p. 1

group-ii

[close]

p. 2

syllabus paper 10 applied indirect taxation one paper 3 hours 100 marks objectives to gain knowledge about the tax laws in force for the relevant accounting year and to provide an insight into procedural aspects for filing tax returns for various assesses learning aims the syllabus aim to test the student s ability to explain the basic principles underlying the central excise service tax vat sales tax understand procedure for tax return preparation filing assessment and tax refund for various assesses understand the powers of various assessing authorities understand appellate procedure under various provisions of these acts skill set required level b requiring the skill levels of knowledge comprehension application and analysis contents 1 2 3 4 5 6 canons of taxation indirect taxes central excise customs laws service tax central sales tax vat act practical problems and case studies under indirect tax laws 5 25 15 15 15 25 1 canons of taxation indirect taxes features of indirect tax constitutional validity indirect tax laws administration and relevant procedures 2 central excise the central excise law goods excisable goods manufacture and manufacturer classification valuation related person captive consumption cas 4 cenvat basic procedures export ssi job work assessment demands refund exemptions powers of officers adjudication appeals settlement commission penalties central excise audit and special audit under 14a and 14aa of central excise act impact of tax on gatt 94 wto anti dumping processing tariff commission and other tariff authorities 3 customs laws basic concepts of customs law territorial waters high seas types of custom duties anti-dumping duty safeguard duty valuation customs procedures import and export procedures baggage.

[close]

p. 3

exemptions warehousing demurrage project imports and re-imports penalties and offences export promotion schemes eou duty drawback special economic zones 4 service tax introduction nature of service tax service provider and service receiver registration procedure records to be maintained classification of taxable services valuation of taxable services exemptions and abatements payment of service tax return cenvat credit rules export and import of services other aspects of service tax taxable services special audit under 14a and 14aa of central excise act 5 central sales tax act vat act introduction definition of sale under cst stock transfer branch transfer under cst inter state sale various forms for filing of sales tax returns under cst sales outside territorial waters under cst procedures practical examples on cst vat salient feature of state vat acts treatment of stock branch transfer under state vat acts filing return under state vat acts accounting auditing vat 6 practical problems and case studies under indirect tax laws

[close]

p. 4

paper 10 applied indirect taxation contents study note 1 2 3 4 5 6 7 8 particulars page no overview of central excise act 1944 cenvat credit overview of customs law basics of service tax adjudication penalties and appeals in indirect taxes appeals in indirect taxes central sales tax act 1956 state level vat 1-80 81-119 120-165 166-219 220-242 243-260 261-292 293-312

[close]

p. 5

study note 1 overview of central excise act 1944 this study note includes constitutional background laws relating to central excise central excise act 1944 duties leviable levy collection exemptions from excise duty goods excisable goods manufacture manufacturer classification of goods harmonised system of nomenclature interpretative rules of ceta valuation of goods valuation in case of job work ­ rule 10a some critical issues in central excise mrp based valuation assessable value under section 4 other issues refund other important provisions assessment under central excise law warehousing export benefits and procedures excise on small scale industries procedural aspects under central excise duty other procedures in central excise demands and penalties appeals important provisions of central excise act 1944 important provisions of central excise rules 2002 important rules of central excise valuation rules 2000 rules of classification practical problems applied indirect taxation 1

[close]

