this blog post, Angeline Benny, a fourth-year law student at NALSAR University of Law, Hyderabad and pursuing a Diploma in Entrepreneurship Administration and Business Laws from NUJS, Kolkata, explains how and when excise duty is payable in India.
Excise duty is a form of indirect tax that is levied when goods are manufactured or produced. The Central Government has been given the mandate to impose the same under Entry 84 in the Union List of the Seventh Schedule read with Article 246 of the Indian Constitution. According to the entry, excise duty may be imposed only in the case of goods ‘manufactured or produced in India’. In addition, the entry provides exceptions like excise on alcohol and narcotics.
The legal framework for excise duty consists primarily of the following acts:
- Central Excise Act, 1944
- Central Excise Tariff Act, 1985
The central excise law extends to Designated Areas in Continental Shelf as well as Exclusive Economic Zone (EEZ). The former Act provides definitions while the latter provides an exhaustive schedule wherein goods are classified and appropriate tariffs are proscribed. The classification in the Central Excise Tariff Act, 1985 is based on an international system wherein goods are assigned a Harmonized System of Nomenclature (HSN) number.
Excise duty charged on goods maybe classified into the following:
- Basic Duty
Now known as Central Value Added Tax (CENVAT), this is the excise duty imposed on “all excisable goods which are produced or manufactured in India as, and at the rates, set forth in the First Schedule to the Central Excise Tariff Act, 1985 ” as per Section 3(1)(a) of the Central Excise Act, 1944.
- Special Excise Duty
Section 3(1)(b) of the Central Excise Act, 1944 permits levy of a ‘special duty of excise’, on excisable goods specified in the Second Schedule to the Central Excise Tariff Act, 1985. The rate of such excise duty has been set forth in the aforementioned Second Schedule.
- Additional Excise Duty
Section 3 of the Additional Duties of Excise (Goods of Special Importance) Act, 1957 permits the charge and collection of excise duty in respect of the goods as listed in the First Schedule of the Act. The Additional Duties of Excise (Textiles and Textile Articles) Act, 1978 also provides for similar additional duty in case of specific goods.
The legislative framework has been further supplemented by Rules such as Central Excise (Amendment) Rules, 2002 and the Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000. The Central Excise (Amendment) Rules, 2002 clarifies the date for determining the duty. In addition, it also provides the procedure for assessment of the duty applicable on the excisable goods and the manner in which such payment of such applicable duty should be made. The Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000 provides the methods to calculate the value of goods in order to determine the duty applicable on excisable goods when transaction value cannot be determined under Section 4 of the Central Excise Act, 1944.
Additionally, the National Calamity Contingent Duty (NCCD) is levied under section 136 of the Finance Act, 2001. Other Finance Acts have introduced the imposition of cesses such as the Education Cess under section 91 read with section 93 of the Finance (No. 2) Act, 2004 as well as the Secondary and Higher Education Cess under section 136 read with section 138 of the Finance Act, 2007.
Furthermore, the CENVAT Credit Rules, 2004 permit the credit of excise duty and how the same may be utilized. Duties of excise paid on input/capital goods by a manufacturer and service tax paid may be adjusted against excise duty or service tax liability, if any arise. The aforementioned National Calamity Contingent Duty and Education are also included while calculating credit under the Rules. It was recently amended by the CENVAT Credit (First Amendment) Rules, 2016.
When Must Excise Duty Be Paid?
The taxable event in excise duty is the manufacture or production of goods, as provided in Section 3(1)(a) of the Central Excise Act, 1944. Hence, there is no requirement of ‘actual sale’ of the goods in order to impose excise duty. Although the excise duty is applicable when the goods are manufactured, it becomes payable only upon the ‘removal’ of such goods. Rule 4 of the Central Excise (Amendment) Rules, 2002 reiterates this position. The notion of such collection at the stage of removal of the excisable goods was introduced for the sake of convenience.
In the case of Collector of Central Excise Hyderabad vs. Vazir Sultan Tobacco Company Limited, the Supreme Court held that “The removal of goods is not the taxable event. Taxable event is the manufacture or production of goods.” Hence, the date of determining the rate of tax is when the goods are manufactured as it is the taxable event. It cannot be the subsequent date of removal of the excisable goods.
Rule 8 of the Central Excise (Amendment) Rules, 2002 provides when the deadline for payment of the applicable excise duty. The applicable excise duty after removal of goods from a factory or warehouse is to be paid on the 6th of the following month in case of payment through net banking. In case any other form of payment has been used, the payment must be made by the 5th day of the following month. The month of March poses an exception to the aforementioned deadlines, irrespective of the mode of payment. If the excisable goods are removed in the month of March, the deadline for payment falls within the same month i.e. it has to be paid by the 31st day of March.
Payment of Excise Duty
Central Board of Excise and Customs (CBEC) has the responsibility to collect excise duty and from 1st October 2014, the payment of Central Excise Duty has been become automated vide notification 19/2014-CE (NT) dated 11.07.2014. Therefore, taxpayers are now required to pay the applicable Central Excise Duty online through net banking. In order to comply with the same, taxpayers use CBEC’s payment gateway called the Electronic Accounting System in Excise and Service Tax (EASIEST) to pay their taxes online. Excise duty is paid through the challan form called G.A.R.-7 Proforma for Central Excise Tax Payments.
The following are the steps to pay excise duty under the current payment model:
- In order to pay excise duty online, log on to NSDL-CBEC site website cbec-easiest.gov.in and select e-Payment from the menu.
- The Assessee then enters the 15 digit Assessee Code allotted by the jurisdictional Commissionerate. The validity of the Assessee Code entered shall be verified online. Upon successful verification of the Assessee Code, the corresponding Assessee details like Name, Address, Commissionerate code etc. which are mentioned in the Assessee Code Master shall be visible. Additionally, the tax to be paid i.e. Excise Duty in this instance shall be automatically selected.
- The Assessee shall then select the Type of Duty / Tax to be paid by picking Accounting Codes for Excise. A maximum of six such Accounting Codes can be selected at a time by the Assessee.
- After selection of the accounting code, the Assessee opts for the Bank through which payment is to be made. Internet payment facility is only provided through a number of banks that lie within the Bank List.
- The Assessee is now given an opportunity to review the details entered before being re-directed to the net-Banking site of the selected Bank for payment. Upon confirmation of the details, the net-Banking site of the selected Bank shall be available.
- The Assessee shall log in the aforementioned site using the user ID and password provided by the bank for the purpose of net banking. Upon successfully logging in, the Assessee must enter details of the payment to be made. For instance, the Assessee is required to enter the amount of tax to be paid for each accounting code selected. Further, the Assessee also has to choose Bank account number that is to be used for the purpose of making the payment.
- In case the payment is made, a challan counterfoil shall be displayed. The same contains the Challan Identification Number (CIN), details of the payment made and the name of the Bank acting as an intermediary for the e-payment of excise duty. The counterfoil so obtained acts as proof of payment. The Assessee has an option to download the counterfoil from the website of the bank.
- After such payment, the Assessee may verify that the payment has been made using the Challan Status Inquiry at NSDL-CBEC website. The Assessee has to use the CIN for the same and the facility should be utilized only after a week from making the payment online. Such Inquiry will confirm that the payment challan has been uploaded on the EASIEST (NSDL) website. If such data regarding the challan is not available after making the inquiry, the Assessee may complain to the appropriate authority by sending an email to [email protected].