A Project Report

ON / IN

Taxation- II

AS PARTIAL FULFILLMENT OF PGPBM PROGRAM,

Second year , Trimester - V

SUBMITTED BY

Pardeep Kumar
Marketing-Finance
2208-09/
MF-025
Pune Institute of Business Management

PUNE
2009 -2011
 DECLARATION

I, Pardeep Kumar hereby declare that this project report is the record of authentic
work carried out by me during the period from 15th February to 30th April, 2011
and has not been submitted earlier to any university or institute for the award of
any degree/diploma etc.

Name of the Student with Sign: Pardeep

Date: 30-04-2011
 ACKNOWLEDGEMENT

This project has been an honest and dedicated attempt to make the
analysis on marketing material as authentic as it could. And I earnestly
hope that it provides useful and workable information and knowledge to
any person reading it.

During this period, I had the pleasure of working closely with

accomplished organization people who shared with me their experience
and helped me in completion of my research.
I express my sincere thanks to my project guides and my institute faculty
for guiding me.
Lastly I am grateful to my parents who been my mentors and
motivators. I am also thankful to all my batch mates who have been
directly or indirectly involved in successful completion of this project.

TABLE OF CONTENTS:
 Topics Page no.s
Sr.No.
1.
Objectives And Scope Of The Project.

2.
Background Introduction / Synopsis Of The
Project.
a) Company profile,
b) Basic introduction of the project,
c) Organizational hierarchy,
d) Department.

3.
Research Methodology.
a) Methods & Tools adopted for analysis,
b) Data collection,
c) Techniques for analysis,
d) Pictorial / Graphic / pie charts, presentation
of data.

4.
Observations / Findings.

5.
Limitations.

6.
Suggestions / Recommendations.

7.
Conclusion.

8.
Bibliography.
CENTRAL EXCISE TAXES

NATURE & MEANING CENTRAL EXCISE TAXES

EXCISE TAXES

Central excise duty is an indirect tax, levied in goods manufactured

in India. The tax is administered by the central government under the authority of entry 84 of the
union list (list 1) under 7 schedule, read with article 256 of the constitution of India.

The word “excise” is derived from a Dutch term “acise” , which itself is derived from the Latin
word “accensay” , which means to tax “excise” is a word of wide import any & according to
dictionary meaning, denotes “an in direct tax on commodity manufactured ,produced ,sold ,used
or transported by the country”. Excise duty is a duty levied on the goods that are indigenously
manufactured.
Excise duties having been defined in this manner in sec. 3 of the that act, it immediately follows
from the very defined that for anything to be liable to excise duties, it must fulfill all the
following conditions.

(A) It must be “goods”.

(B) It must be “excisable goods”.
(C) It must be either produced or manufactured in India.

While the duty no doubt is on goods as such, still goods themselves cannot pay duty. This takes
us to the next concept of “taxable event”. For every tax, whether direct or indirect, there is a
“taxable event”. That is the event or situation which gives rise to the liability which he has
created, which would mean that he should be the person to pay the duty. Since the taxable event
is production/manufacturer.
Excise duty is today the most important source of revenue in India. It constitutes about 1/5 of the
total yearly receipts of the central government.
The finance act, 2000 has renamed the ‘duty of excise’. The ‘central value added tax’
(CENVAT), which term is the term ‘duty’, ‘duties’, ‘excise duty’ or ‘duties of excise’.

The Webster’s New International Dictionary defines “excise duty” as :-

(A) Any duty, toll or tax ;

(B) An inland duty or imposed, levied upon the manufacture, sale or consumption of
commodities within the country.
(C) A tax upon the pursuit or fall of certain sports, trades or occupation, usually taking in
this case, the form of exactions for licenses.

The supreme court of India has defined “Excise duty” as “a tax on the production or
manufacture of excisable goods produced or manufactured within the country”

Nature of Excise Duty

A few special features describing the nature of excise duty are as follows:-
1. The duty of excise is not levied on directly on the goods but is levied on the manufacture or
production of a new commodity. Hence it is called an ‘indirect tax’.
2. Excise duty is payable by the manufacturer or the producer, not by the consumer. However the
incidence of duty is always indirectly on the consumer.
3. Excise duty is levied on goods &the taxable events is manufacture or production if a new
commercial commodity. The levy collection of excise duty is practically made at a stage next to
the manufacture of goods, i.e. removal of goods.
4. The taxable event is not independent of liability to pay duty from levy of duty. Therefore there
cannot be different taxable events for different purposes.
5. The method of collection does not effect the essence of excise duty, but only relates to the
machinery of collection for administration convenience.
Excise differentiated from other duties:

Excise v/s custom duty :-

Excise duty is levied on manufacture or production of goods within the country. Thus it is related
to industrial activity. Custom duty, on the other hand, is attracted on the movement of goods
across the custom frontier.
Excise duties are the duties, payable on goods produced at home, where as custom duties on
goods imported into country from abroad.

