Central Excise Law India

The Central Excise Duty is charged under the Central Excise Act, 1944. The rates of duty, whether on value (ad valorem) or specific, are prescribed under schedule I and schedule II of the Central Excise Tariff Act, 1985.

Central Excise duty is an Indirect Tax levied on goods manufactured in India. Excisable goods have been defined as those, that have been specified in the Central Excise Tariff Act as being subjected to the duty of excise. The word 'Goods' has not been defined in the Act. Therefore excisable goods’ meaning is borrowed from the Constitution and from the Sale of Goods Act and understood as per the decision of the Apex Court. Under excise it is understood to be items that are movable, i.e. capable of being moved and marketable, i.e. capable of being sold.

Central Excise duty is levied and collected on the goods/commodities manufactured in India. The event under which the goods will be taxable under the Central Excise law is ‘manufacture’ which means that the liability of Central Excise duty arises as soon as the goods are manufactured. Central Excise Act defines ‘Manufacture’, by an inclusive definition, as any process incidental or ancillary to the completion of a manufactured product. Manufacture under Central Excise can be understood as a process wherein the name, characteristic and use of the input are changed or is/becomes distinct and different after the process. Thus a process which simply changes the form or size of the same article or enhances the value of the article would not constitute manufacture. Repairing or reconditioning does not constitute manufacture. Assembling would constitute manufacture.

Conditions for Liabilities of Excise Duty

• The duty is on goods.
• The goods must be excisable.
• The goods must be manufactured or produced.
• Such manufacture or production must be in India.

Unless these conditions are met, Central Excise Duty cannot be charged or levied.

Central Excise Day is celebrated all over India on February 24th. Various programs are conducted on this day in different states. This day marks the enactment of the Central Excise & Salt Act, 1944.

Types of Central Excise Duties

Basic Excise Duty – Under section 3 of the Central Excises and Salt Act, 1944, the basic excise duty is charged on all excisable goods other than salt. The goods must be produced or manufactured in India. The rates applied are as per the schedule to the Central Excise tariff Act, 1985.

Additional Duty of Excise – Section 3 of Additional Duties of Excise (goods of special importance) Act, 1957, states that the levy and collection of additional excise duty is authorized with respect to the goods mentioned in the schedule to the Act. This duty is charged in lieu of sales tax under different enactments like industries development, medicinal and toilet preparations, sugar etc. The duty received is shared between the State and Central Governments.

Special Excise Duty – Special excise duty is attracted on all excisable goods on which Basic Excise Duty under the Central Excises and Salt Act, 1944 is levied. This duty is charged as per the Section 37 of the Finance Act, 1978. Every year since then, the Finance Act specifies whether the duty is to be levied and collected or not for that financial year.

Liability of Payment of Central Excise Duty

The goods cannot pay duty by themselves. Thus, the person who manufactures or produces those goods is liable to pay the excise duty. Three types of parties are considered as manufacturers:

1. Those who manufacture the goods personally
2. Those who employ hired labor to manufacture the goods
3. Those who get the goods manufactured by other parties

Liability of excise duty could be better understood by the following examples:

• If the factory is leased out, the one who takes the factory on lease, i.e. lessee actually manufactures the goods, and thus the lessee is liable to pay the duty.
• When raw material is supplied to get goods manufactured by others, then the one who manufactures is liable to pay duty and not the one who just supplies the raw material.
• If the manufacturer is producing goods on behalf of the customer/supplier, then the latter will be liable to excise duty, as the manufacturer is mere dummy.