CENTRAL EXCISE DUTYINTRODUCTION AND

OVERVIEW

CENTRAL EXCISE DUTY

EXCISE DUTY : It is a duty levied on the production or manufacture of excisable goods in India. It is a tax levied upon manufacture and not upon sale of goods. In

In order to attract levy of excise duty, three condition must be fulfill:-

a) There should be goods.b) The goods should be excisable goods.c) Goods must have been produced/manufactured in India.

Central excise duties contribute approximately one-third share to the Union Exchequer. These duties from the single largest source of revenue for central govt. central excise duty is levied and collected through the machinery of Central Excise Act,1994.

Goods can be non-excisable in any of the following situations:

a) If it is immoveable.b) If it is non-marketable.c) If it has not been specified in the

schedule to central excise and Tariff Act.

TYPES OF EXCISE DUTIES

Basic Excise Duty

Special Duty of Excise

CessNational Calamity

Contingent

Additional duty

TYPES OF EXCISE DUTIES1.Basic excise duty (BED) or CENVAT

This is levied u/s 3(1) of the central excise Act 1944. this duty is levied on all excisable goods produced /manufactured within India at the rates specified in the first schedule to central excise Traffic Act 1985.presently the rate is 10%. The basic duty proceeds are shared by upon and states these rates do not apply in the case of petroleum and tobacco products, pan masala and items attracting specific duty.

2.Special duty of exciseIt is levied u/s 3 (i)(b) of the CE Act 1944. SED also known as auxiliary duty is levied as surcharge on basic excise duty. The objecting of imposing SED is to generate additional resources for some specified object. SED is livable at the rates specified in schedule second to Central Excise Tariff Act 1985.

3. Additional duty on goods of special importance

ADD is levied under either additional of excise Act 1957 or under additional duty of excise act 1978. former provides for additional excise duties in lieu of sales tax on specifically items like Textile,Sugar,Tobacco and later provides for specified of Textile and articles of textile. The Central Sale Tax Act has restricted the powers of state govt. to levy sales tax on declared goods and hence , additional duty has been clamped.

4. National Calamity Contingent Duty (NCCD) It kind of surcharge levied under Finance Act, 2001 on items like cigarettes,bidi,pan masala and other tobacco products.

5. Cess It is levied on certain commodities like tea, rubber etc. for

the purpose utilizing the proceeds fir the development of the industries and welfare of workers. In some cases, it's levy and collection is entrusted to Central Excise Department.

Education Cess 1% secondary and higher education Cess Finance Act 2004 provided for education cess @of 2% w.e.f 9.7.2004. education cess is duty of excise to be calculated on aggregate of all duties of excise including special excise duty or any other duty of excise , but excluding cess on excisable goods.A secondary and higher education cess @1% of the aggregate duties of custom excise and service tax has been imposed . It is applicable in respect of custom and excise from 1.3.2007 and in respect of service tax from date when finance act 2007 enacted.

1.Method of calculation will be same as for 2%education cess.

2.In case of excise duty , this cess which be changeable on aggregate duties of excise.

6. DUTY LEVIABLE UNER OTHER ACT For levy and collection of duties livable under other acts ,

some times, the machinery of central excise dept. is used.

COMPARISION

BETWEEN

Excise D

UTY, CUSTOM

DUTY & SALES TA

X

EXCISE DUTY

CUSTOM DUTY

SALES TAX

1.BASIS OF CHARGES

Excise duty is a tax on manufacture of goods.

Custom is charged on import/export of goods from India.

sales tax is tax on sale on goods with in India.

2. CLASSIFICATION OF GOODS

Central excise Tariff ACT1985 classifies goods for the purposes of levy and rates of duty.

Custom Tariff Act 1985 classifies goods for the purposes of the levy and rates of duty.

CSR Act classifies goods for C.S.T. on inter-state sales and states tax on sales within a particular states for the purpose of determine rates of sales tax.

