LAWMADEEAZY.COM

LAWMADEEAZY.COM

Menu

Central Excise Bill, 2024

Leave a Comment / By /

Central Excise Bill, 2024

In June 2024, the Central Board of Indirect Taxes and Customs (CBIC) released a draft Central Excise Bill, 2024 to replace the outdated Central Excise Act, 1944, with a comprehensive and modern central excise law. The primary focus of the consultative process was to enact a law that factored in ease of doing business and removed redundant provisions. The draft Bill comprised 12 chapters, 114 sections and 2 schedules. In contrast, the 1944 Act had 11 chapters, more than 110 sections, and 4 schedules.

What is Excise Duty?

Excise duty is a kind of indirect tax charged on the sale of certain products. The customer did not pay excise duty directly to the authorities, but it was added to the cost of the product by the producer or merchant and then passed on to the consumer by way of increased prices.

The Excise Duty Act, 1944, governed the regulations related to excise duty in India and the tax was administered by the Central Board of Excise and Customs.

Types of Excise Duty

  1. Basic Excise Duty: Basic Excise Duty was levied under Section 3 of the Central Excises and Salt Act, 1944. Under this section, all excisable products apart from salt, manufactured or produced in India, were subject to Basic Excise Duty. Central Value Added Tax or CENVAT, as it was also called, was charged at the rates mentioned in the Central Excise Tariff Act.
  2. Special Excise Duty: Central Excise Duty was charged under Section 37 of the Finance Act, 1978. It was levied on all excisable products that were subject to Basic Excise Duty under Section 3 of the Central Excises and Salt Act, 1944. The rate at which Special Excise Duty was charged was mentioned in the Second Schedule to Central Excise Tariff Act, 1985.
  3. Education Cess on Excise Duty: According to Section 93 of Finance (No. 2) Act, 2004, Education Cess was an excise duty that had to be computed on the aggregate of all excise duties including special excise duty or other excise duties, but not including Education Cess of excisable goods.
  1. Natural Calamity Contingent Duty: Section 136 of the Finance Act, 2001, had imposed the Natural Calamity Contingent Duty under clause 129 of the Finance Bill, 2001. The Natural Calamity Contingent Duty was charged on cigarettes, chewing tobacco, and pan masala.
  2. Excise Duty in case of clearances by Export Oriented Units: The Export Oriented Units had an obligation to export all the goods produced by them. However, if their final product was cleared in a domestic tariff area, the rate at which excise duty was charged was the same as customs duty on a similar article if imported in India.
  1. Duties under other Acts: Certain duties as well as cesses were charged on manufactured goods under other Acts. The taxes, however, were collected under the administrative machinery of central excise. The rules and provisions of the Central Excise Act were responsible for the levy as well as collection of these duties and/or cesses.
  2. Additional Duty on Goods of Special Importance: Additional Excise under Additional Duties of Excise (Goods of Special Importance) Act, 1957, was levied on certain goods of special importance. The ‘Additional Duty’ was charged along with excise duty.
The Additional Duty on Goods of Special Importance scheme had been implemented due to the suggestions made to the Government by manufacturers. The suggestions were made to avoid multiple taxes and duties at different levels. The levy of all taxes as well as their collection at one stage by one authority was expected to make it convenient to not only pay the tax, but to also administer it. Therefore, the Central and State Governments agreed to charge additional duty on certain items instead of charging sales tax. The additional duty was distributed among different States, and the State Government shared the revenue from this duty based on the percentages specified in the second schedule of the Act.
<style=”text-align: justify;=””></style=”text-align:>
  1. Additional Customs Duty commonly known as Countervailing Duty (CVD): This duty was charged on imports.
  2. Additional Duty on Mineral Products: Under the Mineral Products (Additional Duties of Excise and Customs) Act, 1958, additional duty had to be paid on mineral products such as motor spirit, furnace oil, diesel and kerosene.
  3. Duty on Medical and Toilet Preparations: Under the Medical and Toilet Preparations (Excise Duties) Act, 1955, excise duty was charged on medical preparations.
  4. Special Additional Duty of Customs: Special Additional Duty of Customs was charged on items that were bound under the Information Technology Agreement (apart from information technology software), and also on certain raw materials or inputs for the manufacture of IT or electronic products.
 

