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INTRODUCTION

Central Excise is a levy (tax), levied on a commodity (manufactured within the country) by
the Union Government by an Act of Parliament(usually in the Finance Bill, in the
presentation of the Budget in the Parliament, generally on the last working day of February
every year) by notifying under a Tariff. It is an indirect tax paid by the manufacturer, who
passes its incidence to the customers.“Excise Duty” is levied the moment the process of
manufacture is complete. Central Excise levy was existing for years. But in 1944, 11
different Acts were combined into one Act and this was then named as "The Central Excise
and Salt Act, 1944".

In 1996 it was renamed as "The Central Excise Act, 1944".

This Act is the original Act for excise, which contains the Tariff Items1 to 67.

In 1975 the Tariff Item 68 was introduced with the description "all other goods not elsewhere
specified". The Industry started describing it as "Terror Items".

In 1985 the controversial Tariff Item 68 was abolished and a new Tariff Act known as "THE
CENTRAL EXCISE TARIFF ACT, 1985"(CETA) was introduced. This new act replaced the
first schedule to the original Act.

Objective of the Act

Chargeability of Central Excise Duty


The central excise duty has been mentioned under Entry 84 to List I of the Seventh Schedule
to the Constitution of India (the “Union List”)
Article 246(1) of the Constitution of India confers exclusive powers upon the Parliament to
make laws with respect to any of matters enumerated in the Union List.
In exercise of its powers, the Parliament enacted the Central Excise Act, 1944 (the “Central
Excise Act”) and Rules there under, which inter alia provide for levy, collection and
connected procedures with respect to central excise duty (called “CENVAT”).
Section 3 of the Central Excise Act, the charging section, provides that there shall be levied
and collected, in such a manner as may be prescribed, a duty of excise to be called the Central
Value Added Tax (CENVAT) on all excisable goods (excluding goods produced or
manufactured in Special Economic Zones) specified in the Second Schedule to the Central
Excise Tariff Act, 1985 (CETA) which are produced or manufactured in India, as, and at the
rates, set forth in the said Second Schedule.
The central excise duty is on the act of manufacture or production. The duty is collected, on
the goods manufactured or produced, at the time of their removal from the factory. Generally,
the manufacturer of goods is responsible to pay duty to the Government. The rates at which
the central excise duty is to be paid are stipulated in the CETA.
Levy of Central Excise Duty

Broadly, the following laws deal with the matters relating to Central Excise Duty:
(i) Central Excise Act, 1944
(ii) Central Excise Tariff Act, 1985
(iii) Additional Duties of Excise (Goods of Special Importance) Act, 1957
(iv) Central Excise Rules, 2002
(v) CENVAT Credit Rules, 2004
(vi) Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000
(vii) Central Excise (Determination of Retail Sale Price of Excisable Goods) Rules, 2008.

(viii) Central Excise (Removal of Goods at Concessional Rate of Duty for Manufacture of Excisable
Goods) Rules, 2001
(ix) Customs, Central Excise Duties and Service Tax Drawback Rules, 1995
Levy of Excise Duty

Section 3(1)(a) of the Central Excise Act provides that there shall be levied and collected in such a
manner as may be prescribed a duty of excise to be called the CENVAT on all excisable goods
(excluding goods produced or manufactured in Special Economic Zones) which are produced or
manufactured in India as, and at the rates, set forth in the First Schedule to the CETA.

four basic conditions for levy of central excise duty

1. the duty is on goods; the word “goods” has not been defined the Central Excise Act. Article
366(12) of the Constitution of India defines “goods” includes all “material, commodities and
articles”.

(ii) the goods must be excisable;

(iii) the goods must be manufactured or produced

(iv) such manufacture or production must be in India.

Types of Excise Duty

1. Basic excise duty: Basic excise duty is levied under the Central Excise Act. Basic excise duty is
levied at the rates specified in the First Schedule to the CETA read with exemption notification, if
any. Normally, basic excise duty is levied as a percentage of value as determined under the
provisions of the Central Excise Act. The rates at which basic excise duty is charged vary from item to
item. Basic excise duty may be fixed on ad valorem basis or specific rate basis. In other words, basic
excise duty may be a percentage of the value of the goods or at a specific rate.

