excise

1. In the Indian tax structure, there are a lot of taxes that people pay for different reasons. Income tax, sales tax,
entertainment tax, value added tax etc. All these taxes are existent because in some way or the other it impacts and
helps the economy. One such tax that is prevalent in any manufacturing sector is the excise duty.
What is excise duty?
An excise or excise tax (sometimes called an excise duty) is a type of tax charged on 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. This tax is now known as the Central Value Added Tax (CENVAT).
Though the collection of tax is to augment as much revenue as possible to the government to provide public services,
over the years it has been used as an instrument of fiscal policy to stimulate economic growth. Thus it is one of the
socio-economic objectives.
What are the types of excise duty?
There are three different types of central excise duties which exist in India [ Images ] which are as follows:
Basic - Excise Duty, imposed under section 3 of the 'Central Excises and Salt Act' of 1944 on all excisable goods
other than salt produced or manufactured in India, at the rates set forth in the schedule to the Central Excise tariff
Act, 1985, falls under the category of basic excise duty in India.
Additional - Section 3 of the 'Additional Duties of Excise Act' of 1957 permits the charge and collection of excise duty
in respect of the goods as listed in the schedule of this act. This tax is shared between the central and state
governments and charged instead of sales tax.
Special - According to Section 37 of the Finance Act, 1978, Special Excise Duty is levied on all excisable goods that
come under taxation, in line with the Basic Excise Duty under the Central Excises and Salt Act of 1944. Therefore,
each year the Finance Act spells out that whether the Special Excise Duty shall or shall not be charged, and
eventually collected during the relevant financial year.
Which goods are excisable goods?
The term 'excisable goods' means the goods which are specified in the first schedule and the second schedule to the
Central Excise Tariff Act, 1985, as being subject to a duty of excise and includes salt.
Who is liable to pay excise duty?
The liability to pay tax excise duty is always on the manufacturer or producer of goods. There are three types of
parties who can be considered as manufacturers:
• Those who personally manufacture the goods in question
• Those who get the goods manufactured by employing hired labour
• Those who get the goods manufactured by other parties

2. 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.
What is the consequence of evading payment of excise duty?
Under the different sections of the central excise act, the fines for evading tax can range from twenty-five to fifty per
cent of the amount of duty evaded. When you look at the amount of excise you may have to pay, this is a rather large
amount and along with the financial repercussions, you also have to encounter a tarnished image.
Introduction
As per AY 2009-10
• Customs duty of 5% to be imposed on Set Top Box for television broadcasting.
• Customs duty on LCD Panels for manufacture of LCD televisions to be reduced from 10% to 5%.
• Full exemption from 4% special CVD on parts for manufacture of mobile phones and accessories to be
reintroduced for one year.
• List of specified raw materials/inputs imported by manufacturer-exporters of sports goods which are exempt
from customs duty, subject to specified conditions, to be expanded by including five additional items.
• List of specified raw materials and equipment imported by manufacturer-exporters of leather goods, textile
products and footwear industry which are fully exempt from customs duty, subject to specified conditions, to
be expanded.
• Customs duty on unworked corals to be reduced from 5% to Nil.
• Customs duty on 10 specified life saving drugs/vaccine and their bulk drugs to be reduced from 10% to 5%
with Nil CVD (by way of excise duty exemption).
• Customs duty on specified heart devices, namely artificial heart and PDA/ASD occlusion device, to be
reduced from 7.5% to 5% with Nil CVD (by way of excise duty exemption).
• Customs duty on permanent magnets for PM synchronous generator above 500 KW used in wind operated
electricity generators to be reduced from 7.5% to 5%.
• Customs duty on bio-diesel to be reduced from 7.5% to 2.5%.
• Concessional customs duty of 5% on specified machinery for tea, coffee and rubber plantations to be
reintroduced for one year, upto 06.07.2010.
• Customs duty on ‘mechanical harvester’ for coffee plantation to be reduced from 7.5% to 5%. CVD
on such harvesters has also been reduced from 8% to nil, by way of excise duty exemption.
• Customs duty on serially numbered gold bars (other than tola bars) and gold coins to be increased from
Rs.100 per 10 gram to Rs.200 per 10 gram. Customs duty on other forms of gold to be increased from