3.TAXABLE EVENT

Taxable event for levy of tax is production or manufacture of goods within India

Taxable event is entry inward/outward of goods into /from India.

Taxable event is sale of goods within inter –state.

4.VALUE Excise duty is charged on assessable value.

Custom duty is also charged on assessable value.

Sales tax is charged on sales price.

5.RATE OF TAX

Excise duty is uniform .

Custom duty rate in respect of specific goods is also uniform

C.S.T. at the rate 5% is also uniform but the rates of sales tax very.

6.COLLECTION POWER

Excise duty on most of items is levied by central govt. except on certain specify goods e.g..(alcoholic liquors). State excise on above mentioned items is levied and collected by state govt.

Custom duty on import /export is levied collected and retained by central govt.

CST levied by central govt. but collected and retained by state govt. collection of state sakes taxes sole prerogative of concerned state.

7.TIME OF PAYMENT

It is payable on removal of goods from factory / go down.

It is payable on before custom clearance .

It is payable after sales take place.

DIFFE

RENCE

IN

DIF

FEREN

T

EXCIS

E

DUTIES

BASIS Basis excises duty (BED)

Special excise duty (SED)

National calamity contingent duty(NCCD)

Additional duty of excise (ADD)

1.Charging section/rule

This is also known as CENVAT and is imposed under section 3 (1) of central excise Act 1944

This is levied under section 3(1)(b) of Central Excise Act, 1944.

This was levied under finance Act 2001

This is levied under (a) Goods of Special Importance Act 1957(b) Textile and Textile Article Act 1978

2. LEVY This is levied on all excisable goods produced or manufactured within India. This is levied at the rate specified in the First schedule to Central Excise Act,1985

This is levied only on those excisable goods which are specified in the second schedule to the Central Excise Tariff Act, 1985

It is a kind of surcharge It has been levied on items specified in the seventh schedule to the finance act

The additional excise duty in lieu of sales tax are levied on specified items of textile, sugar.

CENTRAL

EXCISE LAW

S

Central Excise Law is not one enactment. The provisions regarding Central excise r governed mainly by the Central excise Act, 1944, Central Excise Rules 2002 and Central Excise Tariff Act, 1985. Further, some provisions of Customs Act, Criminal Procedure Code, Indian Penal Code, etc. apply to Central Excise.The list of various Acts and Rules is as follows:

1. Central Excise Act, 1944. (as amended from time to time) provides for the basis of charging of excise duty, valuation of goods for excise purposes, powers of officers, penalties etc. This is the basic Act governing Central Excise.

2. Central Excise Rules, 2002. These rules have been framed, amended and notified by the Central Government from time to time under powers granted to it by Section 37 of the Central Excise Act 1944. The rules prescribe the procedures to be followed, forms to be filled for clearance and storage of goods, their accounting, licensing procedures, procedures for refund of duty, appeals against orders of excise authorities etc.

3. Central Excise Tariff Act 1985.(CETA). This Act classifies all the goods under various heads and sub-heads for prescribing different rates of duties. Each head has a specific code assigned to it.

4. Central Excise (Valuation) Rules 2000. Section 4 of the Central Excise Act contains provisions regarding determination of value for charging excise duty. These rules have been framed to supplement Section 4.

5. Cenvat Credit Rules 20046. Central Excise (Removal of Goods at Concessional Rate of Duty for

Manufacture of Excisable Goods)Rules 2001.7. C.E. (Determination of Retail Sale Price of Exciseable Goods)Rules

2008.8.Customs, Excise and Service Tax Appellate Tribunal (Procedure)

Rules 1982. CEGAT ( PROCEDURE ) RULES PRESCRIBE ROCEDURE OF FILING AND HEARING APPEALS TO CEGAT (now CESTAT).

9.Additional Duties of Excise (Goods of Special Importance) Act, 1957. This Act provides for imposition of additional excise duty in lieu of Sales Tax on goods of special importance. Such goods are known as ‘Declared goods’ under the Central Sales Tax Act.

