Excise Act,1944 Entry 84 of the Union List of the VII Schedule to the Constitution of India empowers the CG except on ALCOHOLIC LIQUORS FOR HUMAN CONSUMPTION, OPIUM, INDIAN HEMP AND OTHER NARCOTIC DRUGS AND NARCOTICS WHERE THE STATE GOVERNMENT has the power  to levy. However in the case of medicinal and toilet preparations contaning above mentioned things will not be considered. Basic Excise Duty - it is leviable under first schedule to the Central Excise Tariff Act, 1985. it was 16% and with effect from 24 Feb 09 it has been reduced to 8% by way of exemption notifications. Additional Duty of Excise ( Textile and Textile Articles ) - aim curb the demand and consumption thereof or to generate revenue therefrom which can bear the extra load of taxation. National Calamity Contingent Duty - It is levied u/s 136 of the Finance Act, 2001. At persent it is being levied on cigarettes, biris, pan masala and miscellaneous tobacco products; motor cars,multi-utility veicles & two wheelers; domestic crude oil; and mobile phones. Additional duty of Excise - 85 of the section of Finance Act, 2005 on Pan Masala and Tobacco products. Education Cess - 91 read with section 93 act, 2004. It is calculated @ 2% on aggregate of all the duties of excise (excluding education cess and secondary education cess on excisable goods), which are levied and collected by the Central Govt under any law. SHEC - 136 read with section 138, 2007 3 Levy of excise duty ACCEx v National tobacco Co. India Ltd. [1978] 2 ELT 416 (SC) - The term levy included both imposition as well as assessment but does not include collection. designated area in continental shelf and Exclusive economice zone of India 3(1A) Goods produced by or on behalf of Central or State Government are liable to excise duty. Other than salt UOI v. Bombay Tyre International Ltd. [1983] 14 ELT 1896 (SC) - Levy of excise duty is on the production of the goods, the stage of collection need not in point of the time synchronize with the completion of the manufacture process.
Conclusion - Thus the levy - status of constitutional concept but the determination is as per the rules framed and need not in point of time synchronize with the completion of the manufacturing process. Levy of excise duty of pm but determination of rate of duty as per following rules -  Taxability base - Goods should be excisable at taxability event. Taxability event - pm of excisable goods ( happening of which attracts the liablity of tax. ) Tax rate base -  Central Excise Rules, 2002 Rule 4 Duty is payable at the time of removal of goods from factory or warehouse.
Every person who produces or manufactures any excisable goods, or who stores such goods in a warehouse, shall pay the duty leviable on such goods. No excisable goods, on which any duty is payable, shall be removed without payment of duty from any place, where they are pm or from a warehouse, unless otherwise provided. Rule 5 relevant date for determination of duty and and tariff valuation shall be the date of actual removal of goods from the factory or warehouse. Concept of deemed removal - the date of issue of goods for consumption in case of captive consumption will be considered deemed date of removal. Union Carbide India Ltd v UOI [1986] 24 ELT 169 (SC) - Articles  captively consumed can be charged to duty only when they have reached the stage where they can be identified as 'goods' i.e they are marketable are excisable commodities. Articles in Crude and elementary form are not dutiable as that are merely intermediate product.  Intermediate product exempt, if final product dutiable  White Machines v CCEx [2008] 224 ELT 347 (SC) - Even final product is exempt the intermediate product is excisable if the same is marketable in the condition in which the Department seeks to levy duty thereon. C.I. chilled rolls final product, C.I. castings intermediate product.  CCEx v Gurdaspur Distillery [2008] 224 ELT 337 (SC) - does not because of its specification in Tariff Schedules unless it is marketable. Hence methane gas cc as fuel is not dept failed to prove. Cipla Ltd. Vs CCEx  [2008] ELT 403 (SC) - Mere transfer to another captive unit of the assessee doesn't establish marketablility of the product. Assess benzyl methyl salicylate BMS banglore to patalganga Exempted at the time of manufacture - exemption withdrawn, yes as the goods were excisable at the time of manufacture - wallace flour mills co.ltd. V CCEx. [1989] 44 ELT 598 (SC). Goods were not liable to special levy/additional levy - subsequent made leviable - no, as there was no levy of special duty on goods at the time of manufacture. - CCEx v Vazir Sultan Tobacco Co. Ltd. [1996] 83 ELT 3 (SC) 2(d) Excisable goods means goods specified in the first schedule and second schedule to the Central Exicse Tariff Act, 1985 as being subject to a duty of excise and includes salt. Explanation to Section 2 (d) - Deemed Marketability - Goods includes 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. 366(12) of the Constitution defines goods to include all materials, commodities and articles. 2(7) of Sale of Goods Act, 1930 defines Goods to mean every kind of movalbe property other than actionable claims and money and include stocks and shares, growing crops, grass and things attached to and forming part of the land,which are agreed to be severed before sale or under the contract of sale. Controversy UOI v Delhi Cloth & General Mills Co. Ltd. [1977] 1 ELT 199 (SC) - known to the market as such and can ordinarily come to the market for being brought and sold. Thus in case of immovable properties no excise duty can be levied.
