Excise Duty

Administration

•The Central Excise law is administered by the

Central Board of Excise and Customs (CBEC or
Board) through its field offices, the Central Excise
Commissionerates.

•For this purpose, the country is divided into 10

Zones and a Chief Commissioner of Central
Excise heads each Zone. There are total 61
Commissionerates in these Zones headed by
Commissioner of Central Excise.
For enforcing the central excise law and collection
of Central Excise duty the following types of
procedures are being followed by the Central Excise
Department:
•Physical Control – Applicable to cigarettes only.
Here assessment precedes clearance which takes
place under the supervision of Central Excise
officers;
•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 and clears the goods.
 Structure For Excise
Chairman/Board Members of Customs & Central Excise

Chief Commissioner
BASIC CONDITIONS FOR EXCISE LIABILITY  
          Section 3 of Central Excise Act ( often called the
'Charging Section' ) states that 'There shall be levied
and collected in such manner as may be prescribed
duties on all excisable goods other than salt which
are produced or manufactured in India . These words
are same as those used in Entry No 84 to list I. This
definition of Central Excise duty is vital, because it
clearly signifies that there are four basic conditions
for levy of Central Excise duty.
(1) The duty is on goods.
(2) The goods must be excisable.
(3) The goods must be manufactured or produced
(4) Such manufacture or production must be in India.
Unless all of these conditions are satisfied, Central
Excise Duty cannot be levied.
TYPES OF EXCISE DUTY
There are three types of Central Excise duties
collected in India namely

1)Basic Excise Duty

This is the duty charged under section 3 of the

Central Excises and Salt Act,1944 on all
excisable goods other than salt which are
produced or manufactured in India at the rates
set forth in the schedule to the Central Excise
tariff Act,1985.
2). Additional Duty of Excise

Section 3 of the Additional duties of Excise (goods

of special importance) Act,1957 authorises the levy
and collection in respect of the goods described in
the Schedule to this Act. This is levied in lieu of
sales Tax and shared between Central and State
Governments. These are levied under different
enactment's like medicinal and toileteries
preparations, sugar etc. and other industries
development etc.
3). Special Excise Duty

As per the Section 37 of the Finance Act,1978 Special excise

Duty was charged on all excisable goods on which there is a
levy of Basic excise Duty under the Central Excises and Salt
Act,1944.Since then each year the relevant provisions of the
Finance Act specifies that the Special Excise Duty shall be or
shall not be levied and collected during the relevant financial
year.
Constitutional & Legal provisions behind levy
of Service Tax in India
 Constitutional Validity
            Article 265 of the Constitution lays down that no tax shall be levied or collected
except by the concerned authority. Schedule VII divides this subject into three
categories-

a) Union list (only Central Government has power of legislation)

b) State list (only State Government has power of legislation)
c) Concurrent list (both Central and State Government can pass legislation).

 To enable parliament to formulate by law principles for determining Service Tax by the
Central Govt. & collection of the proceeds there of by the Central Govt. & the State, the
amendment vide constitution (95th amendment) Act, 2003

 Consequently, new article 268 A has been inserted for Service Tax levy by Union Govt.,
collected and appropriated by the Union Govt.,  and amendment of seventh schedule to
the constitution, in list I-Union list.
 Service Tax
 Service tax is payable @ 10% of the 'gross
amount' charged by the service provider for
providing such taxable service. The Education
Cess is payable @ 2%, and Secondary and
Higher Education Cess payable @ 1% of the
service tax payable.
 Karnataka State:
› Service tax collected (2009-10) Rs4891.79Cr
 Legal provisions
 Activities covered under Service Tax

      The provisions relating to Service Tax were brought into force with
effect from 1st July 1994. It extends to whole of India except the state of
Jammu & Kashmir. The services, brought under the tax net in the year
1994-95 ,are as below:
 (1) Telephone
 (2) Stockbroker
 (3) General Insurance       
    The Finance Act (2) 1996 enlarged the scope of levy of Service Tax covering three
more services, viz.,
 (4) Advertising agencies,
 (5) Courier agencies
 (6) Radio pager services.

