This article is written by Mehak Vardhan studying BBA LLB currently in NMIMS Kirti P. Mehta School of Law
The Central Excise Act of 1944 plays a pivotal role in India’s tax framework, governing the imposition and collection of excise duties on goods manufactured within the country. This Act is designed to promote equitable taxation, stimulate economic progress, and safeguard consumer interests. It defines the concept of Basic Excise Duty, sets down rules for tax payment, and allocates funds dedicated to consumer welfare. The Act also delineates rules related to offenses and penalties, ensuring that individuals and businesses are held accountable for any violations. It grants authority to government officials and landowners to uphold proper procedures and compliance. A significant feature of this Act is its provision for appeals through the Commissioner (Appeals) for parties dissatisfied with decisions, as long as they adhere to specific conditions and time constraints. In summary, the Central Excise Act of 1944 is a fundamental component of India’s indirect tax system, with a strong emphasis on fairness, economic development, and the availability of legal avenues for dispute resolution.
Keywords – Central Excise Act 1944, Excise Duty, Consumer Welfare Fund, Tax Evasion, Commissioner (Appeals), Settlement Commission
Excise duty represents an indirect tax imposed by the Central Government of India on the manufacturing, sale, or licensing of specific goods. Unlike State excise duties that apply to products like alcoholic beverages and opium, Central excise duties are applicable to goods produced within the country and consumed within its borders. The Central Excise Act of 1944 was enacted to consolidate and modify the legislation pertaining to central excise duties. Under this act, any goods manufactured or produced in India are subject to a central excise duty referred to as CENVAT. This act serves as a fundamental legal framework governing the assessment and equitable collection of central excise duties, ensuring efficiency and fairness in the process.
Central Excise duty is an indirect form of taxation and is collected from a customer by a retailer or an intermediary. It is paid when goods are transferred from the production unit to a warehouse. This particular tax is governed by Central Excise Act, 1944. Ideally, the Central Board of Excise and Customs is responsible for the collection of excise duty.
During the period of British colonial rule in India, this legislation was initially introduced to oversee the production of salt and the imposition of excise duties on a variety of domestically produced or manufactured goods. Prior to 1944, there were 16 separate laws in place, each governing the levying of excise duties on specific categories of products. These individual acts were eventually merged and consolidated into the Central Excise and Salts Act of 1944.
The Central Excise Act, 1944 was created to ensure that laws concerning the Central Duties of Excise on any goods or products manufactured within the length and breadth of India, could be consolidated as well as amended by the Central Government. It highlights the government’s commitment to creating a fair and transparent tax system that supports economic growth and development.
Levy of excise duty by Constitution of India
The Indian Constitution bestows distinct tax-levying powers upon both the Union and State governments. Article 246 within the Constitution delineates the jurisdiction of the Union and State governments in terms of taxation. The seventh schedule of the Constitution categorizes various subjects under three distinct lists, defining the areas over which both the state and Union governments can enact laws. This constitutional arrangement empowers the Central Government to impose excise duty on goods that are produced or manufactured within India, with certain specified exemptions.
Excise duty is levied under Entry 84 of Union List
Entry 84 of the union list of seventh schedule to the constitution of India empowers CG to levy excise duty on tobacco and other goods manufactured and produced in India except:
i. Alcoholic liquors for human consumption
ii. Opium, Indian hemp and other narcotic drugs and narcotics. but including:
Medicinal and toilet preparations containing alcohol, or any substance stated before.
Basic Excise Duty
Basic Excise Duty that is imposed on various products made in India, is authorized by Central Excises and Salt Act,1944. This duty may be with reference to the value, weight, volume, unit, length or area of the excisable goods. The rates of basic excise duty are given in the Schedule to the Central Excise Tariff Act, 1985. The net proceeds of basic excise duties are allocated between the Union and the States according to prescribed proportion. Salt, however, is exempt from this tax. So, if a company or person in India makes or produces a product, they have to pay this Basic Excise Duty as a tax.
Who Should Pay Excise Duty?
Considering the fact that excise duty is charged on the manufacture/production of goods, the producer/manufacturer of goods is liable to pay excise duty to the government. The three parties that must pay excise duty include the following:
• The individual or entity that manufactured or produced the goods
• The individual or entity that was responsible for the manufacture of goods by way of hiring labour
• The individual or entity responsible for the manufacture of goods by other parties
When to Pay Excise Duty?
