Excise duty brief introduction

1. Excise Duty
Dr.P.Ravichandran,
M.Com., M.B.A., M.A (Astrology)., M.Phil., Ph.d.,
D.C.P., D.L.L & A.L., P.G.D.C.A., P.G.D.P.M & I.R.,
Associate Professor of Commerce,
Commerce Research Centre,
S.B.K.College, Aruppukottai.
e-mail id : prcapk@gmail.com
Mobile: 9443424090 & 9080030090

2. Present Excise duty Laws and
Rules in India
 Central Excise Act, 1944
 Central Excise Tariff Act, 1955
 CENVAT Credit Rules, 2004
 Central Excise Rules, 2002
 Central Excise Valuation Rules, 2004

3. Central Excise Law
 The Central Excise Law is the law which
empowers the Central Govt. to collect
excise duty on the goods manufactured
(or) produced in India.
 Excise duty is a duty on goods
manufactured in India.

4.  Chapter II of the Central Excise Act, 1944
deals with the levy and collection of excise
duty with the help of Sec.3 which is the
charging section. This duty is based on the
value of goods manufactured.
It is necessary to determine the VALUE of the
excisable goods in order to levy and collect the
excise duty on these goods by applying the
RATES specified in the First Schedule and the
Second Schedule to the Central Excise Tariff
Act,1985.

5.  The First Schedule gives the Basic Excise
Duty (BED) rate and
 The Second Schedule gives the Special
Excise Duty (SED) rate.

6. Central Excise Act, 1944
This is the basic law related to the levy
and collection of duties of central
excise.
 This Act does not contain the rate at
which duties are imposed.

7. Present system - Power to levy Taxes
Power to
levy Taxes
Centre
State
Excise
Duty
On
Manufacture
Customs
Duty
On Imports
& Exports
Central
Sales Tax
On Inter-
State Sales
On Provision
of Services
On Sale of
goods within
the States
On movement
of goods /
transfer
Service
Tax
Value
Added Tax
Entry Tax/
Octroi / Local
body taxes

8. Central Excise Tariff Act, 1985
 This Act classifies various goods on
which central excise duties are levied
and prescribes the rates at which the
duty is payable.
Central Excise Rules, 2002
 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.

9. EXCISE DUTY
 An excise duty is a type of tax charged on
the goods produced within the country (as
opposed to customs duties, charged on
goods from outside the country).
 It is a tax on the production (or) sale of a
good.

10. State Excise
 Excise duty on alcohol, alcoholic
preparations and narcotic substances
is collected by State Govt. and it is
called “ State Excise” duty.
Central Excise
 The Excise Duty on the rest of goods is
called “Central Excise” and is collected in
terms of Sec.3 of the Central Excise Act,
1944.

11. Sales Tax vs Excise duty
Sales Tax is a tax on the act of sale;
Excise Duty is a tax on the act of
manufacture (or) production of goods.

12. Excise duty vs Customs duty

13. Excise duty vs Central Sales Tax

14. Central Excise Act vs.
Central Excise Tariff Act

15. LIABILITY FOR CENTRAL EXCISE
 Four conditions 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.

16. 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.

17. 2. EXCISABLE GOODS
 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 .
 Articles which are included in the Central
Excise Tariff Act, 1985 (CETA) are called as
Excisable goods.

18. 3. Goods must be manufactured
(or) produced
 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.
 Deemed Manufacturing….
 Packing, Labeling, Drawing,
Mixing, Diluting etc.,

19. 4. Manufacture (or) production
must be in India
 Finally, for the liability to pay central excise
duty to arise the goods must be manufactured
(or) produced in India.
Not Amounts to
Manufacture
Amounts to Manufacture

20. Who is liable to pay Excise Duty?
The liability to pay excise duty is always on the
manufacturer (or) producer of goods.
 There are 3 types of parties who can be
considered as manufacturers.
 1. Those who personally manufacture the
goods in question.
 2. Those who get the manufactured goods by
employing hired labour.
 3. Those who get the goods manufactured by
other parties.

