Excise duty is commonly referred to as Central Excise duty in India. It is ‘Central’ because it is a tax levied by the Central or Union Government as opposed to State Excise duties levied by state governments. Excise duty is levied on the activity of manufacture of goods. Activities specified as amounting to manufacture in Central Excise law are liable to excise duty. Also, the products shall be mentioned in the relevant schedule of Central Excise Tariff Act, 1985 so as to attract excise duty.
Registration in Central Excise is therefore required only if a person undertakes manufacture of excisable goods. For convenience of collection, excise duty payment is postponed to the stage of removal of goods. As a measure of further liberalization, excise duty has been made payable on monthly basis. There may be situations when excisable goods need to be stored without payment of excise duty. To take care of such practical exigencies of trade, excise law provides for registration of persons like dealers who store excisable goods for downstream sales.
Given the social and economic conditions in India, excise law exempts certain categories of persons like those whose turnover is below a particular threshold limit. Persons who are covered by such exemption are not required to obtain registration.
The turnover limit for small scale exemption is Rs. 1.5 crore (2011-12). Manufacturers with higher turnover will be required to take registration under central excise law. Once a person gets himself registered, the next job is to find out the rate of duty applicable to his goods. This process is officially termed as ‘classification’ mainly because, excisable goods are methodically classified under different product groups with great deal of sub-categorisation with 8-digit numeric code against which duty rate is mentioned. Hence, the code which is called heading, sub-heading or tariff item, becomes paramount for determining the duty rate and invariably calls for vintage advisory and litigation services in classification of goods to ensure certainty of duty liability.
Excise duty is generally payable as a percentage of value of goods. On getting to know the duty rate, valuation for excise duty purpose gains importance. The process, at times, is rather complicated as there are rules providing for various methods of valuation in specified situations like goods meant for internal consumption. Added to this is the perpetually divergent views on what is to be included in the value and what is to be kept out.
Excise duty is also used as a tool to achieve different social or economic objectives by the Government of India by granting exemptions. The exemptions may provide full or partial relief. It may be for the benefit of specified persons or sectors or in specified cases. The exemptions may be open-ended when there are no conditions attached or they may be subject to fulfilling certain conditions.
Indian excise law offers tax credit scheme called Cenvat credit scheme. The scheme enables the tax-payer to take credit of excise duty paid on inputs or raw materials and such credit can be used to offset duty burden on final products. The credit scheme is riddled with numerous conditions and is known for eternal controversies. Over the years formidable compliance and litigation capabilities have ensured that evolution and interpretation of law in this area are fair and do not place undue burden on the tax payers.
Central excise law has elaborate provisions for collecting duty not paid or short paid besides those for refunding excess duty paid. To take care of such situations, the law has put in place dispute resolution system which begins internally within the department and at higher levels the remedy by way of appeal extends to specialised quasi-judicial fora and regular courts.