A Study on the Taxation in HEG Ltd.

Dissertation submitted

In Partial fulfillment for the

Post Graduate Diploma in Business Management

By

Atul Kumar Rai

Roll No.: GJUJUL08AC050

Batch 2008-2010

Under the Guidance of

Mr. P.K.Jain
DGM-Finance

HEG Ltd.

NSB SCHOOL OF BUSINESS

B-II/1, MCIE, Delhi-Mathura Road, New Delhi-44
 NSB SCHOOL OF BUSINESS

B-II/1, MCIE, Delhi-Mathura Road, New Delhi

CERTIFICATE

This is to certify that the summer project report title “A

study on Taxation in HEG.” is a bonafide work done by

Mr. Atul Kumar Rai, Roll No.: (GJUJUL08AC050) of

Batch 2008 – 2010, Submitted to NSB School of

Business, New Delhi in partial fulfillment of the

requirement for the award of Post Graduate Diploma In

Business Management, and that the report represents

independent and original work on the part of the

candidate.

44
 Prof.

Alok Satsangi

Corporate Relations

Cell

ACKNOWLEDGEMENT

I wish to express my sincere gratitude to my institute to provide this

opportunity to learn the element of TAXATION.

One person is seclusion is hardly ever able to complete any project or

training. There is always discussion with professionals about conceptual

matters, which enhance the idea and the knowledge of trainee.

Thereby, I would like to acknowledge the contribution and support that

each person’s at HEG Ltd. extended to me during my training period.

I would also like to express my special thanks to my guide Mr. P.K. Jain

(DGM-Finance), Mr.Ved B. Gupta (Dy. Manager-Finance), Sanjeev

Asati, Anubhav Chowdhary who provide me valuable insight about

aspect of taxation with respect of the company and the external

environment with which it associated.

44
 ATUL KUMAR RAI

DECLARATION

I hereby declare that the work which is being presented in project

report entitled “TAXATION” is an authentic record of my work carried

out under the able guide of Mr. P.K. Jain; DGM-Finance

The work has been carried out by me as summer training at premises

of HEG Ltd. Mndideep(Near Bhopal) and was undertaken as part of

course curriculum PGDBM program of NSB, NEW DELHI.

44
DATE- ATUL KUMAR RAI

PLACE-

44
 CONTENT-

S.NO. TOPIC PAGE

NUMBER

1 VISION AND MISSION 8

2 PROFILE OF THE ORGANISATION 9-20

3 HEG Ltd. 21-27

4 PERFORMANCE HIGHLIGHTS AND DATA 28-38

ANALYSIS

5 TAXATION 39

6 INCOME TAX 39-64

7 SALE TAX 65-73

8 VAT 74-89

9 PAN 90-91

10 EXCISE DUTY 92-96

11 CUSTOM DUTY 97-102

13 FINANCE OF HEG 103-105

12 CONCLUSION 106-113

13 BIBILIOGRAPHY 114

44
VISION

HEG LTD. -GRAPHITE DIVISION

A vibrant globally acknowledge top league player in Graphite

Electrode and allied business with commitment to growth,

innovation, quality and customer focus.

44
MISION

HEG LTD. -GRAPHITE DIVISION

To become a leading international player in Graphite

Electrodes and related business by leveraging our core

competence value to our customer, shareholders, employee,

and society.

44
PROFILE OF THE GROUP

44
 Group Profile

The 500 million dollar LNJ Bhilwara Group is a diversified group with

interests in Graphite Electrodes, Textiles,

In its over four-decade long existence, the LNJ Bhilwara Group has

come to be identified with quality and technology. Six

of the Group companies have been awarded ISO 9001:2000

certification for their exemplary quality standards. The fact

44
that export earnings comprise over forty percent of the Group’s

turnover underlines its high quality standards. Awarded ISO

9001:2000 & ISO 14001:2004 Certifications.

The journey of the LNJ Bhilwara Group began in 1961 when

the Group founder, L. N. Jhunjhunwala established a textile

mill in Bhilwara, Rajasthan.

Today that single textile mill has expanded into several

textile mills; the Group has diversified strategically and

stands proud as a multi-product and service conglomerate.

Industry pioneers in many cases, we have also established

ourselves one of the top 50 Indian business groups.

The marriage of traditional values and foresight has

combined advancement while retaining our core. Hence,

while expanding our original business of yarn, we have

moved into manufacturing fabric, technical textiles,

automotive fabric, knitted and ready-to-wear garments and

now denim.

44
Opportunity is the window to the future and we are looking

out of it. We have diversified into areas that few players have

ventured into... Graphite Electrodes, which has been forward-

integrated into sponge iron and steel billets business is one

such example. We also have the largest single site graphite

electrode manufacturing plant in Asia.

Self-reliance is our mantra. The success of our first hydro

captive power plant led us to set up India's first merchant

hydro power plant. Today, the group's power business is

flourishing with five projects already under its belt and is well

on track towards producing 1500 / 2000 mw by 2012. Our

in-house power consultancy firm consolidates our position in

this segment

The main group companies are

1. Graphite electrode

 HEG Limited

44
2. Textile

 RSWM Ltd.

 Maral overseas ltd.

 BSL Ltd.

 Bhilwara Spinners

3. POWER

 Bhilwara energy ltd.

 Malana Power company ltd.

 AD Hydro power ltd.

4. Infotech

Textile

Bhilwara Spinners Limited, is an integral part of the LNJ Bhilwara

Group. The Group is a multi-product conglomerate with a global

presence and business interests spanning diverse indstries like

Textiles, Power Generation, Graphite Electrodes and IT enabled

services.

44
Bhilwara Spinners, based at Bhilwara (Rajasthan), manufacturer of

cotton, synthetic blended yarns of various counts and blends. The

present capacity of the unit is 18,496 spindles.

Based on the requirement of the market, Bhilwara Spinners

diversified their product portfolio and now producing various value

added product mix like Polyester / Acrylic, mod acrylic flame

retardant yarn, Sewing thread, Slub yarn, Viscose Carpet Yarn, Linen

Yarn etc. The unit is also manufacturing products suitable for other

uses like upholstery, tapestry, and industrial fabrics.

44
 Products

Bhilwara Spinners Limited,

The company is manufacturing synthetic blended yarn in raw white

and the range includes :

* 100% Polyester, Viscose, Acrylic, Polyester/Viscose blended,

* Polyester/Acrylic blended

* Polyster/Viscose blended

* Polyester/Linen blended

* Viscose/Linen blended

* High Twist / Super High Twist

* Slub/ Spun yarn

* Blended with Texturised, Special Application yarns for Carpet,

44
Sewing Thread,

* Flame and Temperature Resistance yarn like Aramide, Modacrylic,

Homo Acrylic, Poly Sulphide yarn (PPA) .

Mayur Suitings,

Mayur Suitings the innovative and value for money brand, is a part of

RSWM Limited, the flagship company of Rs 2859 crore LNJ Bhilwara

Group.

For almost 30 years, Mayur has been constantly delivering high quality

fabric to the markets in India as well as other countries in the world.

Mayur has emerged as a leader in fabric due to its ability to transform

itself rapidly to meet the challenges of a highly competitive global

economy. Constant modernization and introduction of state-of-the art

technology has enabled it to stay ahead in the industry and successfully

surpass all expectations.

All this fabric is manufactured at the state of the art manufacturing unit

at LNJ Nagar, Mordi, District Banswara in Rajasthan. Innovation and

consistent quality are the two pillars that the company has always

believed in. And it is on these two pillars that the company has built its

hugely popular status in the world.