3. Rs.250 per 10 gram to Rs.500 per 10 gram. Customs duty on silver to be increased from Rs.500 per Kg. to
Rs.1000 per Kg. These increases also to be applicable when gold and silver (including ornaments) are
imported as personal baggage.
• Customs duty on cotton waste to be reduced from 15% to 10%.
• Customs duty on wool waste to be reduced from 15% to 10%.
• Customs duty on rock phosphate to be reduced from 5% to 2%.
• CVD exemption on Aerial Passenger Ropeway Projects to be withdrawn. Such projects will now attract
applicable CVD.
• Customs duty exemption on concrete batching plants of capacity 50 cum per hour or more to be withdrawn.
Such plants will now attract customs duty of 7.5%.
• On packaged or canned software, CVD exemption to be provided on the portion of the value which
represents the consideration for transfer of the right to use such software, subject to specified conditions.
• Customs duty on inflatable rafts, snow-skis, water skis, surf-boats, sail-boards and other water sports
equipment to be fully exempted.
The Customs Act was formulated in 1962 to prevent illegal imports and exports of goods. Besides, all imports are
sought to be subject to a duty with a view to affording protection to indigenous industries as well as to keep the
imports to the minimum in the interests of securing the exchange rate of Indian currency.
Duties of customs are levied on goods imported or exported from India at the rate specified under the customs Tariff
Act, 1975 as amended from time to time or any other law for the time being in force. For the purpose of exercising
proper surveillance over imports and exports, the Central Government has the power to notify the ports and airports
for the unloading of the imported goods and loading of the exported goods, the places for clearance of goods
imported or to be exported, the routes by which above goods may pass by land or inland water into or out of Indian
and the ports which alone shall be coastal ports.
In order to give a broad guide as to classification of goods for the purpose of duty liability, the central Board of
Excises Customs (CBEC) bring out periodically a book called the "Indian Customs Tariff Guide" which contains
various tariff rulings issued by the CBEC. The Act also contains detailed provisions for warehousing of the imported
goods and manufacture of goods is also possible in the warehouses.
For a person who do not actually import or export goods customs has relevance in so far as they bring any baggage
from abroad.
Types of duties
Under the custom laws, the following are the various types of duties which are leviable.
Basic Duty:
This is the basic duty levied under the Customs Act. The rate varies for different items from 5% to 40%.
Additional Duty (Countervailing Duty) (CVD):
This additional duty is levied under section 3 (1) of the Custom Tariff Act and is equal to excise duty levied on a like

4. product manufactured or produced in India. If a like product is not manufactured or produced in India, the excise duty
that would be leviable on that product had it been manufactured or produced in India is the duty payable. If the
product is leviable at different rates, the highest rate among those rates is the rate applicable. Such duty is leviable
on the value of goods plus basic custom duty payable. eg. If the customs value of goods is Rs. 5000 and rate of basic
customs duty is 10% and excise duty on similar goods produced in India is 20%, CVD will be Rs.1100/-.
Additional Duty to compensate duty on inputs used by Indian manufacturers. This Additional Duty is levied under
section 3(3) of the Customs Act. It can be charged on all goods by the central government to counter balance excise
duty leviable to raw materials, components and other inputs similar to those used in the production of such good.
Anti-dumping Duty:
Sometimes, foreign sellers abroad may export into India goods at prices below the amounts charged by them in their
domestic markets in order to capture Indian markets to the detriment of Indian industry. This is known as dumping. In
order to prevent dumping, the Central Government may levy additional duty equal to the margin of dumping on such
articles, if the goods have been sold at less than normal value. Pending determination of margin of dumping, such
duty may be provisionally imposed. After the exact rate of dump ing duty is finally determined, the Central
government may vary the provisional rate of dumping duty. Dumping duty can be imposed even when goods are
imported indirectly or after changing the condition of goods. There are however certain restrictions on imposing
dumping duties in case of countries which are signatories to the GATT or on countries given "Most Favoured Nation
Status" under agreement. Dumping duty can be levied on imports on such countries only if the Central Government
proves that import of such goods in India at such low prices causes material injury to Indian industry.
Protective Duty:
If the Tariff Commission set up by law recommends that in order to protect the interests of Indian industry, the Central
Government may levy protective anti-dumping duties at the rate recommended on specified goods. The notification
for levy of such duties must be introduced in the Parliament in the next session by way of a bill or in the same session
if Parliament is in session. If the bill is not passed within six months of introduction in Parliament, the notification
ceases to have force but the action already undertaken under the notification remains valid. Such duty will be payable
upto the date specified in the notification. Protective duty may be cancelled or varied by notification. Such notification
must also be placed before Parliament for approval as above.
Duty on Bounty Fed Articles:
In case a foreign country subsidises its exporters for exporting goods to India, the Central Government may import
additional import duty equal to the amount of such subsidy or bounty. If the amount of subsidy or bounty cannot be
clearly deter mined immediately, additional duty may be collected on a provisional basis and after final determination,
difference may be collected or refunded, as the case may be.
Export Duty:
Such duty is levied on export of goods. At present very few articles such as skins and leather are subject to export
duty. The main purpose of this duty is to restrict exports of certain goods. The Central Government has been granted
emergency powers to increase import or export duties if the need so arises. Such increase in duty must be by way of
notification which is to be placed in the Parliament within the session and if it is not in session, it should be placed
within seven days when the next session starts. Notification should be approved within 15 days.