Who Should Pay Excise Duty?

Considering the fact that excise duty was charged on the manufacture/production of goods, the producer/manufacturer of goods was liable to pay excise duty to the Government. The three parties that had to pay excise duty included the following:

  1. The individual or entity that manufactured or produced the goods
  2. The individual or entity that was responsible for the manufacture of goods by way of hiring labour
  3. The individual or entity responsible for the manufacture of goods by other parties

Need for the new Bill

Considering the fact that excise duty was charged on the manufacture/production of goods, the producer/manufacturer of goods was liable to pay excise duty to the Government. The three parties that had to pay excise duty included the following:
  1. The individual or entity that manufactured or produced the goods
  2. 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
Need for the new Bill The Central Excise Bill of 2024 represented a significant reform in India’s manufacturing sector taxation. Aiming to address modern economic challenges and streamline the existing framework, this Bill sought to simplify the excise duty structure, enhance compliance through digital solutions, and foster a business-friendly environment. The Bill aimed to optimise the excise duty regime by strengthening adjudication processes and promoting sustainable manufacturing practices. Under the 1944 Act, excise duty was applied to specific goods like tobacco products and five fuels – crude oil, gasoline, diesel, natural gas, and air turbine fuel (ATF). While the excise on most goods was subsumed by the Goods and Services Tax (GST) with effect from 1 July 2017, States were not prepared to bring high-revenue-earning items into the GST regime. Tobacco attracted both GST and central excise duty. The Government had collected more than Rs 3 trillion from central excise in the financial year 2023-24. States levied value-added tax on petroleum products, not State GST. The proposed Bill focused on the remaining excisable items. By aligning the excise duty regime with the GST and customs frameworks, the proposed Bill would reduce the compliance burden for oil and gas companies. Under the current tax system, ONGC and Indian Oil Corporation, among others, paid GST on equipment, materials, and services they used. However, the finished products were taxed under excise duty. This mismatch between tax systems created inefficiency because companies could not claim credit for the GST they paid earlier when they paid excise duty. In essence, the Central Excise Bill would replace the 80-year-old Central Excise Act. Currently, companies such as Oil and Natural Gas Corp, Oil India Ltd, and Indian Oil Corp faced a massive compliance burden, which might be alleviated under the new law.

