CENTRAL EXCISE LAWS

1. Explain the Meaning and Nature of excise duty? 10

marksAns: It is a duty levied upon goods manufactured and not upon sales or the proceeds of sale of goods. Therefore the duty of excise is levied on a manufacturer or producer in respect of the commodities produced or manufactured by him. It is a tax upon manufacture of goods and not upon sales or proceeds of sale of goods.Excise Duty is a duty on excisable goods produce or manufacture in India.

The power to levy and collect excise duties has been conferred on the Union Government by virtue of Article 246 of the Constitution of India. Entry 84 of the Union List empowers the Government to levy duty of Excise on Tobacco and other goods manufactured or produced in India excluding alcoholic liquors for human consumption, opium, Indian hemp and other narcotic drugs and narcotics where state Government has the power to levy excise duty.However in case of medicinal and toilet preparations containing alcohol or opium, Indian hemp and other narcotic drugs, the central Government has the power to levy excise duty.

It means that only the goods, which are produced or manufactured in India can become liable to excise duties. Thus, the statutory authority to levy duty of excise has been conferred by the Constitution on the Union Government.

Entry 84 – Duties of excise on tobacco and other goods manufactured or produced in IndiaExcept:(a) Alcoholic liquors for human consumption(b) opium, Indian hemp and other narcotic drugs and narcotics; butIncludingMedicinal and toilet preparations containing alchohol, or any substance stated before.Example: Medical syrups for cold and cough contains a small portion of alcohol. Even though it contains alcohol, it will come under Union List 1.

‘Duty of excise’ has been renamed as Central Value Added Tax (CENVAT).

CENVAT includes ‘duty’, ‘duties’ ‘duty of excise’ or ‘duties of excise’.

Although excise started as a pure duty on manufacturing activity, over a period of time it has included deemed manufacture and is tending towards a value added tax and the changed nomenclature indicates the same. In future, it would be subsumed into the GST.

CENTRAL EXCISE LAWS

(a) Duties under Central Excise Act, 1944 : Excise duties are of following types –

(i) Basic excise duty: This duty is levied under section 3(1)(a) of Central Excise Act. As per section 2A of Central Excise Act, basic excise duty is termed as Cenvat with effect from 12-5-2000. It is levied at the rates specified in First Schedule to Central Excise Tariff Act, read with exemption notification, if any.

(ii) Special excise duty: This duty is levied under section 3(1)(b) of Central Excise Act.Special duty of excise is leviable on some commodities like pan masala, cars etc. These items are covered in Second Schedule to Central Excise Tariff. However, with effect from 01.03.2006, all good have been exempted from special excise duty.

(iii) Duty in case of 100% EOU and FTZ : Hundred percent Export Oriented Undertakings (EOU) and units in Free Trade Zone (FTZ) export all their production. However, when they clear their final products in Domestic tariff area (DTA), excise duty has to be paid. The duty amount is equal to the aggregate of the duties of customs leviable on like article if imported in India. Even if rate of customs duty is considered for payment of duty, actually the duty paid by them is central excise duty. The rate of customs duty is taken only as a measure.

(b) Duties under Other Acts: Some duties and cesses are levied on manufactured products under other Acts like Additional Duty on Goods of Special Importance [AED(GSI)] and Additional Duty on Textile Articles. The administrative machinery of Central Excise is used to collect these taxes. Provisions of Central Excise Act and Rules have been made applicable for levy and collection of these duties/cesses.

A National Calamity Contingent Duty (NCCD) has been imposed vide section 136 of Finance Act, 2001. This duty is imposed on pan masala, chewing tobacco and cigarettes.

• Basic Excise Duty is levied u/s 3(1) of Central Excise Act. The section is termed as ‘charging section’.

CENTRAL EXCISE LAWSGeneral rate of duty of central excise on non-petroleum products is 10% w.e.f. 27-02-2010. (The duty rate was 14% during 1-3-2008 to 6-12-2008, which was reduced to 10% w.e.f. 7-12-2008 and to 8% w.e.f. 24-02-2009). This duty is applicable to majority of excisable goods. There is partial exemption to a few products.