44
The comprehensive product-mix includes fabric ranges for classic formal

wear as well as semi formal wear. This includes unique blends of

Polyester Viscose. All this is available in different yarn counts and

shades. What's more, exciting innovations are accentuated by an array

of blends in new finishes, including poly / viscose / silk, poly / wool /

silk feather-touch, Poly / wool / Lycra, poly / viscose / linen and poly /

viscose cationic dyed soya protein / bamboo and functional fabric.

Performance fabric like high wicking, cool comfort, anti-bacterial, anti-

static, odor preventive, biodegradable and energy fabric, etc.

Mayur produces in excess of 12 Million Meter / Annum. Mayur has been

the recipient of the extremely prestigious SRTEPC award for many

consecutives years.

Quality does not happen by chance at Mayur. Men and machines work

together to achieve the customer’s expectation. Continuous

improvement, innovative technology and avant-garde ideas about

applying technology are the cornerstones of Mayur’s in industry

leadership position.

We have the most stringent quality control protocols and we have the

latest certifications. ISO 9002 and ISO 9001:2000 Accreditation, TQM

Implemented Plant, ERP Management systems to ensure Timely

delivery and Internationally acceptable ‘4-Point’ system for Grading are

44
some of the certifications we have. Product quality, innovation and eco-

friendliness are a hallmark of all the company’s division.

For testing purposes we have ICI Pilling tester, Random pilling tester,

Vertical flammability tester, Automatic light fastness tester, Spectra

data color, Color matching cabinet and Crease recovery tester to name

a few.

The backbone of the company is the robust distribution network that

takes the product to the four corners of the country. The company has

its products in over 7000 retail outlets all over India. For us, it is not

enough to manufacture the finest fabric. The real challenge is to ensure

that the finished fabric reach our customers on time, every time.

Ever motivating management practice, excellent leadership, highly

skilled workforce and a well focused approach leads us to achieve our

goal of being a leader in the Textile industry. We own this strong

position not only to our technical competence but also to our clear

orientation towards the wishes of our customers. Our technical

expertise and unrelenting trust towards continuous quality

improvement are the principal strengths of Mayur.

44
 POWER GENERATION:-

Bhilwara Energy Limited will be focusing on diversification of The

Group's portfolio in the power Business, like Power Transmission,

Power Distribution, Power Trading and Power Generation from non

hydro sources like wind and thermal and to further consolidate its

presence in Hydro power generation.

The company endeavors to develop or acquire new green field power

projects in states like Himachal Pradesh, Uttranchal, Sikkim, Madhya

Pradesh, Chattisgarh & Arunachal Pradesh.

BEL holds 51% equity stake in Malana Power Company Limited

(Kullu), a joint venture with S N Power, Norway.

Thereby, it holds 45.9% holding of A D Hydro Power Limited

(Manali) indirectly, since MPCL holds a 90% stake in ADHPL.

Today, it is one of the largest private players in the power sector of

India. Leveraging upon its engineering skills and understanding of the

power business, BEL is effectively managing its companies. Among its

many achievements BEL can boast of effectively implementing

44
projects taken up by its member companies.

BEL would also be independently implementing hydropower projects

which are smaller than 100 MW and also some of the larger projects

in case the Norwegian partners do not want to undertake them under

MPCL, while larger projects above 100 MW would continue to be

implemented by MPCL.

Bhilwara Infotech

"We, at BIL, strive to ensure Customer Satisfaction by providing

quality software and services, on time, every time. We are

committed to comply with the requirements of our Quality

Management System and to continually improve its effectiveness

through Management Reviews of the Quality Objectives."

44
 HEG Limited

 HEG Ltd, a premier company of the LNJ Bhilwara group, is

today India's leading graphite electrode manufacturer. It has one

of the largest integrated graphite electrode plants in South-East

Asia, processing sophisticated UHP (Ultra High Power) Electrodes.

 The company exports over 80% of its production to more

than 25 countries of the world.

 The position the company enjoys today in India and abroad is

largely due to its commitment to constant upgradation of its

product quality to match international standards and to meet new

challenges to win and excel in all situations.

In the 1990's, we set our “Vision” to be : “ A vibrant globally

acknowledged top league player in Graphite Electrodes and allied

businesses with commitment to growth, innovation, quality and

customer focus”.

 In Graphite, our focus is on UHP grade electrodes, and we

44
have expanded our product range and established the same on

some of the toughest furnaces of our customers. Today, we have

years of experience supplying quality UHP grade electrodes all over

the world.

 The encouragement from our customers has led us to

increase production capacity and become a significant global

producer of quality UHP grade electrodes for EAF application. Our

ability to source the best raw materials from sources worldwide

and the skills of our human resources has been the key to our

growth.

 With a recent Rs 4.5 billion ( US$ 120 million) investment,

we have now expanded our manufacturing capacity.

As a responsible graphite electrode manufacturer, we continue to

invest in technology, development of new products and in our

human resources.

44
 Set up in 1977, HEG is a diversified company with interests

in Graphite Electrodes and Power. From a modest

investment made in 1977, the company reported a turnover

of Rs. 6500 million (US$140 million) in fiscal 2007. A

Flagship of the LNJ Bhilwara Group, HEG is Asia's leading

graphite electrodes manufacturer and exporter.

 It is an ISO 9001 & ISO 14000 Certified Company, by M/s

Bureau Veritas.

 Largest integrated graphite electrodes plant in South East

Asia & Middle East and second largest in the World.

 Technology originally sourced from 'SERS' - a subsidiary of

Pechiney, France. The Collaboration ended in the early 1990s.

 Won the country's top export award (CAPEXCIL) for 17

consecutive years.

 Also won the National Top Export Award from the

Government of India and the Rajiv Gandhi National Quality

Commendation Award.

44
 QualityPolicy
We, in HEG, are committed to being a customer-oriented

organisation where Quality is the inspiration and innovation is the

way of life.

We believe that world is our market and therefore competitive

quality of our products, response and service is the essence of

our being.

We recognise that the involvement of the employees is basic to

quality and for continuing growth and improvements.We would

involve our suppliers in the continuing programme for Quality

Improvement.

We believe that quality can only be obtained in a safe, clean and

orderly environment and therefore, we are committed to these

basics in our day to day activity.

SafetyPolicy
We in heg, are committed to being a safe and eco - friendly

44
organization. we believe that protection of our personnel and the

environment is one of our prime responsibilities.

We, therefore, commit ourselves to:

Introduce sound safety, health and environment

management practices.

Conduct our business responsibly through adoption of safer,

healthier, cleaner and energy- efficient technologies.

Comply with all applicable legislations and regulations related

to safety health and environment.

Continually improve our safety, health and environmental

performance by developing effective controls of our

operation.

Investigate the accidents to identify root causes and

introduce corrective and preventive measures.

Generate a high degree of awareness amongst all the

interested parties,

44
 Care for Ecology

HEG, an ISO 14001:1996 company, is fully

aware of the ecological impact of its processes and

actions can have and has put in place effective

mechanisms to minimise any negative fallout.

Also, the Company has carried out comprehensive

afforestation programme in and around its facilitiesd

.The Company’s facility at Mandideep has been

regarded one of the cleanest graphite electrode plant

44
 in the world when seen in the light of the material used and

the products manufactured there.

Performance Highlights and data analysis

44
Graphitesegment revenue breakup fpr
2008

HIGH POWER
ELECTRODE
32%

ULTRA HIGH
POWER
ELECTRODE
68%

44
44
44
 PRODUCTIONOFSTEELTHROUGHEAFROUTE

500
M 450
I 450 424
L 402
L 400
358 365
I
O 350
319
N 296
300
T
O 250
N
N 200
E
S 150

100

50

0
2001 2003 2005 2006 2007 2008 2010E

44
44
44
44
44
44
44
Taxation

44
• Tax system in India is divided in to two types, Direct Tax and

Indirect Tax.