21. Job work in article of jewelry (or)
other articles of precious metals
Job workers Fin.Goods Produced
Brand Name Owner

22. IS IT MANDATORY TO PAY DUTY ON
ALL GOODS MANUFACTURED?
 Yes, it is mandatory to pay duty on all goods
manufactured, unless exempted.
 For example, duty is not payable on the goods
exported out of India.
 Similarly exemption from payment of duty is
available, based on conditions such as kind of
raw materials used, value of turnover
(clearances) in a financial year, type of process
employed etc.

23. So…… Excise duty is applicable on –
 Goods which are marketable and movable;
 Goods which are mentioned in CETA, 1985;
 Goods which are manufactured in India.

24. How Excise Duty is calculated?
 Excise rate – it is a percentage / value
to be charged as Duty on Assessable
Value / Quantity.
 Assessable Value / Quantity – is
determined based on valuation
methods provided by Central Excise
Department.

25. When we have to pay Excise Duty?
 On removal;
 The taxable event under the Central
Excise Law is “manufacture”;
 The liability of Central Excise duty arises
as soon as the goods are
manufactured, however collected on
removal under Rule – 11 invoice.

26. Removal under Rule-11 invoice
 Excisable goods shall be removed from a
factory (or) a warehouse with an invoice
signed by Proprietor (or) authorized
person.
 Serial number of invoice could be pre-
printed (or) Computer generated at the
time of issue of the invoice.

27. Requirements of Rule–11 invoice
 Name and address of Dealer
 Division name and address
 Registration number of Dealer
 Name of Consignee
 Description of goods
 Classification of goods
 Time and Date of removal
 Rate of Duty
 Quantity of goods
 Value of goods
 Duty payable
 Mode of Transport
 Vehicle number

28. CENVAT Credit (ModVAT)
 Object was to avoid the cascading effect of multi
point levy which skews the price of a product.
 Duty paid is allowed as credit on Inputs and Capital
goods purchased from Manufacturers,
Registered dealers.
 This credit is allowed to be used for discharge of
duty payable.

29. Procedure of payment of Excise duty
 Daily Stock Account of Stored Goods – DSA
A daily stock has to be maintained by every
assessee in legible manner, indicating particulars
regarding description of goods manufactured
(or) produced, opening balance, quantity
manufactured (or) produced inventory i.e., stock
of goods, quantity removed, Assessable value,
amount of duty payable, particulars regarding
the duty actually paid.
Invoice shall be in triplicate and should be
marked as –  Original for buyer,
 Duplicate for transporter,
 Triplicate for assessees.

30.  Goods cleared from factory are cleared
under an invoice.
 Duty is payable on monthly basis by 5th of
the next month in which duty becomes
due, i.e., in which goods are cleared from
the factory.
 Duty is paid through current account called
PLA and / (or) Central Value Added Tax
Credit, i.e., CENVAT Credit.
Procedure for payment of
Excise duty

31. Contd…
 Small Scale Industry (SSI) is required to pay
the duty by 15th of the next month.
 However, the duty for the month of March is
paid by 31st March itself not on 5th of next
month, i.e., 5th of April because government
accounts closes on 31st March.
 Duty is paid by assesses through current
account known as PLA (Personal Ledger
Account).
 PLA is credited when duty is paid. i.e., deposited
in the bank by filing a challan called TR-6
on monthly basis.
 Only excise duty paid comes in PLA, the items
like fine, penalty, interest does not appear
in PLA.

32. Conceived by
Dr. P.Ravichandran
M.COM., M.B.A., M.A(Astrology)., M.Phil., Ph.D.,
D.C.P., D.L.L & A.L., P.G.D.C.A., P.G.D.P.M & I.R.,
Associate Professor of Commerce,
Commerce Research Centre,
S.B.K.College,
Aruppukottai.
E-mail id: prcapk@gmail.com
Mobile: 9443424090 & 9080030090