10. Central Excise (Appeal Rules) 2001.11.Central Excise (Compounding of Offences) Rules 2005.12.Notifications. Section 5A and 11C of Central Excise Duty 1944 grant

powers of Central Government to issue notifications granting partial or full exemptions from Central Excise. These notifications have full legislative backing.

The rules and notification have to be placed before each House of Parliament which has power to amend or modify these. So, these rules and notification have full legislative support and are treated as pert of the Act itself.

The Central Excise Act, 1944# The Central Excise Act, 1944(CEA) is the basic Act providing for charging

of duty, time and manner of payment of duty, execution of bonds, procedure for appointment and powers of officers, provisions of arrest, penalty etc.

# In the Act, the detailed procedures regarding levy of duty on unmanufactured (from bulk pack to retail pack) products and manufactures products like matches, sugar, manufactures, tobacco, tyres etc. have been given.

# It came into force on 28th February, 1944 and extends to whole of India and extends to whole of India.

THE SCHEME OF THE ACT IS AS UNDER :-No. Chapter Sections

1 Titles and Definitions ( 1 to 2 A )

2 Levy and Collection of Duty ( 3 to 12 )

2 (a) Amount of Duty ( 12A to 12D )

3 Powers and Duties of Excise Officers ( 12 E to 23 )

3 (a) Advance Rulings ( 23 A to 23 H )

4 Transport by Sea ( 24 to 30 )

5 Settlement of Cases ( 31 to 32 A )

6 Adjudication of Confiscations and Penalties

( 33 to 34 A )

6 (a) Appeals ( 35 to 36 )

6 (b) Presumption as to Documents ( 36 A & 36 B )

7 Supplementary Provisions ( 37 to 40 )

DEFINITIONS

# Adjudicating authority means any authority competent to pass any order or decision under this Act, but does not include the Central Board of Excise and Customs constituted under the Central Boards of Revenue Act, 1963 Commissioner of Central Excise (Appeals) or Appellate Tribunal (CESTST); [Section 2 (a)]An adjudicating authority can never go back on his order but the appellate authority can revise orders of Adj. authority.

# Appellate Tribunal means the Customs, Excise and Gold (Control) Appellate Tribunal constituted under section 129 of the Customs Act, 1962. [Section 2 (aa)]

# Broker or commission agent means a person who in the ordinary course of business makes contracts for the sale or purchase of excisable goods for others ; [Section 2 (aaa)]

# Central Excise Officer means the Chief Commissioner of Central Excise

Commissioner of Central Excise,Commissioner of Central Excise (Appeals),Additional Commissioner of Central Excise,Joint Commissioner of Central Excise,Deputy Commissioner of Central Excise,Assistant Commissioner of Central Excise,Any other officer of the Central Excise Department or Any person ( including an officer of the State Government) invested by the Central Board of Excise and Customs constituted under the Central Board of Revenue Act, 1963.

1. Curing includes wilting, drying, fermenting and any other process for rendering an unmanufactured product fit for marketing or manufacture ; [Section 2 (c)]

2. Excisable goods means good specified in the Schedule to the Central Excise Tariff Act, 1985 as being subject to a duty of Excise [Section 2 (d)]

3. Exempted Goods : Goods specified in CETA 1985 for prescribed cenvat rate but due to exemption notification issued by Cental Government, there is exemption from duty liability

4. NIL Rated Goods: Excisable goods specified in CETA 1985 but rate of duty

mentioned against them is NIL . SC in Nandi printer case decided that goods are excisable if specified in CETA even though rate of duty is nil.

5. Factory means any premises, including though precincts thereof, wherein or in any part of which excisable goods other than salt are manufactured, or wherein or any part of which any manufacturing process connected with the production of these goods is being carried on or is ordinarily carried on [Section 2 (e)]

6. Manufacture includes any process-Incidental or ancillary to the completion of a manufactured product ;which is specified in relation to any goods in the First Schedule of the Central Excise Tariff Act, 1985 as amounting to manufacture, or which in relation to goods specified in the 3rd schedule involves packing or repacking of such goods in a unit container or labeling or relabeling of containers including the declaration or alteration of retail sale price on it or adoption of any other treatment on the goods to render the product marketable to the consumer.