Manufacture means bringing into existence a new substance not merely 'to produce some change in the substance'. american judgement - every change yet tlm ncu Fabricated Dy. CCEx v Tungabhadra Steel Products Ltd. [2004] 163 ELT A161 (SC) - That Electric overhead travelling cranes fabricated by assessesfor their own use at work spot, carrying on the business of fabrication and erection of hydraulic gates, hoists, etc., required for construction of dams and multi purpose river valley projects are not excisable, since they are immovable property. Mallur Siddeswara spinning mills (P) Ltd. V CCEx [2004] 166 ELT 154 (SC) - that generating sets bolted on a frame, which are capable of being unbolted and shifted from that place, are not immovable property. Bihor Industries v CCEx [1989] 40 ELT 280 (SC) - First article must be listed if it is not listed then marketability is not required. So it is second concern. CCEx v TISCO [2004] 165 ELT 386 (SC) - Marketability means selling of a commodity known to commerce and which may be worthwhile to trade in. There was amendment of section 2(d) by Finance Act, 2008 inserted capable of being bought and sold for a consideration hence requirement of commercially known to the market has been removed usage in captive consumption is not determinative of whether the article is capable. Goods must be marketable in the condition in which Department wants to levy duty of excise. AP State Electricity Board v CCEx [1994] 70 ELT 3 (SC) - Marketability does not depend upon the number of sales and it does not confined to territorial limits of this country. Single buyer ECE Industries Ltd. V CCEx [2004] 164 ELT 236 (SC) - Parts used for repair or replacement during warranty period are excisable. 2(f) Manufacture - includes any process i) ia to the completion of mp ii) the section or chapter notes of the First Schedule CETA, 1985. Deemed manufacture iii) third schedule packing including declaration or alteration of rsp or adoption of any other treatment marketable ( deemed manufacture). manufacturer hired labour and any person who engages in their pm on his own account. Empire Industries Ltd. V UOI [1985] 20 ELT 179 (SC) - not necessary absolutely make out a new thing. Different commercial commodity having its distinct characte, use name and commercially known as such.