• Direct Taxes that comprising of income tax, wealth tax, etc. are

those whose burden falls directly on the taxpayer.

• The indirect taxes are levied on goods and services and its

ultimate falls indirectly on the consumers. The indirected taxes are

comprising of sales tax, service tax, VAT, excise duty, custom duty,

etc.

INCOME TAX

Income Tax is all income other than agricultural income levied and

collected by the central government and shared with the states.

According to Income Tax Act 1961, every person, who is an assessee

and whose total income exceeds the maximum exemption limit, shall

be chargeable to the income tax at the rate or rates prescribed in the

finance act. Such income tax shall be paid on the total income of the

previous year in the relevant assessment year.

44
The total income of an individual is determined on the basis of his

residential status in India.

Income Tax Timeline in India (History)-

1860 1860 Introduced for the first time for a period of

five years to cover the 1857 mutiny expenses. It

was abolished in 1873.

1877 1877 The tax system was revived as a result of

the Great Famine of 1876.

1886 1886 Introduced as Act II of 1886. It laid down

the basic scheme of income tax that continues till

the present day.

1918 1918 Introduced as Act VII of 1918. It had

features like aggregation of income from various

sources for the determination of the rate,

classification of income under six heads and

application of the Act to all income that accrued or

arose or was received in India from whatever

44
 source in British India.

1922 1922 On the recommendations of the All-India

Income Tax Committee, the father of the present

act was introduced. The central government was

vested with the power to administer the tax.

1961 1961 The Act came into force from 1 April 1962, it

extended to the whole of India.

1997 1997 Establishment of the Tax Reform Committee

under the chairmanship of Dr. Raja J. Chelliah. It

was followed by restructuring the income tax with

parameters like lower taxes, fewer slabs, higher

execptions, etc.

2003 The Kelkar Task Force, which was followed by

outsourcing of PAN/TAN, exemption of dividend

income, compensated by levy of the dividend

distributed tax to be paid by the company.

Income Tax Rates Across the World

44
Country Personal Income Tax Rate

Australia 0% - 48.5%

Canada 16% - 29%

Estonia 24% - 24%

Denmark 44% - 63%

Hong Kong 0% - 33%

India 0% - 33%

Israel 10% - 49%

Malaysia 0% - 29%

Mexico 3% - 32%

Russia 13% - 13%

Singapore 0% - 22%

UK 0% - 40%

44
US 10% -35%

INCOME TAX RATES/ SLABS

For individuals, HUF, Association of Persons (AOP) and Body of

individuals (BOI):

For the Assessment Year 2009-10

44
 Rate
Taxable income slab (Rs.)
(%)

Up to 1,60,000

Up to 1,90,000 (for women)

NIL
Up to 2,40,000 (for resident individual of

65 years or above)

1,60,001 – 3,00,000 10

3,00,001 – 5,00,000 20

5,00,001 upwards 30*

*A surcharge of 10 per cent of the total tax liability is applicable where

the total income exceeds Rs 1,000,000.

Note : -

• Education cess is applicable @ 3 per cent on income tax, inclusive

of surcharge if there is any.

44
 • A marginal relief may be provided to ensure that the additional IT

payable, including surcharge, on excess of income over Rs

1,000,000 is limited to an amount by which the income is more

than this mentioned amount.

• Agricultural income is exempt from income-tax.

ResidenceRules

An individual is treated as resident in a year if present in India

I. for 182 days during the year or

II. for 60 days during the year and 365 days during the preceding

four years. Individuals fulfilling neither of these conditions are

nonresidents. (The rules are slightly more liberal for Indian citizens

residing abroad or leaving India for employment abroad.)

A resident who was not present in India for 730 days during the

preceding seven years or who was nonresident in nine out of ten

preceding yeas I treated as not ordinarily resident. In effect, a

newcomer to India remains not ordinarily resident.

44
For tax purposes, an individual may be resident, nonresident or not

ordinarily resident.

Non-Residents and Non-Resident Indians

Residents are on worldwide income. Nonresidents are taxed only on

income that is received in India or arises or is deemed to arise in

India. A person not ordinarily resident is taxed like a nonresident but

is also liable to tax on income accruing abroad if it is from a business

controlled in or a profession set up in India.

Capital gains on transfer of assets acquired in foreign exchange is not

taxable in certain cases.

Non-resident Indians are not required to file a tax return if their

income consists of only interest and dividends, provided taxes due on

such income are deducted at source.

It is possible for non-resident Indians to avail of these special

provisions even after becoming residents by following certain

procedures laid down by the Income Tax act.

44
Taxability of individuals is summarised in the table

below

Status Indian Foreign

Income Income

Resident and ordinarily

Taxable Taxable
resident

Resident but not ordinary

Taxable Not Taxable
resident

Non-Resident Taxable Not Taxable

INCOME TAX - TAXABLE HEADS OF INCOME

Remuneration for work done in India is taxable irrespective of the

place of receipt.

Remuneration includes:

• Tax upon salaries and wages

• Tax upon pension

44
• Tax upon bonus, fees & commissions

• Tax upon Gratuity

• Tax upon Annuity

• Tax upon profits in lieu of or in addition to salary

• Tax upon advance salary and perquisites

Others:

• Tax upon Allowances

• Tax upon Deferred compensation

• Tax equalisation

Besides remuneration for work, individuals may be

taxed on the following income:

Tax upon Income from house property

44
The annual value of property, consisting of any buildings or lands

appurtenant thereto of which the assessee is the owner, other than

such portions of such property as he may occupy for the purposes of

any business or profession carried on by him, the profits of which are

chargeable to income tax, shall be chargeable to income tax under

the head "Income from House Property".

Tax upon Income from business or professions:-

For charging the income under the head "Profits and Gains of

business," the following conditions should be satisfied:

• There should be a business or profession

• The business or profession should be carried on by the

assessee.

• The business or profession should have been carried on by the

assessee at any time during the previous year.

Tax upon Income from capital gains:-

44
Capital asset means property of any kind held by an assessee

whether or not connected with his business or profession.

Tax upon Income from other sources:-

Income of every kind, which is not chargeable to income tax

under the heads

• salary

• income from house property,

• profits and gains of business and profession,

• capital gains can be taxed under the head "income from other

sources".

However such income should also not fall under income not forming

part of total income under the IT Act.

Tax upon Clubbing of Income:-

The total income of an individual also includes certain income of

other persons. These are:-

44
 a. Income of spouse from,

remuneration derived from the concern in which the individual is

substantially interested unless the remuneration is by virtue of the

application of technical or professional skill possessed by him or her;

o assets transferred by the individual to the spouse or to

any other person for the benefit of the spouse unless the transfer is

for adequate consideration or in consideration of an agreement to live

apart.

b. income of son's wife from assets transferred by the individual

to her or to any other person for her benefit unless the transfer is for

adequate consideration.

c. income of his minor child - other than the minor child suffering

from disability specified in section 80-U, referred to in para 5.3.9

except when such income arises to the child on account of any

manual work done by him or on account of any activity which

involves application of any skill, talent or specialised knowledge and

experience.

44
The individual in whose income the income of other spouse as

mentioned in (a) (i) above is to be included will be the husband or

wife whose total income - before including such remuneration income

- is greater. Similarly the income of minor child is to be included in

the income of the parent having greater income. If the marriage of

the parents does not subsist, it will be parent who maintains the

child.

Tax Rates

In India, Individual income tax is a progressive tax with three slabs.

From April 1, 2008 new tax slabs apply, which are as follows:

• No income tax is applicable on all income up to Rs. 1,50,000 per

year. (Rs. 1,80,000 for women and Rs. 2,25,000 for senior

citizens)

• From 1,50,001 to 3,00,000 : 10% of amount greater than Rs.

