Excise Duty

What is Excise Duty?

Excise duty refers to the tax levied on the manufacture of goods within the country. It is a must to know that GST subsumed with indirect taxes including excise duty. So, in short, Excise duty technically does not exist in India except on a few items such as petroleum and liquor. Central Board of Excise and Customs (CBEC) holds responsibility for collecting Excise duty.

Excise Duty is a form of Indirect Tax of which collection is being done by a retailer or an intermediary from consumer and after that, it is being paid to the Government. Excise duty is being payable on the manufacture of goods. It is being levied at a time when goods being moved from the warehouse or place of production for sale. There is no requirement for imposing excise duty on the actual sale of goods, as Excise duty already imposing at the time of manufacture of goods.

Acts and Rules Governing Excise Duty in India?

The two acts underline the laws related to the levying of Excise duty that extends to the whole of India.

The legal framework around Excise Duty is majorly governed by the two acts-

Central Excise Act, 1944

Central Excise Tariff Act, 1985

Central Excise duty rates are being defined by the Central Excise Tariff Act, 1985. The Central Excise Act majorly provides the definitions related to excise while the Central Excise Tariff Act includes an elaborate schedule of excisable goods and the tariffs on them. The CBEC, which functions under the leadership of the Finance Minister, administers the levy of excise and custom laws in the country.

What are the different forms of Excise Duty in India?

Basic Excise Duty Additional Excise Duty Special Excise Duty

It is also sometimes referred to as the Central Value Added Tax (CENVAT). This type of Excise duty is being imposed on goods that are classified under the first schedule of the Central Excise Tariff Act, 1985.

This duty imposed under Section 3(1)(a) of the Central Excise Act, 1944 and levied on all excisable goods in the country except Salt.

As per Section 3 of the Additional Duties of Excise (Goods of Special Importance) Act, 1957, this duty levied on goods listed in Schedule 1 of the given act.

This additional duty is being levied on some specific goods and is charged by the Central and State Government as a substitute for the Sales Tax.

The Additional Duties of Excise (Textiles and Textile Articles) Act, 1978 also provides for similar legislation.

This kind of duty is levied on special goods specified under the Second Schedule to the Central Excise Tariff Act, 1985.

Who is liable to pay Excise Duty?

Person or entity that deals in the manufacturing of goods in question.
Person or entity that got the manufacturing of goods by hiring labour.
Person/entity that got the goods manufactured by other parties.

When should the Excise duty be paid?

Excise duty is being levied on the manufacturing of goods and is paid at a time when goods are ‘removed’. The Central Excise (Amendment Rules, 2002 Rule 4) main emphasis is upon the same and notifies that removal of goods for sale is not a taxable event; it is only for the sake of convenience.

Central Excise (Amendment Rules, 2002 Rule 8 provides that if goods being removed from the warehouse for sale, then, in that case, Excise duty must be paid on the 5th of the following month. If the payment is made via net banking, the date is the 6th of the following month. This rule is applicable on all the months except for March in which the payment should be made within 31st March.

Process to make payment of Excise Duty

From October 1, 2014, Excise Duty is being paid via Net Banking by all the taxpayers is a mandate. One needs to make use of the CBEC payment gateway called the Electronic Accounting System in Excise and Service Tax.

Steps are as follows:

Step 1 Visit on the payment website -cbec-easiest.gov.in and select the e-payment option.

Step 2 Enter the 15-digit Assessee Code allotted by the jurisdictional Commissionerate. Code verification will be done online.

Step 3 Fill in the assessee details like name, address, jurisdictional Commissionerate information, etc.

Step 4 From the tax-type menu, select the accounting Codes for Excise.

Step 5 After doing the selection of accounting code, select the bank through which you want to make the payment.

Step 6 Before being redirected to the website of the bank, you get an option on the CBEC website to review the information filled. Once satisfied, you may proceed to payment.

Step 7 Log in to the net banking portal with your user ID and password. Enter the amount of tax to be paid and the bank account through which it is to be paid.

Step 8 After making a successful payment, a Challan Counterfoil will be generated which contains Challan Identification Number (CIN). You must keep it as proof of payment.

Step 9 After this, you need to verify that the payment has been made on EASIEST using the Challan Status Inquiry.

Difference between Excise Duty and Customs Duty?

The Custom duty applies to those goods that are sold in India but manufactured outside India. Excise Duty levied on those manufactured goods and services that are produced within the country.
Custom duty is to be paid by the importer of goods. Excise duty paid by the manufacturer of goods and not by the consumer.

Consequences of Evading Excise Duty?

If anyone evades in making payment of Excise duty, they may have to face huge financial repercussions. As per the laws related to excise duty, the amount of penalty can befall between 25 to 50 percent of tax evaded. Excise Duty is always a big amount, when the penalty calculated as a percentage, it can be of substantial value.