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Taxation system in India
Direct Taxes Indirect Taxes
Excise CustomsIncome Tax Wealth Tax
Sales Tax / VAT Service Taxes
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Taxation system in IndiaDirect Taxes Indirect Taxes
Tax on property / income, to be paid by theowner / earner
Tax on goods / services, incidence onintermediary but burden on consumers
Direct Taxes Indirect Taxes
Imposed on Persons Imposed on Goods / Services
Progressive
based on level of income /wealth (i.e., capacity to pay)
Regressive
No relation with income
Incidence & burden on taxpayer Shifting of burden by taxpayer to consumer
Administrative convenience costly &
difficult
Administrative convenience easy &
economical
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Central Excise
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Central Excise Law
Central Excise Act, 1944
Central Excise Tariff Act, 1985
Rules
Central Excise Rules, 2002
CENVAT Credit Rules, 2004
Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000
Central Excise (Determination of Retail Sale Price of Excisable Goods) Rules, 2008
The Central Excise Act, 1944 extends to the whole of India.
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Excise Duty
Excise duty is a duty on excisable goods produced or manufactured in India.
Basic Conditions of excise liability
The duty is on goods.
The goods must be excisable.
The Goods must be manufactured or produced.
Such manufacture or production must be in India.
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Excise Duty
Types of excise duty
Basic Excise duty (CENVAT).
Specific
Tariff Value
Ad veloram
Special Excise Duty.
Additional duty of excise.
Education Cess.
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Excise Duty
Levy of excise duty and taxable event
Section 3 is the charging section under Central Excise Act, 1944;
provides for levy of excise duty on all excisable goods produced or manufactured in India;
Production or Manufacture of excisable goods in India is the taxable event;
Relevant date for rate of duty and tariff valuation (Rule 4 & 5 of Central Excise Rules, 2002)
Duty is payable at the time and place of removal of goods
Relevant date for determination of rate of duty and valuation shall be the actual date of
removal
Liability to pay excise duty is on the manufacturer / warehouse-keeper
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Excisable Goods
Excisable Goods means goods specified in the schedules to the Central Excise Tariff Act, 1944
as subject to a duty of excise [Section 2(d)].
Goods has not been defined in the Act.
Sale of Goods Act, 1930 Every kind of movable property
UIO v. Delhi Cloth & General Mills Co. Ltd. Movability and marketability
Amendment to Section 2 (d) Goods capable of being bought and sold are deemed to be
marketable;
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Manufacture
Section 2 (f) Inclusive definition :-
Any process incidental or ancillary to the completion of manufactured product;
Specified as deemed manufacture in CETA
Repacking / re-labeling / alteration of MRP Specified as amounting to manufacture in CETA
UIO v. Delhi Cloth & General Mills Co. Ltd.
Bringing into existence a new substance and not just bringing some change in the
substance;
Manufacture implies a change but every change is not a manufacture, there must be a
transformation, a new and different article must emerge
Deemed manufacture Mineral Water, Conversion of powder into tablets or capsules, printing /
artwork on glasses, Refined edible oil, Betel Nut (Supari)
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Central Excise Basic ConceptsJune 5, 2010
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Manufacture Some issues
Bleaching, dyeing, printing & mercerizing of textile fabric:-
Whether duty payable at each time the fabric is subjected to one process, or
One time on final clearance of textile fabric after all the process?
Held in CCEx V. Textile Corpn. of Marathwada Ltd. (2008) that duty is payable at the final stage.
(Even if paid at each stage, CENVAT Credit available)
Manufacture vis--vis processing
Manufacture a result of one or more process;
Manufacture implies processing, however, every processing may not amount to
manufacture
[Parle Products Ltd. and J. G. Glass Industries Ltd.]
Whether packing, labeling and branding amounts to manufacture?
Whether assembly amounts to manufacture? (BPL India Ltd.)
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Change in tariff headings
Whether change in tariff heading between the input material and the final output necessary to
render finished goods liable to duty?
Inputs and final product falling under same heading :-
Manufacture is a process of bringing into existence a new substance;
Once a new substance commercially known as such emerges, it is exigible to duty;
Therefore, it is irrelevant whether the new article falls into the same tariff heading
Input and final product fall under different tariff headings :-
Mere change in tariff heading does not mean there is manufacture;
The process of bringing the change should amount to manufacture to make productexcisable
(S R Tissues)
To conclude, change in tariff heading is not relevant to determine excisability.