1,50,000 (Lower limit changes appropriately for women and

senior citizens)

44
 • From 3,00,001 to 5,00,000 : 20% of amount greater than Rs.

3,00,000 + 15,000 (slightly less for women and further less for

senior citizens)

• Above 5,00,000 : 30% of amount greater than Rs. 5,00,000 +

55,000 (slightly less for women and further less for senior

citizens)

SURCHARGE

A 10% surcharge (tax on tax) is applicable if the taxable income (taking

into consideration all the deductions) is above Rs. 10 lakh (Rs. 1

million). The limit of 10 lacs was increased to Rs. 1 crore (Rs. 10

million) with effect from 1 June 2007 for corporate assesses.

EDUCATION CESS

All taxes in India are subject to an education cess, which is 2% of the

total tax payable. With effect from assessment year 2008-09,

44
Secondary and Higher Secondary Education Cess of 1% is applicable on

the subtotal of taxable income.

TAX RATE FOR NON-INDIVIDUALS

There are special rates prescribed for Firms, Corporates, Local

[5]
Authorities & Co-operative Societies.

REFUND STATUS FOR SALARIED TAX PAYERS

The Income Tax Department has put on its website the list of income

tax refunds of all salary tax payers which could not be sent to the

concerned persons for want of correct address. (link to check refund)

CORPORATE INCOME TAX

For companies, income is taxed at a flat rate of 30% for Indian

companies, with a 10% surcharge applied on the tax paid by companies

with gross turnover over Rs. 1 crore (10 million). Foreign companies

pay 40%.[7].An education cess of 3% (on both the tax and the

surcharge) are payable, yielding effective tax rates of 33.99% for

domestic companies and 41.2% for foreign companies.

44
From 2005-06, electronic filing of company returns is mandatory.

FRINGE BENEFIT TAX

Fringe Benefit Tax is a tax payable by companies against benefits that

are seen by employees but cannot be attributed to them individually.

This tax is paid as 33.99% of the benefit, which is only a percentage of

the actual amount paid.

TAX PENALTIES

"If the Assessing Officer or the Commissioner (Appeals) or the

Commissioner in the course of any proceedings under this Act, is

satisfied that any person-

(b) has failed to comply with a notice under sub-section (1) of section

142 or sub-section (2) of section 143 or fails to comply with a direction

issued under sub-section (2A) of section 142, or

(c) has concealed the particulars of his income or furnished inaccurate

particulars of such income,

he may direct that such person shall pay by way of penalty,-

44
(ii) in the cases referred to in clause (b), in addition to any tax payable

by him, a sum of ten thousand rupees for each such failure;

(iii) in the cases referred to in clause (c), in addition to any tax payable

by him, a sum which shall not be less than, but which shall not exceed

three times, the amount of tax sought to be evaded by reason of the

concealment of particulars of his income or the furnishing of inaccurate

particulars of such income"

Avoidation of double taxation

Since a 'resident' is liable to pay tax in India on his 'total world

income', it is possible that he may have to pay tax on his foreign

income in that country also, where it is earned. Such situation leads

to double taxation of the same income -in India and again in the

country where it is earned. To avoid such a situation, the

Government of India has entered into agreements for avoidance of

double taxation with different countries, a discussion about which is

made in Chapter XII.

Filing of Return - compulsory

As per AY 2008-09 Non-auditable accounts are furnished by those

businesses, which have annual turnover of up to Rs 40 lakh per

44
annum and those professionals having income up to Rs 10 lakh per

annum.

From July 26 onwards taxpayers including salaried class would also

be allowed for the first time to file tax returns in 1,000 designated

post offices in the country.

Earlier the one-by-six scheme that prescribed the return was to be

filed compulsorily, if any of the following six items were present and

whether the person had taxable income or not.

One-by-six scheme--

If a person is enjoying any of the following item, he/she has to file

his/her return.

• Occupation of a House

• Ownership of a motor car

• Expenditure on foreign travel

• Holder of credit card

• Electricity payments in excess of Rs 50,000/annum

44
• Member of a club - where the entrance fee is more than Rs

25,000/-.

Penalty

Under the existing law, penalty for delay in filing of return of income

is calculated as a percentage of the shortfall of tax. Where tax has

already been deducted at source, or advance tax has been duly paid,

no penalty is leviable. It is proposed to amend the law to provide for

the penalty of Rs.1000 even in such cases. This provision is targeted

towards the salary earners who always had the impression that their

liability was over the moment the tax was deducted by the employer.

Types of Assessments

Basically assessment is an estimation for an amount assessed while

paying Income Tax. It is a compulsory contribution that is required

for the support of a government. It is generally of the following

44
 types.

Self assessment

The assessee is required to make a self assessment and pay the tax

on the basis of the returns furnished. Any tax paid by the assessee

under self assessment is deemed to have been paid towards regular

assessment.

Regular assessment

On the basis of thereturn of income chargeable to tax furnished by

the assessee an intimation shall be sent to the assessee informing

him about the tax or interest payable or refundable to him.

Best judgement assessment

In a best judgement assessment the assessing officer should really

base the assessment on his best judgement i.e. he must not act

44
dishonestly or vindictively or capriciously. There are two types of

judgement assessment :

1. Compulsory best judgement assessment made by the assessing

officer in cases of non-co-operation on the part of the assessee or

when the assessee is in default as regards supplying informations.

2. Discretionary best judgement assessment is doen even in cases

where the assessing officer is not satisfied about the correctness or

the completeness of the accounts of the assessee or where no

method of accounting has been regularly and consistently employed

by the assessee

Income escaping assessment or re-assessment

If the assessing officer has reason to believe that any income

chargeable to tax has escaped assessment for any assessment year

assess or reassess such income and also nay other income

chargeable to tax which has escaped assessment and which comes to

his notice in course of the proceedings or any other allowance, as the

case may be.

Precautionary assessment

44
Where it is not clear as to who has received the income, the

assessing officer can commence proceedings against the persons to

determine the question as to who is responsible to pay the tax.

Section 80C

Section 80L used to allow deduction of interest earned on, say, a

National Savings Certificate or a bank deposit up to a limit of Rs

12,000. But now all these are gone .In their place has come Section

80C -- "u/s 80CCC, & u/s 80CCD", as the Finance Bill puts it. Thus,

the new Section 80C of the Income Tax Act proposed in Union Budget

gives you a bigger tax break than what the current regime offers.

• Deduction in respect of Life Insurance Premia, Contribution to

Provident Fund, etc.

• Rs 1 lakh can be invested under this section without any

individual sub-limits except in the case of Rs 10,000 in pension

funds.

• Sections 88, 80L, 80CCC and 80CCD is clubbed in.

44
 Schemes eligible for Section 80C benefits

• PPF

• ELSS - Mutual Funds

• NSC

• KVP

• Life Insurance

• Senior Citizen Saving Scheme 2004

• Post Office Time Deposit Account

Sale Tax

44
 Central Sales tax is generally payable on the sale of all goods by a

dealer in the course of inter-state Trade or commerce or, outside a

State or, in the course of import into or, export from India.

Interstate sale

According to S3, a sale or purchase shall be deemed to take place in

the course of interstate trade or commerce in the following cases:

• when the sale or purchase occasions the movement of goods

from one State to another;

• when the sale is effected by a transfer of documents of title to

the goods during their movement from one State to another.

Where the goods are delivered to a carrier or other bailee for

transmission, the movement of the goods for the purpose of clause

(b) above, is deemed to start at the time of such delivery and

terminate at the time when delivery is taken from such carrier or

bailee. Also, when the movement of goods starts and terminates in

the same State, it shall not be deemed to be a movement of goods

from one State to another.

