Class Notes on Taxation – Unit III
Central Excise Laws
Nature, Scope, and Basis of Levy of Central Excise Duty:
- Nature: Central Excise Duty is a tax on the production or manufacture of goods within India. It is a form of indirect tax and is levied by the central government.
- Scope: It applies to all goods produced or manufactured in India, except for those specifically exempted by law.
- Basis of Levy: The duty is levied based on the value of the goods produced or manufactured. It is collected at the time of manufacture, and the liability arises when goods are removed from the factory.
Examples:
- Duty on Cigarettes: Central Excise Duty is levied on the manufacture of cigarettes and is calculated based on the quantity and value of cigarettes produced.
Meaning of Goods
Definition:
- Goods: Refers to any movable property that is produced or manufactured and is subject to excise duty. It excludes immovable property, such as land and buildings.
Examples:
- Movable Goods: Include products like automobiles, machinery, and pharmaceuticals.
- Exclusions: Real estate transactions do not fall under excise duty.
Manufacture and Manufacturer
Manufacture:
- Definition: Manufacture involves the process of bringing into existence a new product with a distinct name, character, or use. It is not limited to processes that lead to a new product but also includes any process that results in a product with an altered character.
Manufacturer:
- Definition: A manufacturer is any person or entity engaged in the process of manufacturing goods. This includes producers, processors, and assemblers.
Examples:
- Automobile Manufacturer: A company that assembles cars from various parts.
- Textile Manufacturer: A firm that produces textiles from raw fibers.
Classification and Valuation of Goods
Classification:
- Definition: The process of categorizing goods under the appropriate tariff headings based on their nature, use, and composition. Classification determines the rate of duty applicable.
Examples:
- Tariff Headings: Electronic goods might fall under a different tariff heading compared to furniture.
Valuation:
- Definition: The process of determining the value of goods for the purpose of calculating excise duty. It is typically based on the transaction value, which is the price actually paid or payable for the goods.
Examples:
- Transaction Value: The price at which the goods are sold to the buyer, excluding taxes and discounts.
Duty Payment and Exemption Provisions
Duty Payment:
- Procedure: Excise duty is paid by the manufacturer at the time of removal of goods from the factory. Manufacturers are required to file excise returns and pay the duty to the government within specified time limits.
Exemption Provisions:
- Types of Exemptions:
- Full Exemption: Certain goods may be completely exempt from excise duty under specific conditions.
- Partial Exemption: Some goods may qualify for partial exemptions or concessional rates based on their nature or use.
Examples:
- Exempted Goods: Goods like agricultural machinery and certain medical equipment may be exempt from excise duty.
- Concessional Rates: Specific rates for products like handicrafts.
Provisions and Procedure Dealing with Registration and Clearance of Goods
Registration:
- Requirement: Manufacturers must obtain registration with the Central Excise Department to be eligible to produce or manufacture excisable goods.
- Procedure: Registration involves submitting an application to the excise authorities, providing details about the manufacturing process, premises, and other relevant information.
Clearance of Goods:
- Procedure: Goods must be cleared from the factory premises after the payment of excise duty. Manufacturers must file a clearance document, including details of the goods, quantity, and duty paid.
- Documentation: Includes excise invoices, challans, and other relevant documents.
Examples:
- Factory Clearance: Filing of documents such as the Excise Invoice before removing goods from the factory premises.
Overview of Set-Off of Duty Scheme
Set-Off Scheme:
- Definition: Allows manufacturers to offset the excise duty paid on inputs against the excise duty payable on the finished goods. This is aimed at reducing the cascading effect of taxes.
Provisions:
- Input Duty Credit: Manufacturers can claim credit for the excise duty paid on raw materials and inputs used in the manufacture of finished goods.
- Utilization: The credit can be utilized to set off the duty payable on the finished goods.
Examples:
- Input Duty Credit: If a manufacturer pays excise duty on raw materials and then produces finished goods, they can use the credit for the duty paid on inputs to reduce the duty payable on the final product.
