The Union Government levies Central Excise duty on a commodity manufactured and consumed. It is an indirect tax levied on the purchase of goods on everyone, irrespective of a rich or poor person.
When it comes to the law, Central Excise Act is the law relating to the levy and collection of central excise. However, the Central Excise Act, 1944 does not provide the list of commodities applicable to the Central Excise duty. The Act consolidates sixteen pieces of legislation enacted before 1944.
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Nature of Central Excise Duty
Central Excise Duty is imposed under Section 3(1) (a) of the Central Excise Act, 1944. It is of the nature of the indirect tax imposed on the commodities manufactured or produced within the country’s territory.
The Union Government levies the Central Excise Duty, and the Constitution of India vests the power to levy such tax on the Central Government. Under entry number 84 of the Union List, the Constitution of India provides for levying excise duties on goods manufactured and produced in India under the seventh schedule. The central excise duty is levied on every produced well in India except:
- Alcoholic Liquor on human Consumption.
- Opium, Indian Hemp and narcotic drugs and narcotics
Features of Central Excise Duty
- It is an indirect tax.
- It is levied on all excisable goods produced in India. But, it does not include the goods produced in the special economic zones.
- The Central Excise Tariff Act, 1985, specifies the excisable goods.
- It is levied and collected uniformly throughout India and done per the provision of the Central Excise Act, 1944.
- Taxable events of the Central Excise is the manufacture or production of the goods.
- Though the taxable event is manufacture or production, the payment occurs when the goods are removed or cleared from the factory.
- The manufacturer of excisable goods pays the excise duty except in the case of reverse charge.
Types of Central Excise Duty
Basic Excise Duty
Basic Excise Duty is known as the Central Value Added Tax. This form of excise duty is on goods classified on the first schedule of the Central Excise Tariff Act, 1985. The duty is levied under section 3(1)(a) of the Central Excise Act, 1944. This duty applies to all goods other than salt.
Additional Excise Duty
As per the Additional Duties of Excise (Goods of Special Importance) Act, 1957, additional excise duty is levied on goods of high importance and some special category of goods.
Special Excise Duty
Special Excise Duty is levied on special goods classified under the Second Schedule of the Central Excise Tariff Act, 1985.
Difference Between Excise Duty and Custom Duty
- The excise duty is the tax levied on items manufactured within the country’s boundaries. However, customs duty incorporates tax imposed on the goods imported from other countries or foreign territories.
- Excise duty is calculated by calculating the volume, numerical value and quality of the goods. The customs duty is calculated according to the assessable value of the products or goods.
- The manufacturer pays the excise duty, whereas custom duty is a tax paid by the company, firm, organisation or the person who buy goods or products from the importer.
Central Excise Act, 1944
The Central Excise Act 1944 got enacted to consolidate prior legislation that levied excise duty. The act was originally known as the Central Excise and Salts Act, 1944 and came into force on 28th February 1944. In 1996 the Central Excise and Salts Act, 1944, was renamed Central Excise Act, 1944.
The Objective of the Central Excise Act, 1944
The objective of the central excise act are :
- To collect the excise duty on manufactured goods.
- To reduce collection costs.
- To control wasteful expenditure.
- To avoid tax evasion by taking appropriate control measures.
- To promote industrial growth in the rural area.
- To support domestic industries.
- To collect high revenues.
Important Definition Under the Central Excise Act, 1944
- Adjudicating Authority: Section 2(a) defines Adjudicating Authority. It means a competent authority to pass an order or decision under Act. The Act does not include the Central Board of Excise or Customs constituted under the Central Boards of Revenue Act, 1963.
- Broker or Commission Agent: Section 2(aaa) of the Central Excise Act defines a broker or commission agent as a person who makes contracts in the course of business to sell or purchase excisable goods for others.
- Curing: Curing is defined under Section 2(c) of the Act. Curing includes wilting, drying, fermenting or any other process to render an unmanufactured product that fits for marketing or manufacture.
- Excisable Goods: Section 2(d) defines excisable goods. Excisable goods are specified in the Fourth Schedule and are subject to the excise duty that includes salt.
- Factory: Factory is defined under Section 2(e). The factory premises include a precinct where any excisable goods get manufactured or any part where the manufacturing process linked with the production of goods is carried on.