5. Central Excise Duty - Introduction
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For the Assessment Year 2009-10
• Excise duty rate on items currently attracting 4% to be raised to 8% with
following major exceptions:
o Specified food items including biscuits, sharbats, cakes and pastries
o Drugs and pharmaceutical products falling under Chapter 30
o Medical equipment
o Certain varieties of paper, paperboard and articles thereof
o Paraxylene
o Power driven pumps for handling water
o Footwear of RSP exceeding Rs.250 but not exceeding Rs.750 per pair
o Pressure cookers
o Vacuum and gas filled bulbs of RSP not exceeding Rs.20 per bulb
o Compact Fluorescent Lamps
o Cars for physically handicapped
• Specific component of excise duty applicable to large cars/utility vehicles of

6. engine capacity 2000 cc and above to be reduced from Rs. 20,000/- per vehicle
to Rs.15,000 per vehicle.
• Excise duty on petrol driven trucks/lorries to be reduced from 20% to 8%.
Excise duty on chassis of such trucks/lorries to be reduced from ‘20% +
Rs.10000’ to ‘8% + Rs.10000.
• Excise duty on Special Boiling Point spirits to be reduced to 14%.
•
• Excise duty on naphtha to be reduced to 14%.
•
• Duty paid High Speed Diesel blended with upto 20% bio-diesel to be fully
exempted from excise duties.
• The ad valorem component of excise duty of 6% on petrol intended for sale with
a brand name to be converted into a specific rate. Consequently, such petrol
would now attract total excise duty of Rs.14.50 per litre instead of ‘6% +
Rs.13 per litre’.
• The ad valorem component of excise duty of 6% on diesel intended for sale with
a brand name to be converted into a specific rate. Consequently, such diesel
would now attract total excise duty of Rs.4.75 per litre instead of ‘6% +
Rs.3.25 per litre’.
• Excise duty on manmade fibre and yarn to be increased from 4% to 8%.
• Excise duty on PTA and DMT to be increased from 4% to 8%.
•
• Excise duty on polyester chips to be increased from 4% to 8%.
• Excise duty on acrylonitrile to be increased from 4% to 8%.
• The scheme of optional excise duty of 4% for pure cotton to be restored.
• Excise duty for man-made and natural fibres other than pure cotton, beyond the
fibre and yarn stage, to be increased from 4% to 8% under the existing optional
scheme.
•
• An optional excise duty exemption to be provided to tops of manmade fibre
manufactured from duty paid tow at par with tops manufactured from duty paid
staple fibre.
• Suitable adjustments to be made in the rates of duty applicable to DTA
clearances of textile goods made by Export Oriented Units using indigenous raw
materials/ inputs for manufacture of such goods.
• Full exemption from excise duty to be provided on goods of Chapter 68 of
Central Excise Tariff manufactured at the site of construction for use in

