CENTRAL EXCISE DUTY NATURE & MEANING CENTRAL EXCISE DUTY

EXCISE DUTY
Central excise duty is an indirect tax, levied in 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 7 schedule, read with article 256 of the
constitution of India. The word “excise” is derived from a Dutch term “acise” ,
which itself is derived from the Latin word “accensay” , which means to tax
“excise” is a word of wide import any & according to dictionary meaning, denotes
“an in direct tax on commodity manufactured ,produced ,sold ,used or transported
by the country”. Excise duty is a duty levied on the goods that are indigenously
manufactured. Excise duties having been defined in this manner in sec. 3 of the
that act, it immediately follows from the very defined that for anything to be
liable to excise duties, it must fulfill all the following conditions.

(A) It must be “goods”. (B) It must be “excisable goods”. (C) It must be either
produced or manufactured in India. While the duty no doubt is on goods as such,
still goods themselves cannot pay duty. This takes us to the next concept of
“taxable event”. For every tax, whether direct or indirect, there is a “taxable
event”. That is the event or situation which gives rise to the liability which he
has created, which would mean that he should be the person to pay the duty. Since
the taxable event is production/manufacturer. Excise duty is today the most
important source of revenue in India. It constitutes about 1/5 of the total yearly
receipts of the central government.
The finance act, 2000 has renamed the ‘duty of excise’. The ‘central value added
tax’ (CENVAT), which term is the term ‘duty’, ‘duties’, ‘excise duty’ or ‘duties
of excise’.