Excise v/s sales tax :-

Excise duties are the duties levied upon a manufacture or producer of specified goods, in respect
of their manufacture & production in a factory within the country. It is not related to sale of
goods or proceeds of such sale. Sale tax , on the contrary is levied on the vendor of goods, in
respect of his sale.
The taxable event in case of excise duty is the coming into existence of a commodity. However
in case of sale tax , the taxable event is the sale of a commodity. The event of a sale of a
commodity is immaterial for levy of excise duty.
In 1939, the duty of excise included the tax on sales as well. However, when the government of
India Act 1985, delegated powers to levy tax on sale to another authority, it was distinguished
from excise duty.

Excise v/s service tax :-

Service tax is a tax on the services provided by the specified category of person to their clients &
customers. On the contrary, excise duty is a tax on removal of goods from the place of
manufacture or production, irrespective Of whether the same are used by customer or not.
Excise v/s octroi :-

Octroi is charged on the entry of goods & a specified area. This is generally levied & collected
by the local governments.
While excise duty is levied on the goods manufactured &produced &the country. Octri is a kind
of entry tax. The levy of excise duty is therefore not conflict with the levy & imposition of
octroi.

Types of excise duty:-

Central excise duties can be classified into the following categories:-

(A) Basic excise duty (BED):- BED is levied under the central excise act 1994, on
specified goods manufactured or produced in India at the rates specified in the
Central Excise Tariff Act 1985. The basic excise duty may be:-
(1) Ad Valorem Duty i.e. duty levied at the specified rate on the volume of goods.
(2) Specific Duty i.e. duty levied at the specified rate on the unit, weight, volume, length
or area of goods.
There is a fixed rate of duty @ 16% is charged.
The basic excise duty is shared between the Union & the States.

(B) Special duties also known as auxillary duties, are the regulatory duties, which are
levied as surcharge on certain specified goods. The purpose of special duties to raise
additional resources for some specified objects. Special excise duty is the percentage
of effective basic duty is calculated & relief exemptions & rebates is granted. Thus, if
the basic excise duty is nil the special excise duty would also be nil.
The special duties were first introduced in India in 1963 at the time of Chinese aggression.
Special excise duties are generally announced through the Finance Bill.
(C) Additional duties:- Additional duty is collected on certain specified goods & products
under the provisions of separate status. The additional duty is levied with the object
to, either curb the demand or consumption of the particular commodity or to generate
revenue sources from the commodity, which can, for the time being, bear the extra
 load of taxation. These additional duties are in addition to the basic excise duty &
special excise duty.
(D) National calamity contingent duty [finance act 2001]:- A national contingent duty is
imposed by a finance act 2001. This duty shall be in addition to any another duties of
excise chargeable on such goods under the Central Excise Act 1944 or any other law
for the time being in force. This duty is imposed on Pan masala, Cigarettes, Bidies &
other tobacco products.
(E) Special Additional Excise Duty [finance act 2002]:- In the case of goods specified in
the 8th schedule, beings goods manufactured, there shall be levied and collected for
purpose of the union by surcharge, a duty of excise to called the special additional
excise duty at the rates specified in the said schedule,
This duty shall be in additional to any other duty on such goods under central excise
duty 1944 or any other law for the time being in force.
The 8th schedule:-
1. Motor Spirit (Petrol),
2. High Speed Diesel Oil
(F) State excise duty:- It is imposed on manufacturing or production of
items listed in state constitution.
According to list 2nd of 7th schedule entry 51 the state governments are authorized to
levy excise duty on the production & manufacture of the followings goods:-
1. Any alcoholic liquor meant for human consumption.
2. Opium, bhang, narcotics drugs and other narcotics.
The duty by the Central government on the production & manufacture of goods in
India is called excise duty while the duty levied by the state government on the production &
manufacture of narcotics in order to get for the sake of convenience called state excise.
(G) Cesses:- Cess is a tax imposed for specified purpose with reference to some goods.
The cess is collected separately & the collecting autority is under obligation to utilize
the same for the specified purpose only.
BASIS OF EXICE DUTY:

The basic conditions of excise liability are:-

1:- The duty is on goods.
2:- The goods must be excisable
3:- The goods must be produced
4:- Such manufacture must be in India