2. Additional duty on goods of special importance; Additional duty of excise is levied and collected
on goods of special importance under s 3(1) of the Additional Duties of Excise (Goods of Special
Importance) Act, 1957.

3. National Calamity Contingent Duty

Section 136 of the Finance Act, 2001 provides that in the case of goods specified in the Seventh
Schedule, being goods manufactured or produced, there shall be levied and collected for the
purposes of the Union, by surcharge, a duty of excise, to be called the National Calamity Contingent
Duty (the “NCCD”), at the rates specified in the said Schedule.

Registration under the Central Excise Act

The following categories of persons require registration under the Central Excise Act read with the
Central Excise Rules, 2002:
(i) Every manufacturer of dutiable excisable goods. (ii) First- and second-stage dealers (including
manufacturer’s depots and importers) desiring to issue CENVAT invoices. (iii) Persons holding
warehouses for storing non-duty paid goods. (iv) Persons who obtain excisable goods for availing
end-use based exemption. (v) Exporter-manufacturers under rebate/bond procedure; Export
Oriented Units (EOUs) and Special Economic Zone (SEZ) units which have interaction with the
domestic economy. (vi) Registered importer issuing CENVAT able invoice

Persons Exempted from Registration

1Manufacturers of goods which are chargeable to Nil rate of duty or are fully exempted.

2 Manufacturers of goods which are exempted on the basis of “value of clearances” made in a
financial year and remain under the exemption limit (SSI). In cases where the value of clearances
excluding export turnover in the current financial year exceeds Rs 90,00,000 (Indian Rupees Nine
Million), the assessee has to file a declaration prescribed under Notification for getting exempted. In
other words, no declaration is required to be filed if the value of such clearances is below Rs
90,00,000 (Indian Rupees Nine Million).

3 Persons manufacturing excisable goods under the Customs warehousing procedures provided final
products including scrap are exported and no duty drawback is claimed.

4 Wholesale traders or dealers of excisable goods (except first-stage dealer, second-stage dealer and
depot).

5 Approved/licensed units in SEZs and 100% EOUs. However, if the SEZ units, or as the case may be,
EOUs are having clearances in or procurement from the Domestic Tariff Area (DTA), such units would
not be eligible to avail exemption from registration.

Exemption from excise duty

Under s 5A of the Central Excise Act, the Central Government has the power to grant exemption, full
or partial, from payment of duty either generally by issue of a Notification or in a specific case of an
exceptional nature, by means of a special order. The power is exercisable in public interest.

Manner of payment of excise duty

The excise duty is to be paid on monthly basis by the fifth day of the succeeding month (sixth day of
the following month in case of e-payment through internet banking) except for the month of March
when duty is to be paid by the 31st day of March.

Electronic payment (e-payment) of excise duty using the internet banking facility has been made
mandatory for assesses

The buyers, on the basis of tax invoice issued by the manufacturers, would be allowed to avail
CENVAT credit in respect of the duty paid/payable on such goods immediately on receipt of the
goods by them.

Liability For Central Excise


For condition must be present for the charge of central excise duty:

1.The duty is on goods.

2.The goods must be excisable.

3 .The goods must be manufactured or produced.

4.Such manufacture or production must be take place in India.

GOODS

For an item to be considered goods for the purpose of the levy of central excise duty ,it must satisfy
two requirements:

1. Movability

Goods must be movable. Duty cannot be levied on immovable property .Central excise duty cannot
imposed on plant and machinery.

2. Marketability

Goods must be marketable .The goods must be known in the market and must be capable of being
bought or sold.

Taxable event for central excise duty

Taxable event for charge of duty of central excise is the manufacturer or production of goods in
India.

In this context, the Supreme Court has observed:

Excise duty is not directly on the goods, but manufactured thereof. Though both excise duty and
sales duty levied with reference to goods, the two are very different imposts. In one case, the
imposition is on the act of manufactured or production, while in the other it is on the act of sale.

Who is liable to pay central excise duties?

The central excise duty is a tax on manufacture or production of goods .Hence the liability to pay
excise duty lies on manufacturer or the producer.