The Webster’s New International Dictionary defines “excise duty” as :(A) Any duty,
toll or tax ; (B) An inland duty or imposed, levied upon the manufacture, sale or
consumption of commodities within the country. (C) A tax upon the pursuit or fall
of certain sports, trades or occupation, usually taking in this case, the form of
exactions for licenses. The supreme court of India has defined “Excise duty” as “a
tax on the production or manufacture of excisable goods produced or manufactured
within the country” Nature of Excise Duty A few special features describing the
nature of excise duty are as follows:1. The duty of excise is not levied on
directly on the goods but is levied on the manufacture or production of a new
commodity. Hence it is called an ‘indirect tax’. 2. Excise duty is payable by the
manufacturer or the producer, not by the consumer. However the incidence of duty
is always indirectly on the consumer. 3. Excise duty is levied on goods &the
taxable events is manufacture or production if a new commercial commodity. The
levy collection of excise duty is practically made at a stage next to the
manufacture of goods, i.e. removal of goods.
4. The taxable event is not independent of liability to pay duty from levy of
duty. Therefore there cannot be different taxable events for different purposes.
5. The method of collection does not effect the essence of excise duty, but only
relates to the machinery of collection for administration convenience. Excise
differentiated from other duties: Excise v/s custom duty :Excise duty is levied on
manufacture or production of goods within the country. Thus it is related to
industrial activity. Custom duty, on the other hand, is attracted on the movement
of goods across the custom frontier. Excise duties are the duties, payable on
goods produced at home, where as custom duties on goods imported into country from
abroad. Excise v/s sales tax :Excise duties are the duties levied upon a
manufacture or producer of specified goods, in respect of their manufacture &
production in a factory within the country. It is not related to sale of goods or
proceeds of such sale. Sale tax , on the contrary is levied on the vendor of
goods, in respect of his sale. The taxable event in case of excise duty is the
coming into existence of a commodity. However in case of sale tax , the taxable
event is the sale of a commodity. The event of a sale of a commodity is immaterial
for levy of excise duty. In 1939, the duty of excise included the tax on sales as
well. However, when the government of India Act 1985, delegated powers to levy tax
on sale to another authority, it was distinguished from excise duty.
Excise v/s service tax :Service tax is a tax on the services provided by the
specified category of person to their clients & customers. On the contrary, excise
duty is a tax on removal of goods from the place of manufacture or production,
irrespective Of whether the same are used by customer or not. Excise v/s octroi
:Octroi is charged on the entry of goods & a specified area. This is generally
levied & collected by the local governments. While excise duty is levied on the
goods manufactured &produced &the country. Octri is a kind of entry tax. The levy
of excise duty is therefore not conflict with the levy & imposition of octroi.
Types of excise duty:Central excise duties can be classified into the following
categories:(A) Basic excise duty (BED):- BED is levied under the central excise
act 1994, on specified goods manufactured or produced in India at the rates
specified in the Central Excise Tariff Act 1985. The basic excise duty may be:(1)
Ad Valorem Duty i.e. duty levied at the specified rate on the volume of goods. (2)
Specific Duty i.e. duty levied at the specified rate on the unit, weight, volume,
length or area of goods. There is a fixed rate of duty @ 16% is charged. The basic
excise duty is shared between the Union & the States. (B) Special duties also
known as auxillary duties, are the regulatory duties, which are levied as
surcharge on certain specified goods. The purpose of special duties to raise
additional resources for some specified objects. Special excise duty is the
percentage of effective basic duty is calculated & relief exemptions & rebates is
granted. Thus, if the basic excise duty is nil the special excise duty would also
be nil. The special duties were first introduced in India in 1963 at the time of
Chinese aggression. Special excise duties are generally announced through the
Finance Bill. (C) Additional duties:- Additional duty is collected on certain
specified goods & products under the provisions of separate status. The additional
duty is levied with the object to, either curb the demand or consumption of the
particular commodity or to generate revenue sources from the commodity, which can,
for the time being, bear the extra load of taxation. These additional duties are
in addition to the basic excise duty & special excise duty. (D) National calamity
contingent duty [finance act 2001]:- A national contingent duty is imposed by a
finance act 2001. This duty shall be in addition to any another duties of excise
chargeable on such goods under the Central Excise Act 1944 or any other law for
the time being in force. This duty is imposed on Pan masala, Cigarettes, Bidies &
other tobacco products. (E) Special Additional Excise Duty [finance act 2002]:- In
the case of goods specified in the 8th schedule, beings goods manufactured, there
shall be levied and collected for purpose of the union by surcharge, a duty of
excise to called the special additional excise duty at the rates specified in the
said schedule, This duty shall be in additional to any other duty on such goods
under central excise duty 1944 or any other law for the time being in force. The
8th schedule:1. Motor Spirit (Petrol), 2. High Speed Diesel Oil
State excise duty:- It is imposed on manufacturing or production of items listed
in state constitution. According to list 2nd of 7th schedule entry 51 the state
governments are authorized to levy excise duty on the production & manufacture of
the followings goods:1. Any alcoholic liquor meant for human consumption. 2.
Opium, bhang, narcotics drugs and other narcotics. The duty by the Central
government on the production & manufacture of goods in India is called excise duty
while the duty levied by the state government on the production & manufacture of
narcotics in order to get for the sake of convenience called state excise. (G)
Cesses:- Cess is a tax imposed for specified purpose with reference to some goods.
The cess is collected separately & the collecting autority is under obligation to
utilize the same for the specified purpose only. BASIS OF EXICE DUTY: The basic
conditions of excise liability are:1:- The duty is on goods. 2:- The goods must be
excisable 3:- The goods must be produced 4:- Such manufacture must be in India
Excise is levied on the following basis; 1:- Specific duty 2:- Ad-valorem duty 3:-
Compounded duty

(F)
1:- SPECIFIC DUTY:It is the duty payable on the basis of certain units like
weight, length, volume, thickness etc. for example duty on cigrattes is payable on
the basis of its length. Duty on sugar is based on per kg. etc. In such cases
calculation of duty is payable in comparatively easy. In view of simplicity many
goods were earlier covered under specific duty. However this disadvantage is that
even if the selling price of product increases and the revenue earned by the
government doesn’t increase accordingly. Frequent revision of the rates have to be
done which is slow and time consuming process hence now most of the goods are
covered under Ad-valorem duty. Presently specific rates amended for:1:- Cigrattes
on the basis length, match box on the basis of per hundred boxes/ packs. 2:-
Marbles slabs and tiles on the basis of square mt.basis 3:- Colour t.v. based on
screen size in centimeter. 4:- Sugar per quintal basis. 5:- Cement on ton basis.