Conclusion - Question of degrees of transformation and labour and skill spent are irrelevant. What amount to manufacture  has to be determined naturally having regard to the fact and circumstances of each case. CIT v Tara Agencies [2007] 214 ELT 491 (SC) - Example of production, manufacture and processing - tea business blending of different qualities of tea to smoothen its marketablility is its processing. Fedders Lloyd Corporation Ltd v CCEx [2008] 221 ELT 3 (SC) - Two branches delhi - condensing unit, mumbai - procured cooling units locally, quality control tests, affixing brand name, pipe kits, electrical cord, remote control etc. so mumbai process is also amount to manufacture. CCEx v Raj purohit GMP India Ltd. [2008] 231 ELT 577 (SC) - mere classification of the resultant product under a different heading from the original product doesn't. the process of slitting and cutting of steel sheets and polyster film lamination Question no. 17 CCEx v BOC (I) Ltd [2008] ELT 323 (SC) - send its own empty cylinders to procure hilium gas. Note 9 to chapter 28 of the tariff - amendment with effect from 1-3-08 amended to replace the word and with or. Consequentely mere labelling or packing or  falling under amount to manufacture. CCEx v Textile Corpn. Marathwada Ltd. [2008] 231 ELT 195 (SC) - Where more than one processes are carried out on goods, each process independently amounting to manufacture, the duty may be paid after completion of the last of such processes i.e. at the final stage. Chapter notes to chapters 52, 54 & 55, provides that in relation to textile articles, the process of dyeing, printing, bleaching, mercerising, twisting, texturising, doubling, multiple-folding, cabling or any other process. i) pay excise duty at each and every stage of manufacturing, it would be entitled to CENVAT credit and the whole exercise would be revenue neutral, Hence the assessee has rightly paid the duty at the final stage. Manufacture vis a vis processing UOI v Parle products Ltd. [1994] 74 ELT 492 (SC) - at the end of it commercially new and different article emerges. It is be decided on evidence based on trade parlance and not on court's own perception and appreciation of the matter. UOI v J.G. Glass Industries Ltd. [1998] 97 ELT 5 (SC) - will serve no purpose or will be of no commercial use but for the said purpose. Hence printing of glass bottles does not amount to manufacture.
Labelling and branding of the products does not since fully even without affixation of such labels and brand name.
Important note - however where lr of containers is in relation to the goods specified in third schedule, then, such process shall amount to deemed manufacture. B.P.L. India Ltd. V Ccex 2002 143 elt 3 sc - assembly  imported kits and colour monitors by using the fasteners constituted processing. However does not result in the emergence of an entirely new and distinct article having a different char will not amount to. Refrigeration plant/ cold storage/ central air conditioning/ caustic soda assemble out of duty paid parts, works as a system and as a whole cannot be considered as excisable goods. CCEx v Virdi Brothers [2007] 207 elt 321 sc. CCEx v Kapri International (P) Ltd. [2002] 142 ELT 10 (SC) - multiple levy under the same tariff entry is permissible. Hence bed sheets, bedspreads, table cloths etc out of duty paid cotton fabrics CCEx v S R Tissues [2005] 186 ELT 385  (SC) - mere change in tariff heading is not to be looked upon while deciding whether manufacture involved or not.   Waste and Scrap In chapter 72 of iron and steel, heading 7204 refers to ferrous waste and scrap. Similarly in Chapter 40 relating to rubber and articles thereof, tariff entry 4004 00 00 incorporates waste of rubber and thus the waste of such product are exigible to duty. Waste , parings and scrap arising in the course of manufacture of exempted goods is exempt from duty, if only exempted goods are manufactured in that factory. Khandelwal Metal & engineering Works v UOI  [1985] 20 ELT 222 (SC) - by-product of manufacture so inclusion in tariff heading is not contrary to section 3(1). Waste of containers - containers in which input are received cannot be treated as waste on their clearance. CCEx v West Coast Industrial Gases Ltd. [2003] 155 ELT 11 (SC) Scrap arising during manufacture of parts for repairs of plant - Excisable. UOI v. Grasim Industries Ltd. [2008] 229 ELT 328 (Raj.) no duty if manufacture takes place in course of construction of immovable property. Furniture dutiable, fixtures not. Cannibalizing i.e. without reducing them into broken piece of wood, laminates etc. Craft interiors pvt ltd. V CCEx [2006] 203 ELT 529 (SC). A manufacturer is one who actually undertakes the manufacturing activity. An independent contractor or manufacturer cannot be termed as a hired labourer. Our specification, affixation of brandname or supply of raw material does not decide that we are the manufacturer. A person supplying rm on indep job work basis, job worker will be manufacturer. according to his desing or specification or with his name or trade name. CCEx v MM Khambatwala [1996] 84 ELT 161 (SC). However in case the supplier is having full control in that case supplier will be the manufacturer. Britannia Biscuit Co. Ltd. V CCEx [1997] 89 ELT 22 (SC) - assessee reserved the right to reject will supply metal, other four unit are manufacturer. 