p. 6

overview of central excise act 1944 1.1 constitutional background central excise is a duty on excisable goods manufactured or produced in india other than alcoholic liquor duty liability is principally on `manufacturer except in a few cases in majority of cases duty rate w.e.f 24.2.09 is 10 plus education cess of 2 and secondary and higher education cess of 1 thus generally duty is 10.30 there are some exclusions partial or full exemptions and higher duties in some cases as per appendix iv of ceta the rate of additional duty on goods of special importance is 8 in majority of the cases section 31 of the additional duties of excise goods of special importance act 1957 power of taxation under constitution of india is as follows a the central government gets tax revenue form income-tax except on agricultural income excise except on alcoholic drinks and customs b the state governments get tax revenue from sales tax excise from liquor and alcoholic drinks tax on agricultural income c the local self governments e.g municipalities etc get tax revenue from entry tax and house property tax article 265 provides that no tax shall be levied or collected except by authority of law the authority for levy of various taxes as discussed above has been provided for under article 246 and the subject matters enumerated under the three lists set out in the schedule-vii to the constitution list i union list item no 82 item no 83 item no 84 tax on income other than agricultural income duties of customs including export duties duties of excise on tobacco and other goods manufactured or produced in india except alcoholic liquors for human consumption opium narcotics but including medical and toilet preparations containing alcohol opium or narcotics corporation tax taxes on the sale or purchase of goods other than newspapers where such sale or purchase takes place in the course of interstate trade or commerce taxes on consignment of goods where such consignment takes place during interstate trade or commerce taxation of services any other matter not included in the list ii list iii and any tax not mentioned in list ii or list iii item no 85 item no 92a item no 92b item no 92c item no 97 list-ii i.e the state list in respect of which the state government has exclusive powers to levy taxes are as follows item no 46 item no 51 item no 52 item no 54 taxes on agricultural income excise duty on alcoholic liquors opium and narcotics tax on entry of goods into a local area for consumption use or sale therein usually called as octroi tax on sale and purchase of goods other than newspapers except tax on interstate sale or purchase 2 applied indirect taxation

[close]

p. 7

list-iii concurrent list list iii of seventh schedule called concurrent list includes matters where both central government and state government can make laws 1.2 laws relating to central excise central excise act,1944cea the basic act which provides the constitutional power for charging of duty valuation powers of officers provisions of arrests penalty,etc central excise tariff act,1985 ceta this classifies the goods under 96 chapters with specific codes assigned central excise rules,2002 the procedural aspects are laid herein the rules are implemented after issue of notification central excise valuationdetermination of price of excisable goods rules,2000 the provisions regarding the valuation of excisable goods are laid down in this rule cenvat credit rules,2004 the provisions relating to cenvat credit available and its utilisation is mentioned 1.3 central excise act 1944 the duty of central excise is levied if the following conditions are satisfied 1 the duty is on goods 2 the goods must be excisable 3 the goods must be manufactured or produced 4 such manufacture or production must be in india in other words unless all of these conditions are satisfied central excise duty cannot be levied.ownership of raw material is not relevant for duty liability ownership of raw material is not relevant for duty liability ­ hindustan general industries v cce 2003 155 elt 65 cegat cce v mahindra mahindra 2001132 elt 632 cegat 1.4 duties leviable · basic excise duty is levied u/s 31 of central excise act the section is termed as `charging section general rate of duty of central excise on non-petroleum products is 10 w.e.f 27-02-2010 the duty rate was 14 during 1-3-2008 to 6-12-2008 which was reduced to 10 w.e.f 7-12-2008 and to 8 w.e.f 24-02-2009 this duty is applicable to majority of excisable goods there is partial exemption to a few products education cess 2 of excise duty under section 93 of finance no 2 act w.e.f 9-7-2004 secondary and higher education cess s&h education cess 1 of the total duties of excise vide section 136 read with section 138 of finance act 2007 w.e.f 1-3-2007 thus total excise duty is 10.30 in majority of the cases · · national calamity contingent duty ­ a `national calamity contingent duty nccd has been imposed vide section 136 of finance act 2001 on some products nccd of 1 has been imposed on mobile phones w.e.f 1-3-2008 in addition cesses and duties have been imposed on some specified products 1.5 levy collection exemptions from excise duty 1.5.1 what is the taxable event the taxable event is of great significance in levy of any tax or duty excise duty is leviable on all excisable goods which are produced or manufactured in india thus `manufacture or production in india of an `excisable goods is a `taxable event for central excise it becomes immaterial that duty is levied and collected at a later stage i.e at the time of removal of goods therefore removal from factory is not the `taxable event applied indirect taxation 3

