What is Excise Duty

The primary and fundamental meaning of "excise duty" or Duty of excise is tax on articles produced or manufactured in the taxing country and intended for home consumption (i.e. consumption within the same country). It is an indirect duty which the manufacture or producer passes on the ultimate consumer, that is, its ultimate incidence will always be on the consumer. What attracts the duty of excise is an activity, namely, the production or manufacture of goods.

Nature and chargeability of Central Excise duty.

Central Excise duty is an indirect tax levied on goods manufactured in India. The taxable event under the Central Excise law is manufacture and the liability of Central Excise duty arises as soon as the goods are manufactured. The duty, though it becomes payable on the manufacture of goods, is collected at the time of removal of goods from the factory.

Acts and Rules for the collection of duty of Excise.

The Central Excise duty is collected under the authority of the Central Excise Act, 1944 at the rates specified under Central Excise Tariff Act, 1985. This duty is commonly referred as the Basic Excise Duty. In addition to this duty a few textile items, like fiber, yarn etc. also attract Additional Excise Duty under Additional Duties of Excise (Textiles and Textile Articles) Act, 1975. The Additional Duties of Excise (Goods of Special Importance) Act, 1957 and Miscellaneous Cess Acts provide authority for collection of Additional Excise Duty and Cess respectively on several manufactured items over and above Basic Excise Duty.

Procedure for collection of duty.

The following types of procedures are being followed by the Central Excise department for levy and collection of the Central Excise duties:-

1. Physical Control – Applicable to cigarettes only. Here assessment precedes clearance which takes place under the supervision of Central Excise officers;
2. Compounded levy scheme – Applicable to Stainless Steel Pattis/Pattas, Aluminium circle, Processed textile fabrics – by independent processors, Embroidery in the piece, in strips or motifs, ingots and billets of non alloy steel falling under heading no.7206.90 and 7207.90 and Hot re-rolled products of non alloy steel of headings nos. 7211.11, 7211.19, 7211.30, 7211.52, 7211.59, 7211.60, 7211.92, 7211.99, 7213.90, 7214.90, 7215.90, 7216.10 and 7216.90. In this case the duty is charged at a flat rate depending upon the capacity of plant and machinery.
3. Self Removal Procedure – Applicable to all other goods produced or manufactured within the country. Under this system, the assessee himself determines the duty liability on the goods he clears.