Excise duty must be paid at the time of removal of goods. Assesses must pay the excise duty on the manufacture or production of goods. This means that the assessment and payment of excise duty should align with the moment the goods leave the manufacturing or production premises. The Act meticulously outlines the timing of excise duty payment
Excise Duty Payment Parties and Timings
Considering that excise duty pertains to the manufacture and production of goods, it is the responsibility of the producer or manufacturer to pay this duty. There are scenarios, though, where other entities may also be liable to pay excise duty. If labour is hired to manufacture goods, the entity that engaged the labour may be responsible for excise duty. Similarly, if goods are manufactured by third parties on behalf of a company or individual, the principal entity is held responsible for the excise duty.
Levy and Collection of Duty
There will be levied and collected in such manner a duty of excise on all excisable goods which are produced or manufactured in India. (Excisable goods means goods specified in the First Schedule and the Second Schedule to the Central Excise Tariff Act, 1985 as being subject to a duty of excise.) Chapter II of the act highlights that, if there’s a shortage in the quantity of goods due to natural reasons, the government can reduce the tax on those goods. Also, the government can set limits on how much of certain goods a person can have. If a person collects more tax money from a buyer than they should, they have to give that extra money to the government.
Provisions Of the Act
- Regulations for Tax Payment and Consumer Welfare
Chapter II-A talks about how the government deals with taxes on certain goods and how it benefits consumers.
- Section 12A mentions that when someone has to pay a tax on certain goods, (at the time of clearance) they must clearly show the amount of tax paid on all the documents related to those goods, like invoices.
- Section 12B says the presumption that incidence of duty has been passed on to the buyer which means that if someone pays the tax, it’s assumed that they passed on the full cost of the tax to the person buying those goods, unless they can prove otherwise. The government has even set up a fund called the “Consumer Welfare Fund” to help consumers. The money collected in this fund is used by the government to improve the welfare and well-being of consumers in various ways. Through this, the government aims to generate revenue that can be used to support various public initiatives and services
2. Powers and Duties of Officers and Land Holders
Chapter III of this act explains the responsibilities and authority given to government officers and landowners. It outlines the rules and guidelines they need to follow, how audits are handled, and what happens when someone is arrested in relation to these matters. This section ensures that audits are conducted fairly and that individuals have an opportunity to explain their financial records.
It also outlines the procedures for the arrest and proper handling of individuals involved in cases related to the Act It’s like a rulebook to ensure everything is done fairly and according to the law. Let’s take a closer look at a few sections within this chapter to understand it better:
- Section 14A: Special Audit in Certain Cases
This section deals with situations where a manufacturer or a person is subjected to a special audit. It means their financial records are carefully examined. The key point here is that the person being audited should have a chance to explain or defend any information found during the audit, especially if it’s going to be used in legal proceedings
- Section 19: Disposal of Persons Arrested
If someone is arrested for a legal violation related to land or other matters, they must be taken to a Central Excise Officer, who is authorized to send them to a magistrate (a legal official). This is to make sure the arrested person’s case is handled properly and fairly according to the law.
- Section 20: Procedure to be Followed by Officer-in-Charge of Police Station
When someone is sent to a police station, the officer in charge of that station has a specific set of rules to follow. They must decide whether to release the person on bail (basically, letting them go temporarily with a promise to return for a court appearance) or send them to the right magistrate (a legal authority) if bail is not an option. This section lays out the steps the police must take when dealing with such cases.
Offences and punishments
The Central Excise Act, 1944 has stringent provisions in place to deal with offenses related to excise duty. Section 8 or of a rule made under clause (iii) or clause (xxvii) of sub-section (2) of Section 37 outlines the various actions that are considered illegal under the Excise Act and the potential penalties for those actions. These actions include:
•Contravening Rules: Breaking any rules mentioned in Section 8 or rules made under Section 37 of the Act.
•Evading Payment: Trying to avoid paying the taxes required by the Excise Act.
•Illegally Handling Goods: Removing or dealing with goods in a way that goes against the rules of the Act.
•Dealing with Suspect Goods: Handling goods that you know or have reason to believe could be confiscated under the Act.
•Misusing Tax Credit: Not following the rules related to using tax credits for paying excise duty on final products.
•Providing False Information: Not providing required information or giving false information unless you can prove it’s true.
•Assisting Offenses: Trying to commit or helping someone commit any of the offenses mentioned above.
