Central Excise is an indirect tax which is levied on goods manufactured in India. These good should be excisable i.e. only those goods excise duty is charged which comes under the regime Excise Duty. Central Excise forms the major source of revenue for the government. The taxable event under the Central Excise law is ‘manufacture’ and the liability of Central Excise duty arises as soon as the goods are manufactured and is unrelated to weather the goods are sold or not. Various types of excise duty are as follows:
- Basic Duty (CENVAT)
- Special Duty
- Additional Duty
Basic Duty (CENVAT) – Basic excise duty is termed as CENVAT. Basic duty is the specified rate at which excise duty charged on the manufactured goods. These rates are specified in First Schedule to Central Excise Tariff Act. In addition to the basic excise duty there are other two types of duties levied by the central government are:
Special Duty – It is a special duty charged on some of the goods such a pan masala, cars etc.
Additional Duty – The additional duty is charged on the specified items i.e. the goods of special importance under the Additional Duties Act, 1957.
- If any good exempt from the basic excise duty, that particular good will not imply that it is exempt from the other two types of duties unless it is specifically provided in the exemption notification.
- Excise duty on alcoholic liquors for human consumption and opium is levied and collected by the State Governments.
Excise Duty is Payable on one of the following basis:
- Specific Duty
- Tariff Value
- Value based on Retail Sale Price
- Ad Valorem Duty
It is a duty which is charged on the basis of specific unit like weight, volume, length, thickness, etc. For example in case of Sugar excise duty is payable on the basis of weight i.e. per kg basis and in case of Cigarette excise duty is payable on the basis of length.
It is aduty payable as % of Tariff Value which is fixed by the Government from time to time.
Value based on Retail Sale Price
This duty is payable based on maximum retail price. Retail price is the maximum price at which the final goods in the packaged form that can be sold to the ultimate consumer. So in case of more than one retail price printed on the same package than the maximum of such retail price will be considered for excise.
Ad Valorem Duty
It is duty payable as % based on the assessable value. This assessable value is derived on the basis of section 4 of Central Excise Act which deals with the valuation of excisable goods.
The Provisions and Laws relating to Central Excise are covered under the following Acts:
Central Excise Act, 1944
This is the basic act which provides for the charging of duty, calculations, powers of officers, penalty etc. It has been amended from time to time. So the rules covered in Central excise act 1944 have been simplified and amended which are now contained in following new rules:
- Central Excise Rules. 2002
- CENVAT Credit Rules, 2004
Central Excise Tariff Act, 1985
It contains tariff schedules divided into 20 sections. The rates at which the goods specified in the schedule have to be charged are contained in this Act. Excisable goods have been classified under different categories like animal products, vegetable products, mineral products, chemical products, wood products, textile products, stone products, metal products, vehicles, arms and ammunitions.
Some of the Basics Concepts of Central Excise Act:
- Excisable Goods
The term goods is not defined by the central excise act the scope of the term is derived from definitions given by the constitution, customs act, the sale of goods act. The two most important elements derived from these definitions about the goods are that the goods should be movable and marketable.
Excisable goods are those goods which are specified in the schedule to the Central Excise Tariff act 1985 i.e. those goods which are being subject to the excise duty.
The word manufacture is not completely defined in the Act. The definition is inclusive but not exhaustive. Definition of manufacture in section 2(f) includes;
- Any process which is incidental or ancillary to the completion of manufactured product
- Deemed Manufacture – Deemed manufacture is of two types:
a) The process which Central Excise Tariff Act, 1985 specifies as amounting to manufacture. So any of these processes are carried out will be manufacture even if the court has declared that process to be not as manufacture.
b) Process in relation to goods specified in Third Schedule to Central Excise Act such as repacking, labeling or relabeling, declaration or alteration of retail sale price.
- Manufacture as defined by various court decisions as when the process results in a different article or commodity. For example manufacture of a table from wood, conversion of pulp into paper or sugarcane to sugar, etc. It means a process from which a new and identifiable product having a distinctive name, character or use must come out.