[close]

p. 8

overview of central excise act 1944 1.5.2 who is liable to pay duty rule 41 of the central excise rules 2002 provides that 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 in the manner provided in rule 8 or under any other law and no excisable goods on which any duty is payable shall be removed without payment of duty from any place where they are produced or manufactured or from a warehouse unless otherwise provided it is provided that the goods falling under chapter 61 or 62 of the first schedule to the tariff act produced or manufactured by a job worker may be removed without payment of duty leviable thereon and the duty of excise leviable on such goods shall be paid by the person referred to in sub-rule 3 as if such goods have been produced or manufactured by him on the date of removal of such goods from his premises registered under rule 9 explanation ­ where such person has authorized the job worker to pay the duty leviable on such goods under sub-rule 3 such duty shall be paid by the job worker on the date of removal of such goods from his registered premises rule 42 provides that notwithstanding anything contained in sub-rule 1 where molasses are produced in a khandsari sugar factory the person who procures such molasses whether directly from such factory or otherwise for use in the manufacture of any commodity whether or not excisable shall pay the duty leviable on such molasses in the same manner as if such molasses have been produced by the procurer rule 43 provides that notwithstanding anything contained in sub-rule 1 every person who gets the goods falling under chapter 61 or 62 of the first schedule to the tarrif act produced or manufactured on his account on job work shall pay the duty leviable on such goods at such time and in such manner as may be specified under these rules whether the payment of such duty be secured by bond or otherwise as if such goods have been manufactured by such person provided that such person may authorize the job worker to pay the duty leviable on such goods on his behalf and the job worker so authorized undertake to discharge all liabilities and comply with all the provisions of these rules from the above discussion it can be concluded that the following persons shall be liable to pay excise duty i ii iii iv a person who produces or manufactures any excisable goods a person who stores excisable goods in a warehouse in case of molasses the person who procures such molasses in case goods are produced or manufactured on job work a the person on whose account goods are produced or manufactured by the job work or b the job worker where such person authorizes the job worker to pay the duty leviable on such goods 1.5.3 liability to excise duty section31 provides that there shall be levied and collected in such manner as may be prescribed a a duty of excise to be called the central value added tax cenvat on all excisable goods which are produced or manufactured in india as and at the rates set forth in the first schedule to the central excise tariff act 1985 b a special duty of excise in addition to the duty of excise specified in clause a above on excisable goods specified in the second schedule to the central excise tariff act 1985 which are produced or manufactured in india as and at the rates set forth in the said second schedule provided that the duties of excise which shall be levied and collected on any excisable goods which are produced or manufactured i in a free trade zone or a special economic zone and brought to any other place in india or ii by a hundred per cent export-oriented undertaking and brought to any other place in india shall be an amount equal to the aggregate of the duties of customs which would be leviable under the customs act 1962 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 4 applied indirect taxation

[close]

p. 9

1.5.4 collection of excise duty for collection of central excise duty the following two procedure are followed by the central excise department i physical control procedure applicable to cigarettes only in this case the assessment precedes clearance which takes place under the supervision of central excise officers ii self-removal procedure applicable to all other goods produced or manufactured within the country under this system the assesee himself determines the duty liability on the goods and clears the goods 1.5.5 exemptions from levy of excise duty section a of the central act 1944 empowers the central government to grant exemption form lay of excise duty and lays down the provisions relating thereto 1 power to notify exemptions in public interest section 5a1 provides that the central government is empowered to exempt in the public interest any excisable goods from the levy of whole or any part of excise duty such exemption may be granted either absolutely or subject to such conditions as may be specified in the notification exceptions however unless specifically provided in such notification no exemption shall apply to excisable exceptions however unless specifically provided in such notification no exemption shall apply to excisable goods which are produced or manufactured i in a free trade zone or special economic zone and brought to any other place in india or ii by a hundred per cent export-oriented undertaking and brought to any place in india 2 exemption in public interest section 5a2 provides that if the central government is satisfied that it is necessary in the public interest so to do it may by special order in each case exempt from payment of duty of excise under circumstances of an exceptional nature to be stated in such order any excisable goods on which duty of excise is leviable 3 notification may provide for different method of levy of duty as well section 55a3 provides that an exemption in respect of any excisable goods from any part of the duty of excise leviable thereon may be granted by providing for the levy of a duty on such goods at a rat expressed in a form or method different from the form or method in which the statutory duty is leviable and any exemption granted in relation to any excisable goods in the manner provided in this subsection shall have effect subject to the condition that the duty of excise chargeable on such goods shall in no case exceed the duty statutorily payable section 5a2a provides that the central government may if it considers it necessary or expedient so to do for the purpose of clarifying the scope or applicability of any notification issued or order issued insert an explanation in such notification or order as the case may be by notification in the official gazette at any time within one year of issue of the notification or order and every such explanation shall have effect as if it had always been the part of the first such notification or order as the case may be 1.6 goods it is obvious from section 31 that to attract excise duty the following conditions must be fulfilled · · · · there should be goods the goods must be excisable the goods must be manufactured or produced and the manufacture or production must be in india goods manufactured or produced in sez are excluded excisable goods this means that the goods manufactured or produced in sez are excisable goods but no duty is leviable as charging section 31 excludes these goods thus the goods manufactured in sez are not exempted goods they can be termed as excluded excisable goods applied indirect taxation 5

