Why excise duty is charged in india

F if the undertakings are owned or controlled by the same person or by the same group;. G if one is connected with the other either directly or through any number of undertakings which are inter-connected undertakings within the meaning of one or more of the foregoing sub-clauses.

Explanation II. Explanation III. Explanation IV. Undertaking B is inter-connected with undertaking A and undertaking C is inter-connected with undertaking B. Undertaking C is inter-connected with undertaking A; if undertaking D is inter-connected with undertaking C, undertaking D will be inter-connected with undertaking B and consequently with undertaking A; and so on.

Explanation V. Explanation VI. III where any person is an associated person in relation to another, the latter shall also be deemed to be an associated person in relation to the former;]. Valuation of excisable goods with reference to retail sale price. Provided that in case the provisions of the Act, rules or other law as referred to in sub-section 1 require to declare on the package, the retail sale price excluding any taxes, local or otherwise, the retail sale price shall be construed accordingly.

Remission of duty on goods found deficient in quantity. Provided that different limit or limits of percentage may be fixed for different varieties of the same excisable goods or for different areas or for different seasons. Power to grant exemption from duty of excise. Provided that, unless specifically provided in such notification, no exemption therein shall apply to excisable goods which are produced or manufactured —.

Provided that the order for non-reversal of credit shall not apply where an assessee has preferred a claim for refund of excise duty paid by him :. Provided further that the Central Government may also specify in the notification referred to above for non-reversal of credit, if any, taken by the buyer of the said product.

Registration of certain persons. Restriction on possession of excisable goods. Offences and penalties. Provided that in the absence of special and adequate reasons to the contrary to be recorded in the judgment of the Court such imprisonment shall not be for a term of less than six months;.

Provided that in the absence of special and adequate reasons to the contrary to be recorded in the judgment of the Court such imprisonment shall not be for a term of less than six months. Certain offences to be non-cognizable. Offences by companies. Provided that nothing contained in this sub-section shall render any such person liable to any punishment provided in this Act, if he proves that the offence was committed without his knowledge or that he had exercised all due diligence to prevent the commission of such offence.

Power of Court to publish name, place of business, etc. Presumption of culpable mental state. Relevancy of statements under certain circumstances. Customs duties are computed on a specific or ad valorem basis. In other words, it is calculated on the value of goods. If there are doubts regarding the truth or accuracy of the value of goods, valuation of such item is done through the following method:.

The Indian government has increased the basic customs duty on an array of items that include refrigerators, air-conditioners, footwear, washing machines, furniture fittings, tableware, jewelry and many more. This was done in an effort to shore up the falling rupee and restrict the current account deficit. This was initiated with an aim to curb imports of specified imported items. With the increase in duty, the prices of these goods are likely to rise, dampening their demand, reducing the imports and then indirectly assisting the domestic manufacturers.

In recent years, India witnessed major reforms in the taxation system via digitalization. Under this new scheme, hard copies of the uploaded documents are not required to be produced to the assessing officers. The objective here is to minimize the physical interface between the customs agencies and trade and to maximize the pace of clearance. Products IT. The nature and extent of processing may vary from one class to another.

There may be several stages of processing, a different kind of processing at each stage. With each process suffered the original commodity experiences a change. Whenever a commodity undergoes a change as a result of some operation performed on it or in regard to it, such operation would amount to processing of the commodity.

But it is only when the change or a series of changes takes the commodity to the point where commercially it can no longer be regarded as the original commodity but instead is recognized as a new and distinct article that a manufacture can be said to take place. Process in manufacture or in relation to manufacture implies not only the production but also various stages through which the raw material is subjected to change by different operations.

It is the cumulative effect of the various processes to which the raw material is subjected to sic that the manufactured product emerges. Therefore, each step towards such production would be a process in relation to the manufacture. Where any particular process is so integrally connected with the ultimate production of goods that but for that process processing of goods would be impossible or commercially inexpedient, that process is one in relation to the manufacture.

See Collector of Central Excise, Jaipur v. Thus, to constitute manufacture the process involved must bring about a transformation and as a result of such transformation a new and different commercial article must emerge having a distinctive name, character and use.

Therefore, a mere change of form, shape or size of the same article or substance would not ordinarily amount to manufacture.

However, the definition of manufacture in the Excise Act underwent various amendments in years , , and By virtue of these amendments, 'manufacture' would now include any process which is specified as amounting to manufacture in relation to any goods in the Section or Chapter Notes specified in the First Schedule to the Central Excise Tariff Act, and in respect of goods specified in the Third Schedule to the Excise Act which involve packing or re-packing of such goods in the unit container or labeling or re-labeling of containers including the declaration or alteration of retail sale price on it or adoption of any other treatment on the goods to render the product marketable to the consumer.