Excise is levied on the following basis;

1:- Specific duty

2:- Ad-valorem duty
3:- Compounded duty

1:- SPECIFIC DUTY:-

It is the duty payable on the basis of certain units like weight, length, volume, thickness etc. for
example duty on cigrattes is payable on the basis of its length. Duty on sugar is based on per kg.
etc. In such cases calculation of duty is payable in comparatively easy.
 In view of simplicity many goods were earlier covered under specific duty.
However this disadvantage is that even if the selling price of product increases and the revenue
earned by the government doesn’t increase accordingly.
Frequent revision of the rates have to be done which is slow and time consuming
process hence now most of the goods are covered under

Ad-valorem duty. Presently specific rates amended for:-

1:- Cigrattes on the basis length, match box on the basis of per hundred boxes/ packs.
2:- Marbles slabs and tiles on the basis of square mt.basis
3:- Colour t.v. based on screen size in centimeter.
4:- Sugar per quintal basis.
5:- Cement on ton basis.

2:- AD-VELORAM DUTY:-

Fixing specific duty or tariff value is possible only for few selected items like sugar pan masala
consumer goods etc. Generally it is not practically possible to charge specific duty.
Similarly paying duty on the basis of mrp is possible only in respect of few
selected commodities. In other case central excise is payable on the basis of value and this is
called ad-veloram duty.
On a few commodity excise duty is levid on fix price or rate per unit. For eg.
Cement is levid @ 350 per ton and on sugar is levid on @ 340 per ton. However on the majority
of goods the duty is levid on the ad-veloram basis. In such case duty is payable should be worked
out on percentage basis of the assessable value of the goods clearly. This percentage of duty is
specified in the CEPA from 1994-1995. the gatepass system has been replaced by invoice
system. The manufacturer under self removal procedure( under chapter vii a rule 173 A to 173
Q) can clear goods by payment of duties, on the value shown in there invoice.there is no need of
filing price list ( except whenever the clearance are taking place from as well as depot /
consignment agents of factory)
 The value shown in the invoice should be arrived at after considering the
provision of section 4 and section 4a of central excise act 1944 as well as central valuation rule
1975.

3:-COMPOUNDED DUTY:-

Compounded is the combination of specific and ad-veloram duty.

LEVY OF SLABS

1:- CENTRAL RATE – 16 %

2:- MERIT RATE – 8 %
3:- DEMERIT RATE – 24 %
( With effect from 20th feb 1999 as per the budget of 1999 )
Earlier these were 11 various ad- veloram rates, some commodities were earlier fixed rates at 30
% 32 % 40 % but now maximum excise duty has been lower to maximum of 24% .

LEVIABILITY

The duties of excise which shall be levied and collected on any excisable goods which are
produced or manufactured:-

1:- In a free trade zone and brought to any other place in India
2:- By a hundred per-cent export oriented undertaking and allowed to be sold in India.
Shall be an amount equal to the aggregate of the duties of customs which would
be leviable ( under the customs act,1962 c52 of 18962) or any other law for the time being in
force on like goods produced or manufactured outside India if imported into India and where the
said duties of customs are chargeable by reference to their value the value of such excisable
goods shall notwithstanding anything contceined in any other provision of this act be determined
in accorndance with the provisions of the customs act,1962 (52 of 1962)and the customs tarrif
act 1975 (51 of1975).
WHO IS LIABLE TO CHARGE THE DUTY LEVIABILITY:-

CONSTITUTION IS SUPREME LAW:-

Legislative powers emanate from the provisions enshrined in the constitution adopted by the
respective country.

INDIA IS UNION OF STATES:-

India being a union of various states has a quasi federal constitution in which the powers of
legislation are shared between the union and states. Article 246 and the seventh schedule
mentioned therein which lay down the division line, are specifically relevant for this purpose. It
shall be seen therefrom that both the union and the state government have powers to legislative
in regard to the levy and collection of excise duty.

CONSTITUTION AUTHORITY FOR LEVY OF EXCISE DUTY BY CENTRAL

GOVERNMENT:-
As regard duties of excise, the union government regulates that part of levy which is provided in
entry 84 or entry 97residual power of lidt 1 under seveth schedule read with article 246 of the
constitution of India and the state government regulates those given in entry 51 list 3. The major
part of excise duties are leviable by the union government more popularly known as central
excise while the state legislature have a minor share to regulate as described in entry 51.
It is understood that industrial alcohol will be subject to union excise as it is not fir for
human consumption hence it is the central government not the state government which is
competent to levy duty thereon.
The union duties of excise are levied on varieties of goods which are classified in
the schedule to the central excise tariff act 1985. The central excise tariff contains a detailed
classification of excisable goods the rate of duty leviable on each tariff head.

