In this blog post, Shambhavi Bundela, a student at New law College Bharati Vidyapeeth, Pune and pursuing a Diploma in Entrepreneurship Administration and Business Laws from NUJS, Kolkata, analyses if the Central Excise is applicable to make fixtures
Introduction
Central Excise duty is an Indirect tax levied on goods manufactured in India. This tax is administered by the Central Government under the power of Entry 84 of the Union List in the Seventh schedule and Article 246 of The Constitution of India. There are two Acts which govern and regulate the Excise law, the first is The Central Excise Act, 1944 in which provides the levy of Central Excise duty and the other is The Central Excise Tariff Act, 1985 where the Rates of duty and specific goods are prescribed under the Schedule I and II. The taxable event under the Central Excise law is ‘manufacture’ and the liability of paying off the duty arises as soon as the goods are manufactured and are cleared from the warehouses. The Central Excise law is administered by the Central Board of Excise and Customs (CBEC). Central Board is a part of the Department of Revenue under the Ministry of Finance, Government of India. It deals with the tasks of formulation of policy concerning levy and collection of Customs & Central Excise duties and Service Tax. The country is divided into 23 zones and chief Commissioner of Central Excise heads each zone. For Small Scale industry the concept of Tax clinics has been introduced educating small manufacturers about their legal responsibilities and guiding them in conduct of tax.
Registration
For the administration of the Central Excise manufacturers of excisable goods or any person who deals with excisable goods with some exceptions, are required to get the premises registered with the Central Excise department before commencing the business. Manufacturing is anything wherein any entity changes its shape and form and has marketability and the process of such process is Manufacture and also includes packing and labeling. As per section 6 of The Central Excise Act, 1944 any person who is engaged in production or manufacture of any process of production or manufacture of any specific goods included in the (the first schedule and the second schedule) to the central Excise Tariff Act,1985 , or The wholesale purchase sale or the storage of any specific goods in the (First schedule and the second schedule) to the Central Excise Tariff Act,1985 shall get himself registered with the proper officer in such manner as prescribed.
The legal provisions contained in Rule 9 of The Central Excise Rules, 2002 also governs the scheme of registration and following category of persons are required to register with jurisdiction over his place of business/factory:
- Every manufacturer of excisable goods on which duty is levied
- First and second stage dealers
- Person holding warehouses for storing non-duty paid goods
- Persons obtaining excisable goods for end use
- Exporter-manufacturers Which have interaction with domestic economy
- Persons who get yarns ,fabrics, readymade garments on job work( not required anymore)
Separate registration is required in respect of separate premises and for each depot, godown etc. Registration certificate maybe granted to the minors also provided that they have legal guardians. The application for registration should be submitted in Form A1 and, Form A2 (Garment dealers) or Form A3 (tobacco dealers) to the jurisdictional Divisional office and the Registration along with constitutional document of business, PAN card no. , account details etc. Non registration can lead to confiscation of goods and penalty up to INR10, 000.
Assessment and Payment
In 1996, the self-assessment system was introduced, the assessee himself assesses his tax return and the Department scrutinizes it or conducts selective audit to ascertain correctness of the duty paid. Rule 4 provides that producer or manufacturer shall pay duty leviable in such goods in the manner provided under the Rule 8 or under any other law. No Excisable goods shall be removed from the place where they are manufactured or from the warehouse until the duty is paid off and before removal of such excisable goods the duty has to be assessed on the goods.
As per rule 6, assessee or the producer is himself required to determine duty liability at the time of removal of goods. Thus he shall apply correct classification and value on the quantities and indicate the same in invoice and also to check the return for the month and submit to the Range office having jurisdiction. First, for determining the rate of duty, classification is required under the First schedule to Central Excise Tariff Act, 1985. Some goods are subjected to ‘special duty of excise’ thus; reference to second schedule shall also be made. Second, value is to be determined where rate of duty is dependent on value in accordance with Central Excise Act, 1944. Also, total value is determined by multiplying unit value with total quantity (where duty is charged at specific rate).
Records and Returns
Records are necessary to be maintained in course of any business activity. The records determine the tax liability of the assessee. The government relies on the private records of the assessee for more simplification and every assessee shall maintain private records. This private record shall be maintained on a daily basis indicating particulars of the goods manufactured, quantity produced or manufactured, inventory, quantity removed, assessable value of the goods, amount of duty to be paid, and amount which is already paid. The duplicate of such records is required to be furnished to the Range officer for accounting of transactions.
From October 2014 all returns must he submitted electronically however manual payment can be done on case to case basis, with reasons recorded in writing. There shall be monthly return for production and removal of goods and CENVANT Credit in Form ER-1 within 10 days on next month. Whereas manufacturers of processed yarn, readymade garments and unprocessed fabrics avail exemption and shall file quarterly return in Form ER-3 within 20 days of next month. In case of return related to principal input there shall be monthly return in Form ER-6 and annual return in Form ER-5 by 30th April every year.
What are fixtures? Does Central Excise Apply On Its Making?
The word ‘fixtures’ is not well defined and has no legal definition. Fixture is a piece of equipment or any physical property or furniture which is fixed in a position in a real property. Fixtures include Electric sockets, light fixtures, plumbing installation etc. and are treated as part of real property. These are fixed or attached to a wall or building or any other property and even if you can easily remove it, the method used to attach it make it a fixture. Fixtures are fixed or attached with the intention to make the item a permanent attachment.
The Central Excise and Tariff Act, 1985 in the First schedule provides goods in which excise duty are levied. Such goods are mentioned under different categories and classifications with their tariff item no. In separate chapters the goods which are fixtures are also thus categories in different heads which are:
- Tariff item 83025000 – Hat-racks, Hat-pegs, brackets and similar fixtures at Rate of duty 12.5%
- Tariff item 84663020 – Jigs and fixtures; at Rate of duty 12.5%
- Miscellaneous Manufactured Articles under Chapter 94 which are: Furniture, bedding, mattresses support, Metal furniture used in offices of steel, Wooden furniture used in offices or kitchen, lamps and lightning fitting , chandeliers, Wall lamps, solar lanterns or lamp, Seats used for Aircraft, motor vehicle, Prefabricated housing materials, at 12.5%
Under Notification No. 12/2015-Central Excise Issued by the Central board the rate duty in manufacture of inputs of LED lights ,LED fixtures etc. has been reduced. It has reduced to a Rate of 6% from an earlier Rate of 12%. Thus, through notifications issued the rate of duty can be lowered down or even be exempted of the Excise duty.
Conclusion
A Manufacturer or Factory owners who deals with making of ‘fixtures’ which includes process incidental or ancillary to manufacture , processes specified in the First schedule, or packing and labeling process of goods shall be obliged to the payment of Excise duty at the time of removal of goods from the place of manufacture or warehouse. The manufacture shall fulfill the compliance requirements regarding the Compulsory Registration and Excise registration is obtained on immediately upon submitting the application. Compliance is also required in maintenance of Records and Accounts of financial statements and transactions. No independent audit is required under the Central Excise Act; however, they must provide the access. An Invoice signed by the owner is necessary for removal of goods from the factory. Filling of returns shall be made monthly electronically.
The Tariff 2016-17 classifies and such fixtures are classified which clearly shows that fixtures are excisable on their respective Rate of duty. Fixtures are nothing but property permanently attached to the real property. Under the tariff different categories of fixtures are mentioned which are excisable, and the owner who is dealing with manufacturing of such fixtures shall complete the compliances and pay off the Rate of duty on the respective classification. Fixtures include furniture, electric sockets, and other physical property attached or hanged on a real property.