7. Manufacturer: The word manufacturer has not been defined by a separate sub section. The latter part of the Sec. 2(f) has been used to define manufacturer .

8. Sale and Purchase with their grammatical variation and cognate expressions, mean any transfer of the possession of goods by one person to another in the ordinary course of trade or business for cash or deferred payment or other valuable consideration. [Section 2 (h)]

9. Wholesale dealer means a person who buys or sells excisable goods wholesale for the purpose of trade and manufacture and includes a broker or commission agent who in addition to making contracts for sale or purchase of excisable goods for others, stocks such goods belonging to others as an agent for the purpose of sale. [Section 2 (k)]

DIFFERENCE BETWEEN GOODS AND EXCISABLE GOODSBasis goods Excisable Goods

1. Definition Goods are not defined under Central Excise Act but Finance Act defines it.

Excisable goods are defined under section 2 (d) of Central Excise Act

2. Essential character To be called goods, a commodity must be movable and marketable.

To be called excisable goods, a commodity must be specified in 1 and 2 schedule of Central Excise and Tariff Act 1985

3.Scope Wider term Narrow term

DIFFERENCE BETWEEN DUTIABLE AND EXCISABLE GOODSBasis Excisable goods Dutiable goods

1. Charging section Under section 2(d) of Central Excise Act

No section

2. Meaning Goods specified in schedule 1 and 2 of Central Excise Tariff Act 1985 as being subject to duty

Goods on which actual excise duty is paid

3. Scope Goods which are exempted or are at nil rate are still excisable goods

Goods which are exempted or are at nil rate are not dutiable goods

4, Point of levy Goods are excisable at the time of manufacture

Goods become dutiable at the time of removal of goods

LEVY A

ND

COLL

ECTI

ON

MEANING OF LEVY

Levy means imposition of tax . Once a tax or duty is imposed b, it is quantified and then collected . The term levy includes both imposition of tax as well as assessment , however , it does not include collection.

DIFFERENCE BETWEEN LEVY AND COLLECTION

BASIS LEVY COLLECTION

MEANING Levy means imposition of duty

When excise duty is actually realized , it is called collection

APPLICABLE PROVISION

Section 3 is the charging section

Rule 8 prescribes that excise duty shall be collected at the time of removal

POINT OF LEVY The levy is on production or manufacture of excisable goods

C collection at the time of removal

POINTS of Distinction

Levy under the Act Levy Under Finance act

Nature of levy Such type of levy is a Continuous levy

Such type of levy is a yearly levy that is it remains alive only for an year

Alteration of Rates

The rates remain same unless altered by the finance act

Such levy automatically lapse at the end of financial year and continuance of such duty in subsequent yr at the old or new rates shall be treated as a fresh levy

Sharing of collection

The collection proceeds from such levy are shared by the Union with the states

The collection proceeds from such levy from such levy are exclusively for government of India and are not shared with the states

DUTIES SPECIFIED IN THE FIRST AND SECOND SCHEDULE TO THE CENTRAL EXCISE TARIFF ACT ,1985 TO BE LEVIED

(a) A duty of excise , called Central Value Added Tax (CENVAT) on all Excisable Goods (excluding good produced or manufactured in SEZ )

(b) A Special duty of excise on Excisable goods in schedule 2

Section 3 is a charging section which determines a taxable event and it also provides the duty shall be levied and collected in such manner as may prescribed . Central Excise rules provides that in case of goods removed from a factory or a warehouse , the date for determination of duty and valuation shall be the date of actual removal of such goods from such factory or warehouse.