DEFINATION OF EXCISE DUTY:-

However there is no definition of term excise duty either in constitution or in CEA.
CONSTITUTIONAL AUTHORITY FOR LEVY OF EXCISE DUTY BY STATE
GOVERNMENT:-
As in evident from entry 84 in the union list, in the seventh schedule of the
constitution of India, the union government has no power to levy any duty of excise on alcoholic
liquor for human consumption, opium, Indian hemp, and other narcotic drugs but including
medicinal tolilet preparation containing alcohol or any narcotic substance.
 Central government has power to levied duty on medicinal toilet preparations
containing alcohol narcotic substance etc. eg. Are cough syrup and pain killer tablets or syrups
etc. though the duty is levieable by central government would be collected as state excise duty
the center cannot collect excise duty on them.

AN OVERVIEW OF CENTRAL EXCISE RULE 1944:-

As per usual scheme of any act sec 37 of the CEA grants power to govt. to frame rules for
prescribing procedures form etc. accordingly central excise rules have been notified by central
excise rules have been notified by central govt. ammended from time to time. These rules
provided for various procedures t be followed for clearance storage of goods accounting of goods
licensing procedures refund procedures, appeal procedures etc. rules are generally important as
the prescribed procedure have to be followed by the assessee. In case of central excise, the rules
are more important because excise is a very procedure oriented. Many time such substantive
benefits are lost or penalties are imposed merely because proper procedure were not followed.
Moreover rules often provide for granting concession reliefs hence they must be studied
thoroughly.
These rules contains the procedure for collection of duty. These rules interalia detail the
procedure for appointment and power of officers time manner of payment of duty execution of
bonds etc. detailed procedure regarding on levy of duty on un manufactured products
manufactured tobacco, tyre, cotton fibers tea vegetables products medicine etc. has been given.
They also contain the procedure for availing the benefit of MODVAT.

AN OVERVIEW OF CENTRAL EXCISE & SALT ACT 1944:-

To improve the body of excise duty, the British Govt. framed the central excise and salt act 1944.
there were separate excise act, number 16 all these were consolidated and consolidating act was
passed in 1944. In the year 1996 the word ‘salt’ was omitted from the name of the act, now this
act is known as central excise act 1944. This act is applicable till date but with various
amendments made in it from time to time.
Time is a basic act for excise duty collection, there are 40 sections in this
enactment. This act provides for charging of duty, valuation powers of officer provision of arrest
and penalty etc Sec 37 of the act empowers the central government to frame rules for this
purpose.

AN OVERVIEW OF CENTRAL EXCISE TARIFF ACT 1985:-

This act provides for tariff for central duty of excise. The central excise rules 1984 and central
excise tariff act 1985 form the body of law of central excise. Recommendation made by the
study group constitute to review the central excise tariff a new central excise tariff act has come
into force with effect from 28 feb 1986. the tariff act replaces 1 st schedule of the central excise
and tariff 1944, this is very important development in excise taxation.
When the central excise act was passed in 1944 the act itself included various
items ( called tariff items ) into which goods were classified. However, as more and more goods
were covered under central excise. The tariff began complicated and unsystematic. Hence,
CETA 1985 was passed which comes into effect from 1 st april 1986. the CETA 1985 classified
all goods under 96 chapters and specific court is allotted to each item. There are over 1000 tariff
headings and 2000 sub-headings in this act. This classification forms the basis for classifying the
goods under particular chapter and sub-head to prescribed duty to be charged on particular
product. The excise act and tariff act are thus being separated.

Main features of tariff are as follows;-

1:-LINKING OF CETA:-CEA and CETA are link together as follows:-

I:-Section 2 of CETA states that rate at which duties of excise shall be levied under CEA are
specified in schedule to CETA.

II:-Section 3 (1) of CEA specifies that the duty shall be levied collected on all excisable goods
which are produced as manufactured in India, as and at the rates, prescribed in schedule to the
CETA thus both acts are link to each other.
2:-CETA IS BASED ON HSN:-CETA is based on harmonize system of nomenclature called
harmonized community description coding system. This is an international nomenclature and
standard adopted by the most of the countries to insure uniformity in classification. International
trade through CETA generally follows HSN. Often there are wide variations in HSN and CETA.

