Excise Duty (CENVAT)

CENVAT as populary known as Central Excise Duty is a duty on the

manufacture/production of goods in India.The regulatory body is the Central Board
of Excise and Customs (CBEC) , an agency of the Department of Revenue,
Ministry of Finance of India. The law governing central excise is primarily defined
by the following legislations:
The Central Excise Act, 1944 This Act governs the levy of excise duty. The
legislation provides for the parameters for levy of duty like when it is to be
charged, how the goods are to be valued for the purpose of duty, how the duty
would be regulated and administered such as provisions for discharge of excise
liability, filing returns, powers of excise officers in this regard and also includes the
powers of investigation, appellate remedies, advance rulings and other matters
related to excise duties.
The Central Excise Tariff Act, 1985 (CETA) This Act supplements the Central
Excise Act by classifying products and prescribing the rate of excise duty
applicable to the various classification of manufactured products. CETA classifies
goods under 91 chapters and a specific code is assigned to each item. There are
over 1,000 tariff headings and 2,000 sub-headings. It is based on the Harmonized
System of Nomenclature (HSN).
Taxable
Event
which
creates
Liability
for
Excise
Duty
The taxable event for levy of excise duty is the act of manufacture or production of
goods in India. There are four basic conditions for levy of excise duty:
1. The duty is on goods, i.e. products that are movable and marketable;
2. The goods in question must be excisable , i.e., must be mentioned in Excise
Tariff
Act;
3. The
goods
must
be
manufactured
or
produced;
4. Such
manufacture
or
production
must
be
in
India
.
For administrative convenience excise duty on goods is collected at the time of
their removal from the factory.
Duty
Structure
Broadly, the following types of duties are levied by the Central Government on
goods
manufactured
in
India:
1. Basic
Excise
Duty
2. Education Cess and Secondary and Higher Education Cess on Excise Duty
3. National
Calamity
Contingent
Duty

4. Duties
Under
5. Specified
6. Duty based on the production capacity

Other

Acts
Duty

Exemptions
As under the customs regime, excise law also provides for exemptions both
general, as well as some specific exemptions which apply to only specified
classes of goods or manufacturers. Some broad categories of general exemptions
include:
Exemption for the small scale sector a threshold exemption from excise duty is
given to units with a turnover of less than 1.5 crore rupees (INR 15 million).
Exemption to intermediate products used for captive consumption -intermediate
products manufactured within the factory are exempt from excise duty, subject to
the
conditions
defined
under
the
respective
notifications.
Job work - exemption is given to a job worker who manufactures excisable goods
from inputs supplied by a principal who undertakes to discharge the excise duty
liability on the final product, subject to the stipulated conditions.
Location based exemption exemption from excise duty is granted to units
operating in specified backward regions of India, for example, many excise
exemptions have been granted to the manufacturing units set up in the North
Eastern States of India.
Offsets
available
for
discharge
of
duty
liability
Since excise duty or CENVAT is a value added tax, a credit of excise duties paid
on indigenous input goods, countervailing duty and additional customs duty
elements of customs duty paid on imported input goods, and service taxes paid on
input services is available for offsetting the excise duty liability of a manufacturer
on the final product.
Similarly, excise duty paid on input goods can be offsetted against the service tax
payable on output services provided using such input goods.
In case of export of goods or services, excise duty paid on input goods used in
production of export goods or provision of services may be claimed as a refund or
may be otherwise adjusted against the other liabilities of the manufacturer or
service provider, as the case may be.