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Collection of
Central Excise Duty

M. G. KODANDARAM, IRS
ASSISTANT DIRECTOR (RETD)
NACIN, Vizag
NACIN, BENGALURU
On 08.02.2021
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TOPICS FOR THE SESSION
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• TAX – EXCISE DUTY
• CONSTITUTIONAL AUTHORITY
• TAXABLE EVENT
• LEVY
• COMPOUNDED LEVY
• IMPORTANT CONCEPTS
• IMPORTANT DEFINITIONS
• CLASSIFICATION OF GOODS.

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 Origin of Central Excise in India
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Prior to 1889 different statutes for taxing different
commodities by different agencies
1889- Madras Salt Act
Formation of Salt and Abkari department
1924- Salt Department Formed
1926- Madras Salt Department transferred to
Federal Govt.
1932- Recruitment Rules framed, Uniform designed.
1930- Silver brought under excise net.
1934- Coverage extended -Iron ,steel, sugar,
matches
1934- Tariff Act enacted.
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 C. Excise history
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•1934- Central Board of Revenue constituted.
•King’s Committee recommends centralization of
excise collection.
•1942- Tobacco brought under levy; massive
expansion of dept.
•1944- Central Excises and Salt Act
•1994 – Service Tax levied

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• Duty of excise required the enactment of
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• self-contained law &
• preparation of a separate set of statutory rules.
•no less than 10 separate excise Acts (excise on
kerosene by Ind Fin Act, 1922) and 11 sets of
statutory rules; and 5 Acts relating to salt.
•This agglomeration of statutes and regulations
dealing with similar matters is neither convenient for
the public nor conducive to well-organized
administration.
• under this disjunctive arrangement, …
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•A comprehensive code for the governance of the
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excise staff and each set of statutory rules is
burdened with departmental instructions in which the
public has no concern or interest
•do not form an adequate administrative code.
•consolidate in a single enactment
•rules will be amalgamated & disembarassed of their
unnecessary details
•complete Central Excise Code, which will simplify
the administration of this branch of the revenue
system
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―84. Duties of excise on Constitution definitions
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tobacco & edit
otherMaster
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SCHEDULE VII- LIST-I
manufactured or ―84. Duties of excise on the
produced in India following goods
except - (a) alcoholic manufactured or produced
liquors for human inIndia, namely:—
consumption; (a) petroleum crude;(b) high
(b) opium, Indian hemp & speed diesel;(c) motor spirit
other narcotic drugs & (commonly known as
narcotics, but including petrol);(d) natural gas;(e)
medicinal & toilet aviation turbine fuel; and (f)
preparations containing tobacco and tobacco
alcohol or any substance products.‖
included in sub-para(b)
of this entry‖. 7
•The Central Excise Act, 1944
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[The to edit Excises
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titletostyle
salt Act, 1944]
•Act No. 1 of 1944 24th February, 1944
•An Act to consolidate and amend the law relating to
Central Duties of Excise
•Chapter I - Preliminary
•Section 1. Short title, extent and commencement. -
•(1) This Act ….called the Central Excise Act, 1944.
•(2) It extends TO THE WHOLE OF INDIA.
•1. The words "and to Salt" omitted (w.e.f. 28-9-1996)
by s. 69 of the Finance (No. 2) Act, 1996 (33 of 1996).
• PASSED notified -10th November, 1943.

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CHAPTER II LEVY AND COLLECTION OF DUTY
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Dutiestospecified
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in I st Schedule & II nd Schedule to
the CETA,1985 to be levied.-
(1)There shall be levied and collected in such manner as
may be prescribed,—

(a) a duty of excise to be called CENVAT, on all excisable

goods which are produced or manufactured in India as,
and at the rates, set forth in I st Schedule to CETA’85;

(b) a Special Duty of Excise, in addition .. (a) above, on

excisable goods specified in IInd Schedule to the
CETA’85 which are produced or manufactured in India,
as, and at the at the rates, set forth in II nd Schedule:

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Provided …ED which shall be levied and collected on
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any excisable title are
goods which style
produced or
manufactured,—
(i) in a FTZ or a SEZ and brought to any other place
in India; or (ii) by a 100%EOU and brought to any
other place in India,
shall be an amount equal to the aggregate of the
duties of customs which would be leviable
under the Customs Act, 1962 or any other law for
the time being in force on like goods produced or
manufactured outside India if imported into India,
and where the said duties of customs are
chargeable by reference to their value, the value of
such excisable goods shall, …be determined in
accordance with the provisions of the CA’62 and
CTA’75. 1
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Click to– criteria
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for title
levy style
of excise duty
• Must be goods;
• goods must be excisable;
• should be movable goods;
• must be manufactured or produced;
• should be marketable;
• Should have shelf life;
• manufacture or production must be in India.
• Except in SEZ