        But tax on these services was made applicable from 1st November,
1996.
 Validity
 Constitutional validity upheld – Advertising Services
› Service tax is not on advertisement but on advertising services provided in
connection with advertisement
› Petition challenging of service tax on advertisement services was dismissed. Levy of
service tax on this category of service was held to be constitutionally valid
› Addition Advertising Vs Union of India [1998] 98 ELT 14 (Guj.).

 Constitutional validity of service tax on advertising agency upheld

› Tax is levied on the services provided by the advertising agency in relation to
advertisement and it is not the tax on the advertisement
› Service tax levied on advertising agents do not fall under Entry 55 of State List
( List II ) of Constitution
› Levy held to be valid and in accordance with the provisions of the Constitution.
› Advertising Club Vs Central Board of Excise & Customs [2001] 131 ELT 35
(Madras).
 Validity
 Constitution Validity Upheld – Photography
services
› Constitutional validity of service tax on services
provided by photography studio or agency held to be
valid and within the competence of the Government
› Also held that the double taxation can not be a ground
for invalidating a fiscal statute
› No discrimination by not imposing service tax on free
lancers
› Kerala Colour Lab Association Vs Union of India [2003]
156 ELT 17 (Ker.) (HC)
 Validity
 Constitutional Validity upheld – Tour operator &
Rent-a-Cab
› Held that the stage carriage operators, contract carriage
operators, cab/maxi cab operators and rent a cab scheme
operators are liable to pay service tax
› Provisions making the above services taxable and within
the legislative competence of the Government
› All writ petitions filed in this regard accordingly
dismissed.
› Secy. Federation of Bus Operator Association of T.N. Vs
Union of India [2001] 134 ELT 618 (Madras-HC)
 Validity
 Constitutional Validity Upheld – Outdoor
Caterer
› Levy of tax on the said service held to be within the
legislative competence of the Government and
otherwise constitutionally valid and in order
› It does not violates Article 14 of the Constitution.
› Tamilnadu Hotels Associations Vs Union of India
[2001] 133 ELT 265 (Madras HC)
 Annual Maintenance Contract
 Sales Tax and Service Tax cannot be levied on
the same item. Once sales tax is levied, there
cannot be levied a service tax.
 Not applicable to works contract/composite
contract
 Xerox Modicorp. Ltd. vs. State of Karnataka
142 STC 209 (S.C.)
 IDEA mobile communication Ltd. vs. CCE
Trivandrum [2006] 6 STJ 209 (Tri.-Bangalore)
 Medical / Hospital

 Dispensing of medicines in the course of

Treatment – Not sale of goods
 Commissioner of Sales Tax U.P. vs. Dr. Sukh Deo 23 STC
385 (S.C.)
 Material Consumed In the Course of the
Execution of the Contract – Cannot be said to
be sold
› Pest Control India Ltd., vs. UOI & Others 75 STC
188 (Patna)
CUSTOMS DUTY
It is a type of indirect tax which is realized on goods of
international trade.

In economic sense, it is a kind of consumption tax.

Tariff which is actually a list of commodities along with the

leviable rate of tax is popularly understood as Customs duty.
The Acts under Customs Duty in India:

 Foreign Trade (Exemption from application of Rules

in certain cases) Order, 1993
 Customs Act, 1962
 Notifications

 The Central Government may issue notifications in the

Official Gazette for the purpose of the act.

 Emergency powers are granted to the Central government

to increase import or export duties.

 The increase in these duties should be notified in the

session of Parliament or should be placed within seven days
before the next session of the Parliament.

 The notification is not considered to be valid if it is not

approved within a span time of fifteen days.
Rules

To carry out the purpose of the act several rules are made by the
Central Government. The few among these rules are:

 Custom Valuation Rules, 1988 for valuation of imported

goods that calculates the custom duty payable.

 Customs and Central Excise Duties Drawback Rule, 1971 for

calculating rates of duties as drawbacks on exports.
Mode of Levy of Customs Duty
 Specific Duties: Specific custom duty is a duty imposed on each and
every unit of a commodity imported or exported.

