EXCISE LAWS

CONTENTS
Chapter Page No.

1. Basic Concepts and Definitions

2. Taxable Event

3. Valuation of Goods

4. Classification of Goods

5. Exemption from duty

6. Central Excise Rules, 2002

7. Central Excise (Removal of Goods at Concessional Rate Of Duty)

Rules, 2001

8. Export Procedures

9. Cenvat Credit Rules, 2004

10. SSI Notification

11. Demand & Recovery

12. Refund

13. Civil Proceedings

14. Criminal Proceedings

15. Powers of CEO

“Men give me credit for some genius. All the genius I have lies in this:
when I have a subject in my hand, I study it profoundly, day and night it is before me. My
mind becomes pervaded with it. Then the effort which I have made is what people are
pleased to call the fruit of genius. It is the fruit of labour and thought”
(ALEXANDER)
 TAX HIERARCHY
Constitution Union List (List I)—Entry No 84
B.R. Ambedkar

Act Central Excise Act 1944 + Central Excise Tariff Act, 1985
Parliament

Rules Sec 37 CEA, 1944

Central Govt

Regulations
CBEC

Order/Instruction/ Direction Sec 37-B CEA, 1944

CBEC

Trade Notices & Trade Advices

Chief CCE/ CCE  Issued for resolving disputes of trade – binding on lower jurisdictional officers

Note 1: Constitution of India

Division of Powers

List-I List-II List-III

Union List State List Concurrent List
1. ………..

83. Customs Duties

54. Sales Tax
84. Excise Duties

97. Any matter not falling elsewhere

Entry No 84: Duties of Excise on TOBACCO and OTHER GOODS produced or manufactured in India,
Except: Alcoholic Liquor For Human Consumption,
Opium,
Narcotics;
But including: MEDICINAL & TOILET PREPARATIONS containing alcoholic liquor, opium
or narcotics
Note 2: Act: Central Excise Act [Sec 1 to 40]
.
Sec 3 (Charging Section)
(Product) (Process) ( Place) BED - (10%)
Excisable + Production/ + India (Feb, 2010 onwards)
Goods Manufacture

SED - (10%)
Goods mentioned Process by which New Including J&K
in Schedule commodity comes into existence
[Sec 2(d)] [Sec 2(f)] [Sec 1]

# Applicability of CEA—India (meaning thereof)

India TWI EEZ (Exclusive Economic Zone) High Seas
(Land Mass) (12 NM) (200 NM) (Beyond 200 NM)

Production/manuf
acture of EG
– No ED liability

Production/manufacture of EG (except in SEZ) will

attract ED liability.

Author’s Note:
 SEZ (Special Economic Zone) refer to designated areas in countries that possess special economic regulations that are different from
other areas in the same country. [In India, SEZ are governed by SEZ Act, 2005].
 Area other than SEZ is referred as ‘Domestic Tariff Area (DTA)’.
 Territorial Waters, Continent Shelf, Exclusive Economic Zone and Other Maritime Zones Act, 1976 extends territory of India to 12
NM (Nautical Mile). It further provides that CG can extend applicability of any Act upto 200 NM (by issuance of Noficication in
Official Gazette)
 EDUCATION CESS (EC)
Sec 91 of FA, 2004: Education Cess
There shall be levied and collected, in accordance with the provisions of this Chapter as
surcharge for purposes of the Union, a cess to be called the Education Cess, to fulfil the
commitment of the Government to provide and finance universalised quality basic education.

Sec 93 of FA, 2004: Education Cess

(1) The Education Cess levied under sec 91, in the case of excisable goods, shall be
 A Duty Of Excise (in this section referred to as the EC on excisable goods),
 @ 2%
 calculated on the aggregate of ALL DUTIES OF EXCISE
(including SED or any other duty of excise
but excluding EC (on EG) chargeable under FA, 2004 &
SHEC (on EG) chargeable under FA, 2007)
which are levied and collected by the Central Government under the provisions of
 the Central Excise Act, 1944 or
 any other law for the time being in force.

(2) EC on excisable goods shall be in addition to any other duties of excise chargeable on
such goods, under the Central Excise Act, 1944 or any other law for the time being in force.

(3) The provisions of the CEA, 1944 and the rules made thereunder, shall, as far as may be,
apply in relation to the levy and collection of the EC on excisable goods.

SECONDARY & HIGHER EDUCATION CESS (SHEC)

Sec 136 of FA, 2007: Secondary and Higher Education Cess
There shall be levied and collected, in accordance with the provisions of this Chapter as
surcharge for purposes of the Union, a cess to be called the Secondary and Higher Education
Cess, to fulfil the commitment of the Government to provide and finance secondary and higher
education.

Sec 138 of FA, 2007: Secondary and Higher Education Cess

(1) The Secondary and Higher Education Cess levied under sec 136, in the case of excisable goods,
shall be
 A Duty Of Excise (in this section referred to as the SHEC on excisable goods),
 @ 1%
 calculated on the aggregate of ALL DUTIES OF EXCISE
(including SED or any other duty of excise
but excluding EC (on EG) chargeable under FA, 2004 &
SHEC (on EG) chargeable under FA, 2007)
which are levied and collected by the Central Government under the provisions of
 the Central Excise Act, 1944 or
 any other law for the time being in force.

(2) SHEC on excisable goods shall be in addition to any other duties of excise chargeable on
such goods, under the Central Excise Act, 1944 or any other law for the time being in force
and the Education Cess chargeable under FA, 2004.