44
To make a sale as one in the course of interstate trade, there must

be an obligation to transport the goods outside the state. The

obligation may be of the seller or the buyer. It may arise by reason

of statute or contract between the parties or from mutual

understanding or agreement between them or, even from the nature

of the transaction, which linked the sale to such transaction. There

must be a contract between the seller and the buyer. According to

the terms of the contract, the goods must be moved from one state

to another. If there is no contract, then there is no inter-state sale.

There can be an interstate sale even if the buyer and the seller

belong to the same state; even if the goods move from one state to

another as a result of a contract of sale; or, the goods are sold while

they are in transit by transfer of documents.

Sales tax is payable to the sales tax authority in the state from which

the movement of goods commences. It is to be paid by every dealer

on the sale of any goods effected by him in the course of inter-state

trade or commerce, notwithstanding that no liability to tax on the

44
sale of goods arises under the tax laws of the appropriate state.

Possible offences and the penalties for such offences.

The offences that may be committed and, the penalties, prescribed

for can be summarised as under. Offences, under section10, are

punishable with simple imprisonment (up to 6months) with or

without fine.

1. Giving false declaration in Form C, E-I, E-II, F or H, which he

knows or has reason to believe it to be false.

2. Not getting registered under the CST Act, when required to be

registered or not complying with provisions relating to security.

3. False representation by a registered dealer that the goods,

purchased are covered under his certificate of registration for a

concessional rate.

4. Falsely representing that he is a registered dealer, though he is

not.

44
5. Misusing or using for different purpose, the goods, obtained

under C form at a concessional rate.

6. Having possession of form C, which is not obtained as per

provisions of the CST Act.

7. Collecting any amount, representing as sales tax, by an

unregistered dealer or by a registered dealer in contravention of the

provisions of the CST Act.

Liability of a Company in liquidation, liability of the

directors of a private company.

If a liquidator or receiver is appointed in the case of a company, he

should inform the Sales Tax authorities within 30 days of his

appointment. The Sales Tax Authority shall intimate him the amount

of tax due from the company in liquidation within 3 months. The

Sales Tax authorities are "preferential creditors' in a case of

liquidation.

The Liquidator shall not dispose of assets of the company before

setting aside the amount of dues as intimated by sales tax

44
 department. The liquidator may, however, part with such assets or

properties in compliance with any order of a court or for the purpose

of payment of the tax, payable by the company under the CST Act or,

for making any payment to secured creditors whose debts are

entitled under law to priority of payment over debts due to the

government, on the date of liquidation or, for meeting such costs and

expenses of the winding up of the company, as are in the opinion of

the appropriate authority, reasonable.

The power to levy Sales tax

1. No state can levy sales tax on any sale or purchase where such

sale or purchase takes place

o outside the state and

o in the course of import of goods into or export of goods

outside India.

2. Only the parliament can levy tax on inter-state sale or purchase

of goods

Main Principles in State Sales Tax Laws

44
1. A sale or purchase of goods is said to take place when the

transfer of property in the existing goods or future goods takes place

for consideration of money.

2. The goods have been divided into different categories and

different rates of sales tax are charged for different categories of

goods.

3. In most of the cases related to the sales tax, the tax on the

sale or purchase of goods is at single point.

4. Under the provisions of some state laws the assesses are

divided into several categories such as manufacturer, dealer, selling

agent etc. and such as assess is required to obtain a registration

certificate to that effect. The sales tax or the purchase tax is levied

on that assessee on the basis of his category such as dealer,

manufacturer etc. on production of certain forms or certificates (and

differential rates of sales tax are levied).

5. Generally , a quarter return of sales or purchases is insisted

upon and the assessee is required to furnish the return in the

prescribed form.

44
6. At the time of assessment, the assessee has to furnish all the

documentary evidence and satisfy the concerned sales tax /

commercial tax officer.

7. The sales tax laws of the states prescribe the procedure to be

followed in case an assessee prefers to make an appeal.

8. Every dealer should apply for registration and obtain a

registration certificate to that effect. The registration certificate

number should be quoted in all the bill / cash memos.

Transactions not amounting to inter-state sales

Not all despatches of goods from one state to another result in inter

state sales rather the movement must be on account of a covenant

or incident of the contract of sales. There are some instances wherein

the goods are moved out of the selling state and yet they are not

considered inter state sales :-

• Intra-state sales

• Stock transfer from head office to branch & vice versa

• Import and Export sales or purchases

44
• Sale through commission agent / on account sales

• Delivery of Goods for executing works contract

Sales Tax ID number

A state sales tax ID number is basically a business version of your

Social Security number under which you collect and pay tax for any

service or product you sell that qualifies for taxation in your state.

The state department of taxation provides sales tax ID numbers and

it takes about a month to get one.

The rule of thumb for sales tax is that most services are exempt and

most products are taxable except for food and drugs. However,

states have been gradually adding to the list of services that are

taxable for the last few years. Check with your state department of

taxation to determine if the product or service you sell is taxable in

your state.

Exception in the sales taxes

• Sales to resellers such as wholesalers and retailers that have a

valid state resale certificate.

44
• Sales to tax-exempt institutions such as schools or charities

Which forms are to be filled?

• Form C;

• Form G;

• Forms E-I & E-II.

VAT

VAT is value added tax, which is charged on value addition. VAT can be

considered as a multi-point sales tax with set-off for tax paid on

purchases of inputs material and capital goods. Therefore dealers can

44
deduct the amount of tax paid on purchase from the tax collected on

sales, thereby paying just the balance amount to the government

VAT ‘v’ Sale Tax

According to VAT Act:

VAT is a more transparent and accurate system of taxation. The

existing sales tax structure allows for double taxation thereby cascading

the tax burden. In VAT Act we can take credit of tax paid on input.

D
of
Rai
pur

44
 Sale
Sale B of B of Sale C of
Raip
Raipu
ur @
r
@ 100/- @ 114/-
124/-

Sale

@134/-

Consum
ption in
Raipur

Tax implication under Value Added Tax Act:

Selling Invoice

Price incl. value Tax Tax Net Tax Net Tax

Tax Rate
profit (Incl. Payable Credit Outflow Outflow

(Excl Tax) Tax)

100 4% CST 104 4 0 4.00 4.00

44
 *
114 12.5% VAT 128.25 14.25 0 14.25 14.25

124 12.5% VAT 139.50 15.50 14.25 1.25 1.25

134 12.5% VAT 150.75 16.75 15.50 1.25 1.25

VAT 16.75
Total to Govt.
CST 4.00

*Note: CST Paid cannot be claimed for credit.

According to Sale Tax act:

The manufacturer pays tax on each raw material, which is used to

production of finished goods. Such tax paid goes to the government.

The manufacturer adds the taxes to his cost. Then labour charge,

processing charges and his profit will be added to make up the sales

price. Thereafter he paid tax on the entire amount. The government

receives tax two times - once on the raw materials bought by the

manufacturer and again on the final product. This means manufacturer

44
pays tax on the tax already paid. It has in effect increased the cost of

the goods. In the example below, we pay 14.40 sales tax on the bill,

but the government receives 26.40.

Sales
Selling Tax
Seller Buyer Tax Total
Price Amount
Rate

A (Raw Material B (Mfr) 100 12% 12.00 112.00

Supplier)
B (value addition by Consumer 122 12% 14.40 134.40

way of labour, profit etc

of Rs 10)

Total Sales Tax 26.4

collected by Govt 0

44
VAT solves the problem for both the government and the consumer.

Each dealer is allowed to deduct the tax paid on their purchases from

the tax collected on sales and to pay only the balance to the

government. This means that the purchase and sales will be correctly

recorded.

