|Central Excise |
1. LEVY OF EXCISE DUTY
The power to levy a duty of excise manufactured or produced in India derives its authority from entry 84 of the Union List (List I) of Seventh Schedule read with Article 246 of the Constitution of India. Thus, Central Excise is a tax on the ‘act of manufacture or production’. Section 3 of the Central Excise Act, 1944 (hereinafter referred to as "the Act") is the charging section, which specifies the conditions under which Excise Duty is leviable on all excisable goods which are manufactured or produced in India. Education Cess is a duty of excise which is to be levied @ 2% of the aggregate duty of excise (vide Finance Act, 2004). As Education Cess and higher education cess is a new levy it will not be payable on the opening stock of finished goods as on day 8-7-2004. The Secondary and Higher Education cess is payable at the rate of 1% on excise duty payable under section 3 of Central Excise Act with effect from 1-3-2007. 2. MEANING OF "MANUFACTURE"
2.1 The taxable event for Central Excise duty to be attracted is manufacture or production in India of excisable goods. Section 2(f) of the Act defines the term "manufacture" in an inclusive manner so as to include any process:
i. Incidental or ancillary to the completion of a manufactured product; and
ii. Which is specified in relation to any goods in the Section or Chapter notes of the Schedule to the Central Excise Tariff Act, 1985 as amounting to manufacture; and
iii. Which in relation to goods specified in the Third Schedule to the Central Excise Tariff Act, 1985, involves packing or repacking of such goods in a unit, container or labelling or re-labelling of containers or declaration or alteration of retail sale price or any other treatment to render the product marketable to consumer.
(The clauses (ii) and (iii) above are termed as ‘deemed manufacture’.) The aforesaid definition gives a wider content to the expression "manufacture" as several processes which would not ordinarily be understood as amounting to manufacture are specifically included therein. However, the most commonly used test for ascertaining "manufacture" for the purpose of attracting Central Excise duty has taken place was evolved by the Supreme Court in the case of Delhi Cloth and General Mills 1977 (1) ELT (J 199). In terms of this decision, the activity or process in order to amount to "manufacture" must lead to emergence of a new commercial product, different from the one with which the process started. In other words, it must be an article with different name, character or use. Thus, a process which simply changes the form or size of the same article or substance would not ordinarily amount to manufacture and no excise duty would be payable unless it is deemed to be manufacture as follows:
• In a particular case by a section or Chapter note of the Tariff; or
• In relation to goods, which are specified under MRP based assessment under section 4A, packing or repacking of such goods, labelling or re-labelling of containers including declaration or alteration of retail sales price shall amount to manufacture.
2.2. MEANING OF "GOODS"
Central Excise duty is levied on goods which are manufactured or produced. The understanding of term goods is of vide importance in determining the leviability of Excise Duty. The Act does not define the term "goods". The judgment of the Supreme Court in the case of Delhi Cloth and General Mills (supra) is considered to be the landmark judgment in this regard, where it is held that an ‘an article can be called "goods" if it is known to the market as such and can ordinarily come to the market for being bought and sold. Actual sale of the article is not important but it must be capable of being bought and sold’. The marketability element of goods...
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