Taxmann's Analysis | The Central Excise Bill 2024 and Its Impact on Indian Manufacturing

The Central Excise Bill 2024 and

Its Impact on Indian Manufacturing

The Central Excise Bill 2024

and Its Impact on Indian Manufacturing

1. Introduction

The Central Excise Bill of 2024 represents a significant reform in India’s manufacturing sector taxation. Aiming to address modern economic challenges and streamline the existing framework, this bill seeks to simplify the excise duty structure, enhance compliance through digital solutions, and foster a business-friendly environment. The Central Excise Bill 2024 aims to optimise the excise duty regime by strengthening adjudication processes and promoting sustainable manufacturing practices.

This article provides a comprehensive overview of the key highlights of the proposed Central Excise Bill, detailing significant amendments and policy shifts introduced by the bill.

2. Levy of Excise Duty on Special Economic Zone (SEZ) Units

Under the current Central Excise Act of 1944, goods produced or manufactured in SEZ units are exempt from excise duty. However, the proposed Central Excise Bill does not maintain this exclusion. As a result, goods produced or manufactured in SEZ units will be subject to excise duty under the new bill. It remains to be seen if special incentives and tax benefits, including excise duty exemptions for SEZs, will continue through separate notifications.

3. Eligibility of Central Excise Duty Credit

The proposed bill introduces Section 17, which outlines eligibility for Central Excise Duty Credit. Manufacturers or producers of final products can take credit of central excise duty and other prescribed duties, subject to certain conditions and restrictions. This credit, known as Central Excise Duty Credit, cannot be applied to motor spirit (petrol) and high-speed diesel, even if used in manufacturing final products.

The credit can be used to pay any excise duty on final products or other amounts payable under the rules within prescribed limitations. The government may also restrict the utilisation of unutilised credit for specified excisable goods, potentially causing the credit to lapse on a date specified by the Central Government through notification.

4. Extension of Time Limit for Recovery of Duties

Section 32(2) of the proposed bill extends the time limit for the Central Excise Officer to serve a notice up to 3 years from the relevant date if the duty has not been levied or paid, or in cases of short levy or payment, erroneous refunds, or wrongly availed or utilised Central Excise Duty Credit. The current limit under the Central Excise Act is two years. Notably, the proposed bill does not differentiate adjudication proceedings based on fraudulent or bona fide reasons.

5.

Transition of Credit from Repealed Excise Act to the New Act

The new Central Excise Act includes transitional provisions for credit unutilised under the old law. Such credit can be used under the new act, subject to its provisions and rules. Credit of central excise duty and other prescribed duties under Section 17(1) will be available for inputs (excluding motor spirit and high-speed diesel) received within 30 days of the new act’s commencement, provided the duty was paid under the repealed act. The Principal Commissioner or Commissioner of Central Excise may extend this 30-day period by an additional 30 days for sufficient cause.

6. Rectification of Errors Apparent on the Face of Records

Section 100 of the proposed bill deals with the rectification of errors apparent on the face of records, similar to Section 161 of the Central Goods and Services Tax Act, 2017 (CGST Act). The time limit for rectification has been reduced from 2 years to 6 months, except for clerical or arithmetic errors, which have no time limit for rectification.

7. Change in Rate of Interest under Various Provisions

The proposed Central Excise Bill includes changes in interest rates under various provisions. The details of these changes are provided in the table below:

Interest rate on delayed payment of tax

Interest on Central Excise Duty credit that is wrongly availed and utilised

Interest at a rate not exceeding 18% as may be notified by the Central Government for the period during which the duty or any part thereof remains unpaid

Interest at the rate of 18% per annum where the Central Excise Duty Credit has been wrongly availed and utilised. The interest would be calculated from the period starting from the date of utilisation for such wrongly availed Central Excise Duty Credit till the date of reversal of such credit or payment of duty in respect of such amount as may be prescribed

