Central Excise Duty, also known as CENVAT, is an Indirect tax. It is levied on the goods manufactured in India. It is a Central Levy and is levied under Central Excise Act, 1944. However, the rates of duty are prescribed under Schedule I and Schedule II of the Central Excise Tariff Act, 1985. Though the levy is on the factum of manufacture, however, for administrative convenience, its collection has been postponed to the clearance of manufactured goods.
Every person engaged in the manufacture of dutiable goods, is required to obtain Central Excise Registration. However, if the value of clearance remains within the SSI Exemption Limit, registration is not required. Presently the said exemption limit is Rs. 1.5 Crore per annum. The dealers and importers, desirous of passing on the CENVAT Credit to their buyers, are required to be registered. The manufacturers who desire to procure duty free goods for specified purpose are also required to be registered.
As the rates of Central Excise Duty are mentioned in First and Second Schedule of the Central Excise Tariff Act, 1985. In these schedules, the Excisable goods are classified in groups and sub-groups. These groups are known as headings and sub-headings. Ascertaining applicable heading and sub-heading is known as “Classification”. Determining correct classification is very important in Central Excise.
Central Excise Duty is generally payable as percentage of value of Goods (ad valorem). If buyers and sellers are not related and the transaction value is sole consideration, then determining Assessable Value, does not cause much problem. However, in certain situations, like where the buyers and sellers are related, the manufactured goods are consumed for further manufacture of exempted goods are for rendering services, then this process becomes complicated and a reason for dispute with the department.
Apart from source of revenue, the Central Excise Duty is also used as tool to achieve other social and economic objectives. Therefore, the luxury goods and harmful goods attract higher rate of duty, whereas partial or full exemption from duty is given to essentialities. At times, these exemptions are available, subject to fulfilling certain conditions.
To avoid Cascading effect, a scheme of tax tax credit, known as CENVAT Credit, is also available in Central Excise. It enables the tax-payer to take credit of excise duty paid on inputs and Service Tax paid on the input services and such credit can be used for paying Excise Duty on final products. The CENVAT credit scheme is coupled with with numerous conditions to make it brain teaser and Pandora box of controversies.
Elaborate provisions are their in Central Excise law for collecting duty not paid or short paid. There is a well defined hierarchy of Tribunals and Courts to resolve the disputes. Central Excise Law has also elaborate provisions for refund of Duty, but the process of getting refund is very compbursome.
Persons requiring registration:-
- Every manufacturer of dutiable excisable goods.
- First and second stage dealers (including manufacturer’s depot and importers) desiring to issue Cenvatable invoices.
- Persons holding warehouses for storing non-duty paid goods.
- Persons who obtain excisable goods for availing end use based exemption.
- Exporter-manufactures under rebate/bond procedure; Export Oriented Units and EPZ units which have interaction with the domestic economy (through DTA sales or procurement of duty free inputs).