CENTRAL EXCISE & CUSTOMS TAX

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EXCISE DUTY
Excise duty is levied on production or manufacture and not on sale. Liability of excise duty arise only on removal of goods from the place of storage. Excise duty is an expense while calculating the profits in accounting. Excise duty is levied if goods are marketable.
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CLASSIFICATION OF GOODS
Classification of goods adopted in central excise Tariff Act and Custom Act is common. The classification uses 8-digit nomenclature.

CETA consists of two schedules; the first schedule gives basic excise duty (i.e., CENVAT duty) and second schedule gives export duties.

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 Animal Products (Section I - Chapters 1 to 5) Vegetable Products (Section II - Chapters 7 to 14) Animal or vegetable fats (Section III Chapter 15) Prepared foodstuffs, beverages (Section IV Chapters 16 to 24) Mineral Products (Section V - Chapters 25 to 27) Chemicals, Fertilisers, soap etc. (Section VI Chapters 28 to 38)
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 Plastics and Rubber and their articles (Section VII - Chapters 39 and 40) Leather and articles (Section VIII - Chapters 41 to 43) Wood, cork, straw and their articles (Section IX - Chapters 44 and 46) Pulp, Paper, Paper-board and articles (Section X - Chapters 47 to 49) Textile and Textile Products (Section XI Chapters 50 to 63)
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 Footwear, Headgear, Umbrellas, Articles of human hair (Section XII -Chapters 64 to 67). Articles of stone, plaster, ceramic, glass (Section XIII - Chapters 68 to 70) Pearls, precious metals (Section XIV Chapter 71) 15. Base metals and articles of base metal (Iron, Steel, Copper, Nickel, Zinc, Tin etc.). (Section XV - Chapters 72 to 83)
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 Machinery and mechanical appliances, electrical equipments, television etc. (Section XVI - Chapters 84 and 85) Vehicles, Aircrafts, vessels (Section XVII Chapters 86 to 89) Optical, photographic, medical, surgical instruments, clocks, musical instruments (Section XVIII - Chapters 90 to 92) Arms and Ammunition (Section XIX Chapter 93)
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 Misc. Manufactured articles like Furniture, toys etc. (Section XX - Chapters 94 to 96) Works of Art, collectors pieces and antiques (Section XXI Chapters 97 to 99) This section is only in Customs Tariff and not in Central Excise Tariff.

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VALUATION OF GOODS
Excise duty is payable on the basis of: 1. Specific duty based on measurement like weight, volume, length etc. 2. Percentage of Tariff value. 3. Maximum Retail Price. 4. Compounded levy Scheme. 5. Percentage of Assessable Value (Advalour duty)

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Specific Excise Duty

Specified excise duty is the duty on units like weight, length, volume, etc.
Items Cigarettes Matches Sugar Marble slab and tiles Colour TV Cement Basis of Specific Excise Duty length of cigarette per 100 boxes per quintal square meter screen size in cm. per tonne

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Excise Duty on Tariff Value

Tariff Value is the value fixed by government from time to time. Government can fix different tariff value for different classes. Tariff Value is fixed for Pan Masala, Ready Made Garments.

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Excise Duty on MRP

Government can specify the goods on which excise duty will be based on MRP. MRP shall be the maximum price at which excisable goods shall be sold to the final consumers. It includes taxes, freight and transport charges, commission to dealers etc.

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Compounded Levy Scheme

In case of small manufacturer, government allow small manufacturer to pay excise duty on the basis of specified factors like size of equipment employed, at the specified rates.

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Excise Duty on Assessable Value

Value of transaction i.e., the value at which transaction takes place, in other words it is the price actually paid or payable for the goods on sales. It is also called transaction value. It includes freight and transportation charges, commissions to dealer etc.

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 Excise duty is paid on transaction value or assessable value if: 1. Goods are sold at the time and place of removal. 2. Buyer and assessee (Manufacturer/seller) are not related. 3. Price is the only consideration for sale, i.e., money or some valuable item is received on sale. Assessable Value excludes amount of excise duty, sales tax or other tax actually paid.
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 Assessable Value excludes amount of excise duty, sales tax or other tax actually paid. Following items are included: 1. Primary packing or main packing or necessary packing. 2. Royalty charges. 3. Commission to sales agent.

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 Following items are excluded: 1. Secondary packing. 2. Returnable primary packing like cold drinks bottles, LPG cylinders. 3. Discount given at the time of sales.
Assessable Value = (Sales Price less Deductions) (1+rate of duty)

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REGISTRATION OF GOODS
According to section 6 of Central Excise Act, every manufacturer or producer,who produces excisable goods, must get two types of registration: 1. Registration for manufacturer. 2. Registration for warehouse, where goods are stored.

