Central Excise duty is an indirect tax levied on those goods which are manufactured in India
and are meant for home consumption. The taxable event is 'manufacture' and the liability of
central excise duty arises as soon as the goods are manufactured. It is a tax on manufacturing,
which is paid by a manufacturer, who passes its incidence on to the customers.
The term "excisable goods" means the goods which are specified in the First Schedule and
the Second Schedule to the Central Excise Tariff Act, 1985 , as being subject to a duty of
excise and includes salt.
The term "manufacture" includes any process,
1. Incidental or ancillary to the completion of a manufactured product and
2.Which is specified in relation to any goods in the Section or Chapter Notes of the
First Schedule to the Central Excise Tariff Act, 1985 as amounting to manufacture or
3.Which, in relation to the goods specified in the Third Schedule, involves packing or
repacking of such goods in a unit container or labelling 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.
As incidence of excise duty arises on production or manufacture of goods, the law does not
require the sale of goods from place of manufacture, as a mandatory requirement. Normally,
duty is payable on 'removal' of goods. The Central Excise Rules provide 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 rules or under any other
law. 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. The word 'removal' cannot be necessarily equated with sale.
The removal may be for:-
- Transfer to depot etc.
- Captive consumption
- Transfer to another unit
- Free distribution
Thus, it can be seen that duty becomes payable irrespective of whether the removal is for
sale or for some other purpose.