2:- AD-VELORAM DUTY:Fixing specific duty or tariff value is possible only for few
selected items like sugar pan masala consumer goods etc. Generally it is not
practically possible to charge specific duty. Similarly paying duty on the basis
of mrp is possible only in respect of few selected commodities. In other case
central excise is payable on the basis of value and this is called ad-veloram
duty. On a few commodity excise duty is levid on fix price or rate per unit. For
eg. Cement is levid @ 350 per ton and on sugar is levid on @ 340 per ton. However
on the majority of goods the duty is levid on the adveloram basis. In such case
duty is payable should be worked out on percentage basis of the assessable value
of the goods clearly. This percentage of duty is specified in the CEPA from 1994-
1995. the gatepass system has been replaced by invoice system. The manufacturer
under self removal procedure( under chapter vii a rule 173 A to 173 Q) can clear
goods by payment of duties, on the value shown in there invoice.there is no need
of
filing price list ( except whenever the clearance are taking place from as well as
depot / consignment agents of factory) The value shown in the invoice should be
arrived at after considering the provision of section 4 and section 4a of central
excise act 1944 as well as central valuation rule 1975.

3:-COMPOUNDED DUTY:Compounded is the combination of specific and ad-veloram duty.

LEVY OF SLABS
1:- CENTRAL RATE – 16 % 2:- MERIT RATE – 8 % 3:- DEMERIT RATE – 24 % ( With effect
from 20th feb 1999 as per the budget of 1999 ) Earlier these were 11 various ad-
veloram rates, some commodities were earlier fixed rates at 30 % 32 % 40 % but now
maximum excise duty has been lower to maximum of 24% .

LEVIABILITY
The duties of excise which shall be levied and collected on any excisable goods
which are produced or manufactured:1:- In a free trade zone and brought to any
other place in India 2:- By a hundred per-cent export oriented undertaking and
allowed to be sold in India. Shall be an amount equal to the aggregate of the
duties of customs which would be leviable ( under the customs act,1962 c52 of
18962) or any other law for the time being in force on like goods produced or
manufactured outside India if imported into India and where the said duties of
customs are chargeable by reference to their value the value of such excisable
goods shall notwithstanding anything contceined in any other provision of this act
be determined in accorndance with the provisions of the customs act,1962 (52 of
1962)and the customs tarrif act 1975 (51 of1975).
WHO IS LIABLE TO CHARGE THE DUTY LEVIABILITY:CONSTITUTION IS SUPREME
LAW:Legislative powers emanate from the provisions enshrined in the constitution
adopted by the respective country. INDIA IS UNION OF STATES:India being a union of
various states has a quasi federal constitution in which the powers of legislation
are shared between the union and states. Article 246 and the seventh schedule
mentioned therein which lay down the division line, are specifically relevant for
this purpose. It shall be seen therefrom that both the union and the state
government have powers to legislative in regard to the levy and collection of
excise duty.

CONSTITUTION AUTHORITY FOR LEVY OF EXCISE DUTY BY CENTRAL GOVERNMENT:As regard

duties of excise, the union government regulates that part of levy which is
provided in entry 84 or entry 97residual power of lidt 1 under seveth schedule
read with article 246 of the constitution of India and the state government
regulates those given in entry 51 list 3. The major part of excise duties are
leviable by the union government more popularly known as central excise while the
state legislature have a minor share to regulate as described in entry 51. It is
understood that industrial alcohol will be subject to union excise as it is not
fir for human consumption hence it is the central government not the state
government which is competent to levy duty thereon. The union duties of excise are
levied on varieties of goods which are classified in the schedule to the central
excise tariff act 1985. The central excise tariff contains a detailed
classification of excisable goods the rate of duty leviable on each tariff head.

DEFINATION OF EXCISE DUTY:However there is no definition of term excise duty

either in constitution or in CEA.

CONSTITUTIONAL AUTHORITY FOR LEVY OF EXCISE DUTY BY STATE GOVERNMENT:As in evident

from entry 84 in the union list, in the seventh schedule of the constitution of
India, the union government has no power to levy any duty of excise on alcoholic
liquor for human consumption, opium,
Indian hemp, and other narcotic drugs but including medicinal tolilet preparation
containing alcohol or any narcotic substance. Central government has power to
levied duty on medicinal toilet preparations containing alcohol narcotic substance
etc. eg. Are cough syrup and pain killer tablets or syrups etc. though the duty is
levieable by central government would be collected as state excise duty the center
cannot collect excise duty on them.