Basis for valuation of goods

The duty of central excise is charged on four bases:

 1.Specific duty

 2.Tariff duty

 3.Maximum retail price

 4.ad -valorem basis


1.Specific duty

 It is the duty payable on the basis of some physical feature of the product unit like weight
,length ,volume, thickness etc.

 Some of the goods on which duty is charged on the basis are as follows

item Basis

Cigarette Length

Matches Box of 100

Sugar Quintal

Cement Per tonne

2.Tariff value

The government has the power to declare a value on the basis of which duty of central excise will be
charged .When the government declare the value ,the duty is charged on the value and the actual
value of the goods is ignored.

3.MRP – Based Valuation

Some manufactures had started the practice of central excise by resorting to some questionable
practices. In order to check these malpractices a new basis of valuation was introduced that is the
maximum retail price (MRP) - based valuation.

Eg: television sets, DVD players, Cosmetics and chocolates.

4.Ad Valorem Duty

The first three bases of valuation are applied for only a few goods. In a large majority of cases the
duty of central excise is payable on the basis of the value of the goods, called the assessable value.

Offences and Penalties

As per section 9, if there is any contravention of any provision of excise law, there shall be
imprisonment for 3 years + fine and for 2nd contravention, 7 years imprisonment + fine. These
offenses are non-cognisable as per code of Criminal Procedure.

Powers of Central Excise Officers.-

Power to arrest.

Power to summon persons to give evidence and produce documents in inquiries under this Act

Special audit in certain cases.-


Special audit in cases where credit of duty availed or utilised is not within the normal
limits, etc.

Searches and arrests how to be made.

Disposal of persons arrested.


Inquiry how to be made by Central Excise Officers against arrested persons forwarded to
them under section 19

Failure of Central Excise Officer in duty

Any Central Excise Officer who ceases or refuses to perform or withdraws himself from
the duties of his office, unless he has obtained the express written permission of the
1[Commissioner of Central Excise], or has given to his superior officer two months’
notice in writing of his intention or has other lawful excuse, shall on conviction before a
Magistrate be punishable with imprisonment for a term which may extend to three
months or with fine which may extend to three months’ pay, or with both.

Customs and Central Excise Settlement Commission

The Settlement Commission shall consist of a Chairman and as many Vice-Chairmen and
other Members as the Central Government thinks fit and shall function within the
Department of the Central Government dealing with customs and central excise
matters.

The Chairman, Vice-Chairman and other Members of the Settlement Commission shall
be appointed by the Central Government from amongst persons of integrity and
outstanding ability, having special knowledge of, and experience in, administration of
customs and central excise laws: Provided that, where a member of the Board is
appointed as the Chairman, Vice Chairman or as a Member of the Settlement
Commission, he shall cease to be a member of the said Board.

Powers and procedure of Settlement Commissions

it shall have all the powers which are vested in a Central Excise Officer under this Act or
the rules made thereunder.

he Settlement Commission shall, subject to the provisions of this Chapter, have power to
regulate its own procedure and the procedure of Benches thereof in all matters arising
out of the exercise of its powers, or of the discharge of its functions, including the places
at which the Benches shall hold their sittings.]

Appeals
Any person aggrieved by any decision or order passed under this Act by a Central Excise
Officer lower in rank than a 2[Commissioner of Central Excise] may appeal to the
3[Commissioner of Central Excise (Appeals)] [hereafter in this Chapter referred to as the
1[Commissioner (Appeals)]] 4[within sixty days] from the date of the communication to
him of such decision or order

Procedure in appeal

The 1[Commissioner (Appeals)] shall give an opportunity to the appellant to be heard, if


he so desires.

The 1[Commissioner (Appeals)] may, at the hearing of an appeal, allow an appellant to


go into any ground of appeal not specified in the grounds of appeal, if the
1[Commissioner (Appeals)] is satisfied that the omission of that ground from the
grounds of appeal was not wilful or unreasonable.

The order of the 1[Commissioner (Appeals)] disposing of the appeal shall be in writing
and shall state the points for determination, the decision thereon and the reasons for
the decision. 3[(4A) The Commissioner (Appeals) shall, where it is possible to do so, hear
and decide every appeal within a period of six months from the date on which it is filed.]