vCentric - Hyderabad ABOUT CENTRAL EXCISE

What is tax?

Tax is nothing but money that people have to pay the Government, which is used to provide public services.

What is the objective of tax collections?

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.

Are there different types of taxes?

Yes, there are. Some taxes are direct and others are indirect. Under our constitution, while the Central Government is vested with the powers of levy and collection of certain taxes, the State Governments are empowered to levy and collect certain other type of taxes.

What are direct and indirect taxes?

If the taxpayer bears its incidence and is not able to pass on the burden, such tax is direct tax. Example: - Income Tax, Wealth Tax, Gift Tax etc. If the taxpayer is just a conduit and every stage the tax-incidence is passed on till it finally reaches the consumer, who really bear the brunt of it, such tax is indirect tax. Example: - Excise Duty, Customs Duty, Sales Tax etc.

What is Excise Duty?

Excise Duty is an indirect tax levied and collected on the goods manufactured in India. Who is responsible to pay such duty to the Government? What are the relevant enactments governing levy and collection of central excise duty?

Generally, manufacturer of goods is responsible to pay duty to the Government. This indirect taxation is administered through an enactment of the Central Government viz., The Central Excise Act, 1944 and connected Rules - which provide for levy, collection and connected procedures. The rates at which the excise duty is to be collected are stipulated in the Central Excise Tariff Act, 1985.

Is it mandatory to pay duty on all goods manufactured?

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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. Which organ of the Central Government is entrusted with the collection of Central Excise Duty? What are the other responsibilities entrusted with the Central Government Department?

The Central Excise Department spread over the entire country administers and collects the central excise duty. The apex body that is responsible for the policy and formulation of connected rules is the Central Board of Excise and Customs which functions under the control of the Union Finance Ministry. There are about 60,000 staff and officers including 1500 officers in Group A level and 5,000 officers in Group B level in the Department. The Central Excise officers are also entrusted with the administration and collection of Service tax, Additional Excise Duty in lieu of sales tax on goods of special importance and Additional Excise Duty on textiles and articles of textiles, etc. and the Customs duty. The Central Excise officers are also armed with NDPS Act in the suppression of illicit trafficking in narcotic drugs and psychotropic substances. They are also entrusted with the task of enforcing various allied enactments like the Foreign Trade Regulation Act, the Foreign Exchange Regulation (now Management) Act, the COFEPOSA Act, Who has the liability to levy Excise duty? The liability to pay Excise duty is only on the Manufacturer or Producer. The duty cannot be recovered from the purchaser. (The manufacture may, in turn, recover the cost from the buyer). A person will be treated to be Manufacturer, if he does the following: Manufactures goods on his own account; Manufactures the goods with the help of hired labour. The following people are not manufacturers: Raw material suppliers; Brand owners; persons, giving machines on hire; Contractors, supplying labour. Types of Excise Duties ? Duties of excise are attracted when excisable goods are manufactured or produced in India. There are several types of duties which become payable at the time of clearance of such goods. These duties are :Basic Excise Duty Special Excise Duty Additional Duties of Excise and

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Cess Basic Excise Duty : This duty is specified against each sub-heading in the First Schedule to the Central Excise Tariff Act, 1985. There are however, notifications issued by the Central Government which grant either total or partial exemption from incidence of basic duty. These exemptions are both general and conditional in nature. The effective rate of basic excise duty is thus determinable only after reference to the relevant exemption notification given under the heading "General Exemptions". Special Excise Duty : This duty is leviable only on a few items. The rate of duty and the items on which it is leviable are specified under the Second Schedule to the Central Excise Tariff Act, 1985.

