Get Central Excise Duty Notes / ebook:
In previous post we have given Income From Other Sources (Sec 56-59), Capital Gains (Sec 45-55) Notes, PGBP (Profits and Gains from Business or Profession) ebook / Notes, Income From House Property (Sec 22-27) ebook / notes, and Income From Salaries (Sec 15-17) Notes / ebook. Today we are providing Central Excise Duty ebook / Notes for CA & CMA students.
Central Excise Duty
Central Excise is a levy (tax), levied on a commodity (manufactured within the country) by the Union Government by an Act of Parliament (usually in the Finance Bill, in the presentation of the Budget in the Parliament, generally on the last working day of February every year) by notifying under a Tariff.
It is an indirect tax paid by the manufacturer, who passes its incidence to the customers.
“Excise Duty” is levied the moment the process of manufacture is complete.
Types of Excise Duty:
Basic Excise Duty (BED) or CENVAT
Special Excise Duty (SED)
Excise Duty on clearances by EOU / SEZ in Duty Tariff Area
National Calamity Contingent Duty (NCCD)
Duties under other Acts
Cess under other Acts
Conditions for imposition of central excise duty:
1) Entry No. 84 of List I of Seventh Schedule to Constitution empowers Central Government to impose levy of excise on goods manufactured or produced in India.
2) In case of ‘deemed manufacture’, imposition of excise duty can be justified under entry 97 of List I.
3) Excise is a duty on manufacture. Manufacture or production of ‘excisable goods’ in India is the ‘taxable event’ in Central Excise. [Section 3(1) of Central Excise Act].
4) Ownership of inputs or final products is irrelevant for purpose of liability of excise duty.
Person liable to pay central excise duty:
1) Excise Duty liability is generally on manufacturer, but in some cases, duty is collected from others also. Duty liability is no ‘manufacturer’, though he can collect it from buyer. He will be liable even if he does not collect [rule 4(1) of Central Excise Rules].
2) In case of goods stored in warehouse under rule 20, the duty liability is on person who stores the goods in warehouse [rule 4(1) of Central Excise Rules].
3) In case of molasses produced in khandsari sugar factory, duty liability is of procurer i.e. purchaser if he is procuring it for manufacture of any commodity [rule 4(2) of Central Excise Rules].
4) In case of job work, duty liability is of job worker, even if he is not owner of manufactured goods. However, if inputs are sent under Cenvat provisions or under notification No. 214/86-CE, duty liability is of raw material supplier.
Rate of central excise duty:
1) Basic excise duty is levied u/s 3(1) of Central Excise Act. The section is termed as ‘charging section’. The duty rate is generally 10% w.e.f. 27-2-2010 i.e. total 10.3% including education and SAH cess [earlier, it was 8.24% and still earlier, it was 14% i.e. total 14.42%).
2) Education cess is payable @ 2% of the basic duty and Secondary and High Education Cess is 1% of basic excise duty.
3) NCCD and Cess is payable on some products.
Goods and excisable goods:
1) As per judicial interpretation, for purpose of levy of Excise duty, an article must satisfy two requirements to be ‘goods’ i.e. (a) it must be movable and (b) it must be marketable. However, actual sale is not necessary.
2) ‘Goods’ includes any article, material or substance which is capable of being bought and sold for a consideration and such Constitutional Background goods shall be deemed to be marketable [Explanation to section 2(d) of Central Excise Act].
3) Marketability is to be decided on the basis of condition in which goods are manufactured or produced.
4) The marketability test requires that the goods as such should be in a position to be taken to market and sold. If they have to be separated, the test is not satisfied. Thus, if erected and installed machinery has to be dismantled before removal, it will not be goods – Triveni Engineering v. CCE AIR 2000 SC 2896 120 ELT 273 (SC).
5) Software is excisable goods. However, presently, excise duty/service tax as well as Vat is payable on branded (packaged) software and service tax and Vat is payable on customised software.
6) Section 2(d) of Central Excise Act defines Excisable Goods as ‘Goods specified in the Schedule to Central Excise Tariff Act, 1985 as being subject to a duty of excise and includes salt’. Thus, unless an article is specified in the Central Excise Tariff Act as subject to duty, no duty is leviable.
