Concept and Historical Background of Excise Laws in India

a type of tax charged on goods

AnexciSe or excise tax (sometimes called an excise duty) is
on goods from outside the
produced within the country (as opnosed to customs duties, charged
mandatory to pay duty on all goods
cOuntry). It is a tax on the production or sale ofa o0od. It is
has now subsumed a number of indirect
manuiatured, unless exenpted. However GsT eXCept
technically, does not exist in India
taxes including excise duty. This means excise duty,
ona few items such as liquor and petroleum.
generally collected by a retailer or an
ExCise Duty is a form of indirect tax which is
government. Although this duty IS payable
Ihterimediary from its consumers and then paid to the
whenthe goods are 'removed' from the place ot
onmanufacture of goods, it is usuallv Davable
sale. There is no requirement for the actual
production or from the warehouse for the purpose of
goods for imposing the excise duty hecause it is imposed on the manufacture of such
Sale of the
Board of Excise and Customs (CBEC) was responsible for collecting excise
goods. The Central
duty.

Evolution of Excise Taxation

India
of levy of excise duty began with the establishment of British rule in
Ihe present system accounted for
was an important source of revenue and
and the taxation of salt. The salt duty Rs. 60.85 crores,
In 1920-21 the gross tax revenue was
about one-tenth of the totaltax revenue.
crores.(In 1938-39 the salt revenue was Rs. 8.41 crores
of which the salt revenue was Rs. 6.67 In 1946-47, a year before the salt duty was abolished
Rs. 81.87 crores.
in total gross revenue of
tax revenu. 6
altogether; it constituted only 3% of the
when a wide range
milestone in the development of central excise in India
was a
(The year 1934 duty and articles such as sugar,
withinthe scope of central excise b w o lt v a
of newarticles were brought theSecond World
ingots came into its ambip.(ln 1941, during the course of
matches and steel on vegetable products
rubber tyrescame under excise) (Two years later, it was imposed
War, Act, 1943/ 5
unmanufactured tobacco, cigars and cheroots by the Finance
and
consolidating the various
Central Excises and Salt Act, 1944 was passed
In 1944, the coffee, tea and betel nut. However,
betel
imposing new duties on
enactments on the subject and administrative difficulties. After independence,
1948 because of
nut was taken off the list in was cigarettes in 1948. In the following
year
added to the list
the first important item to be additionalcommodities such
imposed on mill cloth. In 1954 a large number of
excise duty was
batteries and parts, paper, pigments, colours,enamels,
electric
as woolen fabrics,electric fans, brought under central excise.
cellulose lacquers were
paints, varnishes, blacks and oils,
levied on soap, straw-boards, vegetable non-essential
excise was l956, rayon. synthetic
On 01.03.1956 central fuel oils. In December
and industrial
refined diesel oil and vaporising 1960, several other items were made excisable,
viz.
were added. In plates
fibres, yarn and motor cars electric motors, cinema films, aluminium, tin
combustion engines, the Central Excise
Tariff
cycle parts, internal have been added to
a number of items
and pig iron. Since then
 68, was introduced which
wOusiy trom year to year:. In 1975 a general item, namely, item
of
Covered AllOther Goods Not Elsewhere Snecified! The Central Excise Tariff Act, 1985 (5
1986) was enacted with effect from 28.02. 1986 replacing the carlier one.
Important Provisions and laws relating to Central Excise
Excise duty.
Central Excise Act, 1944- This is the basic act which governs the Central
excise estimation,
It provides the basis of charging excise duty, valuation of goods for
compliance to excise law
Power vested in excise officers, penalties incase of failure of
etc.
manufactured in India
CentralExcise Tariff Act. 1985. This act classifv all the goods
excise duty is
under Head and Sub-head categories It prescribes the rate at which
payable.
be filed for clearance of
Central EXCISe Rule, 2002- It provides the prescribed forms to
goods, procedure to be followed for the compliance of law or to make an appeal,
procedure for requesting for refund etc.

Before GST kicked in, there were three kinds of excise duties in India.

Basic Excise Duty

Basic exXcise duty is also known as the Central Value Added under Tax (CENVAT). This
were classified the first schedule
category of excise duty was levied on goods that
of the Central Excise Tariff Act, 1985.
1944.This duty
This dutywas levied under Section 3 (1) (a) of the Central Excise Act,
applied on all goods except salt.

Additional Excise Duty

Additional excise duty was levied on goods of high importance, under the Additional
Excise under Additional Duties of Excise (Goods of Special Importance) Act, 1957.
This duty was levied on some special category of goods.

Special Excise Duty

Second
This type of excise duty was levied on special goods classified under the
Schedule to the Central Excise Tariff Act, 1985.
Presently the central excise duty comprises of a Basic Excise Duty, Special Additional
Excise Duty and Additional Excise Duty(Road and Infrastructure Cess) on auto fuels.

Who Was liable to pay Excise Duty?

goods should be
Since excise duty is levied on the manufacture of goods, the manufacturer of
parties which are liable
liable to pay it to the government. According to the law, there are three
topay the excise duty
 The person/entity that manufactured the goods in question
Ihe person/entity that got the goods manufactured by hiring labour
Person/entity that got the goods manufacturcd by other parties
Excisable goods are goods which
IS to be noted that excise dutyis levied on eveisahle goods be
1985. Goods can
are specitied in the first or second schedule of Central Excise Tariff Act,
categorized as non-excisable in following situation

1. If goods are immoveable

2. If goods are non-marketable
3. If goods are not produced/manufactured in India
schedule to Central Excise & Tariff Act
. Any goods not specified in the first or second
(CETA), 1985

Exemption from Paying the Excise Duty:

Excise duty is not levied if produced good is for export
EXemption are available in some cases on the basis of raw material used for the
production
Some manufacturing or production processes are exempted from paying excise duty
Exemption is also available on the basis of financialworth of clearances or turnover
in any financial year.
Penalties:
25-509% fine of tax anmount that has not been paid can be iposed for evading excise laXes. The
rates are provided by various Section of the CenralExcise Act.