- Fund: Section 2(ee) defines ‘Fund’. Fund means Consumer Welfare Fund established under Section 12C.
- Manufacture: Section 2(f) defines the Manufacture. Manufacture means any incidental or ancillary process to completing a manufactured product. The manufacture includes the process specified in relation to any goods in the section or chapter notes of the Fourth schedule that amount to manufacture.
The relation to the goods specified in the Third Schedule involves packing, repacking goods in a container, or re-labelling the container.
- Sale and Purchase: Section 2(h) defines the sale and purchase. It means any transfer of the possession of the good by a person to another in the ordinary trade course or business for cash or deferred payment or other valuable consideration
- Wholesale dealer: Wholesale dealer is defined under Section 2(k) of the Act. A wholesale dealer is a person who buys or sells excisable goods in wholesale for trade or manufacture. It includes a broker or commission agent who makes contracts to sell or purchase excisable goods for others.
Levy and Collection of Duty
- Section 3 of the Central Excise Act provides conditions where the excise duty is levied on:
- Movable goods
- Marketable goods
- Goods mentioned in the Central Excise Tariff Act
- Goods manufactured in India
- Services such as doctors who treat the patient, accountants who prepare accounts. In such cases, excise duty is not levied, but service tax is levied.
- Immovable goods like roads, bridges and buildings,
- Non-marketable goods (goods for which there is no market).
- Goods not provided under the Central Excise Tariff Act,
- Goods manufactured or produced outside India.
- Section 3A explains how the central government exercises its powers. The powers vested concern the excise duty charge based on the amount of manufacturing of goods specified in the act.
- Section 4 deals with how excisable goods are valued following their selling or retail price. This section also provides some definitions that apply only to this section.
- The word assessee for this section means a person liable to pay the excise duty under the act. It also includes agents.
- The word place of removal for this section means a factory, a warehouse or a depot from where the excisable goods are removed or sold.
- The word time of removal for this section means the time when excisable goods are removed from the factory.
- The word transaction value for this section means the price paid for the goods.
This section provides that no excise duty is levied if the goods are produced in a special economic zone.
The Excise Duty is not levied on:
Remission of Duty on Goods Found Quality Deficient.
- Section 5 of the Act provides the condition for remission of quality deficient goods. The Central Government under this section is empowered to make rules for the remission of duty of excise leviable on excisable goods that are due to any natural cause.
Power to Grant Exemption from the Excise Duty
- Section 5A empowers the Central Government to exempt certain excisable goods from excise duty if necessary for the public interest.
Registration of Certain Persons
Section 6 provides the list of persons required to register themselves.
Following are the person who needs to register:
- Every manufacturer of dutiable excisable goods
- First and second stage dealers who desire to issue an invoice.
- A person who holds a warehouse to store non-duty paid goods.
- A person who obtain excisable goods to avail end-user exemption.
- Exporter or Manufacturer under the rebate or bond procedure. It means Export Oriented Units and EPZ units that interact with the domestic economy.
- Importers who issue invoices for imported goods sold
Restriction on Possession of Goods
- Section 8 provides that no person other than provided by the rules made under Central Excise Act should possess any good as specified under the Second Schedule of the Act. The goods cannot be kept in excess quantity as prescribed for this section.
Offences and Penalties
- Section 9 provides offences and penalties.
Offence Provided under the Act are:
- Violate the provision of Section 8
- Evasion of payment of duty payable
- Remove excisable goods in violation of the provision of the Act
- Acquiring possession of the goods he knows are liable for confiscation under Act or any other rule.
- Breach of the Act’s provisions that are made concerning the credit of duty
- Fails to supply the required information
- Abets to commit an offence
- If a person commits an offence related to the excisable goods on which the duty levied is more than one lakh rupees, the punishment is imprisonment which may extend to seven years with a fine.
- But, in case of the absence of special reasons, the punishment should not be less than six months.
In any other, the imprisonment may extend to three years or fine or with both.
- If a person gets convicted again for an offence, the imprisonment may extend to seven years with a fine for a subsequent conviction.
- Section 9A of the Act incorporates that the offence mentioned under section 9 should be non-cognizable.
