CHAPTER 13

CENTRAL EXCISE LAW

Central Excise Law includes 1. Central Excise Act, 1944 This contains basic provisions relating to the levy of excise duty. 2. Central Excise Rules , 2001- This contains the procedure for the assessment and collection of duty including other procedures like manner of payment of duty, registration, maintenance of records etc., 3. Cenvat credit Rules, 2001. 4. Central Excise (Appeals) Rules, 2001 5. Central Excise (Settlement of Cases) Rules, 2001

6. Central Excise(Removal of Goods at Concessional Rate of Duty for Manufacture of Excisable Goods)Rules, 2001. 7. Central Excise Tariff Act, 1985 Containing the Tariff schedule, based on the international product coding system called Harmonised System of Nomenclature(HSN) 8. Central Excise Valuation(Determination of Price of Excisable Goods) Rules, 2000.

Levy and Collection of Duty

Section 3(1) states: There shall be levied and collected in such manner as may be prescribed a. a duty of excise on all excisable goods which are produced or manufactured in India as and at the rates set forth in the First schedule to the Central Excise Tariff Act, 1985;

b. a special duty of excise, in addition to duty of excise specified in clause(a) above on excisable goods specified in the Second schedule to the Central Excise Tariff Act, 1985 which are produced or manufactured in India as and at the rates set forth in the Second Schedule. There are two types of duty, 1. Basic Excise Duty(BED) I Schedule 2. Special Excise Duty (SED) II Schedule

a. There must be a manufacture b. Manufacture must be in India and c. The manufacture must result in goods d. The resultant goods must be excisable goods

Goods and Excisable Goods

The word goods has not been defined in the Central Excise Act. It can be as defined in Sale of Goods Act - moveable and marketable items & as per Constitution of India All materials, commodities and articles.

Excisable Goods
Excisable Goods means goods specified in the Schedule to the Central Excise Tariff Act, 1985 as being subject to a duty of excise and includes salt.

Manufacture
Manufacture includes any process i. Incidental and ancillary to the completion of a manufactured product, and ii. Which is specified in relation to any goods in the Section or Chapter Notes of the Schedules of the Central Excise Tariff Act, 1985 as amounting to manufacture.

BASIS OF VALUATION
The excise duty is payable in the basis of any of the following: a. Specific duty- based on certain units say length, weight, volume etc., b. Duty based on value 1. Duty based on the Tariff value 2. Duty based on the value arrived at on the basis of valuation u/s.4(Normal price replaced with transaction value) 3. Duty based on Maximum Retail Price(MRP)

VALUATION UNDER NEW SECTION 4 (AD VALOREM)

The duty of excise is chargeable on any excisable goods with reference to their value, then on each removal of the goods, such value shall (a) In a case where the goods are sold by the assessee, for delivery at the time and place of the removal, the assessee and the buyer of the goods are not related and the price is the sole consideration for the sale, be the transaction value.

(b) In any other case, including the case where the goods are sold, be the value determined in such manner as may be prescribed

Related persons
1. They are inter-connected undertakings 2. They are relatives 3. amongst them the buyer is a relative and a distributor or 4. They are so associated that they have interest, directly or indirectly in the business of each other.

ASSESSMENT
Duty is payable on removal of excisable goods. As per Rule 6 of the Central Excise Rules, 2001, the assessee himself is required to determine duty liability at the time of removal of excisable goods and discharge the same. As per Rule 7 of the Central Excise Rules, 2001 provisional assessment can be resorted to in the event the duty cannot be determined at the point of clearance of the goods.

Procedure for payment of duty under self removal procedure

1. The manufacturer may ensure that the goods, which are sought to be removed have been duly intimated to the department providing the process flow chart of manufacture as well as list of critical raw materials. 2. He shall ensure that the finished goods are all duly entered in the production register daily. The manufacturer should authenticate the first and last pages of this register

3. The invoice raised should be in line with the purchase order if any, received from the customer. 4. The assessable value is to be arrived at. (advalorem, MRP etc.) 5. He shall prepare an invoice under Rule 11 and calculate the assessable value and excise duty payable 6. He shall make the removal entry in production register providing details of value, quantity and duty payable

7. It is to be ensured that the person/carrier who/which carries the goods is provided with duplicate for transporter copy of invoice. 8. He shall ensure that at the end of the fortnight he debits the duty payable in the Cenvat credit account and if the balance is not sufficient, pay through Personal Ledger Account(PLA) by 20th or 5th of succeeding month.

MANNER OF PAYMENT
As per Rule 8 of the Central Excise Rules, 2001 the duty has to be discharged on fortnightly basis. First fortnight of the month - 20th of the month Second fortnight of the month - 5th of the succeeding month Second fortnight of March - 31st March

PROCEDURE FOR PAYMENT OF DUTY IN THE CASE OF 100% EOU

There are basically two procedures for dispatching the goods out of India. (a) Duties are paid and subsequently rebate(refund) is claimed after exportation of such goods. (b) Goods are exported under bond without payment of excise duty.

Removal under bond

a. Execute a bond with central excise authorities b. Clear goods from factory under bond without payment of duty c. Export the goods and obtain certificate of export on AR-4 from customs authorities d. Submit proof of export to excise authorities e. Get bond released( or get credit in Running Bond Account if general bond has been executed).