Provides a brief overview of important aspects of central excise and customs in India

1. By CA. Madhukar N Hiregange
FCA,DISA(ICAI)

2. Act & Rules
Central Excise Act, 1944
Central Excise Tariff Act, 1985
Central Excise Rules, 2002
CENVAT Credit Rules, 2004
Central Excise Valuation (Determination of Price of
Excisable Goods) Rules, 2000
Others
Notifications
Circulars
Case Laws

3. Indirect
Tax Laws
Act
Rules
Circulars
Case Laws
Trade
Notices
No Law above the
Constitution of India

4. Types of Duties
Basic Excise Duty
Special Excise Duty
Additional Duties of Excise – (Textiles and Textile
Articles)
Additional Duties of Excise - Goods of Special
Importance
National Calamity Contingent Duty
Education cess
Secondary and Higher Education cess

5. Step 1 : “Goods” exist; movable and marketable
Step 2 : Product under List II (State List) or List III
(Concurrent List) of the VII Schedule not covered by
Central Excise.
Step 3 : Classify the product as prescribed in the
Central Excise Tariff Act,1985.
Broad category or specific coverage
Entry is not clear then the reference to the Rules of
Interpretation

6. Determination of Excisability of Product
Step 4 : Whether the process is a Deemed
Manufacture.
Activity like packing, labeling, repacking etc are
undertaken,
On products as mentioned in Chapter notes and
Third Schedule
Step 5 :The process whether amounting to
manufacture.
Comparing the Incoming material and outgoing
material
Name, character or use.

7. Determination of Excisability of Product
Step 6 :If the item is intermediate product avail credit
on inputs
Pay duty on the finished goods
Pass on credit to the industrial users
Step 7 :The product may be so competitive
It cannot bear any duty of excise.
Can be located at like Kutch or North India,
Himachal Pradesh
Contd..

8. Determination of Excisability of Product
Step 9 : Decision for Registering
Made at the point
Where no other economic or legal opinion exists.
Step 10: The trader who wishes to pass on the duty paid
on goods traded
Could also be registered.

9. What are Goods?
The definition under the Sale of Goods Act, 1930
Goods must be moveable, saleable/marketable
Explanation to Section 2(d) of CE Act, 1944
-states ‘goods’ include any article, material or
substance which is capable of being bought and
sold for a consideration and such goods shall be
deemed to be marketable

10. What is Manufacture?
Process undertaken would amount to manufacture as
understood under the Central Excise
The incoming material and the final outgoing
material are to be compared with respect to their
name, character or use.
Ensured that processes not amounting to
manufacture are not described as manufacture
Result in attempts to deny credit

11. What is Removal?
Removal means the physical act of
shifting/moving the goods
Under excise- the self-removal procedure
No excisable goods on which any duty is payable
- shall be removed from any place where they are
produced or manufactured or from warehouse
without payment of duty
Rate of duty and tariff valuation would be done
on the date of removal.

12. What is classification?
Ascertaining the tariff heading/sub-heading
under which the product is categorized
In line with Central Excise Tariff Act -Based on
HSN
See the Interpretative Notes at the beginning of
the Tariff + Notes in the Section and Chapter
Rules for interpretation

13. Valuation
A. Duty Based on capacity
B. Advalorem
1. Sec 3- Tariff Value Fixed
2. Notified under RSP
3. Set out in Third Schedule
4. Transaction Value
5. Exception to TV – Goods sold; delivery at time &
place of removal; unrelated ; price only
consideration.

14. Valuation Rules
Rule 5 – Sold other than factory – deduction for
freight
Rule 6 – Sole consideration – Alternatives
Rule 7 – Depot /Consignment agent
Rule 8 – Captively consumed
Rule 9 – Related person
Rule 10 – Interconnected/ holding
Rule 10A – Despatched from JW premises
Cum duty if not collected

15. Effect of ED on VAT
If ED is on sale- then VAT on Value
including ED
If ED on removal – no sale – What is
reason – Right to use?
If ED is not paid due to exemption – To be
included if collectable from Dept. ( Value
important)

16. CA. Madhukar N Hiregange
Chartered Accountant

17. Background
One of the oldest known levy.
paid by a merchant who brought his merchandise
into a foreign kingdom for trading.
paid as a tribute to the King for permitting to trade in
his kingdom
This become customs accordingly called as duty of
customs.