2(e) Factory a) other than salt b) any mp connected with production 2(a) Adjudicating authority does not include CBEC constituted under central boards of revenue act, 1963 (54 of 1963), Commissioner of Central Excise (Appeals) or Appellate Tribunal 2(aa) appellate tribunal means the customs, excise and service tax appellate tribunal constituted u/s 129 of the customs act. 2(k) Wholesale dealer 2(h) sale and purchase 2© curing 2(aaa) broker or commission agent Chapter 2  Classification CETA, 1985 3 emergency power of cg to increase the duty of excise. Nil - 50%, in other case - twice. In case of second increase approval of parliament. 5 empowers to cg to amend the f and s schedule of the tarif by a noti. The power to alter rates and duty governed by sec 3 the central excise tariff contains 98 chapters grouped in 21 sections. 77 97 98 kept blank. 1 6 10 12 no rates of duty of excise have been specified. Generally accepted principle in classification of goods - HSN, Functional or end use, trade or commercial parlance v scientific and technical meaning - scinetific only when the statutory context requires, expert opinion and evidence, isi speci and glossary of term, dictionary meaning, trade advices and trade notices - 37B,1944. Burden to prove classification by manu but if dept claim then dept. H.P.L. Chemicals Ltd. v CCEx [2006] 197 ELT 324 (SC). Two opinion - Poulose and Mathen v CCEx [1997] 90 ELT  264 (SC). Residual entry last resort - Mauri Yeast India Pvt. Ltd. v State of UP [2008] 225 ELT 321 (SC). Rules for interpretation aid interpretative rules of HSN set of six rules Rule 1 The titles of sections and chapters are provided for ease of reference only. Classification to be as per terms of heading and section/chapter notes. Chapter 31 the notes provide that certain heading - 31 02 04 specified goods only so these headings cannot extended to include goods by reason of rule 2(b). Rule 2 Reference in a heading to an article, to include certain references :  a incomplete/unfinished or unassembled/disassembled - p&m dismantled for packing wont classified as parts of pm. A motor vehicle not yet fitted with the wheel still classified under motor vehicle CC v Sony India Ltd. [2008] 231 ELT 385 (SC) - Rule 2(a) of tariff interpretation rules applies only if all components required to make a final product are presented at the same time for customs clearnace. Various components purchased on various dates are not covered by rule 2(a). Colour Televisions (CTVs) 94 consignment single purchase order imported foreign holding company.  b include mixture or combination of the material/substance - rubber natural synthetic - swithch to rule 3 Rule 3 Classification when two or more heading a specific heading to prevail over general - 8215 spoons, forks, ladles, skimmers, fish knives etc. 7323 table, kitchen or other hh
note - however when tow or more headings each refer to part only of the materials or sbubstances contained in mixed or composite goods or to part only of the itemsin a set put up for retail sale, those heading are to be regarded as equally specific in relation to those goods. now switch to rule 3(b) and rule 3(c). b goods consisted material/component which gives them- essential character 8510 pair of electric hair clippers, 9615 comb, a pair of scissors 8213, a brush 9603, a towel of textile material - 6304, leather case 4202 c Latter and better maxim - classified under the heading, which occurs last in numerical order among those. 4010 conveyor or transmission belting, 5910 transmission or conveyor belts or belting of textiles material, whether or not reinforced with metal or other material. Case of conveyor belting used in colliery. Top layer vulcanised rubber to ignite and burn its own, central textiles strength, bottom layer plastic friction free to move on rollers. Rule 4 Akin rule - to which they are most skin - plastic film used to filter or remove the glare of the sunlight, pasted on the car glass window panes etc. 3925 30 00 Builders ware of plastics not elsewhere specified - shutters, blinds ( including venetian blinds ). Rule 5 Additional provision  a specific cases to  be classified with articles with which they're normally sold. This rule does not, however, apply to containers which give the whole its essential character. b subject to above rule 5a pm/c if they are normally used for packing such goods. Does not apply when such suitable for repetitive use. Rule 6 classification in the sub heading to be done on the understanding that sub-heading at the same level are comparable. Circular  no. 17/2007- customs, dated 19-4-2007. 8517 12 telephone for cellular network or other wireless networks having the principal function of telephony. not 8471 30 automatic data processing machines. because basic function of telephone is telephony. eight digit tariff - first two - respective chapter, first four - respective heading, first six - sub heading, total eight - tariff item. HSN is and internationally accepted product coding system formulated GATT general agreement on tariffs and trade. Developed by the customs co-operation council, brussels.