[close]

p. 10

overview of central excise act 1944 as per explanation to section 2d `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 basic ingredients from the above definitions of `goods the two essential elements of goods are emanated i ii they should be movable and they should be marketable 1.6.1 goods must be movable in order to be movable an article must fulfill two conditions i ii it should come into existence as a result of manufacture and it should be capable of being moved to market to be bought and sold thus goods must exist where goods have not come into existence they can not be moved as well so long as the goods have not come into existence no question of levy of excise duty would arise it has been observed that the word `manufacture or `production are associated with movables in municipal corporation of greater mumbai v union of india a petrol pump of huge storage capacity which was not embedded to earth but which could not be removed without dismantling was held to be immovable in nature in sirpur papers mills ltd v cce the machinery embedded to a concrete base to ensure its wobble free operation was held to be a movable property cbec has clarified that whatever is attached to earth unless it is like a tree/building/similar thing shall not necessarily be regarded as immovable property if the whole purpose behind such attaching to the concrete base is to secure maximum operational efficiency and safety thus excise duty cannot be levied on immovable property 1.6.2 goods must be marketable marketability denotes the capability of a product of being put into the market for sale where goods are not marketable excise duty cannot be charged on them marketability is the decisive test for durability the article must be capable of being sold to consumer without any additional thing the test of marketability will depend on the facts and circumstances of each case it is a question of fact the vendibility or marketability test includes the following three essential components a b c · · · · the goods should be capable of being sold in the market the goods should be capable of being sold ordinarily and the goods should be capable of being sold as such marketability is to be decided on the basis of condition in which goods are manufactured or produced everything that is sold is not necessarily `marketable waste and scrap can be `goods but dutiable only if `manufactured and are mentioned in tariff the marketability test requires that the goods as such should be in a position to be taken to market and sold if they have to be separated the test is not satisfied thus if machinery has to be dismantled before removal it will not be goods triveni engineering v cce air 2000 sc 2896 2000 air scw 3144 40 rlt 1 120 elt 273 sc branded software is goods however service tax will be payable on tailor made software after finance bill 2008 is passed the following points can be noted ­ · case laws 1 in cipla ltd v union of india it was held by the karnataka high court that for dutiability a product must pass the test of marketability even if it is a transient item captively consumed in the manufacture of other finished goods and that the onus is on the department to produce evidence of marketability 6 applied indirect taxation