3:-CETA CONTAINS 2 SCHEDULE:-CETA consist of 2 schedule the first schedule gives basic
excise duties leviable on various products while 2nd schedule gives list of items on which special
excise duty is payable.
2nd schedule contains only few items. It has been cleared that tariff heading given
in 2nd schedule will be interpreted in the same way as those in 1 st schedule. Items included in 2nd
schedule are already covered in 1st schedule.

4:-SECTION AND CHAPTERS OF CEA:-Tariff is divided into 20 sections each of 20 sections

is related to broader class of goods. Section notes are given at the beginning of each section
which govern entries in that section. These notes are applicable to all chapters in that section.
Each of the section is divided into various chapters and each chapters contains
goods of one class. Chapter notes are given at the beginning of each chapter.

5:-GROUPS AND SUB GROUPS WITHIN THE CHAPTER:-Each chapter is further divided
into various headings depending on different types of goods belonging to same class of products.
The headings are sometimes divided into further sub-headings.
All excisable goods are classified using 2 digit system 2 more digits are added for further sub
classification.

6:-A SAMPLE CHAPTER FORM CETA:-Extract from CETA of chapter is given on previous
page to given an idea of the tariff.

7:-COLUMNS IN CETA:-Central excise tariff has four columns:-

I:-HEADING
II:-SUB-HEADING
 III:-DESCRIPTION OF GOODS
IV:-RATE OF DUTY

IMPORTANT TERMS AND DEFINATION

1:- ASSESSEE:-Asseesse means any person

I:- who is liable for payment of excise duty assessed under these act or any other act
II:- included any procedure or manufactures of excisable goods
III:- a registered person of a private warehouse in which excisable goods are stored.

2:- ASSESSABLE VALUE:- Assessable value is value in which duty is payable as a percentage
generally by value we understand the price as mentioned in bill or invoice. However for excise
purpose it is not possible to fully relay on such price as:-
I;- duty is payable even if goods are not sold
II:- it is desirable to have uniform policy in fixing AV
III:- chances of manipulation in such price should be minimum.

BASIS OF ASSESSABLE VALUE (AV) U/S 4

AV is fixed be sec 4 of the act on the basis of normal wholesale price to independent buyer at
factory gate, inclusive of packing cost but exclusive of
I:- All taxes and duty payable
II:- Trade discount
III:- Cost of durable and returnable containers.
The basic provisions of sec 4 states the value for this purpose has to be calculated
as follows:-
I:- Normal price of the goods at which such goods are originally sold by the assessee to a buyer
in wholesale trade has to be considered.
II:- The price should be at the time and the place of removal ( i.e. at factory rate or at the
godown)
III:- Buyer should be an independent person and not a related person of the seller.

IV:- Price should be the sole consideration on the sale.

V:- If goods are sold at different prices to different classes of buyers each such price will be
treated as normal price for such class of buyer( e.g. such industries treat govt. department,
industrial consumer and other customer as separate class of buyer and prices can be different for
them.). The cost of packing has to be included in the value. However if the packing is of durable
nature is returnable than cost of such packing will not be included.
VI:- The value should be exclusive of excise duty, sales tax and other taxes payable on such
goods.
VII:- Trade discount allowed in a accordance with normal practice of wholesale trade is allowed
as deduction for the purpose of assessable value.
COMPUTATION OF ASSESSABLE VALUE

Custom duty selling price ---------------

Less:- Deductions
I:- All taxes and duty payable -------------
( except excise duty )
II:- Trade discount (+) -------------
III:- Cost of durable
Returnable containers (+) -------------
IV:- Excise duty (+) ------------
_________
-------------- (-) -------------
___________
ASSESSABLE VALUE -------------
___________

3:-CURING:- U/S 2(C):- Curing includes dying, fermenting, witting and any process rendering
an unmanufactured product fit for marketing for manufacture.

