The power to levy a duty of excise manufactured or produced in India derives its authority from entry 84 of the Union List (List I) of Seventh Schedule read with Article 246 of the Constitution of India. Thus, Central Excise is a tax on the ‘act of manufacture or production’. Section 3 of the Central Excise Act, 1944 (hereinafter referred to as "the Act") is the charging section, which specifies the conditions under which Excise Duty is leviable on all excisable goods which are manufactured or produced in India. Education Cess is a duty of excise which is to be levied @ 2% of the aggregate duty of excise (vide Finance Act, 2004). As Education Cess and higher education cess is a new levy it will not be payable on the opening stock of finished goods as on day 8-7-2004. The Secondary and Higher Education cess is payable at the rate of 1% on excise duty payable under section 3 of Central Excise Act with effect from 1-3-2007.

The taxable event for Central Excise duty to be attracted is manufacture or production in India of excisable goods. Section 2(f) of the Act defines the term "manufacture" in an inclusive manner so as to include 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 Schedule to the Central Excise Tariff Act, 1985 as amounting to manufacture and

3. Which in relation to goods specified in the Third Schedule to the Central Excise Tariff Act, 1985, involves packing or repacking of such goods in a unit, container or labelling or re-labelling of containers or declaration or alteration of retail sale price or any other treatment to render the product marketable to consumer.

(The clauses (ii) and (iii) above are termed as ‘deemed manufacture’.) The aforesaid definition gives a wider content to the expression "manufacture" as several processes which would not ordinarily be understood as amounting to manufacture are specifically included therein. However, the most commonly used test for ascertaining "manufacture" for the purpose of attracting Central Excise duty has taken place was evolved by the Supreme Court in the case of Delhi Cloth and General Mills 1977 (1) ELT (J 199). In terms of this decision, the activity or process in order to amount to "manufacture" must lead to emergence of a new commercial product, different from the one with which the process started. In other words, it must be an article with different name, character or use. Thus, a process which simply changes the form or size of the same article or substance would not ordinarily amount to manufacture and no excise duty would be payable unless it is deemed to be manufacture as follows;

• In a particular case by a section or Chapter note of the Tariff; or

• In relation to goods, which are specified under MRP based assessment under section 4A, packing or repacking of such goods, labelling or re-labelling of containers including declaration or alteration of retail sales price shall amount to manufacture.

Central Excise duty is levied on goods which are manufactured or produced. The understanding of term goods is of vide importance in determining the leviability of Excise Duty. The Act does not define the term "goods". The judgement of the Supreme Court in the case of Delhi Cloth and General Mills (supra) is considered to be the landmark judgment in this regard, where it is held that an ‘an article can be called "goods" if it is known to the market as such and can ordinarily come to the market for being bought and sold. Actual sale of the article is not important but it must be capable of being bought and sold’.

The marketability element of goods was enumerated in Union of India and Others, Appellants vs. Sonic Electro Chem (P) Ltd. 2002 (52) RLT 878 (SC) where the Supreme Court held that ‘the essence of marketability is neither in the form nor in the shape or condition in which the manufactured articles are to be found, it is the commercial identity of the articles known to the market for being bought and sold.’ Whether immovable things are goods or not, was clarified in the case of Triveni Engg vs. CCE 2000 (120) ELT 273 by the Supreme Court where it was observed that immovable property or articles embedded to earth, erections, turnkey projects are not generally termed as "goods" because they cannot ordinarily come to the market to be bought and sold.

The explanation is added by Finance Act, 2008 under section 2(d) provides that goods includes any article, material or substance which is capable of being sold for consideration and such goods shall be deemed to be marketable.

The definition of manufacturer under the Act is an inclusive one and broadly specifies two categories of manufacturer; i.e., one who manufactures on his own account or one gets the goods manufactured through hired labour. Thus we can construe the meaning of the word manufacturer as understood in common terminology. Manufacturer may be understood as any person who is the creator, initiator and architect of the activities and the processes, which bring in existence a new and identifiable product/goods in the market. Thus a manufacturer is the one who undertakes manufacturing activity in reality. A purchaser of goods does not become manufacturer, he can only be termed as a supplier of raw material, if applicable or a person who gets goods manufactured according to his specifications or with his brand name. Here, it is worthwhile to mention that such contracts are on a principal to principal basis. A person supplying the raw material cannot be considered as hiring the job worker if he does not supervises and control the activities of the job worker. However if the manufacturer is a dummy or fake unit, then the raw material supplier or the brand name owner is deemed to be the actual manufacturer.