[close]

p. 11

2 3 in uoi v indian aluminium co ltd v cce the supreme court held that marketability of a product must be for its dutiability mere manufacture or specification of an article in tarrif is not enough in bhor industries ltd v cce the supreme court held that the mere inclusion of a particular article in the tariff schedule will not render it liable to excise duty the marketability of that article is of primary importance the decision given in this case was a turning point because prior to this decision it was normal to treat all goods in the tariff schedule as chargeable to duty regardless of the test of marketability in union carbide india ltd v uoi geep industrial syndicate ltd v central government the supreme court held that intermediate products which were in a crude form would not constitute goods in this case aluminium cans produced by the extrusion process were not to be goods as they were neither capable of being sold nor were marketable 4 1.7 excisable goods · section 2d of central excise act defines excisable goods as `goods specified in the schedule to central excise tariff act 1985 as being subject to a duty of excise and includes salt as per explanation to section 2d `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 thus unless the item is specified in the central excise tariff act as subject to duty no duty is leviable in terms of the above definition of `excisable goods it may be held that all those goods which are specified in the tariff schedule are `excisable goods however question arises as to whether those goods which are exempted from duty by a notification but find a place in the tariff schedule are excisable goods by analyzing the definition the following two important ingredients of excisable goods are found a goods must be specified in the schedule to the central excise tariff act 1985 b the goods so specified must be subject to duty 1.7.1 excisability of plant machinery in view of entry n 84 of list-i seventh schedule to the constitution of india duty of excise could be levied only on goods and not on immovable property the goods are classified and charged to duty according to the state and condition in which they are removed from the factory assembly of plant machinery at site mere bringing together of parts of a plant and machinery at site cannot be termed to be manufacture and hence assembled plant cannot be treated to be goods where assembly of parts and components brings out a different recognizable marketable product before its installation or erection or attachment to the earth it would be goods and hence chargeable to duty in sirpur paper mills ltd v cce the supreme court held that machinery assembled and erected at site from bought out component was held to be goods and hence chargeable to duty as it was attached to earth for operational efficiency and could be removed and sold however in triveni engineering v cce the supreme court overruled its decision given in sirpur case and held that the marketability test essentially requires that goods should be in such condition as could be brought as such to the market and sold but if machinery requires dismantling before removal it cannot be goods and hence not chargeable to duty 1.7.2 excisability of waste scrap section 3 imposes duty on manufacture of goods waste and scrap are not manufactured but arise as a result of manufacture of the final product therefore generally there should not be levied any tax on the waste and scrap thus waste and scrap can be `goods but duitable only if `manufactured and are mentioned in tariff case laws in 1987 in the case of modi rubber ltd it was held that even though the waste was capable of fetching some amount of sale it would not be chargeable to excise duty similar decision was given in the case of captainganj distilleries applied indirect taxation 7

[close]

p. 12

overview of central excise act 1944 later in 1989 the criteria for determining whether waste generated would be excisable or not was laid down in the case of asiatic oxygen limited v cce the tribunal held that the question as to whether waste would be charged to duty or not would depend on a b whether a process of manufacture has taken place and whether the waste generated is marketable 1.8 manufacture any taxable event for central excise duty is manufacture or production in india the word `produced is broader than `manufacture and covers articles produced naturally live products waste scrap etc manufacture means to make to inset to fabricate or to produce an article by hand by machinery or by other agency to manufacture is to produce something new out of existing materials · `manufacture means a manufacture as specified in various court decisions i.e new and identifiable product having a distinctive name character or use must emerge or b deemed manufacture · deemed manufacture is of two types ­ a ceta specifies some processes as `amounting to manufacture if any of these processes are carried out goods will be said to be manufactured even if as per court decisions the process may not amount to `manufacture [section 2f ii b in respect of goods specified in third schedule to central excise act repacking re-labelling putting or altering retail sale price etc will be `manufacture the goods included in third schedule of central excise act are same as those on which excise duty is payable u/s 4a on basis of mrp printed on the package [section 2f iii w.e.f 14-5-2003 definition section 2f defines the term `manufacture to include any process i incidental or ancillary to the completion of a manufactured product and ii which is specified in relation to any goods in the section or chapter notes of the schedule to the central excise tariff act 1985 as amounting to manufacture or iii which in relation to the goods specified in the third schedule involves packing or repacking of such goods in a unit container or labeling or re-labelling of containers including the declaration or alteration of retail sale price on it or adoption of any other treatment on the goods to render the product marketable to the consumer and the word manufacturer shall be constued accordingly and shall include not only a person who employs hired labour in the production or manufacture of excisable goods but also any person who engages in their production or manufacture on his own account [clauses ii and iii are called deemed manufacture case laws it was decided in the case of union of india v delhi cloth general mills ltd that the manufacturer of vanaspati used to purchase oil from market and vanaspati was manufactured after subjecting the oil with various processes the excise was paid on vanaspati the excise department contended that during the process of manufacture of vanaspati vegetable non-essential oil was produced which is a separate dutiable product the court decided that manufacture implies a change but every change is not manufacture and yet every change of an article is the result of treatment labour and manipulations but something more is necessary and there must be transformation a new and different article must emerge having a distinctive name and character or use based on the above definition the court held that mere processing of basic oils did not amount to manufacture because it is not marketable product the refined oil requires deodorization before marketing in south bihar sugar mills ltd v uoi the supreme court held that there must be such a transformation that a new and different article must emerge having a distinctive name 8 applied indirect taxation