 Advalorem Duties: Advalorem custom duty is a duty imposed on the

total value of a commodity imported or exported. In case of
Advalorem custom duty, the physical units of commodity are not
taken into consideration.

 Compound Duties: Compound custom duty is the combination of

specific and advalorem custom duties. In this case, the quantities as
well as the value of the commodity are taken into consideration.
 Types of Duties
 Basic Duty
 Additional Duty
 Anti-dumping Duty
 Protective Duty
 Export Duty
Basic Duty:

 This is the basic duty levied under the Customs Act. The rate
varies for different items from 5% to 40%.
Additional Duty (Countervailing Duty) (CVD):

 This is levied under section 3 (1) of the Custom Tariff Act and
is equal to excise duty levied on a like product manufactured
or produced in India.

 If the product is leviable at different rates, the highest rate

among those rates is the rate applicable. Such duty is leviable
on the value of goods plus basic custom duty payable.

 Additional Duty is levied under section 3(3) of the Customs Act by

central Govt. to compensate duty on inputs used by Indian
manufacturers
Anti-dumping Duty:

Central Government may levy additional duty equal to the margin of

dumping on some imported articles, if the goods have been sold at less
than normal value. Pending determination of margin of dumping, such
duty may be provisionally imposed.

Dumping duty can be imposed even when goods are imported

indirectly or after changing the condition of goods.

There are certain restrictions on imposing dumping duties

Protective Duty:

 Central Government may levy protective anti-dumping duties at

the rate recommended on specified goods.

 The notification for levy of such duties must be introduced in

the Parliament in the next session by way of a bill or in the same
session if Parliament is in session.

 If the bill is not passed within six months of introduction in

Parliament, the notification ceases to have force but the action
already undertaken under the notification remains valid.
Duty on Bounty Fed Articles:

 In case a foreign country subsidises its exporters for

exporting goods to India, the Central Government may
impose additional import duty equal to the amount of such
subsidy or bounty.

 If the amount of subsidy or bounty cannot be clearly

determined immediately, additional duty may be collected on
a provisional basis.
Export Duty:

Such duty is levied on export of goods. At present very few

articles are subject to export duty. The main purpose of this duty
is to restrict exports of certain goods.
Cases
Controversy over Ferrari customs waiver:
In commemorating Tendulkar's feat of equalling Don Bradman's 29 centuries in
Test Cricket, automotive giant Ferrari invited Tendulkar to its paddock in
Silverstone on the eve of the British Grand Prix (23rd July 2002) to receive a
Ferrari 360 Modena from the F1 world champion Michael Schumacher.
On 4 September 2002 India's then finance minister Jaswant Singh wrote to
Tendulkar telling him that the government will waive customs duty imposed on
the car as a measure to applaud his feat.
It is claimed that the proposals to change the law (Customs Act) was put forth in
Financial Bill in February 2003 and amendment was passed as a law in May
2003. Subsequently the Ferrari was allowed to be brought to India without
payment of the customs duty. When the move to waive customs duty became
public in July 2003, political and social activists protested the waiver and filed
PIL in the Delhi High Court.
The rules at the time stated that the customs duty can be waived
only when receiving an automobile as a prize and not as a gift.

Under normal circumstances (like importing for personal use),

the total Customs duty incidence on cars comes to around 180%.
The car can only be imported, if the person is transferring
residence into India and the engine capacity is less than 1600 cc
(for new cars), there is no cc limit for old and used cars (in
possession for more than 1 year).
Mr. X has a digital photo camera which he bought in South
America. He is working there on an assignment and will return
to India after two months. He doesn’t have the receipt of digital
photo camera which he bought for USD 400, almost four months
ago. How can he prove the actual cost and the usage time of it, at
airport for customs duty? What will be the extent of tax
exemption?

The Indian Customs will have the approximate value of digital

camera of popular make/brands. Mr. X can also get a copy of the
manufacturers brochure/printed pricelist of the digital camera,
from any dealer and that can be shown to Customs. Besides, he
is entitled to have a free allowance of up to Rs 12000/-.
Case Related to Service Tax (Link)
Thank You !

Amar
Anish
Anubhav
Gaurav Jain
Sanjeeb
Srinath