What is the taxable event calling for the levy ?The event is manufactured or production. If there is no manufacture/production then there is no duty to attract duty there must be a process amounting to manufacture/production and the output be excisable goods sale is not a parameter in excise.

Who is liable to pay excise duty?

Rule 4(1) of central excise rules 2002 provide that every person who produces or manufactures any excisable goods .Or stores such goodsWhat is the relevant date of determination of rate of duty & traffic value under central excise?(rule5)In case of excisable goods other than khan sari molasses: (a) date on which such excisable goods are removed from factory or a warehouse.(b) Capital consumption : when goods removed from store, then it shall be deemed to be removed from factory .

DUTIES OF EXCISE COLLECTED FROM THE BUYER TO BE DEPOSIOTED WITH CENTRAL GOVERNMENT

DUTY OF DEPOSIT EXCISE DUTYEvery person who is liable to pay duty under5 this act or the rules hereunder and has collected any amount in excess of theca duty assessed or determined and paid excisable goods under the acts or the rules made there under from he buyer of such goods bin representing duty of excise shall forthwith pay amount so collected to the credit of central government .

MANNERS PRESCRIBED FOR COLLECTION EXCISE DUTY UNDER THE CENTRAL EXCISE RULES 2002

DUTY PAYABLE ON REMOVAL 1) Every person

According To C.E. act excise duty is attracted the moment manufacture is completed but it becomes payable at the time of removal only and the too at the rate application on the date of removal and not at the rate prevalent on the date of manufacture C.E rules 4 & 5.

2) Notice of demand Where any amount of required to be paid to the credit of the central government as above which has not been o paid the central excise officer may serve on the person liable to pay such amount a notice requiring him to show cause why the said amount as specified in the notice should not paid by the credit the central got.

3) Liability The central excise officers shall after considering the representation if any made by the person on whom the notice is served as above determine the amount due from such person.

4) Adjustment against excise duty payableThe paid to the credit to the central govern shall beer adjust against the duty of exile payable by the person on finalisation of assessment or any preceding for terming by the duty of excise relating to excisable goods.

5) Refund In accordance with the provision of section 11BAnd such person may be make ban application under that in such cases within 6months from the date of the public notice to be issued by the assistant commissioner of central excise for the refund of such surplus amount.

CENTRAL EXCISE RULES 2002I Basic rules

Rule 2 : definition

Rule 3 appointment and jurisdiction

II DUTY RELATED RULES

Rule 4 duty payable on removal

Rule 5 date for determination of duty and tariff valuation

Rule 6 assessment of duty

Rule 7 provisional assessment

Rule8 manner of payment

Rule 13 duty on matches

Rule 13a utilization of amount paid for procurement of central excise stamp for payment of duty

Rule 15 special; producer for payment of duty

Rule 17 removal of goods by a unit

III BASIS EXCISE PRODUCER

RULE 9 registration Rule 10 daily stock amount

Rule 11 goods to be removed on invoice Rule 15 (5) re pre authentication of in voice deleted by finance act 2010

Rule 12 filling of return

IV Return and retention and duty plaids goods

Rule 16 credit of duty on goods brought to the factory

V Job work

Rule 16 a removal of goods for job work etc

VI Export procedure

Rule 18 rebate of duty

Rule 19 export without payment of duty

VII Warehousing profession

RULE 20 warehousing profession

VIII RULE 21 remission of duty

IX POWER OF CEO

RULE 22: ACESS TO REGISTERED PREMISES

RULE 23 POWER TO STOP AND SEARCH RULE 24 POWER TO DETAIN AN SIZE THE GOODS

x PENALITY PROVISION Rule 25 confiscation and penalty Rule 26 penalty for certain officers

Rule 27 general penalty

Rule 28 on confiscation , property to vest in the general in the central governmental

Rule 28 disposal of goods confiscated

Rule 30 storage charges I.R.O. goods consifiscated and redeemed.

XI MISCELLANEOUS RULES

Rule 31 power to issue

Supplement instruction

Rule 32 restriction on removal of goods