Role of Central Excise Commissionerate

Central Board of Excise and Customs (CBEC) implements law and procedures of Central Excise law by several regional units called Central Excise Commissionerates, each covering assessees spread over a specific geographic area. The Commissioner of Central Excise is the overall administrative head of the Commissionerate. Administratively, each Commissionerate is a 3-tier set-up with its Headquarters at the helm, 5 or 6 Divisions at the second level and 5 or 6 Ranges under each Division at the third and final level. COMMISSIONERATE HEADQUARTERS: At Commissionerate Headquarters, the Commissioner is assisted by Additional Commissioners, Joint Commissioners, Deputy Commissioners and Assistant Commissioners in addition to Superintendents, Inspectors and other ministerial staff. There are normally several branches/sections viz., Technical Section, Internal Audit Section, Headquarters Preventive Unit, Judicial Cell, Legal Cell, Maritime Section, Prosecution Cell, Vigilance Section. The Technical Section is the a source of supply of all developments to the departmental officers and also to the assessees/trade through issue of Circulars and Trade Notices. Individual assessee desirous of getting Trade Notices can do so by making annual subscriptions. This Section also examines doubts raised by field officers and trade and

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enable clarifications. This Section is also responsible for arranging faceto-face periodical meetings of Senior Central Excise Officers with various Trade Associations and Chambers of Commerce. The Internal Audit Section is responsible for periodical audit of accounts of the registered assessees. Such audit is carried out by nominated Groups/Parties headed by Superintendents, under prior intimation. Of late a new system of audit has been introduced called EA 2000 which will be the only interaction media between the assessee and the Department in the near future. The Headquarters Preventive Unit, unlike the Audit Groups, keeps secret track of duty payment records of individual assessees, engages informers, collects informations, through market and other sources, makes surprise visit to the factories, whether registered or not, and brings to book duty evasion indulged in by them. The offence cases registered are adjudicated by the Senior Officers of the Department who are vested with quasi-judicial powers, depending upon the duty involved in a particular offence and the Adjudication section endeavors to achieve this objective by adhering to the principles of natural justice. The officers in the level of Superintendents and Inspectors assist the adjudicating authorities. The existing powers of various Central Excise officers, as on date, are as under:Duty involved Upto Rs. 5 lakhs Rs. 5 lakhs to Rs. 20 lalks Rs. 20 lakhs to Rs. 50 lakhs Without limit Adjudicating officer Deputy / Assistant Commissioner Joint Commissiner Additional Commissioner Commissioner

The Legal and Judicial Cells of the Commissionerate Headquarters have also equal role to play, even though the officers of these Sections do not visit factories. While Legal cell attend to all court matters, the Judicial Cell is responsible for filing departmental appeals before the Commissioner (Appeals) and Tribunal, wherever necessary against the adjudication orders passed by the lower departmental authorities. The judicial cell is also responsible for defending the appeals filed by the parties/assessees. The Prosecution Cell is responsible for the entire prosecution proceedings as and when sanctioned by the Commissioner against any Proprietor, firm, Company or individual who are found guilty of an

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offence punishable with imprisonment in terms of Section 9 of the Central Excise Act, 1944. The responsibility of this Cell starts from arresting a person found guilty, remanding him to judicial custody to arrange for a speedy and successful trial before the competent Magisterial Court. The Maritime Section in the Headquarters office exercises the overall control over the exports taking place from the entire Commissionerate jurisdiction. The last but not the least, the Vigilance Cell at the Headquarters level functions as a watch-dog and in the event of any complaint against the departmental officers, this Cell conducts necessary enquiry and take disciplinary action against the erring official as warranted under the Rules. The Vigilance Cell also attends to and redress general grievance aired by the Trade. This Cell is also responsible for conducting periodical meeting of Public Grievance Committee to help Trade and also the Staff Grievance Committee to attend to staff side grievance. DIVISIONAL OFFICE: Deputy Commissioner or Assistant Commissioner is the head of the Division. Each Division of the Commissionerate is a mini Commissionerate within the Commissionerate in the sense, all Branches/Sections would be available similar to Headquarters Commissionerate to cater to the respective divisional jurisdiction. The Divisional officer maintains close contact with all Range Offices under his control through correspondence/visits/inspections. RANGE OFFICE: Superintendent of central excise is the head of the Range and is assisted by Inspectors who are allotted group of factories under his control. All the assessee-factories, on their part, file monthly/quarterly returns of goods dispatched from the factory and duty paid thereon and the officers are to ensure correctness of the duty exemptions availed by the factories, CENVAT availed, duty paid by them and data furnished in their returns. The officers in the Range are also supposed to visit factories as per norms fixed for study of raw material consumption vis--vis final products manufactured and also for examination and sealing of the export consignment.