18. Customs – Constitutional basis
Article 265 states that “no tax shall be levied or collected
except by authority of law”
Customs Act is enacted under Article 246(1) of
Constitution of India
Customs duty is levied under Entry 83 to List I to Seventh
Schedule to the Constitution of India – “Duty of Customs
including export duties”

19. Customs Provisions
Earlier Sea Customs Act 1878; Land Customs Act, 1925
Now - Customs Act 1962 - An Act to consolidate and
amend the law relating to Customs.
Indian Tariff Act 1934 – Now Customs Tariff Act 1975
–
I Sch. - Import duty
II Sch. – Export duty
Rules
Regulations

20. Hiregange & Associates, Chartered Accountants 20
Customs Duty
Customs Duty is on
Import – bringing into India from a place outside india.
Export – taking out of India to a place outside India.
Of Goods
India includes territorial waters of India -
territorial waters representing India to be 12
nautical miles from the nearest point of low tide
along the base line of India

21. Hiregange & Associates, Chartered Accountants 21
Levy of Customs Duty
Taxable event –
UOI Vs. Apar P. Ltd 1999(112) ELT 3
Garden Silk Mills Ltd. Vs. CC 1999(113)ELT 358
Kiran Spinning Mills Vs. CC 1999(113)ELT 753
Import commences when the goods enter into territorial
waters but continues and is completed when the
goods become the part of the land mass of goods
within the country.

22. Hiregange & Associates, Chartered Accountants 22
Assessment
The Classification of goods
rate of duty
rate of exchange
correctness of value declared
prohibitions and restrictions
Procedure
Examination of goods
Asst. of BOE/Shipping Bill/Bill of export etc.
Order of Clearance/let export order

23. Types of duties
Basic customs Duty – 10%
Additional Duty of Customs (CVD) – Equal to ED-
exemptions/MRP based?
Cess on CVD exempted.
Special CVD – 4% - (Sales Tax)
Cess – for specific purpose like development etc. – Ed.
Cess & SHE Cess – 2% & 1%

24. Types of duties
Protective duty – safeguard Indl. Establishment.
Safeguard duty – safeguard the domestic ind.
Countervailing duty on subsidized articles
Anti-dumping duty – to protect domestic industry
National Calamity Contingent duty
Includible for VAT

25. Assessment
The Classification of goods
Rate of duty
Rate of exchange
Correctness of value declared
Prohibitions and restrictions
Procedure
- Examination of goods
- Asst. of BOE/Shipping Bill/Bill of export etc.
- Order of Clearance/let export order

26. Hiregange & Associates, Chartered Accountants 26
Duty Rates
At the rates set out in Customs Tariff Act, 1975.
Duty rate prevailing over the date of
Importation – filing of BOE for home clearance; and
Exportation – Let Export order

27. Hiregange & Associates, Chartered Accountants 27
Other Aspects
Duty is liable on re-importing of goods exported.
Duty is payable for free imports – Samples,
replacements of spares & parts etc.
Exceptions
Pilfered Goods – unloading<>order of clearance
Damaged or deteriorated goods – reduced value
lost, destroyed or abandoned goods – before removal
from customs area
denaturing or mutilation of goods – change of ch.
Exemptions in public interest – full/partial –
conditional/unconditional

28. Hiregange & Associates, Chartered Accountants 28
Other Aspects – cont
Transit Goods – goods remaining in ship without
unloading – for others
Transhipment of goods – goods received in one
port is trfd. to another either for another port or
outside India.
Warehousing – clearance to public or bonded
warehouse allowed for 1 yr
Cap Good for 100% EOU - 5 yrs
Other goods for EOU – 3yrs.

29. High Seas Sale/ Bonding- A 286
A. Subsequent sale occasions import
- Pre existing order – link- reason for import
B. Transfer of Documents
- Sale prior to filing of BOE
- Customer filing BOE
- CD paid after sale
Customs Authorities sell or CD paid by importer/
canalising agency- Liable
De-bonding and then sale

30. madhukar@hiregange.com