Policy of India, state the restriction on exports relating to : (i) Export of warranty spares, and (ii) SCOMET items. (c) Thilagam Turbines Ltd. manufactured a steam turbine for Mr. Prem, who supplied special steel purchased by him from wholesale market (Cost Rs. 10,00,000 plus Central Excise Rs. 1,33,000). The normal price of such material is Rs. 12,00,000 plus Central Excise Rs. 1,48,320. Mr. Prem is eligible to claim Cenvat Credit. Janak Turbines Ltd. incurred manufacturing cost of Rs. 23,00,000. What is assessable value of the turbine? Briefly touch upon the issues involved (7+4+4 = 15 marks) Q 8 (a) What type of goods are eligible for purchase at concessional rate in inter-State sales? Should any document be submitted in this regard? (b) What are the various bonds which are required to be executed for Central Excise purposes? State briefly the purpose of each bond. (c) M/s. Niran & Associates, a firm of Cost Accountants, raised an invoice for Rs. 39,326 (Rs. 35,000 + service tax of Rs. 4,326) on 12th February, 2008. The client paid lump sum of Rs. 36,000 on dated 2nd April, 2008 in full and final settlement: (i) How much service tax M/s. Niran & Associates have to pay and what is the due date for payment of service tax? (ii) What will be the liability if the client refuses to pay service tax and pays only Rs. 35,000? (4+6+5 = 15 marks)
INDIRECT AND DIRECT TAX MANAGEMENT Dec 2008 Final Question No. 1 is compulsory. Answer any five from the rest. Q 1 (a) Provide brief answers to the following : (i) Hema Polymers Pvt. Ltd. has paid excise duty of Rs. 45 lakhs during the year ended 31.03.2008. During the current year, duty payments are expected to be Rs. 70 lakhs. Should the company make only e-payment of duty during the current year i.e. financial year 2008-09? (ii) Can the valuation of goods manufactured and cleared as free samples be done on the basis of MRP for excise purposes? If not, how should they be valued? (iii) Vasudha Spinners Ltd., supplies yarn to a job worker for dyeing. The cost of yarn is Rs. 2,000. Dyeing charges are Rs. 300/- After receipt of dyed yarn from job worker, the finished product is sold at Rs. 2,500/- excluding VAT. The rate of duty is 14%. Find out the assessable value and duty payable. (iv) Vivitha Telecom Ltd. imported an equipment, which reached Indian territorial waters on 20.02.2008. The rate of customs duty on imports was 10% then. The equipment was cleared from bonded warehouse on 28.03.2008. The customs duty on the said date is 12%. What is the rate of customs duty payable? (v) On 18.06.2008, Vasudevan discovers a mistake in the service-tax return pertaining to the half-year ended 31st March, 2008 filed on 23.04.2008. Can he rectify the mistake? (vi) Hema Transformers Ltd. has imported 12,000 units of raw material under Advance Authorization. 11,000 units of the same were consumed to manufacture 14,000 units of finished products. 13,200 units of finished goods were exported to meet the export obligation. Can the 1,000 units of raw materials and 800 units of finished goods remaining after export, be disposed off? (vii) to (x) – questions on direct taxes [2 marks each] Q 1(b) Fill up the blanks - (iii) For delay in payment of service tax, interest is chargeable at _ _ _ _ %, for the period for which payment is delayed. (iv) Application for CST registration should be furnished within _ _ _ _ days from the date when the dealer _ _ _ . (vii) If Central Excise duty is short paid or not paid or erroneously refunded, show cause notice can be issued under section 11A(1) of Central Excise Act within _ __ _ _ from relevant date. (viii) “Exclusive economic Zone” extends to _ _ _ _ nautical miles from the base line under the Customs Act. (ix) SSI unit availing concession on the basis of annual turnover has to file return on quarterly basis within _ _ _ _ days from the close of quarter in Form ER-3. (x) Where subsequent to the provisional assessment, higher amount of customs duty is found payable in final assessment, interest on differential amount will be payable at the rate prescribed under section _ _ _ _ of the Customs Act [1 mark each] Q 2(a) Durga Steel is denied the benefit of a notification under which excise duty exemption is granted to steel rod manufacturers (subject to monetary limit), if no Cenvat Credit of duty paid on inputs is taken. Durga Steel erroneously took Cenvat Credit on inputs first, but prior to utilization, reversed the