7. construction work at such site.
• Excise duty exemption on ‘recorded smart cards’ and ‘recorded
proximity cards and tags’ to be made optional. Manufacturers have the
option to pay the applicable excise duty and avail the credit of duty paid on
inputs.
• EVA compound manufactured on job work for further use in manufacture of
footwear to be exempted from excise duty.
• Benefit of SSI exemption scheme to be extended to printed laminated rolls
bearing the brand name of others by excluding this item from the purview of the
brand name restriction.
• On packaged or canned software, excise duty exemption to be provided on the
portion of the value which represents the consideration for transfer of the right
to use such software, subject to specified conditions.
• Excise duty on branded articles of jewellery to be reduced from 2% to Nil.
•
The Customs Act was formulated in 1962 to prevent illegal imports and exports of goods. Besides, all imports are
sought to be subject to a duty with a view to affording protection to indigenous industries as well as to keep the
imports to the minimum in the interests of securing the exchange rate of Indian currency.
Duties of customs are levied on goods imported or exported from India at the rate specified under the customs Tariff
Act, 1975 as amended from time to time or any other law for the time being in force. For the purpose of exercising
proper surveillance over imports and exports, the Central Government has the power to notify the ports and airports
for the unloading of the imported goods and loading of the exported goods, the places for clearance of goods
imported or to be exported, the routes by which above goods may pass by land or inland water into or out of Indian
and the ports which alone shall be coastal ports
In order to give a broad guide as to classification of goods for the purpose of duty liability, the central Board of
Excises Customs (CBEC) bring out periodically a book called the "Indian Customs Tariff Guide" which contains
various tariff rulings issued by the CBEC. The Act also contains detailed provisions for warehousing of the imported
goods and manufacture of goods is also possible in the warehouses.
For a person who do not actually import or export goods customs has relevance in so far as they bring any baggage
from abroad.
Importance of Central Excise Duty
Central excise revenue is the biggest single source of revenue for the Government of India. The Union Government
tries to achieve different socio-economic objectives by making suitable adjustments in the scope and quantum of levy
of Central Excise duty. The scheme of Central Excise levy is suitably adapted and modified to serve different
purposes of price control, sufficient supply of essential commodities, industrial growth, promotion of small
scale industries and like Authority for collecting the Central Excise duty.
Article 265 of the Constitution of India has laid down that both levy and collection of taxes shall be under the authority
of law. The excise duty is levied in pursuance of Entry 45 of the Central List in Government of India Act,1935 as

8. adopted by entry 84 of List I of the seventh Schedule of the Constitution of India. Charging section is Section 3 of the
Central Excises and Salt Act,1944.
Liability to pay Central Excise Duty
Section 3 of the Central excises and Salt Act,1944 provides that there shall be levied and collected in such manner
as may be prescribed, duties of excise on all excisable goods other than salt which are produced or manufactured in
India at the rates set forth in the schedule to the Central excise Tariff Act,1985.it is therefore clear that as soon as the
goods in question are produced or manufactured, they will be liable to payment of Excise duty. However for
convenience duty is collected at the time of removal of the goods. While Section 3 of the Central Excises and salt
Act,1944 lays down the taxable event, Rules 9 and 49 of the Central excise Rules,1944 provides for the collection of
duty.
There are three types of Central Excise duties collected in India namely
1. Basic Excise Duty
This is the duty charged under section 3 of the Central Excises and Salt Act,1944 on all excisable goods
other than salt which are produced or manufactured in India at the rates set forth in the schedule to the
Central Excise tariff Act,1985.
2. Additional Duty of Excise
Section 3 of the Additional duties of Excise (goods of special importance) Act,1957 authorises the levy and
collection in respect of the goods described in the Schedule to this Act. This is levied in lieu of sales Taxand
shared between Central and State Governments. These are levied under different enactment's like
medicinal and toilet preparations, sugar etc. and other industries development etc.
3. Special Excise Duty
As per the Section 37 of the Finance Act,1978 Special excise Duty was attracted on all excisable goods on
which there is a levy of Basic excise Duty under the Central Excises and Salt Act,1944.Since then each year
the relevant provisions of the Finance Act specifies that the Special Excise Duty shall be or shall not be
levied and collected during the relevant financial year.
Goods themselves cannot pay duty so the person who create the taxable event must discharge the liability which he
had created. The liability to pay tax excise duty is always on the manufacturer or producer if goods. There are three
types of parties who can be considered as manufacturers-
• Those who personally manufacture the goods in question
• Those who get the goods manufactured by employing hired labour
• Those who get the goods manufactured by other parties
The following have been held to be real manufacturers :
• In case where the factories are leased out, duty liability is on the lessee as he is the person who actually
manufactures the said goods

9. • When goods are manufactured from others by supplying raw material, the duty liability will rest on the
person who actually carried out the manufacturing activity and not on the person who supplied the material.
• In the manufacturer is a mere dummy of the customer or supplier of raw material, then the goods are said to
be manufactured on behalf of the customers / suppliers and the latter is liable to duty.

10. • When goods are manufactured from others by supplying raw material, the duty liability will rest on the
person who actually carried out the manufacturing activity and not on the person who supplied the material.
• In the manufacturer is a mere dummy of the customer or supplier of raw material, then the goods are said to
be manufactured on behalf of the customers / suppliers and the latter is liable to duty.