7) ‘Goods’ includes any article, material or substance which is capable of being bought and sold for a consideration and such goods shall be deemed to be marketable. Thus, some articles like cement structures and trusses, scrap etc. will be ‘goods’ even if otherwise they are not marketable.
Dutiability of waste and scrap:
Waste and scrap is ‘final product’ for excise purposes. Waste and Scrap can be ‘goods’ but dutiable only if ‘manufactured’, are capable of being sold and are mentioned in Central Excise Tariff.
1) Taxable event for central excise duty is manufacture or production in India. The word ‘produced’ is broader than ‘manufacture’ and covers articles produced naturally, live products, waste, scrap etc.
2) ‘Manufacture’ can be (a) as defined by Court or (b) Deemed manufacture.
3) ‘Manufacture’ as defined by Courts, takes place only when the process results in a commercially different article or commodity. There can be ‘manufacture’ if both inputs and final product fall in same tariff heading.
4) However, this test does not apply in case of ‘deemed manufacture’.
5) Assembly can be ‘manufacture’. Putting two items together for making a set is not generally ‘manufacture’.
1) Deemed manufacture is (a) process as specified in CETA. Over 35 processes have been specified or (b) Repacking, relabelling, putting or altering MRP in case of articles covered under MRP valuation provisions [clauses (ii) and (iii) of section 2(f) of Central Excise Act].
2) In case of ‘deemed manufacture’ as specified in CETA, simple repacking is not ‘deemed manufacture’. It has to be from bulk pack to retail pack. However, in case of products covered under MRP valuation, it can be ‘manufacture’.
3) Simply putting manufacturer’s mark is not ‘labelling’.
4) Mere putting name of goods, consignor and consignee is not ‘labelling’.
5) Mere putting bar code is not ‘manufacture’
Who is ‘manufacturer’ :
1) Manufacturer is who ‘manufactures’ [Section 2(f) of Central Excise Act] He is the person who actually brings new and identifiable product into existence or undertakes process defined as ‘deemed manufacture’.
2) Duty liability is on ‘manufacturer’, except in few cases of reverse charge. Mere supplier of raw material or brand name owner is not ‘manufacturer’.
3) Loan licensee is not ‘manufacturer’.
4) Ownership is not relevant to determine who is manufacturer. If relationship between brand name owner/raw material supplier and the actual person bringing the new and identifiable product into existence are on Principal to Principal basis, the brand name owner/raw material supplier will not be ‘manufacturer’.
CENVAT Credit is a credit of duty paid on raw materials, capital gods and services used in relation to manufacture of excisable goods or in relation to services provided on which Service Tax is payable.
This credit is available on input goods, input services and capital goods.
Input goods eligible for Cenvat Credit:
1) All goods (except High Speed Diesel Oil [HSD], Light Diesel Oil [LDO] and petrol) used in, or in relation to, the manufacture of the final products. The input may be used directly or indirectly in or in relation to the manufacture of final product. The input need not be present in the final product.
2) Input includes lubricating oils, greases, cutting oils and coolants, accessories of final products cleared along with the final product, goods used as paint, packing material or fuel, or for generation of electricity or steam used in or in relation to manufacture of final product or for any purpose, within the factory of production.
3) Input also includes goods used in manufacture of capital goods which are further used in the factory of manufacturer.
Input service eligible for Cenvat Credit:
1) Setting up, modernization, renovation or repairs of factory, premises of provider of output service or an office relating to such factory or premises
a) Advertisement or sales promotion
b) Market research
c) Storage up to the place of removal
d) Procurement of inputs
e) Activities relating to business, such as accounting, auditing, financing, recruitment and quality control, coaching and training, computer networking, credit rating, share registry and security, inward transportation of inputs or capital goods and outward transportation up to the place of removal.
Capital Goods eligible for Cenvat Credit:
1) Tools, hand tools, knives, etc. falling under chapter 82. Machinery covered under chapter 84. Electrical machinery under chapter 85. Measuring, checking and testing machines, etc. under chapter 90. Grinding wheels and the like goods falling under sub-heading no. 6801.10. Abrasive powder or grain on a base of textile material falling under 08.02.
a) Pollution control equipment
b) Components, spares and accessories of the goods specified above
c) Moulds and dyes
d) Refractories and refractory material
e) Tubes, pipes and fittings thereof, used in the factory
f) Storage tank
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