Credit on Opening Stock:

1. When VAT is introduced, Opening stock of raw material or

consumable (which is purchased as on or after April 1, 2005 and

still unsold on 31st March 2006) will be eligible to receive input

credit subject to submission of requisite documents. VAT will be

levied on such goods, which is sold on or after April 1, 2006 and

input tax credit will be given for the sales tax already paid in the

previous year. This tax credit will be available over a period of 12

months.

2. If finished goods held in opening stock as on 01.04.2006

and it was manufactured from tax-paid goods, which have

44
 been purchased on or after 01.04.05. Then tax paid on raw

material, packing material or explosives consumed in mining,

will be allowed as VAT Credit.

For calculation of VAT credit on consumed raw material, FIFO

base will be adopted.

3. Credit will be allowed only on local purchase i.e. Credit will

not be allowed on inter state purchase or purchase under CST.

Therefore only local purchase will be considered in calculation of

VAT Credit on opening stock.

4. Credit is allowed to registered dealer subject to material

purchased from registered dealer.

5. Sale tax should be mentioned in invoice. If sale tax is not

mentioned on invoice and it is included in purchase price then

Rate, under Sale Tax Act or VAT Act which ever is lower,

will be applied on net turnover for calculation of VAT Credit.

Where net turnover is as followed-

44
 Net Turnover= Purchase Value- sale tax (i.e. Sale price x rate of

sales tax)

100 + rate of sales tax

VAT Credit on opening stock will be allowed to dealer, if he prove in

satisfaction of assessing officer that such material (i.e. raw material or

consumable which is lying in opening stock and those material which

has consumed in manufacturing of finished goods like cement) were

liable to tax in hand of selling registered dealer. If dealer fails to prove

the same then 75 % of net turnover will be consider in calculation of

input VAT Credit.

6. Tax paid on capital goods which is lying in opening stock

will not be allowed as Credit.

44
 "Capital goods" means plants, machinery and equipments

directly used in the process of manufacture and / or in the course

of business excluding such equipments as may be notified."

7. Input Credit on following opening stock will not be allowed-

 Receive under replacement

 Receive Gift

 Receive Free sample

 Petrol, diesel, aviation turbine fuel, natural gas, kerosene,

liquefied petroleum gas.

 Furniture and fixture including AC and refrigerator.

 Material used in capital expenditure in land or civil

construction.

Issue: what will tax treatment on replacement if there is new goods

emerge or major value additions take place?

44
 Credit on Capital Goods:

1. Capital Goods should be purchased within Chhattisgarh.

"Capital goods" means plants, machinery and equipments directly

used in the process of manufacture and / or in the course of

business excluding such equipments as may be notified."

2. Capital Goods should be purchased from registered dealer.

3. Tax portion should be separately mentioned in invoice or cash

memorandum.

Issue: 1. Purchase Value=?

2. If purchase value=100000.00

4. VAT Credit will not be allowed on following Capital Goods-

 Capital Goods purchased from un-registered dealer.

44
  Capital expenditure on land and civil construction for use in

manufacture or trade, including office building or other

construction.

 Furniture and fixture including AC and refrigerator.

 Notified by state govt.

CREDIT ON INPUT MATERIAL:

What is input tax?

Input generally mean goods purchased by a dealer in the course of his

business for re-sale or for use in the manufacture, processing,

packing/storing of other goods or any other business use. The tax paid

on inputs is known as Input Tax. "Input tax means the tax paid or

payable under this Act by a registered dealer to another registered

dealer on the purchase of goods in the course of business for resale or

44
for manufacture of taxable goods or for use as containers or packing

material or for the execution of works contract."

What is input tax credit?

It is the credit for tax paid on inputs. Every dealer has to pay output

tax on the taxable sale affected by him. The basic formula of VAT is

that every dealer pays tax only on the value addition in his hands. In

simple words input tax credit is the mechanism by which the dealer is

enabled to set off against his output tax. Dealers are not eligible for

input tax credit on all inputs. There are certain restrictions and

conditions on the eligibility of input tax credit as it is stipulated in the

VAT Act and Rule.

1. Credit will be allowed only on local purchase i.e. Credit will not be

allowed on inter state purchase or purchase under CST. Therefore

only local purchase will be considered in calculation of VAT Credit.

2. Credit is allowed to registered dealer. Material should be

purchased from registered dealer.

44
3. No input tax Credit under sub-section (1) shall be claimed or be

allowed to a registered dealer-

(i) In respect of any goods specified in schedule II purchased by

him from another such dealer for sale but given away by him

by way of free sample or gift or given to or received by him by

way of replacement.

(ii) In respect of goods specified in schedule II for use or

consumption for manufacture or mining of goods but the goods

manufactured or mined are given away by him by way of

free sample or gift or given to or received by him by way of

replacement.

(iii) Purchase of Petrol, diesel, aviation turbine fuel, natural gas,

kerosene, liquefied petroleum gas.

(iv) If tax amount is not mentioned separately in the invoice or

cash memorandum.

44
4. If manufactured goods disposed otherwise than by way of sale

then amount of input tax Credit relating to such goods will be

reverse or paid.

5. If manufactured goods sold within Chhattisgarh or outside the

state under CST sale then input VAT Credit will be adjusted from

VAT payable on sale within CG or CST payable on sale out side

state.

6. CST paid on inter state sale will not be allowed as VAT Credit.

7. If goods sold out side the state of CG by way of stock transfer

then input tax Credit will be allowed at the rate in excess of 4 %

of input tax. Therefore VAT Credit will be calculated as follow-

 Amount of VAT Credit which will be claimed in respect of

purchased those goods which are taxed @ 4%-

AxB

44
 C

Where

A = Total amount of tax paid @ 4 % on input material which is eligible

for Credit)

B = value of taxable sale including international sale and inter-state

sale but excluding sale by way of stock transfer)

C = Total sale turnover including sale by way of stock transfer.

 Amount of VAT Credit on those goods on which input tax was paid

@ 12.5%-

 Tax amounting to 8.5 % portion is given as input tax credit in

total and remaining 4 % portion will be allowed from above

formula.

8. If goods sold by way of stock transfer then full amount of VAT on

sale in out side the state will be paid in such state

9. If un-adjusted Credit still remains after two year then refund can

be claim.

Payment of Tax:

44
Payment of tax for the first and second month of each quarter will be

paid before 10th day of following month and balance tax of such quarter

will be made before filing of return of such quarter.

Interest:

Registered dealer shall be liable to pay interest 1 %, if he fails to

furnish return or fail to payment of tax

P.A.N.

Permanent Account Number is a number by which the Assessing

Officer can identify any person. Presently the Income Tax

Department is allotting PAN under the New Series to all assessees

which consists of ten alphanumeric character and is issued in the

form of a laminated card. The PAN is ultimately meant to supplant

the General Index Register Number which is currently in use. The

General Index Register Number is a number given an Assessing

Officer to the assessees in the General Index Register maintained by

him which also contains the designation and the particulars of the

Assessing Officer. As per section 139A of the Act obtaining PAN is a

44
must for the following persons:-

1. Any person whose total income or the total income of any other

person in respect of which he is assessable under the Act exceeds the

maximum amount which is not chargeable to tax.

2. Any person who is carry on any business or profession whose total

sales, turnover or gross receipts are or is likely to exceed Rs. 5 lacs

in any previous year.

3. Any person who is required to furnish a return of income under

section 139(4) of the Act.

• The requirement for applying for allotment of PAN under the

New Series has now been extended to the whole of India.

• PAN is required to be quoted in all the transactions mentioned

below:-

o In all returns and in all correspondence with the

department.

o In all challans for payment of any tax or sum due to the

department.

44
o In certain notified transaction. (see the sub module on

notified transactions where PAN has to be quoted)

Application for allotment of PAN is to be made in Form 49A.