[close]

p. 13

in ujagar prints v uoi the supreme court held that the generally accepted test to ascertain whether there was a manufacture is whether the change or the series of changes brought about by the application of processes should take the commodity to the point where commercially can no longer be regarded as the original commodity but instead is recognized as a distinct and new article that has emerged out of and because of the result of processes 1.8.1 assembly or repair or production whether the same is manufacture assembly involves use of certain duty paid components to bring into existence an operational or functional product as per the cardinal list laid down by the supreme court in emperor industries case any process would amount to manufacture if as a result of the said process the object has been transferred into a commercially known new and different product thus where assembly brings into existence of a new commercially known different product however minor the consequent change be it would amount to manufacture however in enfield india ltd case the tribunal held that an assembly repair or reconditioning only improves the quality of performance of something which is not otherwise useful or fit to use it would be manufacture explanation as to what is not manufacture any activity shall not be deemed to be manufacture only because it has been so written in the licence granted the following are not manufacture a natural activity even if carried otherwise e.g drying yarn in natural sun b processing of duty paid goods c purchasing various item and putting into a container and selling them d obtaining of natural products e testing/quality control of items manufactured by others f cutting and polishing of diamond g upgradation of computer system h printing on glass bottles i affixing brand name j crushing of boulders into smaller stones 1.8.2 explanation about incidental ancillary process `incidental means anything that occurs incidentally it refers to occasional or casual process `ancillary means auxiliary process which unless pursued shall not result into manufacture of the product the definition of `manufacture under section 2f includes the processes which are `incidental or ancillary to the completion of a manufactured product a process can be regarded as incidental or ancillary to the completion of the manufactured product if it comes in relation to the finished product it is immaterial whether the process is significant or inessential on the other hand where a process is not connected to the manufacture of the final product it cannot be termed as incidental or ancillary intermediate products captive consumption the definition of manufacture under section 2f implies that manufacture would take place even at an intermediate stage so long as the intermediate product is commercially and distinctly identifiable intermediate products are such products which are produced in a process naturally in the course of manufacture of a finished product which involves more than one process thus such products are output of one process and input for the subsequent process captive consumption means consumption of such output of one process in the subsequent process generally the intermediate products do not have any marketable identity and can hardly be sold in the market applied indirect taxation 9

[close]