4:- EXCISABLE GOODS:-U/S 2(D):- Once it is established that something falls within the
mischief of the term “goods” the issue to be decided is whether it is also “excisable goods”.
Fortunately, the latter term has been defined specifically in section 2(d) of the central excise act
1944. It says that the term “excisable goods”means “goods specified in the I schedule and II
schedule to the central excise tariff act 1985 as being subject to a duty of excise and includes
salt.”
Now, this would mean that it is not as if anything which is sold or is saleable
hence goods is taxable by excise. It should also be specified in the central excise tariff the I
schedule II schedule to central excise tariff act 1985.) Here an important aspect of this definition
is to be noted.
 The definition in sec.2 (d) is specific to the effect that it is only goods spelt out in
the tariff as being subject to duty that can be consider to be exicable goods. This would mean
that it is only till the stage when the duty liability is not discharged by actual payments that the
goods can be called excisable goods. Once the duty is paid or the goods have been subjected to
duty, they are not excisable goods. In sum, excisability attaches itself to the goods only till the
point of payment of duty. Duty paid goods are not excisable goods. Similarly, goods
manufacture in India, once they are cleared from the factory on payment of duty may continue to
be manufactured goods but they are not excisable goods. ( for the purpose of excise law).
An important question that arises is whether the goods specified in the central
excise tariff as per dutiable or they should also satisfy the test of marketability. The Supreme
court in Bhor industry case held that simply because an article falls within the tariff, it would not
be dutiable under the central excise law if the said article is not goods known to the market.
Another distinction worthy of note in this context is the one between excisable
goods dutiable goods. In the excise tariff, the rates are specified by the legislature. However in
several cases the dutiability is brought down to nil though the goods being exempted entirely
from duty u/s 5A now rule and sender notification. There has been some confusion on the part of
a few as to what is the status of goods which are totally exempted. It is contended that in as much
as the goods do not have to pay any excise duty, they are not excisable goods. However this
inspiration is incorrect. Exemption u/s 5A rule 8 dose not remove excisability. It only keeps the
duty otherwise liable in suspended animation lasts. Even when the goods do not have to pay duty
they are exicisable though they may not be dutiable.

5:- MANUFACTURE:- U/S 2(F):- Section 2(f) of central excise act merely states that
manufacture includes any process:-
I:- Incidental or ancillary to the completion of manufactured product.
II:- Which is specified in relation to any goods in the section in chapter notes to the schedule of
the central excise tariff act 1985 and amounting to manufacture called deemed manufacture. This
definition of manufacture is inclusive not exhaustive. However there is a case law in this issue.
MANUFACTURE MEANS:-
I:- Manufacture as specified in various court decisions i.e. new identificable product must
emerge

II:- Deemed manufacture( process amounting to manufacture )

Following would instances when manufacture has been place:-
I:- Manufacture of table from wood items
II:- Conversion of pulp into base paper.
III:- Conversion of sugarcane into sugar.
IV:- Crude diamond into jewellery.
In addition, central excise tariff act specifies some process as deemed
manufacturing. If this process are carried out goodwill be said to be manufacture even if as per
court decision the process may not amount to manufacture.

Manufacture as defined by court takes place only when a process result in a commercially
different article or commodity.

IMPORTANT COURT DECISION ARE AS UNDER:-

1:- New substance having different name character or use must emerge:-In union of India v/s
Delhi cloth mill. Air 1963 sec 791 for eg. Cutting of wood in small pieces or making small
pieces of long steel bar would not amount to manufacture as no new product emerge.

2:- Trade parlance ( transperancy )is important:-The test to be applied is a commodity subject to
processing retains its original character identity or whether the proceed commodity is regarded in
the trade by those who deal in it, as different identity from original commodity. Nature and
extent of commodity processing may vary with each process the original commodity experiences
change but it is only when the change of series of change take commodity to a point where
commercially it is recognized as a new different commodity then it can be say that new
commodity then it can be say that new and different commodity has come into being. The test is
whether in the eyes of those dealing in the commodity or commercial parlance the proceed
commodity is regarded as different in character and identity form the original commodity case
law:- Aditya mills ltd. v/s UOI 1989.

3:- Identity of original article should be lost:- Case law PIO food packers 1980. Commonly,
manufacture is end result of one or more process when the change occurs to a point where
commercially it can be identified as a new separate article manufacture is said to have taken
place.

4:- Assembly can be manufacture:- Assembly of various part components may amount to
manufacture if new product emerges which is movable and marketable.
Case Law:- Assembly of computers from duty paid bought out parts amounts to manufacture.
Sheth computers v/s CCE (2000)

I:- Assembly of CKD ( completely knocked down ) package is not manufacture often goods are
dispatched in SKD ( semi knock down )or CKD conditional for conveyance for dispatch. For e.g.
cycle manufacture bend cycle in unassembled condition from their factory. In such cases
assembly of SKD or CKD packs at site would not amount to manufacture.
Case Law:-
A :- Cycles of India v/s VOI ( 1983 )
B :- Walchand Nagar v/s CCF ( 1995 )

II:- Assembly of plant at site is not manufacture. Assembly of plant at site will not be liable to
pay duty if immovable property emerges. After such assembly because excise duty can be only
on goods i.e. movable property.

5:- Manufacture even if final product falls under same tariff:- There can be manufacture even if
both input and final product fall under same tariff heading if a different idenficable commercially
known product comes into existence.
Case Law:- Laminated packing pvt. Ltd. V/s CCE 1990 (i.e. ELT 326)(sc)

MANUFACTURER:-

The liability to pay duty is on open manufacturer or producer duty cannot be recovered form his
purchaser though the manufacturer may recover the same from buyer.