The structure of CET is based on HSN os except express different intention CETA, 1985. CC v Business Forms Ltd. THR. O. L. [2002] 142 ELT 18 (SC). mere mention of an item therein has nothing to do whether it is manufactured or not. CCEx v Phil Corporation Ltd. [2008] 223 ELT 9 (SC). Camlin v CCEx[2008] 230 ELT 193 (SC) - when the entries in the HSN and CET are different reliance can be palced on the HSN. SKB Dryfruits Marketing Co. Pvt. Ltd.  V CCEx [2008] 224 ELT 339 (SC) HSN notes are safe guide for deciding classification, chatper 20. however explanatory notes can be invoked only if there is ambiguity in tariff items. Coen Bharat Ltd. V. CCEx [2007] 217 ELT 165 (SC). Godrej Industries Ltd. V CCEx [2008] 228 ELT 321 (SC) - assessee Hair dye other goods Tariff Item 68 8% department hair lotion TI 14F 105% - Trade parlance theory.( chemical composition and actual usage are relevant. CCEx v Champdany Industries Ltd. [2009] 241 ELT 481 (SC) -  jute carptet predominance test Carpets made predominantly of jute (with jute content more than 50%) are classified as 'jute carpet' as per predominance test. (sub heading 5703.20 ''floor covering of jute'' nil rate. Refer from page 2.11 Chapter 3 Valuation Specific duty Duty payable on the basis of certain units like length, weight, volume, thickness etc. Cement Clinker  - Rs. 450 per tonne Specific duty cum ad valorem dutyTariff rate of chassis fitted with engine of Tariff Item 8706 00 42 = 16% + 10000 per chassis 3(2) empowers the central govt to fix tariff values UOI v Century Manufacturing company Ltd. [1992] 60 ELT 3 (SC) - constitutional validity to fix tariff values. Section 3(1) gives the power to fix under section 3(2). It will not be subject to the parameters of valuation under section 4. At present tariff values has been fixed for readymade garments and pan masala. (Chapter 61 and 62 - 60 % of the retail sale price declared on the retail packages. 3A CEA, 1944 wef 10-5-2008 overriding section notified goods capacity of production. Section not to apply DTA clearance by 100% EOU. Deemed annual production assistant commissioner. Proportionate if running part year continuous period of 15 days or more. pan masala containing 15% betel nut 4 Transaction value, if related condition satisfied otherwise Central Excise Valuation ( Determination of price of Excisable goods) Rules, 2000.4(1)(b). UOI v Hindalco Industries [2003] 153 ELT 481 (SC). - resort to 4(1)b cannot be taken by ignoring section 4 1 a even all the requirements are met. actual price to be taken even if lower than cost all the same actual price will be considered. CCEx v Gurunanak Refrigeration Corpn. [2003] 153 ELT 249 (SC) Change in price of goods after removal - Not considered.  MRF Ltd. V CCEx [1997] 92 ELT 309 (SC) Alteraton/ revision in the price - not considered [triveni Engg. & Inds. V CCEx [2009] 236  ELT A56 (SC) 4 3 b  related person rule 9 and rule 10 will be considered of the Central Excise Valuation ( Determination of price of excisable goods) rules, 2000. 4 3 d  Transaction value -  the price actually paid or payable add any other amount buyer liable to pay because  of or in connection with sale add amount charged or provision make for - advertising, marketing, storage, outward handling, servicing, warranty, commission or any other matter(bought items,  installation, erection, commissioning, after sales service, design and engineering charges, consultancy charges, testing charges, warranty charges.. Commission to merely commission agent is not allowed Coromandal fertilisers ltd v UOI [1984] 17  ELT 607 (SC) Dharmada includible - CCEX v M/s Panchmukhi Engg Works  & Ors [2003] 158 ELT 550 (SC) Royalty charges for use of trademark in assessable vaule of concentrate sale dependent on payment of royalty for trademark. Pepsi foods ltd v ccex [2003] 158 ELT 