CENTRAL EXCISE: BIRD'S EYE VIEW

All goods produced or manufactured in India, other than alcoholic liquors, opium and narcotic substances, attract a federal commodity tax called Central Excise Duty. This tax is in a way comparable to Value Added Tax though it is confined to the manufacturing stage.

The nomenclature adopted for levying this duty is by and large aligned with the Customs Tariff nomenclature and generally the rates applied are ad-valorem in nature. Over the years , the incidence of this duty has been lowered and at present the average incidence of this duty is around 20%.

Registration

Every manufacturer of excisable goods, other than 'nil' rated goods, has to get registered before commencing production.

Assessment and Clearance Procedure

• All dutiable goods can be removed from a factory only on payment of duty. Exceptions to this rule are goods permitted to be removed in bond(e.g. petroleum products).
• Before removal of dutiable goods, a declaration giving the description of the goods manufactured , the tariff heading, sub heading, and the effective rate of duty is required to be filed.
• This declaration serves as the basis for assessment of duty.
• Manufacturers generally operate under self removal procedure. They determine and pay the duty on the goods before their removal from the place of manufacture.
• This procedure is applicable to all goods except tobacco products, including cigarettes, which are under physical control system.In respect of the latter, the assessment and removal is supervised by the central Excise officers.
• Manufacturers maintain records on production, stogage, and removal of excisable goods. They maintain on their own a duty payment account showing deposits made in the bank as 'Credit' and duty paid on removal as 'Debit'.
• The manufacturers file a monthly return indicating production, clearances, duty paid, goods cleared for exports under bond(without payment of duty) or on payment of duty for subsequent rebate.
• The return is assessed by the Tax Officer and in case of any under or excess payment the manufacturer/assessee is required to pay the dues or is given a refund.

Valuation of Goods :

Central Value Added Tax (CENVAT)

• Duty paid on inputs that go into the manufacture of a final product is given as credit to the manufacturers under the CENVAT scheme.
• This scheme has also been extended to capital goods used for manufacturing process. The policy thrust is towards a full fledged VAT.

Dispute Settlement

• Disputes between an assessee and the department, are resolved through quasi-judicial proceedings by the departmental officers and a tax tribunal.
• The appellate authorities function in an independent manner and observe the due process of law and the principles of natural justice
• Settlement commission has been set up to settle the disputes between the assessee and the department after the issuance of Show Cause Notice by the Department.

Tax on Services

• A tax on a few selected services is levied as a percentage of the value of services or billed amounts
• This tax is attracted on telephones, sharebroking, insurance, radio paging, advertising and courier services.