10-30% per annum

10-30% per annum

Interest on the amount collected in excess of duty

Interest rate for delayed refunds

Interest at the rate of 18% per annum on the amount which has been collected in excess of the duty assessed or determined and paid or payable 10-30% per annum

Interest at the rate of 6% per annum on delayed refunds 5-30% per annum

8. Power to Fix Different Tariff Values by the Central Government

The proposed Central Excise Bill grants the Central Government the authority to set different tariff values under the valuation provisions for the following scenarios:

(a) Different classes or descriptions of the same excisable goods

(b) Excisable goods of the same class or description that are:

• Produced or manufactured by different classes of producers or manufacturers

• Sold to different classes of buyers

In setting different tariff values for excisable goods of the same class and description, the government must consider the sale prices charged by different classes of producers or manufacturers and the normal practices of the wholesale trade in such goods.

This provision is similar to the one contained in Section 3 of the Central Excise Act, which deals with the levy of tax.

9. Reduction in Rate of Duty for Certain Tobacco Products

The proposed bill suggests a reduction in the excise duty rates for certain tobacco products. The details of the products and their proposed reduced duty rates are as follows:

2402 20 Cigarettes containing tobacco:

2402 20 10 Other than filter cigarettes of length not exceeding 65 millimetres

2402 20 20 Other than filter cigarettes of length exceeding 65 millimetres but not exceeding 70 millimetres

Rs. 1280 per thousand

Rs. 2335 per thousand

2402 20 30 Filter cigarettes of length (including the length of the filter, the length of the filter being 11 millimetres or its actual length, whichever is more) not exceeding 65 millimetres Tu Rs. 1280 per thousand

200 per thousand

250 per thousand

440 per thousand

2402 20 40 Filter cigarettes of length (including the length of the filter, the length of the filter being 11 millimetres or its actual length, whichever is more) exceeding 65 millimetres but not exceeding 70 millimetres Tu Rs. 1740 per thousand Rs. 440 per thousand

2402 20 50 Filter cigarettes of length (including the length of the filter, the length of the filter being 11 millimetres or its actual length, whichever is more) exceeding 70 millimetres but not exceeding 75 millimetres

Rs. 2335 per thousand

545 per thousand

2402 20 90 Other Rs. 3375 per thousand

735 per thousand

2402 90 Other:

2402 90 10 Cigarettes of tobacco substitutes

3375 per thousand Rs. 600 per thousand

2403 Other manufactured tobacco and manufactured tobacco substitutes; “Homogenised” or “Reconstituted” tobacco; Tobacco extracts and essences

Smoking tobacco, whether or not containing tobacco substitute in any proportion;

2403 11 Water pipe tobacco specified in Sub-heading Note to this Chapter:

2403 11 10 Hukkah or gudaku tobacco

2403 19 Other:

2403 19 10 Smoking mixtures for pipes and cigarettes

- Biris:

2403 19 21 Other than paper rolled biris, manufactured without the aid of a machine

2403 19 29 Other

2403 19 90

2403 91 00 “Homogenised” or “reconstituted” tobacco

2403 99 Other

99 10 Chewing

99 20 Preparations containing chewing tobacco

2403 99 30 Jarda scented tobacco

2403 99 40 Snuff

10. Other Changes in the Provisions

• The definition of ‘related person’ in the proposed excise bill has been simplified to align with the definition in the GST law.

• The appointment of officers under the Central Excise Bill is proposed to follow similar procedures as provided under the GST law.

• Provisions for filing annual returns are proposed to align with those in the GST law.

• Section 1 of the Central Excise Bill proposes specific provisions for the phased implementation of the new Excise Act.

11. Conclusion

The proposed Central Excise Bill aims to repeal the 80-year-old Central Excise Act of 1944, marking a significant step toward ease of doing business and a simplified taxation structure. Since the implementation of the nationwide GST in 2017, excise duty has been applied to a limited number of products. Repealing the old act and implementing the new excise law will enhance efficiency and facilitate the phased transition of excisable products under the GST regime.