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Rules of Registration
1. Separate registration is required for each premise. 2. Registration is not transferable. 3. Registration certificate shall be given within 7 days of application for registration. 4. If manufacturer cease to produce i.e., stops the production permanently then he should apply for de-registration. 5. Registration can be revoked or suspended by AC/DC if any condition of the Act or Rules is breached.
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CLEARANCE OF GOODS
Taking goods out of factory. Thus, finished goods can be stored not removed in the place of manufacture (factory) without payment of duty. There is not time limit for removal of goods from place of manufacture

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LAWS RELATING TO CENTRAL EXCISE

Central Excise Act, 1944(CEA) : The basic Act which provides the constitutional power for charging of duty, valuation , powers of officers, provisions of arrests, penalty, etc. Central Excise Tariff Act, 1985 (CETA): This classifies the goods under 96 chapters with specific codes assigned. Central Excise Rules, 2002: The procedural aspects are laid herein. The rules are implemented after issue of notification.
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 Central Excise Valuation (Determination of Price of Excisable Goods) Rules,2000: The provisions regarding the valuation of excisable goods are laid down in this rule. Cenvat Credit Rules, 2004: The provisions relating to Cenvat Credit available and its utilisation is mentioned.

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DUTY PAYMENT PROVISIONS

Goods cleared from factory are cleared under an invoice Duty is payable on monthly basis by 5th of the next month in which duty payment becomes due Duty is paid through current account called PLA and /or Central Value Added Tax Credit Small Scale Industry (SSI) is required to pay the duty by 15th of the next month. Duty is paid by assessee through current account known as PLA (Personal Ledger Account). 6/7/2013 23

CENVAT
CENVAT has its origin from the system of VAT This system of VAT was introduced in Central Excise Act in 1986 and it was named as MODVAT (Modified VAT) later in 2000 the name was changed to CENVAT.

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EXCISE DUTY SET OFF PROVISIONS

The manufacturer has to pay tax on the value of goods manufactured but taking the VAT system he can claim the tax credit i.e., CENVAT credit of the tax paid on: 1. Input goods used in manufacture 2. Input services used in manufacture.

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 It should be noted that no CENVAT credit is available if: 1. Final production is exempt from excise duty. 2. The document showing proof of payment of duty on input is not available.

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 Input output relation: There need not be an input output relation for claiming CENVAT credit e.g: duty paid on automobile components used in automobile manufacturer can be adjusted against duty on textile production.

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CENVAT credit on Capital Goods

Any duty paid on machinery and plant, spare parts of machine, tools, dies etc. used in manufacture can also be adjusted against duty payable on production. Up to 50% credit is available in current year and balance in subsequent financial year. Motorcar is not a capital asset and for the purpose of CENVAT Credit for all manufacture.
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THE CENTRAL EXCISE TARIFF 2012-13

GENERAL EXEMPTIONS I. VALUE BASED EXEMPTION NOTIFICATIONS FOR SMALL SCALE
Exemption to first clearances of specified goods upto a value of Rs. 1 crore if CENVAT facility not availed and exemption to goods captively consumed.

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CENTRAL EXCISE EXEMPTION NOTIFICATIONS UNDER VARIOUS EXPORT PROMOTION SCHEMES

SPECIAL ECONOMIC ZONES EOUS, UNITS IN EPZS, STPS OR EHTPS EXEMPTION TO EXPORT GOODS FOR REPAIRS ETC EXEMPTION TO EXCISABLE GOODS SENT FOR TRADE FAIR, EXHIBITION ETC
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 EXEMPTION NOTIFICATIONS RELATING TO GOODS MANUFACTURED IN SPECIFIED AREAS Exemption to specified goods manufactured by Units located in specified areas of North Eastern States equal to duty of excise and additional duty of excise paid in cash Exemption to specified goods manufactured and cleared by Units located in North Eastern States equal to duty of excise and additional duty of excise paid in cash

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EXEMPTION TO GOODS CAPTIVELY CONSUMED

Exemption to goods manufactured in a factory and captively consumed for the manufacture of final products, s ubject to conditions of specified notifications Exemption to capital goods and all goods (other than LDO, HSD and petrol) captively consumed for manufacture of final products (other than matches)

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 Exemption to goods manufacture d in a workshop and used withi n the factory for repairs and maintenance of machinery installed therein
Exemption from additional duty of excise leviable under Section 85 of the Finance Act, 2005 in respect of goods,captively consumed
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EXEMPTION TO GOODS MANUFACTURED IN GOVT. FACTORIES AND SUPPLIED TO DEFENCE Exemption to goods supplied for Defense and other specified purposes Exemption to goods manufactured in prison, specified units of Defense Ministry, shipyard, specified tool rooms/ institutions and Bharat Dynamics Ltd. and supplied for specified purposes

