Excise for Manufacturers (TallyERP.9)

Excise Duty or Duty on Excise is a tax on goods manufactured or produced in India and intended for domestic consumption i.e. sale in India. The Excise Duty is payable at the time of production or manufacture, however, for administrative convenience duty is paid at the time of removal of goods.

Excise Duty is an indirect tax. The liability of payment of Excise Duty is of manufacturers or producers (which is passed on to the ultimate consumer). The levy and collection of duty of Excise is provided under authority of the Central Excise Act, 1944 at the rates specified Central Excise Tariff Act, 1985.

Excise Scope & Availability

Excise Duty means the tax to be paid by the manufacturer, on the goods manufactured in India, either at the time of manufacture or at the time of removal of the goods.

Excise Duty can be levied, only on the fulfillment of the below mentioned conditions.

·         The Duty is on Goods

·         The Goods must be excisable

·         The goods must be manufactured or produced

·         Manufacture and Production must be in India

Excisable Goods means goods specified in the schedule to the Central Excise Tariff Act, 1985 as being subject to a duty of Excise. The Basic requirements to be satisfied are:

·         Goods must be movable.

·         Goods must be marketable i.e. the goods must be such that it is known in the market and is capable of being bought or sold.

Types of Excise Duties

·         Basic Excise Duty (BED): 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.  Basic Excise Duty [also known as Central Value Added Tax (CENVAT)] is levied at the rates specified in Central Excise Tariff Act.

·         Special Excise Duty (SED): As per the Section 37 of the Finance Act, 1978 Special excise Duty was attracted on all excisable goods on which there is a levy of Basic excise Duty under the Central Excises and Salt Act,1944. Special Excise Duty is levied at the rates specified in the Second Schedule to Central Excise Tariff Act, 1985.

·         Education Cess on Excise Duty: Section 93 of Finance (No. 2) Act, 2004 states that education Cess is 'duty of excise', to be calculated on aggregate of all duties of excise including special excise duty or any other duty of excise, but excluding education Cess on excisable goods.

·         Excise duty in case of clearances by EOU: The EOU units are expected to export all their production. However, if they clear their final product in DTA (domestic tariff area), the rate of excise duty will be equal to customs duty on like article if imported in India.

·         National Calamity contingent Duty (NCCD): A 'National Calamity Contingent Duty' (NCCD) has been imposed vide section 136 of Finance Act, 2001 [clause 129 of Finance Bill, 2001, w.e.f. 1.3.2001]. This duty is imposed on pan masala, chewing tobacco and cigarettes.

·         Duties under other Acts: Some duties and Cess are levied on manufactured products under other Acts. The administrative machinery of central excise is used to collect those taxes. Provisions of Central Excise Act and Rules have been made applicable for levy and collection of these duties / Cess.

·         Additional Duty on Goods of Special Importance (AED [GSI]): Some goods of special importance are levied Additional Excise under Additional Duties of Excise (Goods of Special Importance) Act, 1957. The 'Additional Duty' is in addition to excise duty. This scheme was introduced based on the suggestion made by the manufacturers to Government, that multiple level taxes and duties should be avoided. Levy and collection of all taxes at one stage by single authority will be convenient for payment and administration. Hence, by agreement between Central and State Governments, it was decided to make a beginning in 1957, by selecting some items where additional duty will be collected instead of sales tax and such additional duty will be distributed among various States. Revenue from this duty is distributed among State Governments on the basis of percentages given in the second schedule to the Act.

·         Some items covered are textile articles like cotton fabrics, silk and wool fabrics, man-made fibers, terry fabrics, metallised yarn, embroidery; sugar, branded tobacco, pan masala containing tobacco and cigarettes.

·         Duty on Medical and Toilet Preparations: Excise duty is imposed on medical preparations under Medical and Toilet Preparations (Excise Duties) Act, 1955.

·         Additional Duty on Mineral Products: Additional duty on mineral products (like motor spirit, kerosene, diesel and furnace oil) is payable under Mineral Products (Additional Duties of Excise and Customs) Act, 1958.

·         Additional Customs Duty commonly known as countervailing Duty (CVD): Countervailing duty (CVD) is imposed on the Imports.

·         Special Additional Duty of Customs (Special CVD): Special CVD is being imposed on items bound under the Information Technology Agreement (except information technology software), and also on specified inputs/raw materials for manufacture of electronics/IT goods.

·         Additional Duties of Excise (Textiles and Textile Articles) [AED (TTA)]

·         Additional Duty of Excise (Tea and Tea Waste) [AED (TTW)]

·         Secondary and Higher Education Cess

Excise Valuation Methods

Value of the excisable goods has to be necessarily determined to levy the duty on the goods. Under the Central Excise Act, 1944, the following methods of valuation of goods are considered for the assessment of Duty.

