Sailing Through Central Excise Act 1944

-Anusha Balaji A.C.A ( April 2006)

Inception
Central Excise And Salt Act introduced on 28.2.1944 Started with duty levy on 11 items (Sugar, Tobacco & SALT being the major categories) After Independence of India Salt is not subjected to Duty According to Article 265 of the Constitution of India,
no tax shall be levied or collected except by authority of law Allocation of taxable subjects between the Union & State List contained in the Seventh Schedule Entry 84 of the Union List provides for duty of excise

Central Excise Tariff Act 1985 enacted on 19.1.1986 in lines with the Customs Tariff Act 1975 and broadly aligned to the HSN of the International Body (Customs Co-operation Council)

Duty vs Tax
Duty is a Levy on Goods (Customs Duty, Excise Duty) Tax is a Levy on Transactions/ Services
(Sales Tax, Service Tax)

Basis of Levy
Excisability
Marketability

Manufacture

Process of Charge
Incidence of Levy Point of Levy At the time of

manufacture of goods Removal of goods from

factory/warehouse/depot

Quantum of Levy

Calculated on Transaction Value being price payable when goods

are sold

Basic Model of Excise Tax Implication

Central Treasury
Manufacturer A Transporter

100 +16 Excise Duty +4 Sales Tax 120 +12 Actual Charges 132 +18

+ 16
Manufacturer B

- 16 +20
Consumer

Customer Price=200 Actual Margin =20 {10+10 (26-16)}

Value Addition +10 Margin 160 +26 Excise Duty +14 Sales Tax 200

Procedure -Speaking Rules

Registration (Rule 9) Every PERSON, who manufactures, produces, carries on trade,

holds private store-room or warehouses or otherwise uses excisable goods, shall be registered.

Books to be maintained (Rule 10) Daily Stock Statements containing details of goods produced or manufactured: opening balance, quantity produced, inventory of goods and goods removed, assessable value, duty payable and the amount of duty actually paid Shall be maintained. Invoice upon Removal (Rule 11) Every excisable goods removed shall be accompanied with an Invoice/proforma invoice prepared in triplicate.

Returns with Department

Form
ERI

Time Frame

Authority
Superintendent of CE

10 Days from relevant month Quarterly Returns 10 Days (R12A) from relevant quarter

Superintendent of CE

Initially, valuation Rules were prescribed under Central Excise Valuation Rules 1975 Amended And Central Excise Valuation (Determination of Price of Excisable Goods) Rules 2000 introduced w.e.f 1 July 2000

Method of Valuation
1. Normal Transaction Value (Section 4) ie, Sale Price (before duties & taxes) provided, sale is to unrelated person & price is the sole consideration {URP;PSC} Retail Sale Price (Section 4A) With regard to Standard Weights and Measures Act, 1976 list of goods required declaration of MRP on packages prescribed by Central Governments Official Gazatte. Then, Duty calculated on MRP after adjusting for Abatement as may be prescribed. (e.g. 50% for aerated water, 40% for refrigerators, footwear, 35% for biscuits, chocolates) Abatement is with regard to Duty, Tax, packing, forwarding etc. included in MRP. Different RSP on Different Package- Price relevant to that area More than one RSP on the Package- Maximum Price Detailed on the package.

2.

Valuation Rules
Goods Sold by Manufacturer Yes Sec 4 (1) (a) Satisfied No

Yes
AV=TV

No
Sec 4 (1) (b)

Excise Valuation Rules (5 to 11)

Rules on Valuation
PSC P(Not)SC

Delivery at Buyers Place

Ex-Depot Sale

AV = Relevant TV + Additional Consideration (flowing Directly/ Indirectly) Rule 6

AV= SP Transpt Charge

Normal TV (ex-depot)

Rule 5

Rule 7

PSC = Price Sole Consideration AV = Assessable Value TV = Transaction Value

Related Party Sale

Sale to RP

ICU
Holding/ Subsidiary RP Rule 10 Others URP Rule 10 Captive Consumption AV=CP*110% Rule 9

Others Re-Sale

NTV to URP

Retail Price

Rule 9

SSI Exemption
Option I
Full exemption from registration, declaration, excise control & duty until turnover is within Rs 100 lakh. Cenvat Credit not available till turnover exceeds Rs 100 lakhs. Can be availed only from the beginning of a financial year. 60% of Normal Duty on first Rs 100 lakhs of turnover. Cenvat Credit Allowed towards payment of such duty. Unutilised credit can be used towards exporting under export rebate scheme. Can be exercised any time during a financial year however, clearances accrued from the beginning of the FY shall be considered for the Rs 100 lakhs limit. Option once availed cannot be withdrawn Registration, Declaration & Excise Control necessary. Normal Duty paid and Cenvat Credit Availed Can be opted any time during a financial year and once availed cannot be withdrawn

Option II

Option III

SSI The Way Mode

100% Duty Exemption Normal Duty Payment 60% Exemption
Credit Availableand the unutilised credit used for exports

No Cenvat Credit Avail Credit for for first 100 lacs turnover over Rs 100 lacs during the year.

Option at Apply from middle beginning of the of the year. year only. Credit available on materials in stock.

Thank You!