44
 CENTRAL EXCISE

Central Excise duty is an indirect tax levied on those goods which

are manufactured in India and are meant for home consumption.

The taxable event is 'manufacture' and the liability of central excise

duty arises as soon as the goods are manufactured. It is a tax on

manufacturing, which is paid by a manufacturer, who passes its

incidence on to the customers.

The term "excisable goods" means the goods which are specified in

the First Schedule and the Second Schedule to the Central Excise

Tariff Act, 1985 , as being subject to a duty of excise and

includes salt.

The term "manufacture" includes any process,

1. Incidental or ancillary to the completion of a manufactured

product and

2. Which is specified in relation to any goods in the Section or

Chapter Notes of the First Schedule to the Central Excise

Tariff Act, 1985 as amounting to manufacture or

3. Which, in relation to the goods specified in the Third

Schedule, involves packing or repacking of such goods in a

unit container or labeling or re-labelling of containers

including the declaration or alteration

44 of retail sale price on it
 the product marketable to the consumer?

As incidence of excise duty arises on production or manufacture of

goods, the law does not require the sale of goods from place of

manufacture, as a mandatory requirement. Normally, duty is

For the Assessment Year 2007-08
payable on 'removal' of goods. The Central Excise Rules provide
• The general rate of Basic Excise Duty (BED) reduced to 8%.
that every person who produces or manufactures any 'excisable
(As per changes made on Feb 24, 2009)
goods', or who stores such goods in a warehouse, shall pay the
• Extension of the earlier 4 percent cut in excise duty beyond
duty leviable on such goods in the manner provided in rules or
31 March 2009. (As per changes made on Feb 24, 2009)
under any other law. No excisable goods, on which any duty is
• 1% cess for secondary and higher education introduced.
payable, shall be 'removed' without payment of duty from any
• For small scale excemption, the turnover ceiling is increased from
place, where they are produced or manufactured, or from a
Rs 10 million to Rs 15 million.
warehouse, unless otherwise provided. The word 'removal' cannot
• The valuation rule for all the goods manufactured by job worker
be necessarily equated with sale.
has been introduced.

• The effective rates on petrol and diesel is reduced from 8 per cent

to 6 per cent.

• The settlement commission provisions is to be amended.

The removal may be for:-

• The e-payment has become mandatory in cases where the annual

1. excise
Sale duty payable is in excess of Rs 5 million.

2. Transfer to depot etc.

3. Captive consumption
Importance of Central Excise Duty
4. Transfer to another unit

5. Free
Central distribution
excise revenue is the biggest single source of revenue for the

Government of India. The Union Government tries to achieve different

Thus, it can be seen that duty becomes payable irrespective of

whether the removal is for sale or for some other purpose.

44
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.

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

44
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.

Customs Duty

Introduction

The Customs Act was formulated in 1962 to prevent illegal imports and

exports of goods. Besides, all imports are sought to be subject to a

duty with a view to affording protection to indigenous industries as well

as to keep the imports to the minimum in the interests of securing the

exchange rate of Indian currency.

Duties of customs are levied on goods imported or exported from India

at the rate specified under the customs Tariff Act, 1975 as amended

from time to time or any other law for the time being in force. For the

44
purpose of exercising proper surveillance over imports and exports, the

Central Government has the power to notify the ports and airports for

the unloading of the imported goods and loading of the exported goods,

the places for clearance of goods imported or to be exported, the routes

by which above goods may pass by land or inland water into or out of

Indian and the ports which alone shall be coastal ports.

In order to give a broad guide as to classification of goods for the

purpose of duty liability, the central Board of Excises Customs (CBEC)

bring out periodically a book called the "Indian Customs Tariff Guide"

which contains various tariff rulings issued by the CBEC. The Act also

contains detailed provisions for warehousing of the imported goods and

manufacture of goods is also possible in the warehouses.

For a person who do not actually import or export goods customs has

relevance in so far as they bring any baggage from abroad.

Types of duties

Under the custom laws, the following are the various types of duties

which are leviable.

44
Basic Duty:

This is the basic duty levied under the Customs Act. The rate varies for

different items from 5% to 40%.

Additional Duty (Countervailing Duty) (CVD):

This additional duty is levied under section 3 (1) of the Custom Tariff

Act and is equal to excise duty levied on a like product manufactured or

produced in India. If a like product is not manufactured or produced in

India, the excise duty that would be leviable on that product had it

been manufactured or produced in India is the duty payable. If the

product is leviable at different rates, the highest rate among those

rates is the rate applicable. Such duty is leviable on the value of goods

plus basic custom duty payable. eg. If the customs value of goods is Rs.

5000 and rate of basic customs duty is 10% and excise duty on similar

goods produced in India is 20%, CVD will be Rs.1100/-.

Additional Duty to compensate duty on inputs used by Indian

manufacturers. This Additional Duty is levied under section 3(3) of the

Customs Act. It can be charged on all goods by the central government

to counter balance excise duty leviable to raw materials, components

44
and other inputs similar to those used in the production of such good.

Anti-dumping Duty:

Sometimes, foreign sellers abroad may export into India goods at prices

below the amounts charged by them in their domestic markets in order

to capture Indian markets to the detriment of Indian industry. This is

known as dumping. In order to prevent dumping, the Central

Government may levy additional duty equal to the margin of dumping

on such articles, if the goods have been sold at less than normal value.

Pending determination of margin of dumping, such duty may be

provisionally imposed. After the exact rate of dump ing duty is finally

determined, the Central government may vary the provisional rate of

dumping duty. Dumping duty can be imposed even when goods are

imported indirectly or after changing the condition of goods. There are

however certain restrictions on imposing dumping duties in case of

countries which are signatories to the GATT or on countries given "Most

Favoured Nation Status" under agreement. Dumping duty can be levied

on imports on such countries only if the Central Government proves

that import of such goods in India at such low prices causes material

injury to Indian industry.

44
Protective Duty:

If the Tariff Commission set up by law recommends that in order to

protect the interests of Indian industry, the Central Government may

levy protective anti-dumping duties at the rate recommended on

specified goods. The notification for levy of such duties must be

introduced in the Parliament in the next session by way of a bill or in

the same session if Parliament is in session. If the bill is not passed

within six months of introduction in Parliament, the notification ceases

to have force but the action already undertaken under the notification

remains valid. Such duty will be payable upto the date specified in the

notification. Protective duty may be cancelled or varied by notification.

Such notification must also be placed before Parliament for approval as

above.

Duty on Bounty Fed Articles:

In case a foreign country subsidises its exporters for exporting goods to

India, the Central Government may import additional import duty equal

to the amount of such subsidy or bounty. If the amount of subsidy or

bounty cannot be clearly deter mined immediately, additional duty may

be collected on a provisional basis and after final determination,

difference may be collected or refunded, as the case may be.

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Export Duty:

Such duty is levied on export of goods. At present very few articles

such as skins and leather are subject to export duty. The main purpose

of this duty is to restrict exports of certain goods. The Central

Government has been granted emergency powers to increase import or

export duties if the need so arises. Such increase in duty must be by

way of notification which is to be placed in the Parliament within the

session and if it is not in session, it should be placed within seven days

when the next session starts. Notification should be approved within 15

days.

44
 FINANCE OF HEG Ltd.

Overall performance:-

The Company during the year shows strong growth of sales graphite

electrode.

Net sales increased to rs.945.98 crore higher by closed to 16% from rs.

817.87 crore in the previous year.

The export turnover increased approximately 48% as compared to

previous year.

The net profit increased substantially to rs. 146.35 crore from 73.84

crore.

Earnings per share increase increased to rs. 35.17 crore (previous year-

rs. 18.32 crore).

The company had paid an interim dividend @ rs. 7 per share on Equity

share in January, 2008.