1.      Ad Valorem/ Transaction Value: Transaction value means the value of goods which are sold at the time and place of removal and in addition to the amount charged as price, it includes, any amount that the buyer is liable to pay, including any amount charged for, or to make provision for, advertising or publicity, marketing and selling, organization expenses, storage, outward handling, servicing, warranty, commission or any other matter.

Transaction value, on each removal of goods shall be determined on the fulfillment of following conditions:

·         The goods should be sold at the time and place of removal

·         Buyer and Assessee should not be related

·         Price should be the sole consideration for the sale

·         Each removal will be treated as a separate transaction and 'value' for each removal will be separately fixed.

2.      Ad Quantum: In case of Ad Quantum the duty is payable on the basis of certain unit like Weight, Length, volume etc.

Example: Duty on cigarette is payable on the basis of length of the cigarette, duty on Sugar is based on per Kg.

3.      Value determined on the basis of Maximum Retail Sale Price: Retail sale price means the maximum price at which the excisable goods in packaged form may be sold to the ultimate consumer and includes all taxes local or otherwise, freight, transport charges, commission payable to dealers, and all charges towards advertisement, delivery, packing, forwarding and the like, as the case may be, and the price is the sole consideration for such sale.

Factors needs to be considered while determining the value on the basis of maximum retail sale price are:

·         Where on the packages of any excisable goods, more than one retail sale price is declared, the maximum of such retail sale price shall be deemed to be the retail sale price

·         Where the retail price, declared on the package of any excisable goods at the time of its clearance from the place of manufacture, is altered to increase the retail sale price, such altered retail sale price shall be deemed to be the retail sale price.

·         Where different retail sale prices declared on different packages for the sale of any excisable goods in packaged form in different areas, each such retail price shall be the retail sale price for the purposes of valuation of the excisable goods intended to be sold in the area to which the retail sale price relates.

Cenvat Credit

The MODVAT scheme has been replaced by a new set of rules called CENVAT Credit Rules 2002.

Duties eligible for CENVAT Credit

 

A manufacturer or producer of a final product is allowed to take CENVAT credit of duties specified in the Cenvat Credit Rules, 2002.

The duties specified under Cenvat Credit Rules, 2002 are:

·         Basic Excise Duty on inputs specified in the First Schedule to Central Excise tariff Act (corresponding CVD on imported goods is allowable).

·         Special Excise Duty on goods specified in the Second Schedule to the Tariff Act (corresponding CVD on imported goods is allowable).

·         Additional Excise Duty paid under Additional Duties of Excise (Textile and Textile Article).

·         Additional Excise Duty paid under Additional Duties of Excise (Goods of Special Importance).

·         National Calamity Contingent duty (NCCD).

·         Education Cess and Secondary and Higher Education Cess on Excise Duty.

·         Additional custom duty chargeable under Customs Tariff Act (Spl. CVD)

·         Education Cess and Secondary & Higher Education Cess on CVD

·         Additional Excise Duty paid under Clause 85 of Finance Bill,2005 on Pan Masala and certain other Tobacco products.

·         Service tax on input services.

·         Education Cess and Secondary & Higher Education Cess paid on service tax. This credit can be utilized only for payment of education Cess on final product or output services.

Excise Registration (of Factory/ Warehouse)

In accordance with Rule 9 of Central Excise Rules, 2002 and notifications issued under rules 18 and 19 of the said Rules, as the case may be, the following category of persons are required to register with jurisdictional Central Excise Officer in the Range office having jurisdiction over his place of business/factory, by making an application for registration in Form A –1 or A –2 or A –3.

·         Every manufacturer of excise goods (including Central/State Government undertakings or undertakings owned or controlled by autonomous corporations) on which excise duty is chargeable.

·         Persons who desire to issue CENVATABLE invoices under the provisions of the CENVAT Credit Rules, 2001.

·         Persons holding private warehouses.

·         Persons who obtain excise goods for availing end-use based exemption.

·         Exporters manufacturing or processing export goods by using duty paid inputs and intending to claim rebate of such duty or by using inputs received without payment of duty and exporting the finished export goods.

On receipt of application for registration, registration number will be issued to the applicant. Later, the jurisdictional Excise Officer carries out the post facto verification and on fulfillment of all the requirements, issues the registration certificate with in 7 days from the date of application.

Note:  Form A-2: Application form for central excise registration of power loom weavers / hand processors / Dealers of Yarns and Fabrics/ manufacturers of ready made Garments

Form A-3: Application form for central excise registration of manufacturers of hand rolled cheroots of tobacco falling under sub-heading no. 2402.00 of central excise tariff act, 1985

Separate Registration

 

Separate Registration is required in respect of separate premises except in cases where two or more premises are actually part of the same factory (where processes are interlinked), but are segregated by public road, canal or railway-line. The fact, that, the two premises are part of the same factory will be decided by the Commissioner of Central Excise based on factors, such as:

·         Interlinked process - product manufactured/produced in one premise are substantially used in other premises for manufacture of final products.

