The Central Excise Act, 1944

THE CENTRAL
EXCISE ACT, 1944

WHAT IS EXCISE?
 HISTORY
 Central Excise levy was existing for years. But in 1944, 11 different
Acts were combined into one Act and this was then named as "The
Central Excise and Salt Act, 1944".
 In 1996 it was renamed as "The Central Excise Act, 1944".
 This Act is the original Act for excise, which contains the Tariff Items
1 to 67.
 In 1975 the Tariff Item 68 was introduced with the description "all
other goods not elsewhere specified". The Industry started
describing it as "Terror Items".
 In 1985 the controversial Tariff Item 68 was abolished and a new
Tariff Act known as "THE CENTRAL EXCISE TARIFF ACT, 1985"
(CETA) was introduced. This new act replaced the first schedule to
the original Act.
Excise Duty
 Excise is one of the important indirect taxes .
 To simply state Excise is a tax levied on goods manufactured or
produced in India.
 Central Excise duties are the single largest source of Revenue for the
Central Government of India. On an average, out of every one Rupee
Government earns, 19 paise is contributed by Excise.
 Apart from the Basic Excise duty, the following types of duties are
also levied :
 Special duty of excise specified in the Second Schedule to the
Central Excise Tariff Act, 1985 leviable under the Central Excise Act,
1944.
 Additional duty of excise under the Additional Duties of Excise
(Textiles & Textile Articles) Act, 1978.
 Additional duty of excise under section 3 of the Additional Duties of
Excise (Goods of Special Importance) Act, 1957.
Excise Duty Collection.
 They are levied and collected by Central Excise
Department under the authority of the Central Excise
Act, 1944 and Central Excise Rules, 1944.
 Section 3 is the charging section which in turn derives
the power to impose this tax from the Entry 84 of the
Union list under the Seventh Schedule read with Article
246 of the Constitution of India. The Entry empowers the
Central Government to levy Duty on all articles produced
or manufactured in India (including tobacco) except
Alcohol and Opium.
 The power to collect Excise duty on Alcohol and Opium
has been assigned to States and it is known as State
Excise duty.
CONCEPT OF MANUFACTURE
AND MANUFACTURER .
 Manufacture not only includes any process incidental or
ancillary to the completion of manufactured product but
also what is stated to be amounting to manufacture as
per section notes or chapter notes of the Central Excise
Tariff Act, 1985.
 The following four aspects must exist to attract the
definition of manufacturing as given in central excise law
 A process to be carried out.

 The process carried out must result in the manufacture of a new
product than what was originally before.
 The product so produced must have a marketability and
commercially known and sold as such.
 The product must be movable in nature.
ONE UNIT ONE REGISTRATION
 Under the Excise Rules each and
every factory engaged in the
manufacture of Excisable goods, is
required to obtain registration and
will be an assessee for the purpose
of levy and collection of excise duty.
 Therefore, if a company has got 3
or 4 factories located at different
places, each of the factory will
obtain Registration though it may
belong to one company only.
Excisable Goods
 Excisable goods refer to those Goods which are
mentioned in the Central Excise Tariff Act, 1944.
 Goods as per this Act must possess the following
characteristics.
These are the 4 Ms
 The goods should be MOVABLE. (no duty on immovable
goods).
 The goods should be MARKETABLE (capable of being bought
and sold).
 The goods should arise out of MANUFACTURING process.
 The goods should be MENTIONED in the Central Excise Tariff
Act. (if one of the criteria mentioned above is absent, the item
cannot be described as goods to attract Excise levy, even if
there is entry in the tariff).
GOODS
 Excisable Goods are of two kinds:
 Unmanufactured Goods (Coffee, Tobacco).
 Manufactured Goods.
 Rates of duty are of three kinds:

 Specific;i.e., per kg.
 Ad valorem; i.e., on the value of goods expressed in
terms of % of the value.
 Duty on production capacity : On certain Notified
Goods under section 3A.
MODVAT : MODIFIED VALUE
ADDED TAX .
 BACKGROUND
 Prior to the introduction of MODVAT, the Proforma Credit scheme
as specified under Rule 56A of the Central Excise Act, 1944 was in
operation. The scheme was narrow in scope and only applied to
specific situation.
 In the Union Budget of 1986 introduced the new system of

MODVAT. It is a tax on the VALUE ADDITION.
 VALUE ADDITION means the value of the output as reduced by the
total cost of bought out inputs.
 The Modvat scheme at present allows a set off of the excise duties
and additional duties of custom on inputs against the duty liability on
final product and capital goods.
 PURPOSE
 It was introduced in order to avoid Double Taxation on Inputs as
well as on finished goods.
Rajneesh Malhotra

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THE CENTRAL

EXCISE ACT, 1944

 A process to be carried out.

 Rates of duty are of three kinds:

 In the Union Budget of 1986 introduced the new system of

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