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Excise Duty

Excise duty is imposed on the manufacture or production of goods. The readers can access here to know the basics on Excise duty.
Applicable Law Central Excise Act, 1944 and Central Excise Tariff Act, 1985
Taxable Event Excise duty is imposed on the manufacture or production of goods – the term manufacture is very widely defined and includes:
  1. processes which are incidental/ ancillary to manufacture,
  2. processes specified in the First Schedule to the Central Excise Tariff Act as amounting to manufacture, and
  3. certain packing or labelling- processes in relation to goods specified under the Third Schedule of the act.
 Excise duty is payable at the time of removal of goods from the place of manufacture or warehouse.
Which entities is the tax payable by? The entity engaged in production or manufacture of goods has the obligation to pay excise duty.
Rate of Excise Duty Rate of excise duty on various articles varies. The articles and rates of excise duty are mentioned in the First Schedule of the Central Excise Tariff Act, 1985. On certain articles which are listed under the Second Schedule to the act, an ‘additional duty of excise’ is imposed.
Compliance Requirements
Registration For registration, the following form needs to be submitted alongwith constitutional documents of the business venture, copy of PAN Card, details of bank account, etc. to the Jurisdictional Range Superintendent of Central Excise:
  • Form A1 (applicable to most dealers)
  • Form A2 for fabric dealers, readymade garment manufacturers
  • Form A3 for manufacturers of tobacco
Excise registration is obtained on immediately upon submitting the application.
Non-registration can lead to i) confiscation of goods in respect of which registration has not been obtained, and ii) a penalty up to INR 10,000 or the excise duty on the goods in respect of which the registration has not been obtained, whichever is greater.
Accounts & Record Keeping Every entity (liable to pay excise duty) is required to maintain and provide access (to an officer authorized by the Excise Commissioner) to the following records:
  • records prepared and maintained for accounting of transactions relating to receipt, purchase, manufacture, storage, sales or delivery of the goods (including inputs and capital goods)
  • records prepared and maintained for accounting of transaction in regard to payment for input services and their receipt or procurement; and
  • all the financial records and statements (including trial balance or its equivalent).
Audits No independent audit is required under Central Excise Act. However, an entity must provide access to any cost audit reports[1] and income tax audit[2] reports.
Invoicing An invoice (signed by the owner of the factory/ warehouse or his authorized agent) is necessary for removal of goods the factory/ warehouse
Filing Returns Returns related to production & removal of goods
  • Monthly return for production and removal of goods and CENVAT credit in Form ER – 1 within 10 days of the next month
  • Manufacturers of processed yarn, readymade garments and unprocessed fabrics or manufacturers availing an exemption based on the value of clearances from the factory/ warehouse, must file a quarterly return for clearance of goods and CENVAT credit in Form ER – 3 within 20 days of the end of the quarter
  • From 1 October 2014, all returns must be submitted electronically. However, authorities may take manual payment on case to case basis, with reasons recorded in writing for allowing such transaction.
Returns related to principal inputs
  • Monthly return of information pertaining to principal inputs in Form ER – 6
  • Annual return of information relating to principal inputs in Form ER – 5 by 30th April every year.
Detailed list of other forms is provided on the following link: http://www.cbec.gov.in/excise/formidx.htm
[1]Prepared as per Section 233B of the Companies Act.
[2]Prepared as per Section 44AB of Income Tax Act.

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