same. Is the action of Department justified? Can penalty be levied? (b) For certain taxable services rendered by Prem, VAT as well as service tax is leviable. The following bill was raised by Prem on Vignesh (service receiver) on 20-3-2008 - Amount of bill - Rs. 40,000, Vat – Rs. 400. Total - Rs. 40,400. On 31.03.2008, Prem received a sum of Rs. 30,000 in full settlement. What is the service tax payable? You are informed that Vignesh has incurred hotel bills of Rs. 3708/- on behalf of Prem. Clearly indicate the provisions considered in arriving at the service tax payable (c) Direct tax question [4+6+4 = 14 marks] Q 3(a) Enumerate the cases where Cenvat Credit will have to be reversed. (b) Direct tax question (c) Is the material imported under Duty Free Import Authorization (DFIA) transferable? Is value addition required in respect of DFIA? Is Cenvat Credit available in respect of the inputs? (d) At the last minute, Pankaj, an Indian resident, cancels his journey from Singapore to Chennai. However, his baggage is allowed to be sent to Chennai without him accompanying it. Is general free allowance under the Customs Act available in respect of this baggage at Chennai? [6+ - +3+2 marks] Q 4(a) Direct tax question (b) Kimanshu Inc. of Tokyo operates through an agency at Chennai. ERP implementation support services are provided to Chennai unit. Is the Chennai agency liable to pay service tax? (c) Prem Granites Ltd. appealed against excess levy of customs duty on a machinery imported and used for captive use, after paying the disputed amount under protest. Though appeal was decided in its favour, the Department refuses to grant refund on the ground that doctrine of unjust enrichment applies. Is the Department correct? Will your answer be different if the assessee reverses Cenvat Credit taken on input and agitates the matter? (d) Briefly discuss about provisions applicable to EOU for available credit of excise duty paid on inputs and service tax paid on input services [- +4+4+3 marks] Q 5(a) What are the items of turnover which are required to be included while calculating the excise duty exemption limits for SSI units? (b) Examine the liability of principal and agent under the Customs Act, 1962 (c) and (d) – direct tax questions [5+4 marks] Q 6(a) A SSI manufacturer may like to pay full duty even when he is eligible for SSI exemption. (i) Can he do so? (ii) Why he would like to pay full duty? (iii) What is the duty payable? (b) and (c) direct tax questions (d) Can an exporter replace free of cost and without any authorization, spares related to a product exported earlier and found to be defective, within the warranty period? Can the entire product exported earlier be replaced? Can it be so done after the warranty period also? [4+4 marks] Q 7(a) Hema Pipes Ltd. a manufacturer of PVC pipes, removed goods from its factory from 01.06.2007 onwards after payment of excise duty under protest. Raghu Pipes, a sole trader and a customer of Hema Pipes Ltd. had purchased goods on 15.06.2007; in the sale bill issued to Raghu Pipes excise duty was charged. Hema Pipes Ltd., have appealed against the levy of excise duty on 25.06.2007 on 1st June, 2007. Hema Pipes Ltd. informs Raghu Pipes about the factum of their having filed appeal. On the same day, Raghu Pipes seek your advice relating to filing of refund claim and want to know whether the same can be filed after 3 months, by which time the appeal of Hema Pipes Ltd., will be decided. Advise Raghu Pipes as to the period of limitation and documents to be adduced in proof relating to the refund claim. (c) Briefly list the distinctions between ‘Zero rate sale’ and ‘exempt sale’ as per White Paper on VAT laws in India [4+5 marks] Q 8(a) Where from bulk packing, repacking of small packets is done for being marketed, is there “manufacture” as per Central Excise Act? Can it be said that there is ‘deemed manufacture’, where in respect of ready to market imported packs, affixing a sticker containing importer’s details. MRP, etc. is done? (b) Mr. Datey, Cost Accountant rendered taxable service to Vishwa Cement Ltd. In this regard the company sent 200 cement bags free of cost, for the house construction of Mr. Datey. Explain how the value of the taxable service will be determined in this case. Will your answer be different if the service had been rendered free of charge? (c) direct tax question [3+5 marks]
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