What is Excise Duty and its Types

Collection of revenue is very important for functioning of any government and is prevalent since time immemorial. Different types of taxes are imposed by government viz income tax, corporate tax, property tax, sales tax, excise tax, custom tax, and service tax. These taxes help government to run administration to meet socio-economic objectives of government

What is Excise Duty ?

Excise duty is part of indirect tax and was introduced by British in 1944 under Central Excise Act 1944. As per Act, central excise duty is leviable on every item manufactured (except salt) AND, consumed in India. It is a tax paid by producer and passed on to consumers.

It is administered by Central Board of Excise and Custom (CBEC) which is part of Ministry of Finance, Government of India. Central excise duty has been renamed as Central Value Added Tax (CENVAT).

Types of excise duty

There are three main types of excise duty.

Basic excise duty (BED) is charged on all goods except salt under Central Excises and Salt Act 1944, at the rates specified in Central Excise Tariff Act 1985.

Special excise duty (SED) is charged on all excisable goods on which there is a levy of basic excise duty (BED) and is levied at the rates specified in the second schedule of Central Excise Tariff Act, 1985. Every year, Finance Act mentions whether the SED shall be levied or not and collected during the relevant financial year.

Additional duties of excise (AED) is charged on goods of special importance as per Goods Of Special Importance Act, 1957. It is imposed in lieu of sales tax and shared between central and state government on the basis of percentages given in the second schedule of Act.

Apart from above, education cess on excise duty on all excisable goods and National Calamity Contingent Duty (NCCD) can be imposed on pan masala, chewing tobacco and cigarettes.

Documentation

As per Central Excise Rules, 2002, an assessee needs to do following.

Registration: The assessee is required to apply for registration before Assistant/ Deputy Commissioner of that area for getting central excise registration certificate.

Returns: Central excise returns are to be filed by assessee after self assessment in ER-1 format within ten days after the closure of the month. These returns are checked by inspector /superintendent of central excise and assessment is finalized after calling for records or as per circumstances of case. Otherwise show cause notice (SCN) is issued and case remains pending till adjudication takes place.

However, wherever assessee is availing of exemption under any notification, another return ER-3 is to be filed on quarterly bases within twenty days of the close of the quarter.

It may be noted ER-1 and ER-3 returns are consolidated returns which give details of the goods manufactured, cleared, duty paid, details of CENVAT credit, availed on input and capital goods, so utilized.

 e-Payment

The Central Board of Excise and Customs (CBEC) has made it mandatory for e-payment of tax through NSDL website by accessing the internet facility of authorized banks.

To avail of the above facility, the assessee has to enter 15 digit assessee code by Jurisdictional Commissioner. An online check is done and e-payment takes place.

Proposed Regime of Indirect tax-GST:

To simplify indirect tax regime, government is trying to unify sales tax, excise tax and service tax into Goods and Services tax (GST). An agreement between states and union government is likely to be completed and GST will be implemented from April 2013.