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Regional Training Institute, Ranchi

Regional Training Institute, Ranchi. Structured Training Courseware on State Receipts Audit Audit of State Excise Receipts. Session Objectives. At the end of these sessions, the participants will be able to understand Definition of State Excise receipts Nature of State Excise receipts

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Regional Training Institute, Ranchi

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  1. Regional Training Institute, Ranchi Structured Training Courseware on State Receipts Audit Audit of State Excise Receipts

  2. Session Objectives At the end of these sessions, the participants will be able to understand • Definition of State Excise receipts • Nature of State Excise receipts • Important Records & Registers • Audit checks relating to state excise receipts RTI, Ranchi

  3. Definition • Excise duty is a tax on, • production or manufacture of goods produced or manufactured within the country • Excise duty forms part of State list of Seventh Schedule of the Constitution RTI, Ranchi

  4. Excise Duty • States have the power to levy excise duty on, • alcoholic liquors for human consumption • Opium, Indian hemp and other narcotic drugs Which are manufactured or produced in the State and countervailing duty on similar goods manufactured or produced elsewhere in India. RTI, Ranchi

  5. Excise Duty (contd.) • Central Government has the power to levy excise duty on, • Medicinal and toilet preparations containing alcohol • States authorized to collect excise duties on these preparations as per rates specified in Central Act. RTI, Ranchi

  6. Excise Duty (contd.) • State Governments have exclusively rights on, • Manufacture • Selling or • Processing of • Alcoholic liquor and intoxicating drugs RTI, Ranchi

  7. Alcoholic Liquor & Narcotics • License / permit required from State Government for all activities related to alcoholic liquor & narcotics such as, • Raw materials • Production & manufacture • Storage • Transport within the State • Import / Export from one State to another • Wholesale and retail trade RTI, Ranchi

  8. Organizational Set up • Commissioner of State Excise (CSE) • Responsible for administration and execution of excise policies and programmes • Jt. Commissioner (JCE) / Dy. Commissioner of excise (DCE) and Asst. Commissioner Excise (ACE) at Hdqrs. RTI, Ranchi

  9. Organizational Set Up (contd.) • Dy. Commissioner of Excise • Division level • District Collector (assisted by ACE / Excise Superintendent) • District level • Excise Inspectors • Circle level • Excise Sub-Inspector • Block level RTI, Ranchi

  10. Organizational Set Up (contd.) RTI, Ranchi

  11. Production of Alcoholic Liquors • Main raw material for production of alcohol in India is molasses • Molasses is a by-product of sugar factories • Sources like malt, fruit, grape, mahua flowers etc. are also used in some cases RTI, Ranchi

  12. Distillation • Production of alcohol from molasses is done through distillation process. Output is in the following categories: • Absolute alcohol, whose strength is 99.5 % by volume • Rectified alcohol, with water, whose strength is at least 91.27 % by volume • Plane spirit or country spirit, with water whose strength is at least 91.27 % by volume • Denatured spirit, basically rectified alcohol with denaturant with strength of at least 91.27 % by volume RTI, Ranchi

  13. Distillation (contd.) Distillation includes • Reduction • Dilution • Compounding • Blending • Colouring • Flavouring • Sohistication and fortification RTI, Ranchi

  14. Distillation (contd.) • Final output for sale falls into the following categories: • Denatured spirit and special denatured spirit • Country spirit (plain and spiced country liquor) and arrack • Indian Made Foreign Liquor (Whisky, Brandy, Rum & Gin) RTI, Ranchi

  15. Alcoholic Liquors • Beer is manufactured in a brewery • Germinated malt is made into beer wort and processed further to make beer Other categories of alcoholic liquors • Wines • Made from fermentation of grapes • Toddy • Made from fermentation of liquor tapped from trees RTI, Ranchi

  16. Nature of State Excise Receipts • Excise duty and fees as well as countervailing duty on alcoholic liquors and narcotics • Fees for different kind of licenses e.g. distillery, brewery, wholesale, retail trade etc. • Fees levied on hotels, bars etc. • Vend fees on denatured spirits etc. RTI, Ranchi