Items Electronic goods Computers and parts Colour televisions

Rate of duty (%) 13 18

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Video cassette recorders and players Printed circuits and resistors Semi conductors, capacitors,integrated circuits and micro assemblies Concrete, Cement and Coal White cement, aluminous cement & others Products of coal tar distillation Ready mix concrete Articles of cement and asbestos Chemicals Inorganic and organic chemicals Insecticides and pesticides 18 18 18 25 18 13 18 18 8

Miscellaneous Photographic/cinematographic equipment and photocopiers 18 Bulk drugs (general) 18 Toothpaste, toothpowder and washing soap 8 Detergents/toilet soap 18 Railway signaling systems 13 Testing, measuring and analysing equipment 13

Additional Information
FAQs on Indirect taxes

What are the various kinds of taxes levied in the Union Budget? Explain them.

There are two main types of taxes levied - direct and indirect taxes. Direct taxes are collected by the government directly from the tax-payer through levies such as income tax, wealth tax and interest tax. Indirect taxes are the taxes paid while purchasing goods and services. These include excise, customs, sales tax and value-added tax.

What are the different kinds of indirect taxes?

Customs duty, central excise duty, service tax, sale tax, octroi, wealth tax and entertainment tax are a few types of indirect taxes.

Customs duty

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What is customs duty?

Customs duty is a tax collected on goods imported into or exported out of the boundaries of a country. Customs duty now forms a significant source of revenue for all countries, more so in the case of developing countries like India.

On what is customs duty levied?

In India, customs duty is levied on goods imported and at the rates specified in the Schedules to the Customs Tariff Act, 1975.

Why is customs duty imposed?

The Customs Act was formulated in 1962 to prevent illegal imports and exports of goods. Besides, all imports are sought to be subjected 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.

Is export duty also levied in India?

Export duties are practically non-existent at present. They are levied occasionally to mop up excess profitability in international prices of goods in respect of which domestic prices may be low at a given time.

Is import duty levied on all goods?

Import duty is widely levied, barring a few goods like food grains, fertilizer, life-saving drugs and equipments.

What does import duty consist of?

Import duty consists mainly of a basic duty, additional customs duty and special additional duty. Basic duty may be at the standard rate or, in the case of import from some countries, at the preferential rate. Additional customs duty is equal to central excise duty leviable on like goods produced or manufactured in India. It is commonly referred to as countervailing duty (CVD). Special additional duty is levied at the rate of 4% to provide a levelplaying field to indigenous goods which have to bear sales tax. And it is computed on the aggregate of assessable value, basic customs duty, surcharge and additional customs duty leviable under Section 3 of Customs Tariff Act, 1975. Plus, there is also an anti-dumping duty for imports to specified goods with a view to protecting domestic industry from unfair injury.

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Excise duty

What is excise duty?

The primary meaning of excise duty is tax on articles produced or manufactured in the taxing country and intended for home consumption.

On whom is excise duty levied?

Excise duty is an indirect duty which the manufacture or producer passes on the ultimate consumer. What basically attracts this duty is the activity of production or manufacture of goods.

When is excise duty levied?

Excise duty, though it becomes payable on the manufacture of goods, is collected at the time of removal of goods from the factory.

Under whose authority is the duty collected?

The Central Excise duty is collected under the authority of the Central Excise Act, 1944, at the rates specified under Central Excise Tariff Act, 1985. This duty is commonly referred as the Basic Excise Duty.

