Central Excise

1. Brief history and developments

1.1 Central Excise duty is an indirect tax levied on goods manufactured in India. The tax is administered by the Central Government under the authority of Entry 84 of the Union List (List 1) under Seventh Schedule read with Article 226 of the Constitution of India.

1.2.The Central Excise duty is levied in terms of the Central Excise Act, 1944 and the rates of duty, ad valorem or specific, are prescribed under the Schedule I and II of the Central Excise Tariff Act, 1985. 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. The Central Excise Officers are also entrusted to collect other types of duties levied under Additional Duties (Goods of Special Importance) Act, Additional Duties (Textiles and Textiles Articles) Act, Cess etc.

1.3 Till 1969, there was physical control system wherein each clearance of manufactured from the factory was done under the supervision of the Central Excise Officers. Introduction of Self-Removal procedure was a watershed in the excise procedures. Now, the assesses were allowed to quantify the duty on the basis of approved classification list and the price list and clear the goods on payment of appropriate duty.

1.4 In 1994, the gate pass system gave way to the invoice-based system, and all clearances are now effected on manufacturer’s own invoice. Another major change was brought about in 1996, when the Self-Assessment system was introduced. This system is continuing today also. The assessee himself assesses his Tax Return and the Department scrutinises it or conducts selective audit to ascertain correctness of the duty payment. Even the classification and value of the goods have to be merely declared by the assessee instead of obtaining approval of the same from the Department.

1.5 In 2000, the fortnightly payment of duty system was introduced for all commodities, an extension of the monthly payment of duty system introduced the previous year for Small Scale Industries.

1.6 In 2001, new Central Excise (No.2) Rules, 2001 have replaced the Central Excise Rules, 1944 with effect from 1st July, 2001. Other rules have also been notified namely, CENVAT Credit Rules, 2001, Central Excise Appeal Rules, 2001etc. With the introduction of the new rules several changes have been effected in the procedures. The new procedures are simplified. There are less numbers of rules, only 32 as compared to 234 earlier. Classification declaration and Price declarations have also been dispensed with, the CENVAT Declaration having been earlier dispensed with in 2000 itself.

When is Excise Leviable ?

Excise duty is an unique tax as compared to other taxes, For example Income Tax is levied on income earned, Sales Tax on a goods sold. Service Tax is Tax on services rendered whereas Excise is a tax on goods manufactured – whether sold or not. In other words, the liability to pay duty arises no sooner manufacturing is complete even though the assesses are permitted to pay duty at the time and place or removal since there is bound to be gap between manufacture and removal, manufactured goods are permitted to be store without payment of duty. 

Manufacturer

As the Excise duty is levy on goods manufactured and therefore, the crucial factor for determination of duty liability is whether the process carried out amounts to “manufacture”. If an assessee successes in establishing that his activity does not amount to manufacture, the question of levy of excise does not arise, Even though there is statuary definition and well settled case laws in the matter, this is one of the vital areas in the Central
Excise leads to never ending disputes and hence this note devoted to explain the concept of “manufacture” as well as “manufacturer” and hence these concepts are analysed in for understanding the intricacies of the matter.

The word “Manufacture” is derived from the Latin word “MANU” which means Hand, and “FACERE” which means to Make. Thus, the simple definition of manufacture implies something made by hands. Over a period of time the definition got suitably altered to mean converting of raw material into a product by employing any process of manufacturing .Under the Excise Law, unfortunately, the word “MANUFACTURE’ is not defined anywhere. Even this definition is not a direct definition buy only an inclusive definition

PROCEDURE FOR   REGISTRATION

Every person who manufactures or deals in excisable goods is required to obtain Central Excise Registration as per Rule 9 of the Central Excise Rules, 2002. . Persons manufacturing goods, fully exempted or chargeable to nil rate of duty, are not required to seek registration. Separate registration is required for separate premises / units. Application for registration in prescribed format, along with PAN number, is submitted to the jurisdictional Deputy/Assistant Commissioner. Computer generated Registration Certificate, based on 15­digit PAN number, is handed over either immediately or within 7 days in all cases. Registration Certificate is non­transferable. An application is required to be made to the department for carrying out any additions / deletions in the registration certificate. The premises and the details given by the applicant are verified by the Range Officer within 5 working days after issue of the Registration Certificate. No bond or bank guarantee is required for obtaining registration. Formats of application for registration as well as registration certificate, in Form A –

ASSESSMENT OF DUTY

Assessment of excisable goods means determination of excise duty payable on such goods. Assessment involves declaration of quantity of goods. Value of the goods and applicable rates of central excise duty in the invoice. Rule 6 of Central Excise Rules, 2002 authorises the assessee to assess the duly himself. This is known as self-assessment procedure and is applicable to all excisable' goods except cigarettes. The duty is assessed at the time of removal of goods and is indicated on invoice. Normally central excise duties are payable on ad-valorem basis.
MANNER OF PAYMENT OF DUTY

Central Excise Duty on excisable, goods, as assessed on invoices, is paid as per the provisions of Rule 8 of the Central Excise Rules. Rule 8 lays down that duty for that goods cleared during a month shall be paid by the 5th  day/ of the following month but S.S.I. units are allowed to pay duty by' the 15th  day of the following month. Duty for the month of March has to be paid by the 31st day of March by all units.

MAINTINANCE OF RECORDS

Formats of the records to be maintained are not prescribed by the department. Assessee is free to devise his own records. The only requirement in this regard is that.  Information required under Central Excise Laws must be contained in such records. All records prepared or maintained for accounting of transactions related to receipt, purchase, manufacture, storage, sales or delivery of the goods including inputs and capital goad, accounts, agreements, invoice, price list, return, statement or any other source document, whether in writing or in any other form are treated as records for excise laws also