(3) The provisions of the CEA, 1944 and the rules made thereunder, shall, as far as may be,
apply in relation to the levy and collection of the SHEC on excisable goods.
 Central Excise Tariff Act, 1985
8-Digit Coding System [Systematic Arrangement]
Sections: Textile & Textile Articles
 Chapters: [Yarn] [Fabric] [Readymade Garments]
Ist IInd
 Headings
Schedule Schedule
Silk Fabric
Cotton Fabric
 Sub-Headings:
BED SED 100% Cotton
[All Excisable Goods] [Selected Ex Goods]
Mixed Cotton
 Tariff-Item
Mixed with ―X‖
Mixed with ―others‖

Digits Nomenclature Example Product Description Rate of Duty

First 2 digits Chapter 62 Articles of Apparel and clothing accessories

First 4 digits Tariff Heading 62 04 Girls Suit
First 6 digits Tariff Sub-heading 62 04 19 Girls suit made up of silk
Total 8 digits Tariff Item 62 04 19 11 Embroidered Girls suit made up of silk.

Note 3: Rules:
Sec 37:
CG may make rules generally for the purposes of
carrying out the provisions of Central Excise Act, 1944.

Title of Rules Year

i) Central Excise Valuation Rules 2000 Rule 1 to 11
ii) Central Excise Rules 2002 Rule 1 to 33
iii) Cenvat Credit Rules 2004 Rule 1 to 16

Note 4: Orders/ Instructions/ Directions by CBEC = CBEC Circular

Sec 37B: Instructions to Central Excise Officers (CEO)
The CBEC may, if it considers it necessary and expedient so to do
for the purposes of uniformity
 in classification of excisable goods or
 with respect to levy of duties of excise on such
goods
issue such Orders, Instructions and Directions to the CEO as
it may deem fit,
And such officers and all other officers employed in
execution of this Act shall observe & follow such orders,
instructions and directions.
Provided that no such orders, instructions, directions shall be issued –
(a) So as to require any CEO to make a particular assessment or dispose of a
particular case in a particular manner;
or
(b) So as to interfere with the discretion of the CCE (Appeals) in the exercise
of its Appellate functions.
 CASE-A: No Uniformity in classification of product – CBEC issuing Circular taking stand that APPY FIZZ should be
classifiable as ―Fruit Juice’ (ED@8%)

XX.XX: 8% YY.YY: 16%

Fruit Aerated Water
Juice

For the Assessee:  Circular is beneficial Whether Assessee can claim benefit? :--

For the Dept:  Circular is prejudicial Whether Dept bound to follow circular? :--

Binding nature of CBEC Circular: CBEC Circulars are binding on the Department (CEO). The officers
are not allowed to take a stand contrary to those. If they pass any demand order contrary to the circular,
then such demand shall be liable to be held invalid. While striking down such demand, CEO shall not
be allowed even to argue on the merits of the case.

CASE-B: No Uniformity in classification of product – CBEC issuing Circular taking stand that HARPIC/ LIZOL should be
classifiable as ―Surface Cleaner’ (ED@16%)

XX.XX: 16% YY.YY: 8%

Stain Remover Disinfectant

For the Assessee:  Circular is prejudicial Whether Assessee bound to follow circular? :--

For the Dept:  Circular is beneficial Whether Dept bound to follow circular? :--

Binding nature of CBEC Circular: Sec 37-B binds CEO by the circulars but not the assessee. If the circular
appears to be beneficial to the assessee, assessee can claim that benefit. However, if assessee doesn’t find
the circular in his favour then assessee will be within his right to challenge that circular in appeals.
[Remember his appeal is admissible before CCE (Appeals) as CCE (Appeals) is not bound by the
circular and it can hear and decide case on merit (special exception provided in Sec 37-B) – infact,
none of the appellate authorities are bound by the circular – Appellate Authorities have full
discretion to decide the case excercising their own judgment]

 RATAN MELTING & INDUSRIES – 2008-SC [Constitutional Bench]

1) Circular is binding on CEO but not on the Court (Appellate Authorities). Circular represents merely the
Government understanding of statutory provisions. It is for the Court to declare what the particular
provision of statute says.
2) Circular taking a stand contrary to decision of SC has no existence in law. Judgment of SC will render
nugatory the contrary existing circular. And in that eventuality, Department becomes entitled to challenge the
stand taken in the circular.
 ADMINISTRATIVE SET-UP (& OFFICERS HIERARCHY)
Ministry Of Finance (MoF)

Department of Revenue (DoR)

CBDT CBEC

Chief CCE

C CCE CCE(Appeals)

E JC / Addl. Comm

O AC/DC

Other Officers of Central Excise Department

[SCE / Inspector]

HOW AN ASSESSEE WORKS UNDER EXCISE [SELF-REMOVAL PROCEDURE]

Registration Production Removal Pay ED File Return Scrutiny of
(ER-1) Return
Maintain Record Raise Invoice Monthly Basis Monthly Basis SCN
DSA: [RG-1] [Rule 11] (by 5th) (by 10th) (1 Yr / 5 Yrs)
Assess ED
[Rule 9] [Rule 10] [Rule 6] [Rule 8] [Rule 12] [Sec 11-A]

Specific Terminology under Excise

 Assessment = Adjudication CCE(Appeals)
 Assessing Officer = Adjudication Officer [AO]
 Assessment Proceedings = Adjudication Proceedings
 Assessment Order = Adjudication Order [Demand order]
 Assessment Notice = Adjudication Notice [Show-Cause Notice]

CESTAT

High Court

CJ of Delhi HC – Shri Deepak Mishra

Supreme Court

CJI – Shri S.C. Kapadia