Birds Eye View of Central Excise & Cusotms

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

Act & RulesCentral Excise Act, 1944 Central Excise Tariff Act, 1985Central Excise Rules, 2002 CENVAT Credit Rules, 2004Central Excise Valuation (Determination of

Price of Excisable Goods) Rules, 2000OthersNotificationsCircularsCase Laws

Indirect Tax

Laws

Act

Rules

Circulars

Case Laws

Trade Notices

No Law above the Constitution of India

Types of DutiesBasic Excise DutySpecial Excise DutyAdditional Duties of Excise – (Textiles and

Textile Articles)Additional Duties of Excise - Goods of

Special ImportanceNational Calamity Contingent DutyEducation cessSecondary and Higher Education cess

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

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.


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..


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.

What are Goods?The definition under the Sale of Goods Act,

1930Goods must be moveable,

saleable/marketableExplanation 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

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

What is Removal?Removal means the physical act of

shifting/moving the goodsUnder excise- the self-removal procedureNo 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.

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

ValuationA. Duty Based on capacityB. Advalorem1. Sec 3- Tariff Value Fixed2. Notified under RSP3. Set out in Third Schedule4. Transaction Value5. Exception to TV – Goods sold; delivery at

time & place of removal; unrelated ; price only consideration.

Valuation RulesRule 5 – Sold other than factory –

deduction for freightRule 6 – Sole consideration – AlternativesRule 7 – Depot /Consignment agentRule 8 – Captively consumedRule 9 – Related personRule 10 – Interconnected/ holdingRule 10A – Despatched from JW premises

Cum duty if not collected

Effect of ED on VATIf ED is on sale- then VAT on Value

including EDIf 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)

CA. Madhukar N Hiregange Chartered Accountant

BackgroundOne 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.

Customs – Constitutional basisArticle 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”

Customs ProvisionsEarlier 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 dutyRulesRegulationsNotifications – Circulars - Manual

Hiregange & Associates, Chartered Accountants 20

Customs DutyCustoms Duty is on

Import – bringing into India from a place outside india.

Export – taking out of India to a place outside India.

Of GoodsIndia 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


Levy of Customs Duty

Taxable event – UOI Vs. Apar P. Ltd 1999(112) ELT 3Garden Silk Mills Ltd. Vs. CC 1999(113)ELT

358Kiran Spinning Mills Vs. CC 1999(113)ELT

753Import 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.


AssessmentThe Classification of goods rate of duty rate of exchange correctness of value declared prohibitions and restrictions Procedure

Examination of goodsAsst. of BOE/Shipping Bill/Bill of export etc.Order of Clearance/let export order

Types of dutiesBasic 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%

Types of dutiesProtective duty – safeguard Indl.

Establishment.Safeguard duty – safeguard the domestic ind.Countervailing duty on subsidized articlesAnti-dumping duty – to protect domestic

industryNational Calamity Contingent dutyIncludible for VAT

AssessmentThe 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


Duty RatesAt 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


Other AspectsDuty 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 clearanceDamaged or deteriorated goods – reduced valuelost, destroyed or abandoned goods – before removal

from customs areadenaturing or mutilation of goods – change of ch.Exemptions in public interest – full/partial –

conditional/unconditional


Other Aspects – contTransit Goods – goods remaining in ship

without unloading – for othersTranshipment 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 yrsOther goods for EOU – 3yrs.

High Seas Sale/ Bonding- A 286A. Subsequent sale occasions import- Pre existing order – link- reason for importB. Transfer of Documents- Sale prior to filing of BOE- Customer filing BOE- CD paid after saleCustoms Authorities sell or CD paid by

importer/ canalising agency- LiableDe-bonding and then sale

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