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 Exemption to goods manufactured in Ordnance Factories, Mints and factories belonging to Central Govt. and intended to be used by Armed Forces of the Union or by such ordinance factories. Exemption to all the goods and materials manufactured by M/s. Nuclear Fuel Complex, Hyderabad Exemption to specified goods manufactured in factories belonging to State Govt. and intended for use in any of its department
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EXEMPTION TO TECHNICAL, EDUCATIONAL AND RESEARCH INSTITUTES

Exemption to goods produced in a Technical, Educational or Research Institute during the course of training, experiment or research Exemption to specified goods suppliedto a Public Funded Research Institution, University, IIT, IISC, REC or a noncommercial Institution other than a hospital Exemption for 3 years to patented goods manufactured by an Indian owned company, National Lab, Public Funded Research Institution or University
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EXEMPTION TO GOODS PRODUCED WITHOUT USE OF POWER AND FOR UNITS IN RURAL AREAS

Exemption of specified goods produced in a Village Industry and marketed by KVIC Exemption to specified goods manufactured in a rural area by specified manufacturers

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EXEMPTION TO CERTAIN GOODS AND INDUSTRIES

GE-40. Exemption to handicrafts, scented chunnam, katha, vibhuti, contraceptives, enamelware, laminated jute bags, pyrites, fly ash, coke oven and blast furnace gas, sludge, leather board, animal drawn vehicles, erasers and spent fullers earth GE-41. Exemption to all items of machinery and their components/parts and pipes required for setting up of water supply plants
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 GE-42. Exemption to all items of machinery and their components/parts required for setting up of a project for the gener ation of power using non- conventional materials GE-43. Exemption to improved chulhas made of metal or pottery.

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 GE-44. Exemption to strips of plastics, films of plastics, parts and components of one day alarm time pieces, flavouring essences, plaster of paris moulds and refractory container used as inputs in the manufacture of specified final products. GE-45. Exemption to all the goods supplied to UN or an International Organisation for their official use or for supply to G.O.I. approved projects financed by them
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 GE-46. Exemption to capital goods, components and raw materials cleared for repair of goods falling under headin g Nos. 89.01, 89.02, 89.04, 89.05(exc luding floating or submersible drilling or production platforms) GE-47. Exemption to waste and parings arising during manufacture of exempted goods

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NOTIFICATIONS PRESCRIBING EFFECTIVE RATES OF DUTY ON THE GOODS OF VARIOUS CHAPTERS

GE-48. Exemption to all the goods falling within Schedule to the Additional Duties of Excise (Textile and Textile Articles) Act GE-49. Effective rates of additional duty (in lieu of Sales Tax) on specified goods of Chapter 24 and specified textiles GE-50. Effective rates of duties on specified goods of various Chapters GE-51. Effective rates of duty on textile articles falling under Chapters 50 to 63
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 GE-52. Effective rates of duty on textile articles falling under Chapter 50 to 63 GE-53,54,55,56,57,58,59. Exemption and effective rate of duty on specified goods GE-60,61 61A, 61B,61 D. Exemption to goods falling under various chapters

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XI EXEMPTION TO CERTAIN GOODS FOR REHABILITATION WORK

GE-62. Exemption to certain goods for rehabilitation work in tsunami affected districts

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XII EXEMPTION TO CERTAIN GOODS WHEN CLEARED AGAINST A SERVED FROM INDIA SCHEME CERTIFICATE.

GE 63 exemption to certain goods when cleared against a served from India Scheme Certificate issued under paragraph 3.6.4 of the Foreign Trade Policy GE-64. Exemption on all items of machinery, including prime movers, instruments, apparatus and appliances, control gear and transmission equipment and auxiliary equipment and components, required for initial setting up of a solar power generation project or facility. 27.2.2010
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XIII

EXEMPTION - MISCELLANEOUS

GE-65. Exemption to all goods supplied to the United Nations or an international organisation for their official use GE-66 Exemption to waste, parings and scrap arising in the course of manufacture of goods

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CUSTOMS TAX

Introduction
The customs act was formulated in 1962 to prevent illegal imports and exports of goods. Besides all imports are sought to be subject to a duty with a view to affording protection to indigenous industries as well as to keep the imports to the minimum in the interests of securing the exchange rate of Indian currency

 The levy and the rates of customs duty in India are governed by the Customs Act 1962 and the customs Tariff Act 1975.

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Customs duty on imports and exports

Section 12 of Customs Act, often called charging section, provides that duties of customs shall be levied at such rates as may be specified under The Customs Tariff Act, 1975, or any other law for the time being in force, on goods imported into, or exported from india.