AN OVERVIEW OF CENTRAL EXCISE RULE 1944:As per usual scheme of any act sec 37 of
the CEA grants power to govt. to frame rules for prescribing procedures form etc.
accordingly central excise rules have been notified by central excise rules have
been notified by central govt. ammended from time to time. These rules provided
for various procedures t be followed for clearance storage of goods accounting of
goods licensing procedures refund procedures, appeal procedures etc. rules are
generally important as the prescribed procedure have to be followed by the
assessee. In case of central excise, the rules are more important because excise
is a very procedure oriented. Many time such substantive benefits are lost or
penalties are imposed merely because proper procedure were not followed. Moreover
rules often provide for granting concession reliefs hence they must be studied
thoroughly. These rules contains the procedure for collection of duty. These rules
interalia detail the procedure for appointment and power of officers time manner
of payment of duty execution of bonds etc. detailed procedure regarding on levy of
duty on un manufactured products manufactured tobacco, tyre, cotton fibers tea
vegetables products medicine etc. has been given. They also contain the procedure
for availing the benefit of MODVAT.

AN OVERVIEW OF CENTRAL EXCISE & SALT ACT 1944:To improve the body of excise duty,
the British Govt. framed the central excise and salt act 1944. there were separate
excise act, number 16 all these were consolidated and consolidating act was passed
in 1944. In the year 1996 the word ‘salt’ was omitted from the name of the act,
now this act is known as central excise act 1944. This act is applicable till date
but with various amendments made in it from time to time. Time is a basic act for
excise duty collection, there are 40 sections in this enactment. This act provides
for charging of duty, valuation
powers of officer provision of arrest and penalty etc Sec 37 of the act empowers
the central government to frame rules for this purpose.

AN OVERVIEW OF CENTRAL EXCISE TARIFF ACT 1985:This act provides for tariff for
central duty of excise. The central excise rules 1984 and central excise tariff
act 1985 form the body of law of central excise. Recommendation made by the study
group constitute to review the central excise tariff a new central excise tariff
act has come into force with effect from 28 feb 1986. the tariff act replaces 1st
schedule of the central excise and tariff 1944, this is very important development
in excise taxation. When the central excise act was passed in 1944 the act itself
included various items ( called tariff items ) into which goods were classified.
However, as more and more goods were covered under central excise. The tariff
began complicated and unsystematic. Hence, CETA 1985 was passed which comes into
effect from 1st april 1986. the CETA 1985 classified all goods under 96 chapters
and specific court is allotted to each item. There are over 1000 tariff headings
and 2000 sub-headings in this act. This classification forms the basis for
classifying the goods under particular chapter and sub-head to prescribed duty to
be charged on particular product. The excise act and tariff act are thus being
separated.

Main features of tariff are as follows;1:-LINKING OF CETA:-CEA and CETA are link
together as follows:I:-Section 2 of CETA states that rate at which duties of
excise shall be levied under CEA are specified in schedule to CETA. II:-Section 3
(1) of CEA specifies that the duty shall be levied collected on all excisable
goods which are produced as manufactured in India, as and at the rates, prescribed
in schedule to the CETA thus both acts are link to each other. 2:-CETA IS BASED ON
HSN:-CETA is based on harmonize system of nomenclature called harmonized community
description coding system. This is an international nomenclature and standard
adopted by the most of the countries to insure uniformity in classification.
International trade through CETA generally follows HSN. Often there are wide
variations in HSN and CETA.
3:-CETA CONTAINS 2 SCHEDULE:-CETA consist of 2 schedule the
first schedule gives basic excise duties leviable on various products while 2nd
schedule gives list of items on which special excise duty is payable. 2nd schedule
contains only few items. It has been cleared that tariff heading given in 2nd
schedule will be interpreted in the same way as those in 1st schedule. Items
included in 2nd schedule are already covered in 1st schedule.

4:-SECTION AND CHAPTERS OF CEA:-Tariff is divided into 20

sections each of 20 sections is related to broader class of goods. Section notes
are given at the beginning of each section which govern entries in that section.
These notes are applicable to all chapters in that section. Each of the section is
divided into various chapters and each chapters contains goods of one class.
Chapter notes are given at the beginning of each chapter.

5:-GROUPS AND SUB GROUPS WITHIN THE CHAPTER:Each chapter is further divided into
various headings depending on different types of goods belonging to same class of
products. The headings are sometimes divided into further sub-headings. All
excisable goods are classified using 2 digit system 2 more digits are added for
further sub classification.

6:-A SAMPLE CHAPTER FORM CETA:-Extract from CETA of

chapter is given on previous page to given an idea of the tariff.