If someone is found guilty of these offenses, they can face different punishments depending on the seriousness of the offense. In the case of excisable goods where the duty owed is over a certain amount, the punishment can include imprisonment for up to seven years and a fine. However, the court can decide to reduce the imprisonment term to no less than six months only if there are very good reasons for doing so.
Offences by companies
- Section 9AA (1): Offences Committed by Companies
If a company commits an offense under this law, the law holds not only the company accountable but also the person who was in charge and responsible for the company’s business when the offense occurred. This person, along with the company, can be found guilty of the offense and face punishment as a result. However, if that person can prove that they didn’t know about the offense or that they took all necessary precautions to prevent it from happening, they won’t be punished.
- Section 9AA (2): Involvement of Company Officers
Even if a company commits an offense, it goes further to say that if it’s proven that the offense happened with the agreement, approval, or due to the neglect of any director, manager, secretary, or another officer of the company, those individuals can also be considered guilty of the same offense. They can be prosecuted and face punishment accordingly.
Procedures for Filing an Appeal
In cases where an individual or entity is dissatisfied with a decision or order rendered under the provisions of this Act by a Central Excise Officer whose rank is lower than that of a Principal Commissioner of Central Excise or Commissioner of Central Excise, an avenue for recourse exists in the form of an appeal to the Principal Commissioner of Central Excise or Commissioner of Central Excise (Appeals), hereinafter referred to as the “Commissioner (Appeals)” an appeal must be initiated within sixty days from the date of receiving the communication containing the decision or order.
In circumstances where it is demonstrated that the appellant was genuinely prevented by sufficient cause from lodging the appeal within the stipulated sixty-day timeframe, the Commissioner (Appeals) possesses the authority to extend this period by an additional thirty days.
Furthermore, the Commissioner (Appeals) is empowered to grant adjournments and additional time during the appeal hearing process if substantial justification is presented. It is imperative to note that the Commissioner (Appeals) can extend the hearing or grant adjournments no more than three times for any single party involved in the appeal.
Each appeal, in accordance with this section, should be presented in the prescribed format and verified in compliance with the prescribed methodology.
Settlement of Cases with the Central Excise Department
Section 32E of the Central Excise Act allows individuals or businesses (called “assessee”) to apply to the Settlement Commission for resolving their excise duty-related issues before they face legal action. The application must include all the relevant information and details about their excise duty liability. This section outlines the rules and conditions for making such applications.
- Conditions for Application:
- Submission of Accurate Returns: Before applying to the Settlement Commission, the person or business must have submitted excise duty returns in the prescribed manner, indicating the production, clearance, and excise duty payments.
- Receipt of Show Cause Notice: The applicant must have received a notice from a Central Excise Officer, indicating that they owe additional excise duty.
- Minimum Liability: The additional excise duty liability accepted in the application must be at least three lakh rupees.
- Payment with Interest: The applicant should have paid the accepted additional excise duty along with the interest due under section 11AB.
2. Restrictions on Applications:
- Pending Cases: If the case is already being considered by the Appellate Tribunal or any court, the Settlement Commission won’t entertain an application.
- Classification Disputes: Applications cannot be made to interpret the classification of excisable goods under the Central Excise Tariff Act, 1985.
3. Seizure Restrictions:
If excisable goods, books, or documents have been seized by authorities under the Central Excise Act or its rules, the applicant must wait for 180 days from the seizure date before applying to the Settlement Commission.
4. Fees for Applications:
Every application submitted under this section must be accompanied by the prescribed fees.
5. No Withdrawal of Applications:
Once an application is submitted, the applicant cannot withdraw it.
The Central Excise Act, 1944, is a crucial piece of legislation in India that governs the levying and collection of excise duties on goods manufactured or produced within the country. Originally, it consolidated a multitude of separate acts into a comprehensive framework. The Act aims to create a transparent taxation system, supporting economic growth. Key aspects of the Act include the levy and collection of excise duties, regulations for tax payment, consumer welfare initiatives, and provisions for handling offenses. The Act outlines penalties for contraventions and provides guidelines for government officers and landholders in their duties. Additionally, the Act offers a structured process for appeals, enabling individuals or entities to challenge decisions made by lower-ranking Central Excise Officers. In summary, the Central Excise Act, 1944, plays a pivotal role in shaping India’s taxation landscape, promoting a fair and accountable system that fosters economic progress and safeguards consumer interest
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