What is Additional excise duty?

In addition to basic excise duty, a few textile items like fiber and yarn also attract Additional Excise Duty under Additional Duties of Excise (Textiles and Textile Articles) Act, 1975. The Additional Duties of Excise (Goods of Special Importance) Act, 1957 and Miscellaneous Cess Acts provide authority for collection of Additional Excise Duty and Cess respectively on several manufactured items over and above the basic excise duty.

What are the types of excise duties?

Excise duty is either ad valorem (a fixed percentage) or a specific duty (a fixed amount). Excise duty is levied on the sale price of goods at the place of clearance. If the sale is made from the manufacturer's depot or warehouse, then excise duty is calculated on the sale price of goods at the depot.

What is Modvat?

The excise law provides for a scheme known as Modified Value Added Tax (Modvat). Modvat seeks to limit the cascading effect of the incidence

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of duty on exciseable goods used as inputs for the manufacture of other exciseable goods.

On what does Modvat apply?

Modvat applies to all exciseable goods except for those specifically excluded. Service Tax

What is service tax?

Service Tax is a central tax imposed on consumers of selective services and is the latest addition to the genus of indirect taxes like customs and central excise duty.

On what is service tax levied?

Service tax is a tax levied by the Central Government on the following services:

Stock broking services Telephone services Insurance Insurer services Advertising services Radio paging services Courier services.

At what rate is service tax levied? Service tax is levied at the rate of 5% of the value of the taxable service provided. Service tax is recoverable from the customer as a part of the consideration received towards rendering the service. Who collects the service tax? According to the mechanism adopted for collection, service tax is collected by the central excise department. Sales Tax What is sales tax? Sales tax is levied on the sale of moveable goods in India at rates which vary depending upon the type and nature of goods and the state in which the sale has taken place.

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On what is sale tax levied? Sales tax is levied on the value of goods including excise duty paid on the manufacture of the same. Who imposes sale tax? The Central and State Government are both empowered to impose sales tax on transactions involving sale of moveable goods. What are the types of sale taxes? The Central Sale Tax, 1956 (CST Act) and the State Sale Tax (SST Act) are the two types of sale tax. The CST Act deals with transactions in the nature of inter-state sales, ie sales which occasion the movement of goods from one state to another. The SST Act deals exclusively with intra-state sales, ie sales within the respective states. At what rate is sale tax levied? Sales tax under the CST Act is levied at 10% or at the rate specified by the SST Act of the seller's state, whichever is higher. However, this rate may be reduced to 4% upon the purchaser furnishing a prescribed declaration. The declaration may be issued where the buyer purchases the goods for the purpose of use in manufacture, resale or use in mining or power generation. If goods under the SST Act of the seller's state are subject to tax lower than 4%, then rate of tax will be set at lower rate. Octroi What is octroi? Octroi is a tax levied on the entry of goods into a municipality or any other specified jurisdiction for use, consumption or sale. Octroi is levied at the time when the goods enter the municipal limits where the goods are to be ultimately sold, used or consumed. Who bears the octroi? Generally, octroi is borne by the purchaser. Goods in transit are exempted from octroi. Is octroi levied on all items? Certain items have been exempted from the payment of octroi. Further, special concessions, such as refund of octroi, are available under a special package scheme of incentives made available by the government of Maharashtra to new industrial investment. Entertainment tax What is entertainment tax? Entertainment tax is levied on entertainment to which persons are admitted on payment.

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On what is entertainment tax levied? Entertainment tax is levied on different kinds of entertainment under the applicable state legislations. Under the Bombay Entertainments Duty Act, 1923, entertainment tax is levied in Maharashtra on any exhibition, performance or amusement, to which persons are admitted for payment. This tax is also applicable to cable operators. At what rate is entertainment tax levied? Entertainment tax is levied between 20-35% of charges collected by way of subscription or installation or any other charge for entertainment. An additional surcharge of 10% is also levied.

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