·         Large number of raw materials received or proposed to be received is common for both or all the premises

·         Common electricity supplies.

·         Common labour or work force

·         Common administration or works management.

·         Common sales tax registration and assessment

·         Common Income Tax assessment

·         Any other factor as may be indicative of inter-linkage of the manufacturing processes.

Separate Registration is required for each depot, godown etc. in respect of persons issuing CENVAT invoices. However, in the case liquid and gaseous products, availability of godown should not be insisted upon.

Registration Certificate may be granted to minors provided they have legal guardians' i.e. natural guardians or guardians appointed by the Court, as the case may be, to conduct business on their behalf.

Excise Control Code (ECC) Number

The ECC number is a registration number, issued to all the Central Excise Assessees. This Number is based on the principles of 'Common Business Identifier' which shall be used for revenue accounting, validation of documents (e.g. CENVAT invoices), inter-agency coordination and for creation of data warehouse.  

ECC number is a PAN based 15 digit alpha numeric numbers. The first part denotes 10 character (alpha numeric) Permanent Account number issued by Income tax authorities to the concerned person to whom the ECC Number is to be allotted and the second part comprises of a fixed 2 character alpha code which is as follows:

Category	Code
Central Excise Manufacturer (Including registered warehouses)	XM
Registered Dealer	XD

This is followed by 3-Character numeric code - 001, 002, 003 etc. In case, a manufacturer, registered with the Central Excise Department, has only one factory /dealer's premise/warehouse, the last three characters will be 001. If there are more than one factories/warehouses/dealer's premises of such a person having common PAN for all such factories/warehouses/dealer's premises, the last 3 character of the new ECC would be 001, 002, 003 etc.

The ECC Number has to be quoted on the GAR–7Challans covering deposit of Central Excise duties, Additional duties, Cess and other dues to the Government.

 

Examples:

Where the concerned person has only one factory:

ECC Number will be - PAN + XM + 001

Suppose PAN is ABCDE1234H, the ECC Number will be - ABCDE1234H XM 001

Where the concerned person has more than one factory, say 3 factories, having PAN as aforesaid, then the ECC Number will be:

ABCDE1234H XM 001

ABCDE1234H XM 002

ABCDE1234H XM 003

Where the concerned person has one factory and is also registered as a dealer, having PAN as aforesaid, then the New ECC Number will be:

ABCDE1234H XM 001 (for Factory)

ABCDE1234H XD 001 (for Dealer)

Central Excise Invoice System

An invoice is the document under cover of which the excisable goods are to be cleared by the manufacturer. This is also the document which indicates the assessment of the goods to duty. No excisable goods can be cleared except under an invoice.

Removals only on invoice

·         Rule 11 of the Central Excise (No.2) Rules, 2001 provides that no excisable goods shall be removed from a factory or a warehouse except under an invoice signed by the owner of the factory or his authorised agent.

·         In case of cigarettes, which is under physical control, the Factory Officers are posted by rotation in the factory (If the factory operation is 24 hours, the officers are posted 24 hours), will check the operations as per the instructions contained in commodity manual for cigarettes. Accordingly, in the case of cigarettes, each invoice shall also be countersigned by the Inspector of Central Excise or the Superintendent of Central Excise before the cigarettes are removed from the factory.

Serially numbered invoice

·         The invoice shall be serially numbered and shall contain the registration number, description, classification, time and date of removal, rate of duty, quantity and value, of goods and the duty payable thereon. The serial number shall commence from 1st April every year [beginning of a financial year].

·         The serial number can be given at the time of printing or by using franking machine. But when the invoice book is authenticated in the manner specified in sub-rule (5) of rule 11, each leaf should contain serial number. Hand written serial number shall not be accepted.

·         In case of computer-generated invoice, the serial number may be allowed to be generated and printed by computer at the time of preparation of invoice ONLY IF the software is such that computer automatically generates the number and same number cannot be generated more than once. For this purpose, the Central Excise Officers may check the system/software from time to time.

Number of Invoice copies

The invoice shall be prepared in triplicate:

·         The original copy being marked as Original For Buyer

·         The duplicate copy being marked as Duplicate For Transporter

·         The triplicate copy being marked as Triplicate For Assessee

The above requirement is mainly for Central Excise purposes. However, the Assessee may make more than three copies for his other requirements. But such copies shall be prominently marked Not for Cenvat Purposes.

