LEVY OF CENTRAL EXCISE DUTY - Central Excise Practice Manual (OLD) - Central Excise

3. LEVY OF CENTRAL EXCISE DUTY 3.1 Central Excise Tariff and rates of duty: The rates of Central Excise duty are specified in the First Schedule to the Central Excise Tariff Act, 1985. The First Schedule is commonly referred to as the Central Excise Tariff, which contains 96 Chapters grouped under 20 distinct Sections. The rates of Special Excise duty are specified in the 2 nd Schedule to the Central Excise Tariff Act, 1985 . 3.2 Classification of the goods: In order to determine the applicable rate of duty in respect of a particular item, the positioning of that item under a particular head or sub-heading of Central Excise Tariff is essential. The positioning of an item in the appropriate heading / sub-heading is classification. The classification of an item is generally decided in accordance with the commercial or trade parlance. However, a deviation from this principle is made when the trade meaning or commercial nomenclature does not fit in the scheme of the statute. For determination of the rate of duty of a manufactured product, the assessee has to primarily ascertain the relevant Tariff Heading or sub-heading under which the said product is covered. Against each Tariff sub-heading, the rates of Excise duty are specified which are commonly known as Tariff rates. While classifying the excisable goods, the specific heading is to be preferred over a general heading and if there are two specific headings for the product, the one occurring later would prevail. Duty is payable at the rates prescribed in the Tariff. However, in respect of cases where there is any exemption by virtue of a Notification relating to the goods in question, the actual rate of duty (effective rate of duty) is to be worked out after taking into consideration the relevant exemption Notification, subject to the conditions, if any prescribed therein. 3.3 Valuation of the goods: Value of the excisable goods has to be determined when the rate of duty is on advalorem basis (expressed as a percentage of value of goods). It is the responsibility of the assessee to determine the correct assessable value of the goods, declare the same on the invoice and pay duty on the basis of such determination of the value. The various types of value required to be adopted for the purpose of payment of duty are enumerated as below: Transaction value: Basically, the assessable value of the goods for the purpose of payment of duty is the transaction value as determined under Section 4 (1) (a) of the Act. As per Section 4(1)(a) of the Act, transaction value shall be determined in the following manner : (i) in a case where the goods sold by the assessee, for delivery at the time and place of the removal, the assessee and the buyer of the goods are not related and the price is the sole consideration for the sale, then such Price shall be the Transaction value. (ii) In any other case, including the case where the goods are not sold, the value shall be determined in such manner as prescribed in the Central Excise Valuation (Determination of Price of Excisable Goods), Rules, 2000 . The value can be different for different transactions. The adoption of transaction value under Section 4(1) (a) of the Act or the determination of value in accordance with the provisions of Section 4(1) (b) of the Act read with the Valuation Rules as indicated above will not be applicable when a product is notified under Section 4A of the Act or when tariff value is fixed for the goods under Section 3(2) of the Act as illustrated below: M.R.P. Value: In respect of packaged commodities which are required to be marked with Maximum Retail Price (MRP) of the product in terms of the provisions of the Standards of Weights and Measures Act, 1976, the assessment of the goods as notified by the Government under Section 4A of the Act shall be done on the basis of such MRP value, subject to admissibility of abatement, if any, as may be notified. The goods, which are liable to MRP assessment and the extent of abatement admissible in respect of those goods, are detailed in the Notification 49/2008-C.E. (N.T.) dated 24-12-2008 issued under Section 4A of the Act. Tariff value: In respect of certain specified goods, the assessment shall be based on the tariff value prescribed for such goods by the Central Government under Section 3(2) of the Act. For details about the specified goods and the prescription of Tariff value, the relevant Notifications issued under Section 3(2) of the Act may be referred to.