7:-COLUMNS IN CETA:-Central excise tariff has four columns:I:-HEADING II:-SUB-

HEADING III:-DESCRIPTION OF GOODS IV:-RATE OF DUTY

IMPORTANT TERMS AND DEFINATION 1:- ASSESSEE:-Asseesse means any person

I:- who is liable for payment of excise duty assessed under these act or any other
act II:- included any procedure or manufactures of excisable goods
III:- a registered person of a private warehouse in which excisable goods are
stored.

2:- ASSESSABLE VALUE:- Assessable value is value in which duty is

payable as a percentage generally by value we understand the price as mentioned in
bill or invoice. However for excise purpose it is not possible to fully relay on
such price as:I;- duty is payable even if goods are not sold II:- it is desirable
to have uniform policy in fixing AV III:- chances of manipulation in such price
should be minimum.

BASIS OF ASSESSABLE VALUE (AV) U/S 4

AV is fixed be sec 4 of the act on the basis of normal wholesale price to
independent buyer at factory gate, inclusive of packing cost but exclusive of I:-
All taxes and duty payable II:- Trade discount III:- Cost of durable and
returnable containers. The basic provisions of sec 4 states the value for this
purpose has to be calculated as follows:I:- Normal price of the goods at which
such goods are originally sold by the assessee to a buyer in wholesale trade has
to be considered. II:- The price should be at the time and the place of removal
( i.e. at factory rate or at the godown) III:- Buyer should be an independent
person and not a related person of the seller. IV:- Price should be the sole
consideration on the sale. V:- If goods are sold at different prices to different
classes of buyers each such price will be treated as normal price for such class
of buyer( e.g. such industries treat govt. department, industrial consumer and
other customer as separate class of buyer and prices can be different for them.).
The cost of packing has to be included in the value. However if the packing is of
durable nature is returnable than cost of such packing will not be included. VI:-
The value should be exclusive of excise duty, sales tax and other taxes payable on
such goods. VII:- Trade discount allowed in a accordance with normal practice of
wholesale trade is allowed as deduction for the purpose of assessable value.
COMPUTATION OF ASSESSABLE VALUE
Custom duty selling price Less:- Deductions I:- All taxes and duty payable
------------( except excise duty ) II:- Trade discount (+) ------------III:- Cost
of durable Returnable containers (+) ------------IV:- Excise duty (+)
-----------_________ -------------ASSESSABLE VALUE ---------------

(-) ------------___________ ------------___________

3:-CURING:- U/S 2(C):- Curing includes dying, fermenting, witting and

any process rendering an unmanufactured product fit for marketing for manufacture.

4:- EXCISABLE GOODS:-U/S 2(D):- Once it is established that

something falls within the mischief of the term “goods” the issue to be decided is
whether it is also “excisable goods”. Fortunately, the latter term has been
defined specifically in section 2(d) of the central excise act 1944. It says that
the term “excisable goods”means “goods specified in the I schedule and II schedule
to the central excise tariff act 1985 as being subject to a duty of excise and
includes salt.” Now, this would mean that it is not as if anything which is sold
or is saleable hence goods is taxable by excise. It should also be specified in
the central excise tariff the I schedule II schedule to central excise tariff act
1985.) Here an important aspect of this definition is to be noted. The definition
in sec.2 (d) is specific to the effect that it is only goods spelt out in the
tariff as being subject to duty that can be consider to be exicable goods. This
would mean that it is only till the stage when the duty liability is not
discharged by actual payments that the goods can be called excisable goods. Once
the duty is paid or the goods have been subjected to duty, they are not excisable
goods. In sum, excisability attaches itself to the goods only till the point of
payment of duty. Duty paid goods are
not excisable goods. Similarly, goods manufacture in India, once they are cleared
from the factory on payment of duty may continue to be manufactured goods but they
are not excisable goods. ( for the purpose of excise law). An important question
that arises is whether the goods specified in the central excise tariff as per
dutiable or they should also satisfy the test of marketability. The Supreme court
in Bhor industry case held that simply because an article falls within the tariff,
it would not be dutiable under the central excise law if the said article is not
goods known to the market. Another distinction worthy of note in this context is
the one between excisable goods dutiable goods. In the excise tariff, the rates
are specified by the legislature. However in several cases the dutiability is
brought down to nil though the goods being exempted entirely from duty u/s 5A now
rule and sender notification. There has been some confusion on the part of a few
as to what is the status of goods which are totally exempted. It is contended that
in as much as the goods do not have to pay any excise duty, they are not excisable
goods. However this inspiration is incorrect. Exemption u/s 5A rule 8 dose not
remove excisability. It only keeps the duty otherwise liable in suspended
animation lasts. Even when the goods do not have to pay duty they are exicisable
though they may not be dutiable.