p. 14

overview of central excise act 1944 in the case of jk spinning &weaving mills v uoi the supreme court held that the captive consumption would amount to removal hence chargeable to duty however in union carbide v uoi the supreme court held that an intermediate product would be chargeable to excise duty only if it is a complete product and can be sold in the market to a consumer this decision was affirmed in bhor industries v uoi 1.9 manufacturer manufacturer is the person who actually brings new and identifiable product into existence · duty liability is on manufacturer in most of the cases · mere supplier of raw material or brand name owner is not `manufacturer · loan licensee is not `manufacturer loan licensee can be treated as manufacturer only if the manufacture is carried out by use of his own raw material under his own supervision by hiring the premises and equipment shift-wise or otherwise 1.9.1 definition of manufacturer section 2f defines the term `manufacture to include any process ­ i incidental or ancillary to the completion of a manufactured product and ii which is specified in relation to any goods in the section or chapter notes of the schedule to the central excise tariff act 1985 as amounting to manufacture iii which in relation to the goods specified in the third schedule involves packing or repacking of such goods in a unit container or labeling or re-labelling of containers including the declaration or alteration of retails sale price on it or adoption of any other treatment on the goods to render the product marketable to the consumer and the word manufacturer shall be construed accordingly and shall include not only a person who employs hired labour in the production or manufacture of excisable goods but also any person who engages in their production or manufacture on his own account thus according to the above definition the manufacturer is a person a who manufactures or produces any excisable goods or b carries on any process incidental or ancillary to the completion of the manufactured products 1.9.2 who is a manufacturer as per statute the following are held to be manufacturer a person manufacturing for own consumption b person hiring labour or employees for manufacturing c a job-order worker d a contractor 1.9.3 who is not a manufacturer the following have been held as not to be a manufacturer a `where an activity is not a manufacture b brand owners if their relation with the manufaturer is `principal to principal basis c labour contractors who supply labor d loan licensee e raw material supplier is not manufacturer 1.9.4 dutiability of packing labelling and repacking activities section 2f defines `manufacture to include any process which is specified in relation to any goods in the section or chapter notes of the schedule to the central excise tariff act 1985 ceta as amounting to 10 applied indirect taxation

[close]

p. 15

manufacture thus the process may not amount to manufacture as per principles evolved by courts but the same may be liable to excise duty if it is defined as amounting to manufacture under ceta this provision seemingly includes the process like packing labeling re-labelling re-packing into manufacture though otherwise these processes are not `manufacture as no new product emerges in fact these processes are adjunct to manufacture the manufacture shall be complete only when the product is rendered marketable and movable and for this purpose packing is an inevitable process therefore packing and associated with that the labeling is a part of the manufacturing process in cce v prabhat packging ltd the tribunal has held that repacking of an already manufactured product would not amount to manufacture in excise law since repacking does not result into a new commercially distinct product labelling on packaged products is also not manufacture since in the common market parlance a labeled and unlabelled product is treated as the same product and the distinction as such is made the principle was affirmed in the case of pioneer tools and appliances ltd v uoi by the bombay high court 1.10 classification of goods central excise duty is chargeable on the goods which are manufactured in india and are subject to excise duty however all goods cannot be charged with the same rate of duty therefore the goods need to be grouped into separate categories and sub-categories for which the rate of excise duty may be determined this identification of goods through groups and sub-groups is called classification of goods the rate of duty is found out by classifying the product in its appropriate heading under central excise tariff the central excise tariff act 1985 ceta classifies all the goods under 96 chapters and specific code is assigned to each item ceta is based on international convention of harmonised system of nomenclature hsn which is developed by world customs organisation wco that time called as customs cooperation council this is an international nomenclature standard adopted by most of the countries to ensure uniformity in classification in international trade hsn is a multi purpose 6 digit nomenclature classifying goods in various groups central excise tariff is divided in 20 broad sections section notes are given at the beginning of each section which govern entries in that section each of the sections is divided into various chapters and each chapter contains goods of one class chapter notes are given at the beginning of each chapter which govern entries in that chapter there are 96 chapters in central excise tariff each chapter and sub-chapter is further divided into various headings and sub-headings depending on different types of goods belonging to same class of products the central excise tariff act 1985 ceta came into force w.e.f 28th february 1986 the main features of the excise tariff are a the central excise tariff has been made very detailed and comprehensive as all the technical and legal aspects in relation to goods have been incorporated in it b the excise tariff is based on the harmonised system of nomenclature which is an internationally accepted product coding system formulated under the gatt c the goods of the same class have been grouped together to bring about parity in treatment and restrict the dispute in classification matter d the central excise tariff provided detailed clarificatory notes under each section/chapter e the interpretation of the tariff have been provided for at the beginning of the schedule all the section notes chapter notes and rules for interpretation are legal notes and/therefore serve as statutory guidelines in classification of goods f the tariff is designed to group all the goods relating to one industry under one chapter from one raw material in a progressive manner applied indirect taxation 11

[close]