·         Entry No. 84 of List I of Seventh Schedule to Constitution empowers Central Government to impose levy of excise on goods manufactured or produced in India.

·         In case of ‘deemed manufacture’, imposition of excise duty can be justified under entry 97 of List I.

·         Excise is a duty on manufacture. Manufacture or production of ‘excisable goods’ in India is the ‘taxable event’ in Central Excise. [Section 3(1) of Central Excise Act]

·         Excise Duty liability is generally on manufacturer, but in some cases, duty is collected from others also. Duty liability is no ‘manufacturer’, though he can collect it from buyer. He will be liable even if he does not collect [rule 4(1) of Central Excise Rules]

·         In case of goods stored in warehouse under rule 20, the duty liability is on person who stores the goods in warehouse [rule 4(1) of Central Excise Rules]

·         In case of molasses produced in khandsari sugar factory, duty liability is of procurer i.e. purchaser if he is procuring it for manufacture of any commodity [rule 4(2) of Central Excise Rules].

·         In case of job work, duty liability is of job worker, even if he is not owner of manufactured goods. However, if inputs are sent under Cenvat provisions or under notification No. 214/86-CE, duty liability is of raw material supplier.

·         Basic excise duty is levied u/s 3(1) of Central Excise Act. The section is termed as ‘charging section’. The duty rate is generally 10% w.e.f. 27-2-2010 i.e. total 10.3% including education and SAH cess [earlier, it was 8.24% and still earlier, it was 14% i.e. total 14.42%).

·         Education cess is payable @ 2% of the basic duty and Secondary and High Education Cess is 1% of basic excise duty.

·         As per judicial interpretation, for purpose of levy of Excise duty, an article must satisfy two requirements to be ‘goods’ i.e. (a) it must be movable and (b) it must be marketable. However, actual sale is not necessary. 

·         ‘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 [Explanation to section 2(d) of Central Excise Act].

·         Marketability is to be decided on the basis of condition in which goods are manufactured or produced.

·         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 erected and installed machinery has to be dismantled before removal, it will not be goods - Triveni Engineering v. CCE AIR 2000 SC 2896 120 ELT 273 (SC).

·         Software is excisable goods. However, presently, excise duty/service tax as well as Vat is payable on branded (packaged) software and  service tax and Vat is payable on customised software.

·         Section 2(d) 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’.  Thus, unless an article is specified in the Central Excise Tariff Act as subject to duty, no duty is leviable.

·          ‘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, some articles like cement structures and trusses, scrap etc. will be ‘goods’ even if otherwise they are not marketable.

·         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’ can be (a) as defined by Court or (b) Deemed manufacture.

·         ‘Manufacture’ as defined by Courts, takes place only when the process results in a commercially different article or commodity.  There can be ‘manufacture’ if both inputs and final product fall in same tariff heading.

·         In Union of India v. Delhi Cloth Mills Co. Ltd. AIR 1963 SC 791 = 1963 Suppl (1) SCR 586 = 1977 (1) ELT (J199) (SC) (SC five member constitution bench) it has been held that the manufacture means bringing into existence a new substance. Thus, manufacture implies a change but every change is not manufacture. A new and different article must emerge having a distinctive name, character or use.

·         However, this test does not apply in case of ‘deemed manufacture’.

·         Manufacturer is who ‘manufactures’ [Section 2(f) of Central Excise Act]  He is the person who actually brings new and identifiable product into existence or undertakes process defined as ‘deemed manufacture’.

·         Duty liability is on ‘manufacturer’, except in few cases of reverse charge. Mere supplier of raw material or brand name owner is not ‘manufacturer’.

·         Loan licensee is not ‘manufacturer’.

·         Ownership is not relevant to determine who is manufacturer. If relationship between brand name owner/raw material supplier and the actual person bringing the new and identifiable product into existence are on Principal to Principal basis, the brand name owner/raw material supplier will not be ‘manufacturer’.