Central excise act notes

MBA 3rd semester FM02

1. CENTRAL EXCISE ACT

2. Tax is of two types Direct Tax and Indirect Tax.
Direct Tax is the tax, which is
paid directly by people to the government, while
indirect tax is the tax, which is paid indirectly by
people to the government. Income Tax is paid
directly to
the government therefore it is a direct tax while
excise duty is paid by people
to the manufacturer who pays it to the government,
therefore it is an indirect tax.

3. 1.Central Excise Act 1944

2.Central Excise tariff Act 1985

3.Central Excise Rules ,2002
4. CENVAT Credit Rules, 2004


The law of Central Excise duties is governed by the
following :

4. This is the basic law related to the levy and
collection of duties of central excise .However
this Act does not contain the rate at which duties
are imposed




Central Excise Act ,1944

5. This Act classifies various goods on which
central excise duties are levied and prescribes the
rates at which the duty is payable
Central Excise Tariff Act ,1985

6. All manufacturers of excisable goods are required
to register under these rules .The registration is
valid as long as production activity continues and
no renewals are necessary
Central Excise Rules ,2002

7. 1.To collect excise duty on manufactured goods
more conveniently
2. To reduce collection costs
3. To control wasteful expenditures
4. To avoid tax evasion by appropriate control
measures
5.To promote industrial growth in backward areas
6.To support local industries
7.To collect high revenues

OBJECTIVES OF CENTRAL EXCISE ACT ,
1944

8. Central Government has constitutional powers to
levy Excise Duty.
 Power to impose excise on alcoholic liquors,
opium, and narcotics is granted to State
Government.
 Power to impose excise on other items is granted
to Central Government.

9. 1.Basic duty of central excise
This duty is levied at the rates specified in the
First schedule to Central Excise Tariff Act 1985
2. Specific duty of excise
Some commodities like pan masala and cars
have special excise duties levied on them .These
items are covered under in schedule II to the
Central Excise Tariff Act



Types of Excise Duties

10. 3.Education cess on excise duty
Education cess is a duty of excise that has to be
calculated on the aggregate of all duties of excise ,
including special excise duty or any other duty of excise



4.Excise duty on clearances by 100 % EOUs
100 per cent Export –oriented Units are expected to export
all their production .However ,if they clear their final product in
the domestic tariff area,the rate of excise duty will be equal to
that of the customs duty on like article imported in India

11. 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
manufacture 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.
Taxable event for central excise duty

12. Basic Excise duty rate has been changes from
12% to 12.50 % .However Education cess and
Secondary & Higher Education Cess has been
removed .


RATE OF EXCISE DUTY

13. 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
Liability for central excise

14. 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
1.GOODS

15. For the liability of duty of central excise to
arise ,the item in question should not only be
goods it should also be excisable goods .A goods
become excisable if and only if it is mentioned in
the Central Excise Tariff Act 1985.
Thus, unless the item is specified in the CETA as
subject to duty, no duty is levied. 
2.Excisable goods

16. The third condition that must be satisfied for
becoming liable to pay duties of central excise is
that the goods must be manufactured or produced
3.Goods must be manufactured or
produced

17. Finally ,for the liability to pay central excise duty
to arise the goods must be manufactured or
produced in India
4.Manufactured or production must
in India

18. 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 of the goods.



Who is liable to pay central excise
duties

19. SECTION 2(f) of CE ACT:- ‚
Manufacture‛ includes ANY PROCESS:-
(i) INCIDENTAL OR ANCILLARY to the completion of
a manufactured product;
(ii) which is specified in relation to any goods in, the
Section or Chapter notes of the First Schedule to the
CETA,1985 as amounting to manufacture (DEEMED
MANUFACTURE) or
(iii) which in relation to the GOODS SPECIFIED IN
THE THIRD SCHEDULE of CEA involves- packing
or repacking of such goods in a unit container or

Definition of Manufacture-

20. re labelling of containers including the declaration or
alteration of retail sale price on it or adoption of any
other treatment on goods to render product marketable
to consumer. (DEEMED MANUFACTURE)
Thus, manufacture means
Manufacture specified in various Court decisions i.e.
new and identifiable product having a distinctive name,
character or use must emerge, or
Deemed Manufacture
E.g. Manufacture of table from wood, conversion of pulp
into base paper, conversion of sugarcane to sugar, etc.

21. UNION OF INDIA VS. DELHI CLOTH & GENERAL
MILLS CO. LTD.
Manufacture implies a change but every change is
not a manufacture and yet every change of an article
is the result of treatment, labour & manipulation. ‚
Manufacture‛ can be said to have taken place when:-
after process,
a new and different article emerges
having a different name, character or use.

22. Duty is payable AT THE TIME OF THE REMOVAL
of the goods from the factory or
warehouse.
Thus, the taxable event arises as soon as goods
are manufactured but the payment of duty has
been postponed to the stage of removal of goods.
Note-Rate of duty is as applicable on date of
removal i.e. clearance from factory.
Taxable event: - PRODUCTION OR
MANUFACTURE OF GOODS.

23. The duty of central excise is charged on four
bases:
1.Specific duty
2.Tariff duty
3.Maximum retail price
4.ad -valorem basis


Basis for valuation of goods

24. 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


1.Specific duty

25. 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
2.Tariff value

26. Government can specify the goods on which excise
duty will be based on MRP.
MRP shall be the maximum price at which excisable
goods shall be sold to the final consumers. It
includes taxes, freight and transport charges,
commission to dealers etc.
Excise duty on MRP is applicable on products on
which quoting of MRP is necessary under the
Weights and Measurements Act, e.g., Chocolates,
Biscuits, Wafers, Ice Creams, Camera, Refrigerators,
Fans, Footwear, Toothpaste etc
3.MRP –based valuation

27. 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.
Assessable Value is the value of transaction i.e., the value
at which transaction takes place, in other words it is the
price actually paid or payable for the goods on sales. It is
also called
transaction value. It includes freight and transportation
charges, commissions
to dealer etc.
4.Ad Valorem duty

28. Excise duty is paid on transaction value or
assessable value if:
1. Goods are sold at the time and place of removal.
2. Buyer and assessee (Manufacturer/seller) are
not related.
3. Price is the only consideration for sale, i.e.,
money or some valuable item is received on sale.

30. Thanks