  17. Nature of State Excise Receipts (contd.) • Tree charge and surcharge on toddy • Permit fees • Composition fees, fines and penalties • Sale proceeds of Forms • Collection of contribution from licenses in respect of excise staff posted on cost-recovery basis • Duties on medicinal and toilet preparations with alcohol and narcotic ingredients RTI, Ranchi

  18. Mode of Levy • Rate of duty is subject to varying strength or quality of the item • Excise duty or countervailing duty is levied • On excisable articles imported / exported / transported – payment of duty at the time of or before import / export / transportation or • upon issue for sale from warehouse established, authorized or continued under the State Excise Act RTI, Ranchi

  19. Mode of Levy (contd.) • Excise duty or countervailing duty is levied • On spirit or beer, manufactured in any distillery or brewery licensed, established, authorized or continued under the State Excise Act RTI, Ranchi

  20. Mode of Levy (contd.) • Excise duty is an indirect duty • Incidence ultimately on the consumer • Always levied at first point of issue for sale of any excisable article • Statutory liability for payment of duty is with dealer or manufacturer / producer on what is manufactured / produced by him RTI, Ranchi

  21. Important Issues • Issues relating to excise duty at different stages of production, manufacture and trading are • Distilleries • Breweries • Bottled Liquor • Import & Export • Transport & Storage • Permit and Pass • Wholesale & Retail Trade RTI, Ranchi

  22. Important Issues (contd.) Distilleries • Storage and supply of molasses regulated by State Government • Most States specify minimum outturn for spirit out of molasses • Most States also specify free allowance for wastage of molasses from sugar factory to distillery as well as storage losses at the distillery RTI, Ranchi

  23. Important Issues (contd.) Distilleries • Almost all States prescribed free allowance for wastage of alcohol and spirit stored in distillery • No allowance permissible for losses on transfer from VAT to VAT RTI, Ranchi

  24. Important Issues (contd.) Distilleries • Wastage allowances are also prescribed for processes like re-distillation, maturation in casks, blending etc. • In respect of IMFL, rate of duty is dependent on strength of spirit in the liquor in many States RTI, Ranchi

  25. Important Issues (contd.) Breweries • Some States have prescribed norms for minimum out-turn of beer wort from malt, losses for converting wort into beer, and losses during bottling RTI, Ranchi

  26. Important Issues (contd.) Bottled Liquor • In most States, there is no permissible wastages allowance in respect of bottled liquor and beer RTI, Ranchi

  27. Important Issues (contd.) Import & Export • Import of liquor from other States is permitted against • Pre-payment of duty or • A bond for payment of duty • In some States there is a system of transfer of duty through direct credit system or book transfer RTI, Ranchi

  28. Important Issues (contd.) Import & Export • Import permit is required, specifying the quantity and description of liquor, source of import and destination bonded warehouse • Export permit is required and liquor export permitted against pre-payment of duty or bond for payment or bank guarantee RTI, Ranchi

  29. Important Issues (contd.) Import & Export • Acknowledgment of receipt of consignment from Excise department of importing State mandatory; else, exporter liable for duty or duty already paid will not be eligible for refund RTI, Ranchi

  30. Important Issues (contd.) Transport & Storage • Transport implies movement of liquor within the State • from one licensed premise to another • All transport must be against pass • Transport is either against pre-payment of duty or bond RTI, Ranchi

  31. Important Issues (contd.) Transport & Storage • Free wastage allowance for transit losses provided but • No allowance for storage losses at a bonded warehouse • Allowances for issue of liquor to armed forces & paramilitary forces personnel are specified by State or as per army approved entitlement scale RTI, Ranchi

  32. Important Issues (contd.) Permit & Pass • Pass authorizes removal of an excisable article • Permit is ‘No Objection’ issued for removal RTI, Ranchi

  33. Important Issues (contd.) Wholesale and Retail Trade • Wholesale trade in liquor is normally managed by State Governments or private parties • Retail liquor trade is generally with private parties except few Government shops RTI, Ranchi

