Central Excise duty is levied on goods manufactured in India under the Constitution. Duties are charged on goods specified in the Central Excise Tariff Act if they are movable, marketable, and manufactured or produced in India. Manufacture means that a new, identifiable product emerges through a process. Assembly may constitute manufacture if a new product results that is movable and marketable. Certain processes are also deemed manufacture even if they don't meet the standard definition of manufacture. The manufacturer is generally considered to be the person who actually produces the new good.
Central Excise duty is levied on goods manufactured in India under the Constitution. Duties are charged on goods specified in the Central Excise Tariff Act if they are movable, marketable, and manufactured or produced in India. Manufacture means that a new, identifiable product emerges through a process. Assembly may constitute manufacture if a new product results that is movable and marketable. Certain processes are also deemed manufacture even if they don't meet the standard definition of manufacture. The manufacturer is generally considered to be the person who actually produces the new good.
Central Excise duty is levied on goods manufactured in India under the Constitution. Duties are charged on goods specified in the Central Excise Tariff Act if they are movable, marketable, and manufactured or produced in India. Manufacture means that a new, identifiable product emerges through a process. Assembly may constitute manufacture if a new product results that is movable and marketable. Certain processes are also deemed manufacture even if they don't meet the standard definition of manufacture. The manufacturer is generally considered to be the person who actually produces the new good.
• Power to levy Central Excise duty is derived from the Constitution.
• Tax on Excise duty is listed in the Entry 84 of VII schedule, Constitution of India • Duties are levied on goods manufactured or produced in India (excluding Special Economic Zone). • Charging Section of Excise Duty:-Four basic conditions define the duty • Duty is on goods. The goods must be movable and marketable. • The goods must be excisable It must be included in the Central Excise Tariff Act. • The goods must be manufactured or produced New and identifiable product known in the market must emerge. • Such manufacture or production must be in India. Goods manufactures in SEZ are excluded excisable goods. Types of excise duties: Basic excise duty, special excise duty, education Cess, Additional excise duty on goods of special importance-pan masala, tobacco products. Excisable goods: Nature and scope • Goods specified in the schedule due to Central Excise Tariff Act,1985 as being subject to a duty of excise and includes salt. • Unless the item is specified in the Central Excise Tariff Act, as subject to duty, no duty is leviable. • However, once an item is mentioned in the Tariff, it will be ‘excisable goods’ even if duty rate is NIL and even if it is exempted from the excise duty. • Excisable goods does not become non-excisable goods because they are exempt from duty by an exemption notification. • Few goods are not mentioned in the Tariff like flowers. Similarly, some mentioned but rate is ‘blank’. These are non-excisable item though they may be goods. • Onus of the proof that the articles are goods and are marketable is on the department to establish. • What are excisable goods? - Must be movable - Must be marketable - Actual sale not necessary - Actual open market not necessary - Article capable of being bought or sold is deemed to be marketable. - Mere mention in tariff is not enough. • Since excise is a duty on manufacture, duty is payable whether or not goods are sold • Duty is payable even – when goods are used within the factory – Captively consumed within factory for further manufacture. – Goods are given as free samples. – Goods are given as free replacements. • Goods are not marketable if not considered to be saleable as per law. • Everything that is sold is not marketable. • Goods includes any article ,material or substances which I capable of being bought and sold for a consideration and such goods shall be deemed to be manufactured. • The commodity which is sought to be made liable to excise duty must be a commodity that is marketable as it is, and not as a commodity that may, by further processing, be made marketable. • Some examples of goods under Excise Act Gas and steam(good tangible property) Electricity is movable property though not tangible. Drawings, designs, etc are goods (relating to machinery or technology) By product- something (something produced in making main product or a substance obtained in the course of a specific product) Waste and scrap is a final product-scrap can be goods Waste and scrap cannot be goods if not marketable Waste is dutiable only if there is a manufacture. What are not goods? • Goods having very short life are not goods if not marketable. • If goods are marketablein shoprt shelf life, they will be ‘excisable goods’. • Plant and machinery assembled at site cannot be treated as ‘goods’ for the purpose of Excise duty, if it is not marketable and movable. • Assembly is manufacture only if machinery can be removed without dis-assembly(dismantle), NATURE AND SCOPE OF MANUFACTURE • Taxable event is manufacture or production in India. • Excise duty is mainly levied on goods manufactured or produced. • If there is no manufacture, there is no liability of payment of Central Excise duty. • Excise duty is a duty on manufacture and he duty