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 manufacturer 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 good

What are the types of Excise Duty?

There are three different types of central excise duties which exist in India which are as follows:

Basic Excise Duty

Excise Duty, imposed under section 3 of the 'Central Excises and Salt Act' of 1944 on all excisable goods other than salt produced or manufactured in India, at the rates set forth in the schedule to the Central Excise tariff Act, 1985, falls under the category of basic Excise Duty in India.

Additional Excise Duty

Section 3 of the 'Additional Duties of Excise Act' of 1957 permits the charge and collection of Excise Duty in respect of the goods as listed in the schedule of this act. This tax is shared between the central and state governments and charged instead of sales tax.

Special Excise Duty

According to Section 37 of the Finance Act, 1978, Special Excise Duty is levied on all excisable goods that come under taxation, in line with the Basic Excise Duty under the Central Excises and Salt Act of 1944. Therefore, each year the Finance Act spells out that whether the Special Excise Duty shall or shall not be charged, and eventually collected during the relevant financial year.

Which goods are excisable goods?

The term 'excisable goods' means the goods which are specified in the first schedule and the second schedule to the Central Excise Tariff Act, 1985, as being subject to a duty of excise and includes salt.

Who is liable to pay Excise Duty?

The liability to pay tax Excise Duty is always on the manufacturer or producer of goods. There are three types of parties who can be considered as manufacturers:

Those who personally manufacture the goods in question
Those who get the goods manufactured by employing hired labour
Those who get the goods manufactured by other parties

Is it mandatory to pay Excise Duty on all goods manufactured?

Yes, it is mandatory to pay duty on all goods manufactured, unless exempted. For example, duty is not payable on the goods exported out of India. Similarly exemption from payment of duty is available, based on conditions such as kind of raw materials used, value of turnover (clearances) in a financial year, type of process employed etc.

Different Returns Under Central Excise Duty

Following returns are to be submitted:

Monthly returns by large units.
Return by export oriented units.
Quarterly return by SSI.
Annual financial information statement.
Information relating to principal units.
Monthly return of receipt and consumption of each principal inputs.
Annual installed capacity statement.
Quarterly return by assessee's who pay Excise Duty at the rate of 1%/2% (and not manufactured any other goods).
Quarterly returns of eligible Cenvat credit invoices issued.

Different Export Procedures Under Central Excise Duty

Following are some of the export procedures:

Exports are free from Excise Duty.
One can export goods without payment of excise duty under bond under rule 19. Goods can also be exported with payment of Excise Duty and later on rebate can be claimed under rule 18.
Container containing export goods is required to be sealed by Excise Officer. Rules do not permit self sealing of such containers.
Excisable goods should be exported under cover of invoice and Form ARE-1. Goods should be exported within six months from the date of clearance from factory.
Merchant exporter has to execute a bond and issue CT-1. It is required so that goods can be cleared without payment of duty. A manufacturer has to issue a letter of undertaking.
Export to Nepal/Bhutan is required to be made on payment of Excise Duty. This rule is not applicable when supply is against international bidding.
EOU has to issue CT-3 certificate for getting inputs without payment of Excise Duty.

What is the consequence of evading payment of Excise Duty?

Under the different sections of the central excise act, the fines for evading tax can range from twenty-five to fifty per cent of the amount of duty evaded.

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Frequently Asked Questions

Common questions about Understanding Excise Duty Types and Compliance in India.

Excise Duty is an indirect tax levied on goods manufactured or produced within a country, intended for domestic consumption. The manufacturer or producer passes on this duty to the ultimate consumer, making it an indirect tax.

The goods specified in the first and second schedules of the Central Excise Tariff Act, 1985, including salt, are considered excisable goods and subject to Excise Duty.

The liability to pay Excise Duty falls on the manufacturer or producer of the goods. This includes individuals who personally manufacture the goods, those who employ hired labor for manufacturing, and those who outsource the manufacturing to other parties.

No, not all manufactured goods are subject to Excise Duty. Certain goods may be exempted from Excise Duty based on conditions such as the type of raw materials used, the value of turnover in a financial year, or the manufacturing process employed. Additionally, goods exported out of India are exempt from Excise Duty.

There are three types of central Excise Duty in India: Basic Excise Duty, Additional Excise Duty, and Special Excise Duty.

The frequency of returns varies based on the type of unit. Large units must file monthly returns, export-oriented units file returns as per their specific requirements, and small-scale industries (SSIs) file quarterly returns. Annual returns, such as financial information statements and installed capacity statements, are also required.

Goods can be exported without paying Excise Duty under bond (Rule 19) or with payment of duty and later claiming a rebate (Rule 18). Export containers must be sealed by an Excise Officer, and goods must be exported within six months of clearance from the factory, accompanied by specific documentation.

Evading Excise Duty can result in fines ranging from 25% to 50% of the amount of duty evaded, as per different sections of the Central Excise Act.

Yes, Excise Duty is generally applicable to goods exported to Nepal or Bhutan, except when the supply is against international bidding.

Export-Oriented Units (EOUs) can obtain inputs without paying Excise Duty by issuing a CT-3 certificate, which allows them to procure inputs duty-free.