  34. Important Issues (contd.) Wholesale and Retail Trade • Licenses are on annual basis • Restrictions imposed on location of retail shops at, • Market places • Educational institutions • Railway stations • Religious institutions etc. RTI, Ranchi

  35. Important Issues (contd.) Wholesale and Retail Trade • Fees for licenses can be, • Fixed fees based on criteria like population • Public auction • Fixed retail prices • Minimum guaranteed volume • Settlement of licenses is done by District Collector RTI, Ranchi

  36. Important Issues (contd.) Wholesale and Retail Trade • In public auction system successful bidders pay security or advanced license fee of specified amount • Before auctioning licenses, reserve fee is determined RTI, Ranchi

  37. Important Issues (contd.) Wholesale and Retail Trade • Under contract supply scheme monopoly for supply of country spirit is granted to a contractor, who supplies at a fixed wholesale rate to all licenses retailed vendor within the area • For retail sale, country liquor / arrack is sachetted RTI, Ranchi

  38. Important Issues (contd.) Wholesale and Retail Trade • License fee to be paid for serving liquor in a bar attached to hotel, restaurant, club etc. • Additional fees payable for transfer of licenses from one party to another • Unpaid license fees liable for recovery like arrears of land revenue RTI, Ranchi

  39. Spirituous Medical & Toilet Preparations • Excise duty levied on all allopathic/homeopathic/ayurvedic medicinal or toilet preparations, • Containing alcohol or narcotic drugs and intoxicants • Duty levied on medicinal and toilet preparations containing duty paid tincture RTI, Ranchi

  40. Spirituous Medical & Toilet Preparations (contd.) • State Governments authorised to fix wastage allowances for alcohol used in specific medicinal and toilet preparations • Exemptions from levy of duty can be granted only by Central Government, not State Governments RTI, Ranchi

  41. Records & Registers Distilleries • Separate accounts of manufacture, issues, storages and loss (both transit and storage) of rectified spirit and liquor are maintained • Issues made from distilleries only after payment of duty • For issues under bond, duty realised before issue from bonded warehouse RTI, Ranchi

  42. Records & Registers (contd.) Bonded Warehouse • Record relating to quantity of rectified spirit/country liquor received from distilleries • Account of manufacture of country liquor from rectified spirit • Record of daily issue of liquor against duty paid • Stock account of spirit and liquor RTI, Ranchi

  43. Records & Registers (contd.) Pharmacies • Account of rectified spirit received from distilleries • Account of spirit consumed in manufacture of medicines Duty is levied and realised before medicines are issued from pharmacies RTI, Ranchi

  44. Records & Registers (contd.) Departmental Offices • Register of licenses (retailers) • Register of export/import permits • Register of transport permits • In case of free tax, • Register of tree details available for tapping • Shops to be established and • Register of licenses RTI, Ranchi

  45. Records & Registers (contd.) Departmental Offices • Register of collection and challan • Demand, collection and balance register RTI, Ranchi

  46. Audit Checks Scope of Audit • Test check of accuracy of levy and collection of various excise duties and fees in accordance with Act/Rules • Check of refunds with original credits to see correctness of computation RTI, Ranchi

  47. Audit Checks (contd.) Scope of Audit • Examine registers of outstanding demands to ascertain action against defaulters • Test check of credits appearing in demand, collection and balance register vis-à-vis Government Accounts RTI, Ranchi

  48. Audit Procedures – General • Check if duty payable on excisable articles and vend fees have been correctly assesses, collected and brought to account • Check if proper account of confiscated articles and disposal is kept and • See if interest, penalty and fines have been levied wherever required as per rules RTI, Ranchi

  49. Focus Areas • System of auction for allotment of retail vends and fulfillment of conditions attached to the licenses • Review of Inspection Reports of administrative officers and internal check reports of internal audit parties of the Department RTI, Ranchi

  50. Focus Areas (contd.) • Check rates of excise duty levied • See whether continuous record of permits / passes issued, is maintained • Scrutiny of records maintained in distilleries, bonded warehouses etc. • Scrutiny of figures of sales with reference to the departmental records, where license fees are assessed with reference to spirits issued RTI, Ranchi

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