552 (SC) Valuation, manufacture and classification - even does nt amount to manufacture. Similarly goods and their accessories are to be valued separately even if classifiable under same heading. However parts even if different heading are valued with the main goods. Less taxes actually paid or payable. Price cum duty explanation of section 4(1) 1944 - amount recd by the customer exclusive of sale tax or other tax actually paid. normal transaction value under central excise valuation (determination of price of excisable goods ) rules, 2000- meaning unit price at which the goods are sold in the greatest aggregate quantity taken from custom import valuation rules, 2007 which adopted it from GATT valuation code. CCEx v Sujata textiles mills ltd [2005] 181 elt 379 (SC)- turnover tax deductible Addison & co. Ltd. V CCEx  [1997] 97 ELT 532 (SC) - turnover discount deductible Hindustan lever ltd 02 142 elt 513 (SC) Quantity discount deductible - The discount will be allowed by way of charging duty on the net price payable for the goods sold. Bank charges on account of clearance of outstation cheques cannot A. infrastructure Ltd. V CCEx 04 167 elt 369  sc Outward handling charges upto the factory gate for loading of goods includible UOI v Bombay tyres international 83 14 elt 1896 sc Compensatory discount to big dealers - Elgi equipment ltd v ccex 07 215 elt 348 sc actually paid or payable u/s 4 concession tax modipon fibre co v ccex 07  218 elt 8 sc Rule 4 price not known sold by the assessee nearest to the time of removal. In case when goods are not sold at the time of removal - adjt on account of difference in the dates  of delivery of such goods as find reasonable by the proper officer. CBE&C circular no. 813/10/2005-CX, dated 25-4-2005 clarifies that in case of free samples rule 4 Rule 5 Place other than place of removal - cost of transportation is excludible from the transaction value separately shown or not. in case of return journey it should be specifically mentioned that cost of transportation do not include cost of return journey. Insurance cost can be allowed as deduction as being part of transportation cost - UOI v Bombay tyres international ltd 83 14 elt 1896 sc profit on transportaion will not includible if average or equalised system is prevalent - Baroda Electric Meters ltd. V CCEx 97 elt 13 sc compensation to customer for breakage or losses not deductible CCEx surya roshni ltd 2000 122 elt 3 sc. Rule 6  When price is not the sole consideration notional interest on interest free advances - includible only if prices lowered on that account explanation 2 to rule 6 cost of packing whether durable or not will be includible in the transaction value but in case of it can be repeatedly used amortised over the life span Rule 7 goods have transffered to other depot CCEx v Brakes india ltd 05 187 elt a113 sc - the last depot from where goods are actually sold. Rule 8  Captive consumption Circular number 692/08/2003-CX dtd 13th feb 03 Cost of production CAS 4 - research and development, packing and administrative overheads relating to production Dal itchi karkaria ltd 99 112 elt 353 sc market price is not concerned Rule 9  goods sold to related person Related to unrelated and related to related retail dealer in case of related to related whole sale dealer - rule 11 if captivly consumed by related person then rule 8 Rule 10 Valuation in case of excisable goods are sold only through or interconnected undertaking related in terms of 4 1 b ii iii iv or buyer is holding subsidiary rule 9 otherwise not treated as related. CCEx v india thermit corp ltd 2008 226 elt 164 sc - price not influenced by relation CCEx v pepsico india holdings p ltd 09 234 elt 385 sc - trade discount allowed, amount charged for services provided cannot be included. Rule 10A  Value in case of job work 4A