Number of Invoice book

·         The rule 11of the Central Excise (No.2) Rules, 2001 provides that only one invoice book shall be in use at a time, unless otherwise allowed by the Deputy/Assistant Commissioner of Central Excise in the special facts and circumstances of each case.

·         The Board has decided that where assessee requires two different invoice books for the purposes of removals for home-consumption, and removals for export they may do so by intimating the jurisdictional Deputy/Assistant Commissioner of Central Excise.

·         Wherever, an assessee is allowed to keep more than one invoice book, he should be asked to keep different numerical serial numbers for the different sets.

·         In case of running stationary used in computers, the bound book shall not be insisted upon provided the stationary is pre-printed with distinctive names and marks of the assessee. After the invoices are prepared, the triplicate copy shall be retained in bound-book form. Where invoices are to be typed written, the leafs have to be first taken out from the book for typing. In such cases also the triplicate copy shall be retained in bound-book form.

Authentication of Invoices

The rule provides that owner or working partner or Managing Director or Company Secretary shall authenticate each foil of the invoice book, before being brought into use. However, in order to facilitate the trade it has been decided that any person duly authorised in this regard by the Company, owner or working partner may also authenticate invoices. Copy of the letter of authority should be submitted to the Range office.

Intimation of serial numbers

Before making use of the invoice book, the serial numbers of the same shall be intimated to the Superintendent of Central Excise having jurisdiction over the factory of the assessee. This can be done in writing by post/e-mail/fax/hand delivery or any other similar means.

Rounding off of duty in invoice

The amount of duty being shown in invoices issued under rule 11 of the Central Excise (No.2) Rules, 2001 be rounded off to the nearest rupee as provided for under Section 37D of the Central Excise Act, 1944 and the duty amount so rounded off should be indicated both in words as well as in figures.

Types of Duties & Method of Calculation

The Duties for Excise can be calculated on Assessable value and on Duty Value. According to the Excise laws, find below the list of Excise duties with the method of calculation.

Type of Duty	Duty Type	Method of calculation
Basic Excise Duty (BED)	Excise	on Assessable Value
Special Excise Duty (SED)	Excise	on Assessable Value
AED (GSI)	Excise	on Assessable Value
AED (TTA)	Excise	on BED + SED
AED (TTW)	Excise	on BED + SED
AED (PM&T)	Excise	on BED + SED
NCCD	Excise	on BED + SED + AED (GSI)
Special AED	Excise	on Quantity
AED on HSD (High Speed Diesel)	Excise	on Quantity
Educational Cess	Excise	On Total Excise Duty
SHE Cess on Excise duty	Excise	On Total Excise Duty
Countervailing Duty(CVD)	CVD	on Assessable Value + BCD
SED of CVD	CVD	on Assessable Value + BCD
AED (GSI) of CVD	CVD	on Assessable Value + BCD
AED (TTA) of CVD	CVD	on CVD + SED of CVD
AED (TTW) of CVD	CVD	on CVD + SED of CVD
AED (PM&) of CVD	CVD	on CVD + SED of CVD
NCCD of CVD	CVD	on CVD + SED of CVD + AED (GSI) of CVD
Special AED of CVD	CVD	on Quantity
AED on High Speed Diesel of CVD	CVD	on Quantity
Educational Cess on CVD	CVD	On Total CVD
SHE Cess on CVD	CVD	On Total CVD
Basic Custom Duty	Customs	on Assessable Value
Additional Duty on Customs	Customs	on BCD
Educational Cess on Customs	Customs	on Total Customs and CVD
SHE Cess on Customs	Customs	on Total Customs and CVD
Special Custom Duty	Customs	on Current Sub Total

Time & Mode of payment of Duty

1.      Monthly payment of Duty  

·         Assessees who are Large/Regular Units and not availing concession of duty based on turnover, and

·         Assessees availing small scale industries (SSI) concession of duty based on turnover. Have to pay duty on monthly basis. Duty in respect for clearances made in a month should be paid by 15th of the following month.

2.      Excise Duty shall be paid to the government along with G.A.R. -7 Challans.

Returns & Timelines

The following Returns are required to be filed under Excise for Manufacturers

Form No	Particulars	Periodicity	Due Date
ER – 1	Monthly Return by Assesses who are not availing the concession of duty based on turnover (large units) (e-returns)	Monthly	On or before 10th of the following month
	Monthly Return by  Assessee who are neither Large Units nor availing concession of duty based on turnover (Regular Units)	Monthly	On or before 10th of the following month
Monthly Return for CENVAT	Monthly Return by large and Regular units	Monthly	On or before 10th of the following month (With ER-1)
ER–3	Quarterly Return by Assessee availing small scale industries (SSI) concession of duty based on turnover	Quarterly	With in 20days from the close of quarter