External sales revenue of graphite is 88538.53 lac.

44
TAXES PAID BY HEG

Rs. In crore

Taxes 2007-2008 2006-2007

Excise Duty 33.02 49.66

Inter division sales 106.88 10.02

Current year 67.67 12.58

Deferred 9.88 13.97

Provision for fringe benefit taxes 0.43 0.36

Income tax for earlier year 2.62 0.67

44
Following dues of income tax, sales tax, service tax, excise duty along

with the forum where the dispute is pending.

N a m e o f th e sta te N a m e o f t h e s t aD teep a r t m e n t a l A p p e lla t e a u t h o r it ie s

C o m m i s s s io n e rt r ib u n a l H i gh c o u r ts u p r e m e c o u r t
am ount am ount am ount am ount
In c o m e Ta x A c t , 1 9 6 1 In c o m e Ta x _ 57 _ _
c e n t ra l e xc i s e a c t , 1 9 4e4xc is e d u t y 1 2 .7 8 1 3 .6 4 _ _
c e n t ra l s a le t a x a c t , 1 9c5e 6n t r a l s a l e s t a1 x2 6 .8 3 1 8 .4 8 _ _
M .P . P r a v e s h k a r A d h ine iya
n t rmy t, a1x9 7 6 1 5 7 .1 5 1 4 .4 1 5 .4 1 _

M .P .C .T. L o c a l s a le s t a x_ _ 0 .7 7 _

44
 Conclusion

The 500 million dollar LNJ Bhilwara Group is a diversified group with

interests in Graphite Electrodes, Textiles,

Steel , Power Generation and IT Enabled Services.

The group is awarded ISO 9001:2000 & ISO 14001:2004

Certifications.

HEG Limited - HEG Ltd, a premier company of the LNJ Bhilwara

group, is today India's leading graphite electrode manufacturer. It

has one of the largest integrated graphite electrode plants in

South-East Asia, processing sophisticated UHP (Ultra High Power)

Electrodes.

The company exports over 80% of its production to more than 25

countries of the world.

It is an ISO 9001 & ISO 14000 Certified Company, by M/s Bureau

Veritas.

In Graphite, HEG focus is on UHP grade electrodes, and we have

expanded our product range and established the same on some of

44
the toughest furnaces of our customers. Today, we have years of

experience supplying quality UHP grade electrodes all over the world.

HEG Won the country's top export award (CAPEXCIL) for 17

consecutive years.

Also won the National Top Export Award from the Government of

India and the Rajiv Gandhi National Quality Commendation Award.

Taxes - Taxes in India are of two types, Direct Tax and Indirect

Tax.

Direct Tax, like income tax, wealth tax, etc. are those whose burden

falls directly on the taxpayer.

The burden of indirect taxes, like service tax, VAT, etc. can be passed

on to a third party.

Income Tax

Income Tax Rates

44
 • No income tax is applicable on all income up to Rs. 1,50,000 per

year. (Rs. 1,80,000 for women and Rs. 2,25,000 for senior

citizens)

• From 1,50,001 to 3,00,000 : 10% of amount greater than Rs.

1,50,000 (Lower limit changes appropriately for women and

senior citizens)

• From 3,00,001 to 5,00,000 : 20% of amount greater than Rs.

3,00,000 + 15,000 (slightly less for women and further less for

senior citizens)

• Above 5,00,000 : 30% of amount greater than Rs. 5,00,000 +

55,000 (slightly less for women and further less for senior

citizens)

A 10% surcharge (tax on tax) is applicable if the taxable income (taking

into consideration all the deductions) is above Rs. 10 lakh (Rs. 1

million). The limit of 10 lacs was increased to Rs. 1 crore (Rs. 10

million) with effect from 1 June 2007 for corporate assesses.

All taxes in India are subject to an education cess, which is 2% of the

total tax payable. With effect from assessment year 2008-09,

Secondary and Higher Secondary Education Cess of 1% is applicable on

the subtotal of taxable income.

44
For companies, income is taxed at a flat rate of 30% for Indian

companies, with a 10% surcharge applied on the tax paid by companies

with gross turnover over Rs. 1 crore (10 million).

Sale Taxes - Central Sales tax is generally payable on the sale of all

goods by a dealer in the course of inter-state Trade or commerce or,

outside a State or, in the course of import into or, export from India.

Interstate sale

According to S3, a sale or purchase shall be deemed to take place in

the course of interstate trade or commerce in the following cases:

• when the sale or purchase occasions the movement of goods

from one State to another;

• when the sale is effected by a transfer of documents of title to

the goods during their movement from one State to another.

Sales tax is payable to the sales tax authority in the state from which

the movement of goods commences. It is to be paid by every dealer

on the sale of any goods effected by him in the course of inter-state

trade or commerce, notwithstanding that no liability to tax on the

sale of goods arises under the tax laws of the appropriate state.

44
Possible offences and the penalties for such offences.

The offences that may be committed and, the penalties, prescribed

for can be summarised as under. Offences, under section10, are

punishable with simple imprisonment (up to 6months) with or

without fine.

8. Giving false declaration in Form C, E-I, E-II, F or H, which he

knows or has reason to believe it to be false.

9. Having possession of form C, which is not obtained as per

provisions of the CST Act

10. Not getting registered under the CST Act, when required to be

registered or not complying with provisions relating to security.

VAT- VAT is value added tax, which is charged on value addition. VAT

can be considered as a multi-point sales tax with set-off for tax paid on

purchases of inputs material and capital goods. Therefore dealers can

deduct the amount of tax paid on purchase from the tax collected on

sales, thereby paying just the balance amount to the government.

44
VAT is a more transparent and accurate system of taxation. The

existing sales tax structure allows for double taxation thereby cascading

the tax burden. In VAT Act we can take credit of tax paid on input.

According to Sale Tax act:- The manufacturer pays tax on each raw

material, which is used to production of finished goods. Such tax paid

goes to the government. The manufacturer adds the taxes to his cost.

Then labour charge, processing charges and his profit will be added to

make up the sales price. Thereafter he paid tax on the entire amount.

The government receives tax two times - once on the raw materials

bought by the manufacturer and again on the final product.

CENTRAL EXCISE- Central Excise duty is an indirect tax levied on

those goods which are manufactured in India and are meant for home

consumption.

• For the Assessment Year 2007-08, The general rate of Basic

Excise Duty (BED) reduced to 8%. (As per changes made on Feb

24, 2009).

• 1% cess for secondary and higher education introduced.

• For small scale excemption, the turnover ceiling is increased from

Rs 10 million to Rs 15 million.

44
 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.

Customs Duty- Duties of customs are levied on goods imported or

exported from India at the rate specified under the customs Tariff Act,

1975 as amended from time to time or any other law for the time being

in force. In order to give a broad guide as to classification of goods for

the purpose of duty liability, the central Board of Excises Customs

(CBEC) bring out periodically a book called the "Indian Customs Tariff

Guide" which contains various tariff rulings issued by the CBEC. The Act

also contains detailed provisions for warehousing of the imported goods

and manufacture of goods is also possible in the warehouses.

Types of duties: Basic Duty(5-40%), Additional Duty (Countervailing

Duty) (CVD), Anti-dumping Duty, Protective Duty, Duty on Bounty Fed

Articles, Export Duty.

44
 BIBILIOGRAPHY:-

BOOKS

I. Economic India (2008), India’s Tax Reform, Academic

Foundation.

II. Sekhar Gvs (2008), Income Tax, Excel books.

III. P. Subramanian (2008), Guide To T.D.S., T.C.S. and

Advance Tax 2008-2009, Excel books.

JOURNALS

I. Annual report 2007-2008 of HEG Ltd.

WEBSITES

I. www.lnjbhilwara.com

II. www.hegltd.com

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