• Education Cess @ 2% of excise duty under section 93 of Finance (No. 2) Act (w.e.f. 9-7-2004).

• Secondary and Higher Education Cess (S&H Education Cess) @ 1% of the total duties of excise vide section 136 read with section 138 of Finance Act, 2007 w.e.f. 1-3-2007.Thus, total excise duty is 10.30% in majority of the cases.

2. What the basic conditions are for levy of duty under section-3 of the central Excise Act, 1944?

10 marks

Ans: As per section 3 of Central Excise Act (CEA) excise duty is levied if following conditions are satisfied:(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 in India.

In other words, Unless all of these conditions are satisfied, Central Excise Duty cannot be levied.

Therefore we can say that excise duty is not levied on:

1) Services such as doctors treating the patients, accountants preparing the accounts, in these cases service tax are levied.2) Immovable goods such as roads, bridges and buildings.3) Non-Marketable goods, i.e., goods for which no market exists, e.g., melted iron ore at 1600 degree Celsius.4) Goods that are not mentioned in CETA; and5) Goods manufactured or produced out of India.

If production or manufacture is in special economic zone then no excise duty is levied.

An analysis of section 3 of the Central Excise Act, 1944 which is the charging section, throws out the following propositions:-(a) There must be a manufacture(b) Manufacture must be in India and

CENTRAL EXCISE LAWS(c) The manufacture must result in “goods”(d) The resultant goods must be “excisable goods”Excise duty is levied on production of goods but the liability of excise duty arise only on removal of goods from the place of storage, i.e., factory or warehouse.Excise duty is levied even if the duty was paid on the raw material used in production.

Excise duty is levied on government undertakings also, e.g., Railways is liable to duty on the goods manufactured by it.

Excise duty is an expense while calculating the profits in accounting.

Excise duty is levied if goods are marketable. Actual sale is not relevant.

Therefore, goods, which are given for free replacement during warranty period, are also liable for excise duty.Section 3(1) which is the charging section states:There shall be levied and collected in such manner as may be prescribed:(a) a duty of excise on all excisable goods (excluding goods produced or manufactured in special economic zones [SEZ]) which are produced or manufactured in India as, and at the rates set forth in the First Schedule to the Central Excise Tariff Act, 1985;(b) a special duty of excise, in addition to duty of excise specified in clause (a) above, on excisable goods (excluding goods produced or manufactured in special economic zones) specified in the Second Schedule to the Central Excise Tariff Act, 1985 which are produced or manufactured in India, as, and at the rates set forth in the Second Schedule.However, the excise duty leviable on any excisable goods manufactured by a hundred percent export oriented undertaking (100% EOU) and brought to any other place in India shall be an amount equal to the aggregate of the customs duties which would be leviable under the Customs Act or any other law for the time being in force on like goods produced or manufactured outside India if imported into India. The value of such goods shall be determined in accordance with the provisions of the Customs Act, 1962 if the duty to be levied is based on the value of such goods (ad valorem).Where in respect of any such like goods, any duty of customs leviable for the time being in force is leviable at different rates, then, such duty shall, be deemed to be leviable at the highest of those rates.

Here, 100% EOU means an undertaking which has been approved as a 100% EOU by the Board appointed in this behalf by the Central

CENTRAL EXCISE LAWSGovernment in exercise of the powers conferred by section 14 of the Industries (Development and Regulation) Act, 1951 and the rules made under that Act.SEZ has the meaning assigned to it in clause (za) of section 2 of the Special Economic Zones Act, 2005.

3. Discuss briefly whether excise duty is attracted on the excisable goods manufactured by or on behalf of the government?

Section 3(1A) provides that there is no distinction between excisable goods produced by the Government and those produced by others, with regard to payment of excise duty. Excise duty is payable on all excisable goods other than salt manufactured by or on behalf of the Government (both Central and State) also.