1. "Central Excise" -Definition

The collection of revenue and the regulation of trade is almost as old as civilization itself.The British administration had introduced a codified system of levy and collection of Central Excise duties by introducing the Central Excises and Salt Act in 1944 presently Central Excise duty is leviable on every item manufactured in India. "Excise" as stated in the Oxford Dictionary was originally"acise", a word derived from the latin"accensav" meaning " to tax.The fundamental meaning of "Excise duty"is a tax on articles produced or manufactured in the taxing country and intended for home consumption.It is an indirect tax paid by the manufacturer or producer and the incidence is passed on to the ultimate consumer who purchases the item.

2.Importance of Central Excise Duty

Central excise revenue is the biggest single source of revenue for the Government of India.The revenue from this source was ------------- crores during the Financial year 1998-1999 and this formed about 40% of the total revenue of the Union Government .The Union Government also tries to achieve different socio-economic objectives by making suitable adjustments in the scope and quantum of levy of Central Excise duty.The scheme of Central Excise levy is suitably adapted and modified to serve different purposes of price control,sufficient supply of essential commodities,industrial growth,promotion of small scale industries and like.

3.Authority for collecting the Central Excise duty
Article 265 of the Constitution of India has laid down that both levy and collection of taxes shall be under the authority of law.The excise duty is levied in pursuance of Entry 45 of the Central List in Government of India Act,1935 as adopted by entry 84 of List I of the seventh Schedule of the Constitution of India.Charging section is Section 3 of the Central Excises and Salt Act,1944.

4.Different types of Central Excise duty

There are three types of Central Excise duties collected in India namely Basic excise duty,Additional duty of Excise and Special excise duty.

(1) Basic Excise Duty

This is the duty charged under section 3 of the Central Excises and Salt Act,1944 on all excisable goods other than salt which are produced or manufactured in India at the rates set forth in the schedule to the Central Excise tariff Act,1985.

(2)Additional Duty of Excise

Section 3 of the Additional duties of Excise(goods of special importance)Act,1957 authorises the levy and collection in respect of the goods described in the ScheduleI to this Act.This is levied in lieu of sales Tax and shared between Central and State Governments.

(3)Special Excise Duty

(5)Liability to pay Central Excise Duty

Section 3 of the Central excises and Salt Act,1944 provides that there shall be levied and collected in such manner as may be prescribed,duties of excise on all excisable goods other than salt which are produced or manufactured in India at the rates set forth in the schedule to the Central excise Tariff Act,1985.it is therefore clear that as soon as the goods in question are produced or manufactured,they will be liable to payment of Excise duty.However for convenience duty is collected at the time of removal of the goods.While Section 3 of the Central Excises and salt Act,1944 lays down the taxable event,Rules 9 and 49 of the Central excise Rules,1944 provides for the collection of duty.

(6)"Manufacture"-Definition

To "manufacture" is to produce new out of the existing materials.It further implies transformation in to new and different articles having a distinct name,character or use.Section2(f) of the Central Excises and Salt Act,1944 gives statutory definition for "manufacture".
 
 

(7)Classification under Central Excise Tariff Act,1985

The Central excise Tariff Act has come in to force with effect from 1-3-1986.It is based on a system of classification derived from International convention on"Harmonised Commodity Description and Coding system"(HSN) with necessary modifications to suit the requirements in Central excise.The new Tariff contains section and chapter notes to provide necessary guidance and these notes form part of the statute and so have the force of lawThe broad guiding principles laid down by the Courts of law,Tribunals and other authorities are as follows.

(i)Classification of goods under tariff entries is a mixed question of law and fact.It ia to be decided on material evidence.

(ii)Classification of the goods is not required to be done merely on the basis of nomenclature and character but the functions of the goods are also essential ingrediants in the exercise of classifying the goods under the various heads of the tariff.

(iii)More specific items to be preferred to the one less so.

(iv)Tariff expressions not defined therein to be construed in the popular sense.

(v)Trade opinion relevant

(vi)Classification of goods involving technical and questions not decidable without technical opinion and evidence as to the ingredients used in the product.

(vii)Definitions of expressions used in indian standard Institution a good guide

(viii)End use is relevant when there is a reference in the tariff entry to the use or adoption of the article.

(ix)Substance to be called by most appropriate name when capable of being described by more than one name.

(x)Tariff items cover substandard goods as well

(xi)When more than one view possible,benefit of doubt to be given to the assessee.

(xii)In classification matters onus of proof is on the Department.

(xiii)Classification should not be changed without following the principles of natural justice.
 
 

(8)Valuation under the Central Excises and Salt Act,1944

Most of the items in the Central Excise tariff Schedule are having ad valorem rates of duties.In other words,a certain percentage as indicated in the Tariff,of the value of the excisable goods is to be worked out and collected as the Central Excise duty.it is essential to first arrive at the value of the excisable goods in question so that the percentage of duty payable on the same can be worked out.The law regarding the valuation of the excisable goods are laid down under Section 4 of the Central excises and Salt Act,1944 and the Rules made thereunder.The assessable value depends on the normal price.It will be th price at which the goods are ordinarily sold in th course of the wholesale trade at the factory gate where,the buyer and seller are not related,ie.they do not have any interest directly or indirectly in the business of each other and the price is the sole consideration for the sale.The "related peson:" has been defined under section(4) (4) (c) as "a person who is so associated with the assessee that they have interest,directly or indirectly in the business of each other and includes a holding company,a subsidiary company ,a relative and a distributor of the assessee,and any sub-distributor of such distributor"The doubts regarding the concept of "related person" has been settled by the Honouable Supreme Court.It has been laid down that under section (4) (4) (c) there should be mutuality of interest between the two persons before they can be considered "related persons" only one sided interest is not sufficient.However once two way interest is established it does not matter whether the interest is direct or indirect.The degree of interest ia also not material.Under second part of section 4(4) (c) the customer,besides being a distributor of the assessee should be a relative of the assessee within the meaning of the term under the Companies Act,1956.