5:- MANUFACTURE:- U/S 2(F):- Section 2(f) of central excise act

merely states that manufacture includes any process:I:- Incidental or ancillary to
the completion of manufactured product. II:- Which is specified in relation to any
goods in the section in chapter notes to the schedule of the central excise tariff
act 1985 and amounting to manufacture called deemed manufacture. This definition
of manufacture is inclusive not exhaustive. However there is a case law in this
issue.

MANUFACTURE MEANS:I:- Manufacture as specified in various court decisions i.e. new

identificable product must emerge II:- Deemed manufacture( process amounting to
manufacture ) Following would instances when manufacture has been place:I:-
Manufacture of table from wood items II:- Conversion of pulp into base paper.
III:- Conversion of sugarcane into sugar. IV:- Crude diamond into jewellery.
In addition, central excise tariff act specifies some process as deemed
manufacturing. If this process are carried out goodwill be said to be manufacture
even if as per court decision the process may not amount to manufacture.
Manufacture as defined by court takes place only when a process result in a
commercially different article or commodity.

IMPORTANT COURT DECISION ARE AS UNDER:1:- New substance having different name
character or use must emerge:-In union of India v/s Delhi cloth mill. Air 1963 sec
791 for eg.
Cutting of wood in small pieces or making small pieces of long steel bar would not
amount to manufacture as no new product emerge.

2:- Trade parlance ( transperancy )is important:-The test to be applied

is a commodity subject to processing retains its original character identity or
whether the proceed commodity is regarded in the trade by those who deal in it, as
different identity from original commodity. Nature and extent of commodity
processing may vary with each process the original commodity experiences change
but it is only when the change of series of change take commodity to a point where
commercially it is recognized as a new different commodity then it can be say that
new commodity then it can be say that new and different commodity has come into
being. The test is whether in the eyes of those dealing in the commodity or
commercial parlance the proceed commodity is regarded as different in character
and identity form the original commodity case law:- Aditya mills ltd. v/s UOI
1989.

3:- Identity of original article should be lost:- Case law PIO food
packers 1980. Commonly, manufacture is end result of one or more process when the
change occurs to a point where commercially it can be identified as a new separate
article manufacture is said to have taken place.

4:- Assembly can be manufacture:- Assembly of various part

components may amount to manufacture if new product emerges which is movable and
marketable. Case Law:- Assembly of computers from duty paid bought out parts
amounts to manufacture. Sheth computers v/s CCE (2000)
I:- Assembly of CKD ( completely knocked down ) package is not manufacture often
goods are dispatched in SKD ( semi knock down )or CKD conditional for conveyance
for dispatch. For e.g. cycle manufacture bend cycle in unassembled condition from
their factory. In such cases assembly of SKD or CKD packs at site would not amount
to manufacture. Case Law:A :- Cycles of India v/s VOI ( 1983 ) B :- Walchand Nagar
v/s CCF ( 1995 ) II:- Assembly of plant at site is not manufacture. Assembly of
plant at site will not be liable to pay duty if immovable property emerges. After
such assembly because excise duty can be only on goods i.e. movable property.

5:- Manufacture even if final product falls under same tariff:- There
can be manufacture even if both input and final product fall under same tariff
heading if a different idenficable commercially known product comes into
existence. Case Law:- Laminated packing pvt. Ltd. V/s CCE 1990 (i.e. ELT 326)(sc)

MANUFACTURER:The liability to pay duty is on open manufacturer or producer duty

cannot be recovered form his purchaser though the manufacturer may recover the
same from buyer.