WHO IS THE MANUFACTURER:-

Sec. 2(f ) which defines the word manufacturers after defining the word manufacturer states that
the word manufacturer shall be understood accordingly and shall include not only a person who
employs hired labour in the production or manufactures at excisable goods but also any person
who involves in their production and manufacture on his own account. Here again the definition
is not exhaustive the definition contains two categories of manufacturer namely.
I:- Persons who manufacture goods themselves on their own account.

II:-Persons who gets the goods manufactured through hired labor.

Since the definition is not exhaustive the word ‘manufacturer’ has to be
understood in its natural meaning. Manufacturer is a person who actually manufacture of
produce excisable goods.

1:- MANUFACTURED THROUGH HIRED LABOUR:- A person will be treated as

manufacturer if he engaged hired labor who may be employee or contractor for manufacture of
excisable goods. A hired labor is one who hires himself to work for an under control of another
for wages.
2:- MANUFACTURE ON HIS OWN ACCOUNT:- The word on his own account in the
definition of manufacture indicate that a person will be treated as manufacture even if the
manufactures goods for his own consumption or use.

I:-Who is not manufacturer:- It is necessary to understand who is not treated as manufacture.

A:-Raw material supplier is not manufacture:- It is common in industries to supply raw material
to a job worked or processor and get the goods manufactured from him in his factory like bajaj,
maruti, mahindra or premier automobile vary often get many parts manufactured form outside on
jobwork basis. In such cases they will not be treated as manufacturer even if the raw material
supplied by them right of rejection is retained by them.

B:- Brand owner is not the manufacturer:-

Some large units get their goods manufactured from others under their brand name instead of
manufacturing it themselves. They usually control quality may even supply the design for e.g.
bajaj electricals many electrical goods manufactured footwear and use brand name some large
companies also get the goods manufactured from small scale units under their brand names. In
such cases bajaj bata or the formestical companies will not be treated as manufacturer even if
they exercise quality control or allow use of their brand name or provide financial help to the
small manufacturers or even supply the raw material if their relation with the manufactures is
principal to principal basis.

C:- Loan license :- Loan license is not manufacture in drug license supplies raw material to other
having manufacturing facility. Person supplying the raw material is termed as ‘loan license’. He
has to obtain loan license as per rule 138 A of drugs and cosmetics rule. Goods are manufactured
by factory owner under brand name loan license. In such case the loan license is not the
manufacturer. The owner of factory which carries on the actual manufacturing activity is the
manufacture.

D:- Contractor :- Contractor supplying labour in the premises of manufacture is not

manufacturer. If contractor supplies labour and goods which are manufactured in the premises of
manufacture with his machinery the contractor cannot be treated as manufacturer.
DUMMY MANUFACTURER:- The above position regarding supplies of raw material or brand
name owner is valid only if the actual manufacture is not dummy or fague or is not working
under direct control or supervision of raw material supplier. However, mere quality check or
control over price will not make the manufacturer dummy.

REGISTRATION UNDER CENTRAL EXCISE:

In terms of section 6 of the CEA,1944 a manufacturer of any excisable goods is required to

register himself with the central excise office within whose range the factory of the manufacturer
is located.

Rule 9 of the CCR, 1944 further amplifies various procedure aspect of registration as a
manufacture. Under rule 9(1) the following categories of persons have been specified by the
government to be under an obligation to apply to registration.

1:- Person require registration:-

A:- Manufacture of excisable goods( issuing invoice under rule 11 )
B:- Producer of excisable goods ( issuing invoice under rule 11 )
C:- Warehouse where excisable goods are stored without payment of duty.
D:- Users who bring the goods without payment of duty under central excise( removal of goods
at concessional rate of duty for manufacture of excisable goods )rules, 2001 procedure.
E:- Persons who obtain excisable goods for availing end use based exemption notification.
F:- Exporters manufacturing or processing export goods by using duty paid inputs and intending
to claim rebate of such duty or by using inputs receives without payment of duty and exporting
the finished export goods.
G:- Importer( who will issue invoice under CENVAT rules, 2001 )
H:- Dealer of imported goods( whether first second stage who will issue invoice under CENVAT
rules 2001 )
I:- First stage dealer of excisable goods( who will issue invoice under CENVAT rule 2001 )
J :- Second stage dealer of excisable goods( who will issue invoice under CENVAT rules 2001)
Manufacture/ producer/ warehouse/ owner must apply for registration before
commencement of manufacture, production or warehousing of goods.