Recovery of Sums due to Government
- Section 11 provides how to recover certain sums payable to the government.
Price of Goods to Indicate the Amount of Duty Paid Thereon
- Section 12A provides that a person who pays the excise should indicate it in all the documents of assessment, sales of invoice and other similar documents at the time of clearance of the goods in all the assessment and sale invoice documents. The amount of the duty will form the part of the price at which the goods are sold.
- Section 12C provides that the Central Government establishes the Central Welfare Fund. The Funds in the Central Welfare Fund should be utilised by the Central Government for the consumer’s welfare, according to the rules made by the Government.
- The central government should form an authority that maintains proper and separate accounts related to the Fund. The funds are utilised as per the provision of Section 12D.
Powers and Duties of the Officers and Land Holders
- Section 12E of the Central Excise Act, 1944 provides powers of the Central Excise Officer.
The Central Excise Officer can exercise the powers and duties conferred or imposed on any other Central Excise Officer subordinate to him. However, the Commissioner of Central Excise (Appeal) should not exercise the powers and discharge the duties conferred on the Central Excise Officer.
- Section 13 provides that the Central Excise Officer not below the rank of the Inspector of Central Excise has the power to arrest any person.
- Section 14 provides that the Central Excise Officer has the power to summon any person who he considers necessary to give evidence or produce a document.
- Section 15 provides that all the officers of police and customs and Government officers engaged in the Collection of Land Revenue and all Village officers are required to assist the Central Excise Officer in implementing the Central Excise Act, 1944.
- Section 20 provides the procedure to be followed by the officer-in-charge of the police station. The officer in charge should present him for bail in front of the Magistrate. In case of default of bail, the person should be forwarded to the magistrate’s custody.
- Section 23A defines certain terms for Chapter III-A.
- Activity: According to Section 23A, activity means producing or manufacturing goods.
- Advance Ruling: Advance ruling means the determination by the authority for a question of law or fact mentioned in the application regarding the liability to pay the duty.
- Applicant: Applicant under this chapter means:
- a non-resident setting up a joint venture in collaboration with resident or non-resident; or
- a resident setting up joint ventures in collaboration with a non-resident; or
- a wholly-owned subsidiary Indian company of which the holding company is a foreign company that proposes undertaking any business activity in India.
Adjudication of Confiscation
Section 33 provides the power of adjudication. According to this section, any person is liable for a penalty or goods confiscation.
The confiscation or penalty gets adjudged:
- Without limit by a commissioner of central excise.
- For confiscation of goods that do not exceed five hundred rupees and penalty imposed does not exceed two hundred and fifty rupees by assistant commissioner of central excise or deputy commissioner of central excise.
Section 33A provides Adjudication Procedure. According to the section provision, the adjudicating authority should allow being heard by a party in a proceeding if a party desires.
Section 34 provides an option to pay a fine in lieu of confiscation. Whenever a confiscation gets adjudged under the Act or rules, the adjudging officer should give the owner of goods an option to pay in lieu of confiscation, such as a fine which the officer thinks fits.
Section 35 of the Central Excise Act, 1944 provides Appeals to Commissioner (Appeal). The person aggrieved by the decision of the Central Excise Officer lower in rank than a Commissioner of Central Excise may appeal to the commissioner of the Central Excise (Appeal) within sixty days from the date of the decision.
The Union Government enacted the Central Excise Act. The Central Excise duty is imposed as per the provision of the Central Excise Act, 1944. It is the duty imposed on the manufacturer who produces goods in the country. The act covers every aspect of the Excise duty and has provisions related to the levy and collection and forms the powers and responsibility of the authorities related to the Excise duty. The act also provides procedures to be followed in cases and appeals related to the central excise duty. The Act also set provisions for the Consumer Welfare Fund.
Which section of the Central Excise Act, 1944 establishes Consumer Welfare?
Section 12C of the Central Excise Act, 1944.
How is Consumer Welfare Fund Used?
The Central Government utilises the Consumer Welfare Fund for the welfare of the consumers per the rules made by the Central Government.
When did Central Excise Act 1944 come into force?
The Central Excise Act 1944 came into force on 10th November 1943.
Where are the non-cognisable offences defined in the central excise act, 1944?