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• Sn3 (3) The Cen Govt may, by notification in the
Official
Click to Gazette, fix, for
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title purposes of levying
the said duty, tariff values of any articles
enumerated, either specifically …., in Fourth
Schedule as chargeable with duty ad valorem and
may alter any tariff values for the time being in
force.
• (4) The Cen Govt may fix different tariff values
• Sn.3A. Power of Cen Govt to charge ED on the basis
of capacity of production in respect of notified
goods -having regard to the nature of the process of
manufacture .. of excisable goods …, extent of
evasion of duty …. or such other factors as may be
relevant, is of the opinion that it is necessary to
safeguard the interest of revenue,….
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• Sn3A (2) Where a notification is issued
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(a) provide theMaster
mannertitle style
for determination of the
annual capacity of production …, by AC and such
annual capacity shall be deemed to be the
annual production ……; or
• (ii) provide for the determination of the annual
capacity of production … on the basis of such factor
by AC and such annual capacity of production shall
be deemed to be the annual production of such
goods by such factory

• Eg., Pan Masala Packing Machines (Capacity

Determination and Collection of Duty) Rules, 2008.

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 Section 2. Definitions.
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(d) "excisable goods" means goods specified in the
First Schedule and the Second Schedule to the CETA
1985 as being subject to a duty of excise and includes
salt;
Expln - ….

- all goods includes any article, material or

substance which is
-capable of being bought and sold for a consideration
- and such goods shall be deemed to be marketable.

Constitution definitions- Article 366 (12) “goods” -

materials, commodities, and articles;

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Sn2 (f) "manufacture" includes any process,
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(i) incidental or ancillary to the completion of a
manufactured product; and

(ii) which is specified in relation to any goods in Section

or Chapter notes of the I st Schedule to CETA, as
amounting to manufacture; or

(iii) which, in relation to the goods specified in III rd

Schedule involves packing or re-packing of such goods in
a unit container or labeling or re-labeling of containers
including the declaration or alteration of retail sale
price on it or adoption of any other treatment on the
goods to render the product marketable to the
consumer,
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 and the word "MANUFACTURER“
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shall be to edit Master
construed title
accordingly andstyle
shall include not only a
person who employs hired labour in the production or
manufacture of excisable goods, but also any person who
engages in their production or manufacture on his own account.
(k)"WHOLESALE DEALER" means a person who buys or sells
excisable goods wholesale for the purpose of trade or
manufacture, and includes a broker or commission agent …
stocks such goods belonging to others as an agent for the
purpose of sale.

(e) “FACTORY" means any premises, including the precincts

thereof, wherein or in any part of which excisable goods are
manufactured, or wherein or in any part of which any
manufacturing process connected with the production of these
goods is being carried on or is ordinarily carried on;

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• Section 2A. References of certain
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expressions.
In this Act, save as otherwise expressly
provided and unless the context
otherwise requires, references to the
expressions "duty", "duties", "duty of
excise" and "duties of excise" shall be
construed to include a reference to
"Central Value Added Tax (CENVAT)".

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Collection of Excise Duty
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Following two procedures are followed :
(i) Physical Control Procedure: Applicable to
cigarettes only.
In this case, assessment is done by Central Excise
Offices and thereafter goods are removed under
his supervision under cover of an invoice counter
signed by him.
(i) Self-Removal Procedure: Applicable to all other
goods produced or manufactured within the
country.
Under this system, the assesee himself determines
the duty liability on the goods and clears the
goods. 1
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Persons liable to pay
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• Duty liability is generally on manufacturer or
deemed manufacturer.
• In case of molasses produced in khandsari
sugar factory, duty liability is on purchaser -
rule 4(2) - is it RCM in place??
• job work- duty liability is on job worker, even
if he is not owner of manufactured goods.
• However, if inputs are sent under Cenvat
provisions or under notfn No. 214/86-CE,
duty liability is of raw material supplier.
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TOPICS DESCRIPTION
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Charging Section 3 (1) /3(2)/ 3A
section
compounded Based on production capacity - Sn
levy 3A
tariff value Sn 3(3) -
Taxable event All goods produced or
manufactured in India
Tax imposed Manufacturers / dealers / job-
on worker
Rate of tax Depend upon central excise tariff
act 1985 – Schedule- I / II / III / IV
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TOPICS DESCRIPTION
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Registration yes
classification Based on HSN
specific duty based on weight, length, volume etc.
valuation •Value fixed by government
•Transaction value u/s 4 with Rules
•RSP based value u/s4A
Physical cigarettes
control
Document Daily Stock Account -Rule 10