WHO IS THE MANUFACTURER:Sec. 2(f ) which defines the word manufacturers after
defining the word manufacturer states that the word manufacturer shall be
understood accordingly and shall include not only a person who employs hired
labour in the production or manufactures at excisable goods but also any person
who involves in their production and manufacture on his own account. Here again
the definition is not exhaustive the definition contains two categories of
manufacturer namely. I:- Persons who manufacture goods themselves on their own
account. II:-Persons who gets the goods manufactured through hired labor.
Since the definition is not exhaustive the word ‘manufacturer’ has to be
understood in its natural meaning. Manufacturer is a person who actually
manufacture of produce excisable goods.

1:- MANUFACTURED THROUGH HIRED LABOUR:-

A person will be treated as manufacturer if he engaged hired labor who may be

employee or contractor for manufacture of excisable goods. A hired labor is one
who hires himself to work for an under control of another for wages.

2:- MANUFACTURE ON HIS OWN ACCOUNT:- The word on his

own account in the definition of manufacture indicate that a person will be
treated as manufacture even if the manufactures goods for his own consumption or
use. I:-Who is not manufacturer:- It is necessary to understand who is not treated
as manufacture. A:-Raw material supplier is not manufacture:- It is common in
industries to supply raw material to a job worked or processor and get the goods
manufactured from him in his factory like bajaj, maruti, mahindra or premier
automobile vary often get many parts manufactured form outside on jobwork basis.
In such cases they will not be treated as manufacturer even if the raw material
supplied by them right of rejection is retained by them. B:- Brand owner is not
the manufacturer:Some large units get their goods manufactured from others under
their brand name instead of manufacturing it themselves. They usually control
quality may even supply the design for e.g. bajaj electricals many electrical
goods manufactured footwear and use brand name some large companies also get the
goods manufactured from small scale units under their brand names. In such cases
bajaj bata or the formestical companies will not be treated as manufacturer even
if they exercise quality control or allow use of their brand name or provide
financial help to the small manufacturers or even supply the raw material if their
relation with the manufactures is principal to principal basis. C:- Loan
license :- Loan license is not manufacture in drug license supplies raw material
to other having manufacturing facility. Person supplying the raw material is
termed as ‘loan license’. He has to obtain loan license as per rule 138 A of drugs
and cosmetics rule. Goods are manufactured by factory
owner under brand name loan license. In such case the loan license is not the
manufacturer. The owner of factory which carries on the actual manufacturing
activity is the manufacture. D:- Contractor :- Contractor supplying labour in the
premises of manufacture is not manufacturer. If contractor supplies labour and
goods which are manufactured in the premises of manufacture with his machinery the
contractor cannot be treated as manufacturer. DUMMY MANUFACTURER:- The above
position regarding supplies of raw material or brand name owner is valid only if
the actual manufacture is not dummy or fague or is not working under direct
control or supervision of raw material supplier. However, mere quality check or
control over price will not make the manufacturer dummy.

