Study Note 1 Excise Duty Introduction, Legislation & Liability

1. Tax in nature similar to present day Excise Duty dates back to Mauryan period when tax on salt , alcohol @ 5 to 10 % was levied. Mughal period had excise applicable on cotton , edible oil, salt etc . Excise as we understand in current context was introduced on cotton yarn, during British Rule, in 1894 to check exports of Indian Textiles. Subsequently Scope of ED was widend to include Petrol (1917 ) kerosene (1922), silver (1930 ) , sugar and matchsticks (1934). Initially separate Acts were applicable for each commodity. In 1944, there were thus 16 such separate enactments. All these were consolidated in 1944 and unified Act was passed in that year which is still in force. Preamble of the Act therefore refers the Act as an Act to consolidate and amend the law relating to central duties of excise and states the objective of the Act being consolidation of and amendment of law relating to duties of excise on goods manufactured or produced in India. This Act was initially called as Central Excise and Salt Act 1944. However the word salt in the name was dropped in 1996 and now the name of the Act is Central Excise Act 1944. This is the basic Act and provides for charging of duty, valuation, powers of officers, penalties etc. Finance Act 2000 has made an important provision to include CENVAT in the scope of Excise duty As per usual scheme of the Act, section 37 of the Act, grants power to Government to frame rules for prescribing procedures, forms etc. Accordingly Central Excise Rules 1944 have been notified by Government and have also been amended from time to time. Accordingly new set of Rules have been made operational with effect from 1.7.2001. Various procedures for various activities such as Registration, Clearance and Storage of goods, maintenance of records, etc. are outlined in the Rules. Excise is very much procedure based system of taxation. Basic Act is very small and has only 40 sections. Clear understanding of Rules is therefore very much important because in Excise many concessions may get lost and penalties may get imposed simply because proper procedures are not followed. Section 5A and 11C of CEA, authorise Central Government to issue Notifications for granting partial or full exemptions from Excise Duty .

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Central Excise Tariff Act, 1985 (CETA) classification of various goods and their respective rates of duty in its 96 chapters devoted to different classes of goods. The classification is based on HSN classification (Harmonised System of Nomenculture ), which is internationally adopted for identification of goods. Central Excise (Valuation ) Rules 2000- These rules deal with valuation of goods in exceptional cases where value can not be fixed on the basis of Transaction Value as per provisions of Section 4 alone. CEGAT (Procedure) Rules 1982 Customs, Excise and Gold (Control ) Appellate Tribunal (Procedure ) Rules 1982, lay down procedures for filling and hearing of Appeals. Entry 84 of Union list authorises the Central Government to levy Duties of Excise on tobacco and other goods manufactured or produced in India except alcoholic drinks and narcotics. Liability of citizens towards Central Excise emerges out of this entry. Basis of Excise Duty Liability is therefore principles for levy of duty specified under this entry. Section 3 of the act, which is the charging section states that there shall be levied and collected in such manner as may be prescribed, duty of excise , to be called as CENVAT on all excisable goods other than salt, which are produced or manufactured in India. Provision of this charging Section thus prescribes 4 basic conditions for levy of Excise Duty. a. Duty is on goods. b. The goods must be excisable. c. The goods must be manufactured or produced. d. Such manufacture or production must take place in India. Taxable Event in case of tax laws is that event on happening of which, liability is created or attracted towards a particular Tax. Taxable Event in the case of Excise Duty is manufacture or production of excisable goods in India. It is very much necessary therefore understand the meaning of each of the terms outlined in Basic Condition for Excise Duty that lead to Taxable event as described above.

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