Central Excise Duty

The GST Regime in 2018 meant that the Central Excise Duty got majorly subsumed under it. However it is still levied on products like Petroleum and Liquor and this article explains in brief the excise duty present in India and why and how manufacturers can pay the duty.

Tue Feb 02 2021 | Govt. Agencies and Taxation | Comments (0)

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Central Excise duty is an indirect tax levied on goods manufactured in India. Excisable goods have been defined as those, which 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 its meaning is borrowed from the constitution and from the sale of goods Act and understood as per the decisions 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 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 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.

Status of Central Excise Duty in India as of 2020

As aforementioned above, the indirect taxes levied on the manufacturing of goods produced in the country is called Central Excise Duty.  It is important to note that as of 2020, a wide number of indirect taxes including excise duty are now part of GST (Goods and Services Tax).

This means that except on certain items such as liquor and petroleum, central excise duty has ceased to exist in India.

 

Status of Central Excise Duty in India before the GST Regime


Central Excise Duty is a kind of indirect tax which a retailer or an intermediary collects from consumers and then pays to the government. Excise duty is charged by the central government except on some items such as narcotics and alcohol. Whilst the central excise duty is to be paid when goods get manufactured, the usual practice is that it is collected when the goods are ‘removed’ for the purpose of sale from the place of production or from the warehouse. Excise duty is calculated from the weight or volume of the goods rather than the value of the goods.It is important to note that there exists no requirement for the actual sale of the goods kept in the warehouse for imposition of the central excise duty because it is primarily imposed on the manufacture of goods. The authority responsible for collection of central excise duty is the Central Board of Excise and Customs (CBEC).

Legal Provisions concerning Excise Duty in India

Excise Duty in India is majorly governed by 2 legislations. These 2 are:

  • Central Excise Act, 1944
  • Central Excise Tariff Act, 1985

The Central Excise Act mostly provides the definitions related to excise while the Central Excise Tariff Act includes an elaborate schedule of goods on which excise is applicable and the tariff rates that apply.

These two acts underline the laws related to the levying of excise duty that extends to the whole of India. The rates of Central Excise Duty are defined in the Central Excise Tariff Act, 1985. The Central Board of Excise and Customs (CBEC), which functions under the leadership of the Union Finance Minister, administer and control the levy of excise and custom laws in India

There are 3 types of excise duties in India-

Basic Excise Duty- Basic Excise Duty is often called as Central Value Added Tax (CENVAT) and this type of excise duty is imposed on goods which come under the 1st schedule of the Central Excise Tariff Act, 1985. This excise duty was imposed under Section 3(1) (a) of the Central Excise Act, 1944 and applied on all goods in the country with the exception of salt.

Special Excise Duty- The Special Excise Duty is applied on special goods specified under the Second Schedule to the Central Excise Tariff Act, 1985.

Additional Excise Duty- Section 3 of the Additional Duties of Excise (Goods of Special Importance) Act, 1957, states that this excise duty is applied on goods listed in Schedule 1 of the given act. Such duty is charged on some specific goods and is charged by the central and state government as a substitute of the sales tax. The Additional Duties of Excise (Textiles and Textile Articles) Act, 1978 also call for a similar legislation.

Who is required to pay Excise Duty?

Since excise duty is applicable on the manufacturing of goods, the manufacturer of goods are required to pay it to the government. As per the law, there are 3 parties which are required to pay excise duty in India-

  • The manufacturer(s) that manufactured the goods in question
  • The people that got the manufacturing of the good done through hired labour
  • People that get the goods manufactured by 3rd

When is the Excise Duty to be paid?

Excise duty is applied on the manufacturing of goods and has to be paid when such goods are physically removed from the warehouse or the place of manufacture. Rule 4 of the Central Excise (Amendment) Rules, 2002 states the same and has explicitly stated that the removal of goods for sale cannot be taxed but is only for the sake of convenience. Manufacturers are liable to pay the excise duty on production or manufacture of the goods.  The Excise duty must be paid on the 5th of the following month after the sale or movement of goods from the warehouse. There is a one day extension granted If the payment is made through the medium of net banking. The rule of payment extends to all months except for the month of March in which the payment is required to be made within 31st of March.

How can one pay excise duty?

Since 1st October 2014, taxpayers who are liable are required to pay excise duty through net banking through the CBEC payment gateway called the Electronic Accounting System in Excise and Service Tax  or EASIEST.  The following steps are to be followed to to pay excise duty in India:

  • Login to the website cbec-easiest.gov.in and select the e-payment option.
  • Enter the 15-digit Assessee Code allotted to you. This code is then verified online.
  • Fill in the personal details like name, address, etc.
  • From the tax-type menu, choose the accounting Codes for Excise.
  • After choosing the accounting code, choose the preferred bank through which you want to make the payment.
  • Before being taken to the bank’s website, the website will give the user an option to review the information filled by them. Once satisfied, they may proceed to payment.
  • When the payment is successful, a Challan Counterfoil is generated containing the Challan Identification Number (CIN). It must be kept as a proof of payment.
  • After this, one needs to verify that the payment has been made on EASIEST using the Challan Status Inquiry.

What happens when you evade Excise Duty?

Non-payment of excise duty on time can lead to huge financial repercussions for the evader. As per the laws related to excise duty, the amount of penalty can be anywhere between 25 to 50 percent of the amount of tax evaded. More often, the excise duty itself is a big amount and when the penalty is calculated as a percentage of it, it can be of substantial value.

Difference between Excise Duty and Customs Duty

A number of provisions are similar for excise duty and custom duty with the major difference being the place of production of the goods in question. While excise duty is charged on goods produced or manufactured within the country, custom duty applies to the goods that are sold in India but were produced in a different country. Excise duty will be paid by the manufacturer of the goods and not by the consumer. Custom duty will be paid by the importer of the goods.

Tags: CentralExciseDuty, SpecialExciseDuty, AdditionalExciseDuty

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