Central Excise duty is an indirect levy and collection of tax on goods manufactured or produced in India. To levy any duty, tax etc it should be in accordance with the constitution of India. Entry 84 of Union List empowers the levy of excise duty on tobacco or other goods manufactured or produced in India except:

1.      Alcoholic liquor for human consumption

2.      Opium

3.      Indian hemp

and other narcotic drugs but including medicinal and toilet preparations containing alcohol etc.

Conditions for levy of tax

Central Excise specifies 4 basic conditions to be satisfied for levy of duty

1)      There must be goods.

2)      The goods must be manufactured or produced.

3)      Such manufacture or production must be in India.

4)      The goods must be excisable.

Types of Excise Duty

Excise duties are of following types –

1. Central Value Added Tax (CENVAT) – This duty is levied on all excisable goods manufactured or produced in India except those manufactured in Special Economic Zones. The general rate of duty is 16%. Some commodities attract concessional rates as per exemptions and notifications.
2. Special Excise Duty (SED) – Previously this duty was levied on the goods listed under the Second Schedule to Central excise tariff Act, 1985. With effect from 1.3.2006 even these goods are exempt from this duty.
3. National Calamity Contingent Duty (NCCD) - A 'National Calamity Continent Duty' has been imposed on cigarettes, beedis, pan masala and miscellaneous tobacco products. It varies from 10% to 45%.
4. Additional Duty on goods of special importance - Some goods of special importance are levied Additional Excise under Additional Duties of Excise (Goods of Special Importance) Act, 1957. With effect from 1.3.2006 even these goods are exempt from this duty.
5. Additional Duty: An additional duty by way of surcharge has been imposed on cigarettes at specific rates ranging from Rs. 15 to Rs. 180 per thousand cigarettes. Duty at a rate equal to 10% of normal rates of excise duty has also been imposed on pan masala and certain specified tobacco products.
6. Additional Duty on Textile Articles - Additional excise duty of 15% on certain textile and textile articles like articles of silk / wool / cotton, man-made filaments, metallised yarn etc. is imposed under Additional Duties of Excise (Textile and Textile Articles) Act, 1978. The revenue from these levies goes fully to Central Government.
7. Education Cess : An education cess has been imposed on all the excisable products at the rate of 2% on the excise duty payable.
8. Secondary and Higher Education Cess: A Secondary and Higher Education cess has been imposed on all the excisable products at the rate of 1% on the excise duty payable.
9. Cess - A cess has been imposed on certain products. The rates are specified for the products under the respective Acts. 

Types of exemptions on excise duty:

Exemptions are of various types:

1. Product based exemption
2. Industry based exemption
3. Process based exemption
4. Conditional exemption
5. Special orders exemption
6. Backward area exemption

Small Scale Exemption

Excise duty concessions have been given to the small-scale industries in what is called the General Excise Duty Exemption Scheme for small Industries. This is to enable the small-scale industries to compete on favorable terms with their counterparts in the large and medium sector. Such exemption is given to those units whose clearance has not exceeded Rs. 400 lakhs in the previous financial year.

Example: If M/s ABC & Co. has effected clearances of Rs. 360 Lakhs during the financial year 2006-07, then they would be eligible for SSI benefit under the notification 8/2007

For the financial year 2007-08 M/s ABC & Co. can avail the benefit in the following manner:

Clearances up to Rs. 150 Lakhs: Nil Rate of Duty

Above Rs. 150 lakhs: Normal Rate of Duty

Books to be maintained

(a)    Daily Stock Account (R.G. -1)

(b)   CENVAT Credit Register (R.G. -23 Part A)

(c)    CENVAT Credit for Capital Goods (R.G. – 23 Part C)

(d)   Job Work Register

(e)    Personal Ledger Accounts (PLA)

(f)     All records prepared and maintained for accounting of transaction in regard to receipt, purchase, manufacture, storage, sales or delivery of the goods including inputs and capital goods as the case may be.

(g)    All records prepared and maintained for accounting of transaction in regard to payment for input services and their receipt or procurement.

(h)    All financial records and statements including trial balance or its equivalent.

The records have to be preserved for a period of 5 years following the year to which the records pertain.

Filing of Returns

The returns has to be filed in the prescribe forms and within certain time limit as prescribed by the act.