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topics description
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Payment TR-6/GAR-7 challan by 5/6 of the
month and 31st in March
challan/ date
Invoices for
Rule-11- invoice to be countersigned
cigarettes by officer
returns Monthly/quarterly[SSI]- e returns By
10th /20th of quarter - Rule 12
Assessment Self –assessment /At the time of
/ time of clearance of goods from the place of
liability removal except cigarettes
Advance Yes, rules
ruling
ombudsman yes 2
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topics description
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demands Section11/11DD
Demand of Section 11AC
interest
Penal measures Yes. Rules 25/26/27
Section 9 /9A
Appellate Yes,
remedies
prosecution Yes, Section 9 /9A
recovery Yes, section 11
Settlement Yes, rules
commission
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Different types of excise duty levied
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• (1) BASIC EXCISE DUTY TO BE TERMED AS CENVAT;
• (2) EDUCATION CESS @2% ;
• (3) SECONDARY HIGHER EDUCATION CESS ON
EXCISE DUTY @1%;
• (4) NATIONAL CALAMITY CONTINGENT DUTY;
• (5) ADDITIONAL DUTY ON GOODS OF SPECIAL
IMPORTANCE;
• (6) ADDITIONAL DUTIES OF EXCISE ON TEXTILES AND
TEXTILE ARTICLES;
• (7) DUTIES UNDER OTHER ACTS;
• (8) DUTY ON MEDICAL AND TOILET PREPARATIONS;.
• (9) ADDITIONAL DUTY ON MINERAL PRODUCTS;
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Statutes /rules under central excise
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• (i) Central Excise Act, 1944; [CEA]
• (ii) Central Excise Tariff Act, 1985;[CETA]
• (iii) Central Excise Rules, 2002;[CER]
• (iv) Cenvat Credit Rules, 2004;
• (v) Central Excise Valuation (Determination of Price
of Excisable Goods) Rules, 2000;[ valuation Rules]
• (vi) CE (Determination of Retail Sale Price of
Excisable Goods) Rules, 2008 ;[ RSP ]
• (vii) Customs, Excise & Service Tax Appellate
Tribunal (Procedure) Rules, 1982; [CESTAT]
• (viii) CE (Appeals) Rules, 2001;[ Appeals]
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Statutes /rules under central excise
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• (ix) Authority for Advance Rulings (Customs, Central
Excise and Service Tax) Procedure Regulations,
2005;
• (x) CE (Advance Rulings) Rules, 2002;
• (xi) CE (Compounding of Offences) Rules, 2005;
• (xii) Customs and Central Excise Duties and Service
Tax Drawback Rules,1995;
• (xiii) CE (Removal of Difficulties) Rules, 2005;
• (xiv) CE (Removal of Goods at Concessional Rate
of Duty for Manufacture of Excisable Goods) Rules,
2001;

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Statutes /rules under central excise
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• (xvi) CE (Settlement of Cases) Rules, 2007;
• (xvii) Consumer Welfare Fund Rules, 1992;
• (xviii) Pan Masala Packing Machines (Capacity
Determination and Collection of Duty) Rules, 2008.
• (xix) Chewing Tobacco and Unmanufactured
Tobacco Packing Machines (Capacity Determination
and Collection of Duty) Rules, 2010
• (xx) Clean Energy Cess Rules, 2010

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• Classification – what does it mean ?
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Purpose
• – clear and practical way to organise and
communicate information
• Classification of GOODS- why required?
• Globalization – GATT, WTO , WCO
• Tariff and non-tariff barrier
• Used by DGFT, Customs, central excise & vat
• applicability for GST – modified
• Customs tariff – highlights
• Its impact –good or bad – you can decide?

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Click to edit Master title style

THE GENERAL
EXPLANATORY NOTES TO 30
• For condition must be present for charging CED
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• 1.The duty is on goods.
• 2.The goods must be excisable goods
• 3 .The goods must be manufactured or produced
• 4.Such manufacture or production must be take
place in India
• For levy, it must satisfy two requirements:
• 1.Movability Goods must be movable.
• 2.Marketability Goods must be marketable .
• A goods become excisable if and only if it is
mentioned in the Central Excise Tariff Act 1985.
Thus, unless the item is specified in the CETA as
subject to duty, no duty is levied.
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• The duty of central excise is charged on four bases:
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• 1.Specific duty
• 2.Tariff duty
• 3.Maximum retail price
• 4.ad -valorem basis Basis for valuation of goods

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LET US RECOLLECT
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• TAX – EXCISE DUTY
• CONSTITUTIONAL AUTHORITY
• TAXABLE EVENT
• LEVY
• COMPOUNDED LEVY
• IMPORTANT CONCEPTS
• IMPORTANT DEFINITIONS
• CLASSIFICATION OF GOODS.

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Click to edit Master title style

mgkodandaram@gmail.com
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Click to edit Master title style

• M.G. Kodandaram, IRS

• Assistant Director, (Retd) NACEN
• mgkodandaram@gmail.com

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