Excise Duty

What is Excise Duty?

Excise duty is an indirect tax imposed on the production or manufacture of certain goods within a country. In India, this tax is governed by two major legislations: the Central Excise Act, 1944, and the Central Excise Tariff Act, 1985. The responsibility of collecting excise duty lies with the Central Board of Excise and Customs (CBEC), ensuring that manufacturers contribute to the government’s revenue on specific goods.

Before the introduction of the Goods and Services Tax (GST) in 2017, excise duty was one of the primary indirect taxes in India, levied on a broad range of manufactured products. However, with the rollout of GST, several indirect taxes, including excise duty, were merged into the unified tax regime. Despite this change, excise duty still applies to a limited set of products, such as petroleum, liquor, and tobacco. These items are outside the scope of GST, ensuring that excise duty remains relevant in certain sectors.

Types of Excise Duty

In India, there are three primary types of excise duty, each levied on different categories of goods:

1. Basic Excise Duty

   • Scope: Applies to goods listed in Schedule I of the Central Excise Tariff Act, 1985, excluding salt.

   • Purpose: A fundamental tax on excisable goods.

2. Additional Excise Duty

   • Scope: Levied on goods specified in Section 3 of the Additional Duties of Excise Act, 1957.

   • Purpose: A tax shared between the central and state governments as a substitute for sales tax.

3. Special Excise Duty

   • Scope: Applies to goods listed in Schedule II of the Central Excise Tariff Act, 1985.

   • Purpose: A targeted tax on specific categories of goods. One must note that individuals are exempted from paying taxes. However, such a benefit can be availed based on –

     • Value of turnover in a given financial year.

     • Raw materials used.

     • Process involved. 

Who is Eligible to Pay Excise and Taxation Duty?

Excise duty is payable by:

• Manufacturers of goods.

• Entities using hired labor to manufacture goods.

• Entities outsourcing manufacturing to third parties.

These parties are responsible for paying excise duty on the goods they produce or have produced.

When Should You Pay Excise Duty?

According to Rule no. 8 of the Central Excise (Amendment) Rules, 2002, excise duty must be paid on the fifth day of the following month from the date the products are taken from the warehouse or factory for the purpose of sale. This means that the duty is payable on the products that have been manufactured or produced and removed from the premises for sale.

Important Notes:

• Online Payments: If the excise duty is paid online through netbanking, the payment is due on the sixth day of the next month.

• March Payments: If the excise duty is due in March, it must be paid by March 31.

How to Pay Excise Duty?

1. Access the NSDL-EASIEST Website:

   Begin by visiting the NSDL-EASIEST website at https://cbec-easiest.gov.in/EST/. Once there, select the "E-Payment (Excise & Service Tax)" option.

2. Enter Your Assessee Code:

   To initiate the online payment process, enter the 15-digit Assessee Code provided by your jurisdictional Commissionerate.

3. Code Validation:

   The system will perform a quick online check to verify the validity of your Assessee Code.

4. Assessee Details Display:

   If the code is valid, the screen will automatically display your corresponding details, including your name, address, and Commissionerate code.

5. Automatic Duty Selection:

   Based on your Assessee Code, the system will automatically identify the type of Excise Duty you need to pay.

6. Selecting Accounting Codes:

   Next, you'll need to specify the exact duty or tax you're paying. Click on "Select Accounting Codes for Excise" to do so.

7. Choose Accounting Codes (up to 6):

   You can select up to six Accounting Codes at once. The system will validate the date based on your code selections. Once validated, you'll see a drop-down menu listing authorized banks that facilitate online payments. Choose your preferred bank from this list.

8. Confirmation and Bank Redirection:

   After selecting the bank, you'll reach a confirmation screen. Review the entered information carefully. Verifying the details will redirect you to the chosen bank's netbanking page.

9. Netbanking Login and Payment:

   Once redirected, the challan details you entered will be transmitted to the bank along with your location code. Now, log in to your netbanking account to complete the payment process.

10. Successful Payment and Receipt:

    Upon successful payment, you'll receive a challan counterfoil, which serves as your proof of payment. This counterfoil displays payment details, a Challan Identification Number, and the bank you used for the transaction. You can download this document from the bank's website for your records.

11. Verification (Optional):

    After completing the online payment, you have the option to verify the upload of your e-payment challan on the NSDL website. Visit https://onlineservices.cbec-easiest.gov.in/csi.indexl to access the "Challan Status Enquiry." If you encounter any issues finding or uploading the challan, you can lodge a complaint at easiest@nsdl.co.in.

Implications of Not Paying Excise Duty

Failure to pay excise and taxation duty on time or accurately can lead to significant consequences under the Central Excise Act. One of the most immediate implications is the imposition of penalties in the form of fines. These penalties can range from 25% to 50% of the evaded tax amount. This means that you will have to pay not only the original tax amount but also a substantial fine.

Penalty of Not Paying Excise Duty

If you fail to pay excise duty or commit an infraction involving an excisable commodity and the duty chargeable on that product exceeds Rs.50 lakh, you could face imprisonment for a term of up to 7 years. Additionally, a fine will also be levied against you.

For less severe infractions, the sentence might be up to three years in prison, with or without a fine, depending on the circumstances. It is important to note that these penalties are severe, and it is crucial to comply with excise duty regulations to avoid legal consequences.

Differences between Custom Duty and Excise Duty

Differences Between GST and Excise Duty