In other words, by a legal fiction, certain processes have been equated with manufacture, even though as a result of such processes no new or different article emerges having a distinctive name, character or use. Excise duty, as provided under section 3 of the Excise act, is levied on the manufacture or production of 'excisable goods'.

The term 'excisable goods' has been defined to mean goods specified in the First Schedule to the Central Excise Tariff Act, However, there is no definition of the word 'goods'. It was once again left to the Courts to interpret the word 'goods'. In a catena of judgments the Supreme Court has held that in order to be goods an article must be something which can ordinarily come to the market and is brought for sale and must be known to the market as such.

Therefore, the essentiality of the concept of marketability is that the goods manufactured are known in the market or are capable of being sold and purchased in the market. This is best explained by a few cases:. In the case of Union of India vs. Limited supra , the assessee was manufacturing hydrogenated vegetable oil known as vanaspati.

During the process of manufacture, at an intermediate stage, refined oil came into existence. It was the contention of the Revenue Authorities that excise duty was leviable on such refined oil. The assessee contended that the refined oil that came into existence was not refined oil as known to the market since refined oil as known to the market must have undergone the process of deodorisation and that, in their case, the refined oil had not undergone such process.

The Supreme Court held that to become "goods" an article must be something which can ordinarily come to the market to be bought and sold and that since the refined oil, in the condition in which it came into existence in the assessee's factory, was not refined oil which could ordinarily come to the market to be bought and sold, that the said refined oil was not 'goods'.

During the process of manufacture of sugar, a gas known as 'kiln gas' emerged as a byproduct and was released to the atmosphere. The Revenue Authorities sought to levy excise duty on the said kiln gas on the ground that it was either carbon dioxide or compressed carbon dioxide. The contention of the assessee was that kiln gas was not carbon dioxide as known to the market or to the commercial community dealing in carbon dioxide.

The Supreme Court held that excise duty is levied on goods and as the Act does not define 'goods', the legislature must be taken to have used that word in its ordinary, dictionary meaning. The dictionary meaning is that to become goods it must be something which can ordinarily come to the market to be bought and sold and is known to the market. Looking at the evidence on record the Court held:. The kiln gas in question therefore is neither carbon dioxide nor compressed carbon dioxide known as such to the commercial community and therefore cannot attract Item H in the First Schedule.

Thus, before excise duty can be levied and collected on any goods, the twin tests of manufacture and marketability have to be satisfied.

The burden of proving that goods satisfy the twin tests lies on the Revenue Authorities. There are thousands of varieties of manufactured goods. All goods do not carry the same rate or amount of duty. It is not possible to identify all the goods individually. Therefore, it is necessary to identify the goods through groups and sub-groups and then to determine the rate of duty on each group or sub-groups of goods. The exercise of placing the various manufactured goods under the various groups or sub-groups is known as 'Classification' of a product.

This basically means the determination of the heading or sub-heading under which a particular product will be covered. This is a universally adopted standard to ensure uniformity in classification of goods in international trade. The First Schedule of the Tariff Act is divided into 20 sections, which broadly cover separate categories of goods. For instance Section I deals with live animals: animal products; Section II deals with vegetable products; Section XI deals with textile and textile articles; and Section XV deals with base metals and articles of base metal.

Each Section contains a number of Chapters. The First Schedule comprises of 96 Chapters. As mentioned above, each section and each chapter contains notes which act as an aid in the classification of goods. Although these provisions are quite elaborate, they are not always adequate to correctly classify a product.

However, over the years Courts and Tribunals have involved principles for the classification of products. Some of these principles are dealt with herein. Probably the most common and oft repeated principle of classification is that goods should be classified according to their popular meaning or as they are understood in commercial sense.

The test applied in such cases is: how is the product identified by the class of people dealing with or using the product? This test is applied whenever a statute does not contain any definition. The courts in India have repeatedly held that while interpreting fiscal statutes resort should be had to the commercial or popular meaning attached to terms by those dealing in them and not to any scientific or technical meaning. The trade parlance test may, however, have some limitations.

For instance when a new product is introduced in the market, or where the structure of the heading in the Chapter is entirely based on technical identification of various products, the commercial parlance by which a particular product is known would have no relevance. The rate of duty may either be a specific rate, i. Thus, for determining the rate of duty applicable on a particular product the first step is to determine the relevant heading or sub-heading which the particular product is covered.

Against the relevant entry the rate of duty of excise payable on the product is mentioned.