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Captive Consumption
Captive Consumption :-
Use/consumption of goods manufactured in one unit by another unit of the same organisation or
related organisation for further processing / manufacturing another product.
Duty liability on Captively consumed goods :-
Duty liability arises on ___________________ ?
Status of duty liability on captively consumed goods / goods removed for captive
consumption !!
Fiction of removal by explanation to Rule 5 date or issue shall be the date or removal.
Capitively consumed godds excisable only if other conditions of excisabilty fulfilled
(Goods excisable- manufacture).
Current position in Excise law Most of the intermediate product exempt from excise duty if the
final product is excisable.
Case Cipla Ltd. (2008)mere transfer to another captive unit doesnt establish marketabilty.
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Miscellaneous
Waste and Scrap :-
Waste and scrap liable to excise duty?
Earlier position v. new position ..(liable to duty if movable, marketable, manufactured
and mentioned in the tariff)
Waste of exempted goods exempt
Scrap arising during manufacture of parts for repair of plans is excisable (Grasim Industries
Ltd. 2008)
Site related activities :-
Plant and Machinery in a fully manufactured condition removed in a CKD and reassembledat site ;
Various parts are purchased/manufactured at site and a new plant and machinery comes
into existence;
Piece by piece erection of parts into a plant and machinery in immovable manner
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Manufacturer
Manufacturer Section 2(f) :-
A person who manufactures goods on his own account;
A person who manufactures goods through hired labour.
An independent contractor or job worker may himself be treated as manufacturer in case he
exercises control over the activity.
Examples -
Example Manufacturer?
Raw material supplied for manufacturing goods
on Independent job work basis
Raw material supplier OR Job worker?
Goods manufactured by job-worker based on
designs and specifications and/or trade name of
customer
Customer OR Job worker?
In case the customer exercises full control and
supervision over the job worker in the above
cases
Customer OR Job worker?
Job-worker acting as dummy or there is common
source of funding
Customer OR Job worker?
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EOU
SEZ and Domestic Tariff Area.
100% Export Oriented Undertaking :-
Section 3 Duty not chargeable on goods manufactured by a 100% EOU for export out of
India
Proviso to Section 3 In case excisable goods manufactured by a 100% EOU are brought to
any other place in India, excise duty equal to the aggregate of customs duty which would
have been levied in case of import of similar goods, shall be levied.
Valuation of the goods to be done as per the Customs Act
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Imp Definitions (Section - 2)
Factory - Any premises wherein any excisable goods are manufactured or any process
connected with the production is being carried on.
Wholesale dealer A person who buys or sells excisable goods for the purpose of trade and
manufacture.
Sale and purchase Transfer of the possession of goods by one person to another in the
course of trade for a consideration.
Broker or commission agent a person who makes contracts for sale or purchase of excisable
goods for others.
Excisable goods Goods specified in the schedules to the CETA and subject to a duty of excise
and includes salt (Explanation added for deemed marketability in case capable of being bought
and sold)
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Exercise Relevant date for rate of duty
Example Whether duty payable?
At the time of manufacture Not excisable
At the time of clearance 14% duty imposed
YES OR NO?
At the time of manufacture Exempted
At the time of clearance
Exemption withdrawn
and 14% duty restored
YES OR NO?
(Wallace Flour Mills Co. Ltd. case)
At the time of manufacture Nil rate of duty
At the time of clearance 14%
YES OR NO?
Special duty of excise
At the time of manufacture Not liable
At the time of clearance liable
YES OR NO?
(Vazir Sultan Tobacco Co. Ltd. case)
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Exercise computation of duty
Goods manufactured were liable @14% (plus 3% EC); exempted vide a notification
at the time of manufacture. Exemption notification withdrawn while clearance of
certain goods on 1-3-2010. Certain goods manufactured prior to 1-32010 removed
on 2-3-2010. Value of goods Rs. 3,00,000.
Compute excise duty payable.
Goods manufactured were liable @14% (plus 3% EC); additional duty of excise @
8%. Value of goods Rs. 3,00,000. Compute excise duty payable.
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Exercise computation of duty
Amount of excise duty
Rs. 300,000 x 14.42% = 43,260
Amount of excise duty
Basic Excise duty - Rs. 300,000 x 14% = 42,000
Add. Excise duty - Rs. 42,000 x 8% = 3,360
EC (42000+3360) - Rs. 45360 x 3% = 1,361
Total = 46,721
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Central Excise ClassificationJune , 2010