REGISTRATION UNDER CENTRAL EXCISE: In terms of section 6 of the CEA,1944 a

manufacturer of any excisable goods is required to register himself with the
central excise office within whose range the factory of the manufacturer is
located. Rule 9 of the CCR, 1944 further amplifies various procedure aspect of
registration as a manufacture. Under rule 9(1) the following categories of persons
have been specified by the government to be under an obligation to apply to
registration. 1:- Person require registration:A:- Manufacture of excisable
goods( issuing invoice under rule 11 ) B:- Producer of excisable goods ( issuing
invoice under rule 11 ) C:- Warehouse where excisable goods are stored without
payment of duty. D:- Users who bring the goods without payment of duty under
central excise( removal of goods at concessional rate of duty for manufacture of
excisable goods )rules, 2001 procedure. E:- Persons who obtain excisable goods for
availing end use based exemption notification. F:- Exporters manufacturing or
processing export goods by using duty paid inputs and intending to claim rebate of
such duty or by using inputs receives without payment of duty and exporting the
finished export goods. G:- Importer( who will issue invoice under CENVAT rules,
2001 )
H:- Dealer of imported goods( whether first second stage who will issue invoice
under CENVAT rules 2001 ) I:- First stage dealer of excisable goods( who will
issue invoice under CENVAT rule 2001 ) J :- Second stage dealer of excisable
goods( who will issue invoice under CENVAT rules 2001) Manufacture/ producer/
warehouse/ owner must apply for registration before commencement of manufacture,
production or warehousing of goods. FIRST STAGE DEALER:- FSD means a dealer who
purchases either from the manufacturers factory or depot or from the consignment
agent of the manufacturers or from any other premises from where the goods are
sold by or on behalf of the said manufacturer or from an importer of the goods.
SECOND STAGE DEALER means the dealer who purchases the goods form the first stage
dealer. PROCEDURE FOR REGISTRATION IS A S UNDER:1:- Application for registration:-
Application for registration is to be made in form A-1 in quadruplicate to
jurisidictional RSCE. The application should be signed by the authorized signatory
only, in case of partnership firm the application should contain the name of all
the partners and should be signed by all the partners. The following doucuments
should be enclosed with the application:A:- Certified copy of the sales tax
registration certificate. B:- Certified copy of income tax permanent account
number. C:- Ground plan/ map/ layout/ of the factory/ office/ godown if it is
separate with full postal address marking on ground plan of major plant and
machinery where they are installed. Where factory premises are used to manufacture
both excisable as well as non excisable goods than the person intending to
register has to give only a portion of the ground plan wherein manufacturing
activity pertaining to excisable goods is undertaken. D:- Certified copy of the
factory license/ shopestablishment certificate if any. E:- Certified copy of
certificate of incorporation/ certificate for commencement of business in case of
company.
F:- Certified copy of partnership deed in case of firm. G:-Certified copy of
memorandum and articles of association in case of private/ public ltd. Company.
H:- Copy of bye laws of the society if the manufacture is the co-operative
society. I:- Power of attorney for signing excise documents in case of person
other than partner J:- Board resolution copy for authorizing to sign and submit
excise documents application also procure or collect central excise registration
certificate in favour of any one director. K:- If the premises godown is owned
than property tax receipts society’s maintainance receipt, if the premises/
godowns is rented then rent receipt or if there is subtenancy or sublease then
such agreement’s certified copy. L:- No physical verification of premises or
godown will be done before issue of registration certificate the bonafide of the
applicant will be verified form the certified copies of the above documents. M:-
There is no fee for registration and a factory/ depot etc. is to be registered
once only i.e. there is no requirement for renewing the registration. N:-
Registration certificate in form re duly typed in triplicate indicate therein all
goods manufactured/ traded with proper nomenclature tariff headings/ sub headings.
O:- Manufacture applicant are required to submit in addition to above the
following additional details/ documents with form A-1. P:- List of complete plant
and machinery installed within the factory premises. Q:- List of final products
list of intermediate products list of waste scrap to be manufactured or produced
with full description relevant tariff headings/ sub headings numbers. R:- Details
of input with tariff headings and sub headings. S:- Details of manufacturing
process if possible sequence of operations/ process involved in the manufacture of
the.
RECORDS OF PRODUCTION
1:- DAILY STOCK ACCOUNT REGISTER (RG 1):Under rule 10 of the central excise rules
the manufacture is required to maintain a daily stock account of the excisable
goods manufactured by him in daily stock account register. Daily stock account
register is to be maintained on daily basis. In case there is non-production or
dispatch on a particular day nil entries are to be made in the daily stock account
register. The commissioner has the power to grant exemption form making mil
entries in the register. In case of default, goods are liable to be confiscated.
The register is not required to be pre authenticated by the authorities before
being brought into use. However, first page and last page of the daily stock
account register is to be pre authenticated by producer or the manufacture or his
authorized agent.

RECORDS IN DAILY STOCK REGISTER:A:- Quantity deposited in the store room or other
place of storage. B:- Quantity removed after payment of duty from such store room
or other place of storage or from the place or premises specified under rule 9.
C:- for recording the date of storage of loose goods in the finishing room. D:-
The date of subsequent transfer of pacted goods from finishing room to the
finished goods store room E:- Process waste and scrap which are excisable under
the tariff. F:- Quantity delivered form the factory without payment of duty for
export or other purpose and the rate of duty the amount of such duty.

DAY AND TIME OF RECORDING:Usually manufacturer’s accumulate the day’s production

and make a consolidated entry. In such cases, assessee should inform to the
jurisdictional range superitendent and assistant commissioner the day and time by
which the daily production will be entered in daily stock account register. Goods
in gully manufactured condition should be accounted within one hour of the close
of the day.
The entries in the daily stock account register are made on 24 hours cycle i.e.
production of excisable goods for the previous 24 hours is entered in the daily
stock account register every morning at the commencement of the working day.
Entries in the register cab also be made shift wise. Assessee working under three
shifts,