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Excise Duty

Taxation plays a vital role in the economy and makes a significant contribution to it. In India,
the tax structure encompasses different types of taxes and duties like excise duty. To
streamline the process of paying taxes and claiming returns, it is essential for individuals
whose income comes under a taxable bracket to become familiar with the different types of
taxes and duties.

Following is a look at the fundamentals of excise duty meaning to help gain valuable
information about it.

What is Excise Duty?

Fundamentally, excise duty is a tax levied on domestically produced goods. Generally, it is

charged on their production and sale and is also known as CENVAT or Central Value Added
Tax.

Central Excise duty is an indirect form of taxation and is collected from a customer by a
retailer or an intermediary. It is paid when goods are transferred from the production unit to a
warehouse.

This particular tax is governed by two sets of acts – Central Excise Act, 1944 and Central
Excise Tariff Act, 1985. Ideally, the Central Board of Excise and Customs is responsible for
the collection of excise duty.

With the introduction of GST, several indirect taxes have been subsumed, including excise
tax. Nonetheless, it is still applicable to a few items like petroleum, liquor, etc.

When Should You Pay Excise Duty

Excise duty must be paid at the time the items are removed. Assessees must pay excise duty
on items manufactured or produced. Excise duty should be paid on the fifth day of the
following month from the date the products were taken from the warehouse or factory for the
purpose of sale, according to Rule no. 8 of the Central Excise (Amendment) Rules, 2002.

If excise duty is paid online through netbanking, the payment is due on the sixth day of the
next month. If the payment is paid in March, it must be made by March 31.
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Types of Excise Duty

In a broader sense, there are 3 distinct types of excise duty, namely –

 Basic Excise Duty

This type of excise duty is levied on goods that come under schedule one of the Central
Excise Tariff Act, 1985. It is imposed on all excisable goods except salt.

 Additional Excise Duty

It is a tax levied on all goods that are scheduled under Section 3 of the ‘Additional Duties of
Excise Act’ of 1957. This tax collected is shared between the state and central government
and is levied instead of sales tax.

 Special Excise Duty

This category of tax is levied on those goods listed under the Second Schedule of the Central
Excise Tariff Act, 1985.

One must note that individuals are exempted from paying taxes. However, such a benefit can
be availed based on –

 Value of turnover in a given financial year.

 Raw materials used.

 Process involved.

Regardless, individuals who cannot avail of these exemptions should make it a point to pay
the excise duty on time.

PROCEDURES IN CENTRAL EXCISE

Some procedures are basic, which every assessee is required to follow. Besides, some
procedures are required to be followed as and when required. Basic Procedures

(1) Every person who produces or manufactures excisable goods, is required to get
registered, unless exempted. [Rule 9 of Central Excise Rules]. If there is any change in
information supplied in Form A-1, the same should be supplied in Form A-1.
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(2) Manufacturer is required to maintain Daily Stock Account (DSA) of goods manufactured,
cleared and in stock. [Rule 10 of Central Excise Rules]

(3) Goods must be cleared under Invoice of assessee , duly authenticated by the owner or his
authorised agent. In case of cigarettes, invoice should be countersigned by Excise officer.
[Rule 11 of Central Excise Rules]

(4) Duty is payable on monthly basis through GAR-7 challan / Cenvat credit by 5th/6th of
following month, except in March. SSI units have to pay duty on monthly basis by 15th/ 16th
of following month. Assessee paying duty through PLA more than ` 50 lakhs per annum is
required to make e-payment only [Rule 8].

(5) Monthly return in form ER-1 should be filed by 10th of following month. SSI units have
to file quarterly return in form ER-3. [Rule 12 of Central Excise Rules] — EOU/STP units to
file monthly return in form ER2 – see rule 17(3) of CE Rules.

(6) Assessees paying duty of ` one crore or more per annum through PLA are required to
submit Annual Financial Information Statement for each financial year by 30th November of
succeeding year in prescribed form ER-4 [rule 12(2) of Central Excise Rules].

(7) Specified assessees are required to submit Information relating to Principal Inputs every
year before 30th April in form ER-5, to Superintendent of Central Excise. Return for 2004-05
was required to be submitted by 31-12-2004 [rule 9A(1) to Cenvat Credit rules inserted w.e.f.
25-11-2004]. Any alteration in principal inputs is also required to be submitted to
Superintendent of Central Excise in form ER-5 within 15 days [rule 9A(2) to Cenvat Credit
Rules inserted w.e.f. 25-11-2004]. Only assessees manufacturing goods under specified tariff
heading are required to submit the return. The specified tariff headings are – 22, 28 to 30, 32,
34, 38 to 40, 48, 72 to 74, 76, 84, 85, 87, 90 and 94; 54.02, 54.03, 55.01, 55.02, 55.03, 55.04.
Even in case of assessees manufacturing those products, only assessees paying duty of ` one
crore or more through PLA (current account) are required to submit the return.

(8) Assessee who is required to submit ER-5 is also required to submit monthly return of
receipt and consumption of each of Principal Inputs in form ER-6 to Superintendent of
Central Excise by tenth of following month [rule 9A(3) to Cenvat Credit rules inserted w.e.f.
25-11-2004]. Only those assessees who are required to submit ER-5 return are required to
submit ER-6 return.
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(9) Every assessee is required to submit a list in duplicate of records maintained in respect of
transactions of receipt, purchase, sales or delivery of goods including inputs and capital
goods, input services and financial records and statements including trial balance [Rule
22(2)]

(10) Inform change in boundary of premises, address, name of authorised person, change in
name of partners, directors or Managing Director in form A-1.