FIRST STAGE DEALER:- FSD means a dealer who purchases either from the manufacturers
factory or depot or from the consignment agent of the manufacturers or from any other premises
from where the goods are sold by or on behalf of the said manufacturer or from an importer of
the goods.

SECOND STAGE DEALER means the dealer who purchases the goods form the first stage
dealer.

PROCEDURE FOR REGISTRATION IS A S UNDER:-

1:- Application for registration:- Application for registration is to be made in form A-1 in
quadruplicate to jurisidictional RSCE. The application should be signed by the authorized
signatory only, in case of partnership firm the application should contain the name of all the
partners and should be signed by all the partners.
The following doucuments should be enclosed with the application:-
A:- Certified copy of the sales tax registration certificate.
B:- Certified copy of income tax permanent account number.
C:- Ground plan/ map/ layout/ of the factory/ office/ godown if it is separate with full postal
address marking on ground plan of major plant and machinery where they are installed.
Where factory premises are used to manufacture both excisable as well as non
excisable goods than the person intending to register has to give only a portion of the ground
plan wherein manufacturing activity pertaining to excisable goods is undertaken.

D:- Certified copy of the factory license/ shopestablishment certificate if any.

E:- Certified copy of certificate of incorporation/ certificate for commencement of business in
case of company.

F:- Certified copy of partnership deed in case of firm.

G:-Certified copy of memorandum and articles of association in case of private/ public ltd.
Company.
H:- Copy of bye laws of the society if the manufacture is the co-operative society.
I:- Power of attorney for signing excise documents in case of person other than partner
J:- Board resolution copy for authorizing to sign and submit excise documents application also
procure or collect central excise registration certificate in favour of any one director.
K:- If the premises godown is owned than property tax receipts society’s maintainance receipt, if
the premises/ godowns is rented then rent receipt or if there is subtenancy or sublease then such
agreement’s certified copy.
L:- No physical verification of premises or godown will be done before issue of registration
certificate the bonafide of the applicant will be verified form the certified copies of the above
documents.
M:- There is no fee for registration and a factory/ depot etc. is to be registered once only i.e.
there is no requirement for renewing the registration.
N:-Registration certificate in form re duly typed in triplicate indicate therein all goods
manufactured/ traded with proper nomenclature tariff headings/ sub headings.
O:- Manufacture applicant are required to submit in addition to above the following additional
details/ documents with form A-1.
P:- List of complete plant and machinery installed within the factory premises.
Q:- List of final products list of intermediate products list of waste scrap to be manufactured or
produced with full description relevant tariff headings/ sub headings numbers.
R:- Details of input with tariff headings and sub headings.
S:- Details of manufacturing process if possible sequence of operations/ process involved in the
manufacture of the.

RECORDS OF PRODUCTION

1:- DAILY STOCK ACCOUNT REGISTER (RG 1):-

Under rule 10 of the central excise rules the manufacture is required to maintain a
daily stock account of the excisable goods manufactured by him in daily stock account register.
Daily stock account register is to be maintained on daily basis. In case there is non-production or
dispatch on a particular day nil entries are to be made in the daily stock account register. The
commissioner has the power to grant exemption form making mil entries in the register. In case
of default, goods are liable to be confiscated.

The register is not required to be pre authenticated by the authorities before being
brought into use. However, first page and last page of the daily stock account register is to be pre
authenticated by producer or the manufacture or his authorized agent.

RECORDS IN DAILY STOCK REGISTER:-

A:- Quantity deposited in the store room or other place of storage.

B:- Quantity removed after payment of duty from such store room or other place of storage or
from the place or premises specified under rule 9.
C:- for recording the date of storage of loose goods in the finishing room.

D:- The date of subsequent transfer of pacted goods from finishing room to the finished goods
store room

E:- Process waste and scrap which are excisable under the tariff.

F:- Quantity delivered form the factory without payment of duty for export or other purpose and
the rate of duty the amount of such duty.

DAY AND TIME OF RECORDING:-

Usually manufacturer’s accumulate the day’s production and make a consolidated entry. In such
cases, assessee should inform to the jurisdictional range superitendent and assistant
commissioner the day and time by which the daily production will be entered in daily stock
account register.

Goods in gully manufactured condition should be accounted within one hour of

the close of the day.

The entries in the daily stock account register are made on 24 hours cycle i.e.
production of excisable goods for the previous 24 hours is entered in the daily stock account
register every morning at the commencement of the working day.

Entries in the register cab also be made shift wise. Assessee working under three
shifts,