Basic customs duty

All goods imported into India are chargeable to a duty under Cutoms Act 1962 The rates of this duty , popularly known as basic customs duty, are indicated in the First Schedule of the Customs Tariff Act, 1975 as amended from time to time under Finance Acts The duty may be fixed on ad-valorem basis or specific rate basis

 The duty may be a percentage of the value of the goods or at a specific rate The central government has the power to reduce or exempt any good from these duties

Additional duty of customs

This countervailing duty is livable as additional duty on goods imported into the country and the rate structure of this duty is equal to the excise duty on like articles produced in India The base of this additional duty is the value of imports plus the duty levied earlier If the rate of this duty is on ad valorem basis, the value for this purpose will be the total of the value of the imported article and the customs duty on it

Export duty
Under customs act 1962, goods exported from India are chargeable to export duty. The items on which the export duty s chargeable and the rate at which the duty is levied are given in the customs tariffs act, 1975 as amended from time to time Finance Act However, the government has emergency powers to change the duty rates and levy fresh export duty depending on the circumstances

Auxiliary duty of customs

This duty is levies under the Finance Act and is leviable all goods imported into the country at the rate of 50% of their values However this statutory rate has been reduced in the case of certain types of goods into different slab rates based on the basic duty chargeable on them

Cesses
Cesses are leviable on some specified articles of exports like coffee, coir, lac, mica, toacco, marine produts, cashew kernels , black pepper, cardamom, iron ore, oil cakes, animal feed and turmeric

These cesses are collected as part of customs duties and are then passed on to the agencies in charge of the administration of the concerned commodities

Educational cess on customs duty An educational cess has been imposed on imposed goods with effect fro 9/7/2004

The cess will be 2% and 2%+1% of the aggregate duty of customs excluding safeguard duty , countervailing duty , anti Dumping duty

Protective Duties
Tariff commission has been established under Tariff Commission Act. 1951 If the Tariff Commission recommends and central government is satisfied that immediate action is necessary to protect interest of Indian industry, protective customs duty at the rate recommended may be imposed under section 6 of customs tariff Act The protective duty will be valid till the date prescribed in the notification

Anti Dumping Duty on dumped articles

Often, large manufacturer from abroad may export goods at very low prices compared to prices in domestic market Such dumping may be with intension to cripple domestic industry or to dispose of their excess stock. This is called dumping

 In order to avoid such dumping, central government can impose, under section 9A of Customs Tariff Act, anti- dumping duty Levy of such anti dumping policy is permissible as per WTO agreement Anti dumping action can be taken only when there is an Indian producing like articles

Safeguard duty
Central governmnet is empowered to impose safeguard duty on specified imported goods if central government is satisfied that the goods are being imported in large quantities and under such conditions that they are causing or threatening to cause serious injury to domestic industry

 Such duty is permissible under WTO agreement Safeguard duty is a step in providing a need based protection to domestic industry for a limited period, with ultimate objective of restoring free and fair competition

National Calamity Contingent Duty

A National Calamity Contingent Duty(NCCD) of customs has been imposed in section 129 of Finance Act , 2001 This duty is imposed on pan masala, chewing tobacco and cigarettes it varies from 10% to 45%- NCCD of customs of 1 % was imposed on motors cars, multi utility vehicles and two wheelers and NCCD of Rs 50 per ton was imposed on domestic crude oil

 There are different rates of duty for different goods imported from certain countries in terms of bilateral or other agreement with such countries which are called preferential rate of duties the duty may be percentae of the value of the goods or at specified rate

Export procedure
Entry outward Loading in conveyance can start after entry outward is given y customer officer Export manifest/ export report Person in charge of conveyance is required to submit export manifest or export report Registration with DGFT and EPC Exporter has to be obtaining IEC number from DGFT in advance

Third party exports Exports can be by manufacturer himself or by third party. Merchant exporter means a person engaged in trading activity and exporting or intending to export goods Shipping bill Export is required to submit Shipping Bill with required documents for obtaining the permission to export

Import procedure
E-filing of documents Goods should arrive at customs port/airport only. Most of customs procedures are computerized. E filing of documents is required Import manifest or import Persons in charge of conveyance is required to submit import manifest or import report

Entry inwards Goods can be unloaded only after Entry inwards Risk management system Self Assessment on basis of Risk management System(RMS) has been introduced in respect of specified goods and importers

Import procedures
Bill of entry for home consumption on payment of customs duty Importer has to submit Bill of Entry giving details of goods being imported, along with required documents. Electronic submission of documents is done in major ports White Bill of Entry is for home consumption. Imported goods cleared on payment of customs duty

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Bill of entry for warehousing Yellow bill f entry is for warehousing. It is also termed as into bond Bill of Entry as bond is executed. Duty is not paid and imported goods are transferred to warehouse where these are stored. Green bill of entry is for clearance from warehouse on payment of customs duty . It is for ex-bond clearance