is fastened immediately after goods are manufactured. • “produced’, though not defined under Central Excise Act, it has to be understood in the common parlance. • Manufacture is not defined completely. But it means a) Manufacture as specified in various Court decisions. i.e., new identifiable product having a distinctive name, character or use must emerge. Or b) deemed manufacture • In conclusive, manufacture is when a new substance having distinct name, character or use must emerge. • The commodity should fit for commercial use. • The commodity should come into existence as a separate and distinct commodity. • Mere value addition is not enough to be a manufacture. i.e., identity of the original article should be lost. • Manufacture is the end result of one or ore processes. • And when the change occurs to a point where commercially it can be identified as a new separate article, manufacture is said to have taken place. • Such manufacture must be in India for the purpose of effecting the excise duty. • Burden of proof of manufacture is on the department. • Assembly of various parts and components may amount to manufacture if new product emerges, which is movable and marketable. • But mere assembling of parts cannot be manufacture if it does not stand to be a distinctive product. • Sometimes, two different types of goods are supplied together in different packing.it is not manufacture at the use’s end. • For ex: araldite and aluminum painting is supplied in two different packings which is to be mixed prior to its usage. This does not mean that the user has manufactured the product. • Purchasing various items and packing them together will not amount to manufacture if new product does not emerge. • Ancillary and incidental process of manufacture is essential for the completion of product manufacture. Incidental is a casual process and ancillary is a substantial process. Few examples of manufacture • Coffee beans from raw coffee berries- new and different article which is recognised in trade as new and distinct commodity emerges. • Roasting, salting and spicing of nuts is manufacture. • Cotton seed from unginned cotton • Oil from oil seeds • making of pan masala by mixing various ingredients. • Paddy to rice • Stitching of cloth. • Blending and packing tea. • Making masala powder • Wheat to wheat flour • Cutting of fabrics from running length to make bedsheets. • Recording of cassette- pre- recorded audio cassettes is difficult from blank cassettes in the market. What is not manufacture? few illustrations • Testing, inspection and packing of items manufactured by others is not manufacture. • Blending and packing tea- loose tea does not lose it nature or character as such when it is put in packets of different sizes, small or large. • Cutting and polishing of diamond. • Betel nut to supari powder is not manufacture • Printing on glass bottles. • Plain glazed tile to decorated tiles. • Crushing of boulders into smaller stones. • Affixing brand name is not manufacture. • Reconditioning or repair is not manufacture. • Vanaspati from groundnut oil is not manufacture.’ • Repacking of goods is not a manufacture unless the process is specified as ‘amounting to manufacture’ • Processing food or fruits into slices is not manufacture. • Upgradation or modification in the computer system, increasing the processsing capacity of hard disk is not manufacture. • Re processing of defective goods and putting fresh label is not manufacture. Deemed manufacture: • CETA specifies some process as ‘amounting to manufacture’. • If any of these process is carried out, goods will be said to be manufactured, even if as per court decision, the process may not amount to ‘manufacture’. • Process amounting to manufacture may be mentioned in Tariff Entry also. • But it must be specified that the process amounts to “manufacture’. • Even if the process is ‘deemed manufacture’, the test of marketability is still to be satisfied. • Unless the goods are marketable after that process, duty cannot be levied. Who is a manufacturer? • Manufacturer is the person who actually brings new and identifiable product into existence. • It is an important issue in the Central Excise, since the liability to pay the duty is basically on ‘manufacturer’ or ‘producer’.(except few) • The word manufacturer 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. They are called deemed manufacturer. • Examples: a) wheat belongs to a person. But Mill owner is another person who converts the wheat into the flour. The Mill owner will be the manufacturer. b) Cloth being given to the tailor to stitch. Tailor is the manufacturer. • Manufacture/ fabrication at the site of the buyer by an independent contractor is a manufacturer • Example: assembly of crane: an independent contractor who assembles the parts in a factory will be manufacturer and not the owner of the factory. • Manufacturer through hired labour: a person may be treated as manufacturer if he engages ‘hired labour’ who may be an employee or contractor for manufacture of excisable goods. • Independent contractor having own factory and the employees are not the hired labour, then independent contractor is the manufacturer. • Raw material supplier is not a manufacturer. • Independent contractor is a manufacturer even if the manufacture is carried on in the premises of raw material supplier. • Contractor supplying labours or doing work in the premises of manufacture is not a manufacturer. • Brand owner is not the manufacturer.(BATA, BAJAJ Electricals are the brand owners who purchases goods in bulk and affix the brand name on the gods)