Public consultation for the Bill

  • On 7 June 2024, the Government released the Bill for public comments and suggestions.
  • On 26 June 2024, the time to offer feedback was closed.
Key provisions of the Bill
  1. Levy of Excise Duty on Special Economic Zone (SEZ) Units:
Under the Central Excise Act of 1944, goods produced or manufactured in SEZ units were exempt from excise duty. However, the proposed Central Excise Bill did not maintain this exclusion. As a result, goods produced or manufactured in SEZ units would be subject to excise duty under the new Bill. It remained to be seen if special incentives and tax benefits, including excise duty exemptions for SEZs, would continue through separate notifications.
  1. Eligibility of Central Excise Duty Credit:
The proposed Bill introduced Section 17, which outlined eligibility for Central Excise Duty Credit. Manufacturers or producers of final products could take credit for central excise duty and other prescribed duties, subject to certain conditions and restrictions. The credit could be used to pay any excise duty on final products or other amounts payable under the rules within prescribed limitations. This credit could not be applied to motor spirit (petrol) and high-speed diesel, even if used in manufacturing final products. The Government could also restrict the utilisation of unutilized credit for specified excisable goods, potentially causing the credit to lapse on a date specified by the Central Government through notification.
  1. Extension of Time Limit for Recovery of Duties:
Section 32(2) of the proposed Bill extended the time limit for the Central Excise Officer to serve a notice up to 3 years from the relevant date if the duty had not been levied or paid, or in cases of short levy or payment, erroneous refunds, or wrongly availed or utilised Central Excise Duty Credit. The current limit under the 1944 Act was two years. Notably, the proposed Bill had not differentiated adjudication proceedings based on fraudulent or bona fide reasons. Furthermore, in a major relief to businesses, interest on delayed refunds would begin accruing after 60 days from the date of the refund application under the Bill, compared to the current 90 days.
  1. Transition of Credit from Repealed Excise Act to the New Act:
The new Bill incorporated all the rules for claiming tax credits under the excise duty regime. The Bill further included transitional provisions for credit unutilized under the old Act. Such credit could be used under the new law, subject to its provisions and rules. Credit for central excise duty and other prescribed duties under Section 17(1) would be available for inputs (excluding motor spirit and high-speed diesel) received within 30 days of the new Bill’s commencement, provided the duty had been paid under the 1944 Act. The Principal Commissioner or Commissioner of Central Excise could extend this 30-day period by an additional 30 days for sufficient cause.
  1. Rectification of Errors Apparent on the Face of Records:
Section 100 of the proposed Bill dealt with the rectification of errors apparent on the face of records, similar to Section 161 of the Central Goods and Services Tax Act, 2017 (CGST Act). The time limit for rectification was reduced from 2 years to 6 months, except for clerical or arithmetic errors, which had had no time limit for rectification.
  1. Change in Rate of Interest under Various Provisions:
The proposed Bill included changes in interest rates under various provisions.
  1. Interest rate on delayed payment of tax –
  • Under the 2024 Bill – Interest at a rate not exceeding 18% as may have been notified by the Central Government for the period during which the duty or any part thereof remained unpaid
  • Under the 1944 Act – 10-30% per annum
  1. Interest on Central Excise Duty credit that was wrongly availed and utilised –
  • Under the 2024 Bill – Interest at the rate of 18% per annum where the Central Excise Duty Credit had been wrongly availed and utilised. The interest was calculated from the period starting from the date of utilisation for such wrongly availed Central Excise Duty Credit till the date of reversal of such credit or payment of duty in respect of such an amount as may have been prescribed
  • Under the 1944 Act – 10-30% per annum
  1. Interest on the amount collected in excess of duty –
  • Under the 2024 Bill – Interest at the rate of 18% per annum on the amount which had been collected in excess of the duty assessed or determined and paid or payable
  • Under the 1944 Act – 10-30% per annum
  1. Interest rate for delayed refunds –
  • Under the 2024 Bill – Interest at the rate of 6% per annum on delayed refunds
  • Under the 1944 Act – 5-30% per annum.
  1. Power to Fix Different Tariff Values by the Central Government:
The proposed Bill granted the Central Government the authority to set different tariff values under the valuation provisions for the following scenarios:
  1. Different classes or descriptions of the same excisable goods
  2. Excisable goods of the same class or description that had been:
  • Produced or manufactured by different classes of producers or manufacturers
  • Sold to different classes of buyers
In setting different tariff values for excisable goods of the same class and description, the Government had to consider the sale prices charged by different classes of producers or manufacturers and the normal practices of the wholesale trade in such goods. This provision was similar to the one contained in Section 3 of the Central Excise Act, which had dealt with the levy of tax.
  1. Other Changes in the Provisions:
  2. The definition of ‘related person’ in the proposed excise Bill was simplified to align with the definition in the GST law.
  3. The appointment of officers under the Central Excise Bill had been proposed to follow similar procedures as provided under the GST law.
  4. Provisions for filing annual returns had been proposed to align with those in the GST law.
  5. Section 1 of the Central Excise Bill had proposed specific provisions for the phased implementation of the new Excise Act.
  6. The proposed Bill suggested a reduction in the excise duty rates for certain tobacco products.
  7. Role of GST and Excise Duty:
Since the Goods and Services Tax (GST) had gone into effect, Central Excise taxes had mostly been applied to goods that had been used to make oil. The new Bill not only changed the excise rules, but it also took into account ongoing talks about adding petroleum products to the GST, which were not presently taxed. read more information CLICK HERE

Leave a Comment

Your email address will not be published. Required fields are marked *

Scroll to Top