Section 3A incorporated in the Statute by Finance Act, 2008 provides power to the Central Government to charge excise duty on the basis of capacity to manufacture by manufacturer himself in respect of notified goods. Till today, the product under this sub-section has not been notified. Once the product has been notified, excise duty will be payable on the basis of capacity.

The charging section; i.e., section 3 specifies that the rates of Central Excise Duty shall be the rates as are specified in the Schedules to the Central Excise Tariff Act, 1985 (hereinafter referred to as "the Tariff"). The classification of goods in the Central Excise Tariff Act is comprised in two schedules; the First Schedule specifies the basic rate of excise duty and the Second Schedule specifies the special rate of excise duty. The first contains 96 Chapters grouped into 20 sections and has been selectively aligned with the Harmonised System of Nomenclature (The International Nomenclature adopted by more than 130 countries for international trade).

The correct classification of goods is necessary to ascertain the rate of duty on it. Thus, it is essential to determine the right heading or sub-heading of the Tariff under which the goods fall. This process of determining the right place of the goods in the tariff is called classification of goods. The chapter description read along with the section and chapter give us the classification statutorily, and in absence thereof the classification has to be done on trade or commercial parlance. The schedule to the Central Excise Act provides the following rules for interpretation of the tariff to aid in the classification of goods:

1. A reference to a product includes an incomplete or unfinished product provided that the incomplete or unfinished product has the essential character of complete or finished goods.

2. A reference in heading to a material includes the reference to a mixture or combination of that product. The classification of goods consisting of more than one material shall be decided on the basis of the material which gives the essential character to the product.

3. A specific heading should be preferred to the more general heading.

4. In case the classification cannot be decided on the basis of above principle, the product shall be classified under a heading, which occurs last in the chapter/heading/sub-heading.

The Finance Act, 2002, reduced the time period for making an application for rectification of mistake apparent from record in the order of the Appellate Tribunal from the present four years to six months. The mistake may be typographical errors, calculation mistakes, order based on inapplicable statutory provisions, etc.

The Committee of Chief Commissioner of Central Excise shall examine the records of any order passed by the Commissioner of Central Excise as Adjudicating Authority under this Act and if they are not satisfied as to the legality or proprietary of any such decision or order, they shall direct the Commissioner to file an appeal to the Appellate Tribunal for determination of such points arising out of the decision or order.

The Committee of Commissioner of Central Excise shall examine the records of any proceedings in which officer subordinate to him has passed the adjudicating order under this act for the purpose of satisfying as to the legality or proprietary of such decision. In case the Commissioner of Central Excise is not satisfied, he shall direct such authority or any Central Excise officer to appeal to the Commissioner of Central Excise (Appeal) for decision.

An appeal against the order passed by the Commissioner of Excise/Customs as an adjudicating authority or an order passed by the Commissioner appeals lies to the Customs, Excise and Service Tax Appellate Tribunal [earlier CEGAT (Customs Excise and Gold (Control) Appellate Tribunal)] which is formed under the provisions of the Act. However, under Excise in matters of loss of goods occurring in transit from factory to warehouse, rebate on duty of goods exported and goods exported without payment of duty, and similarly under the custom provisions in matters of order in relation to baggage, goods short-landed, or payment of duty drawback by the Commissioner (Appeals), the Tribunal is not empowered to admit the appeal. In such cases, a revision application has to be filed to the Government under the provisions of section 35EE of the Central Excise Act, 1944 (parallel section 129DD of the Customs Act). Section 35G of the Central Excise Act, 1944 (parallel section 130 of the Customs Act) is amended regarding appeals from the orders of the CESTAT. Appeals against the orders of the Tribunal on matters other than relating to the determination of any question having a relation to the rate of duty of customs or to the value of goods shall be filed in the High Court. The High Court will formulate the question of law after satisfying itself that substantial question of law is involved. The new provision shall apply to the orders of the Tribunal on or after 1st of July, 2003. The appeal is to be filed within 180 days of the receipt of the order appealed against by the Commissioner or the other party.

1. (i)  In an appeal made under section 35G of the Central Excise Act, 1944 (parallel section 130 of the Customs Act);

(ii) On a reference made under section 35G of the Central Excise Act, 1944 by the Tribunal before 1st July, 2003 (parallel section 130 of the Customs Act);

(iii) On the reference made under section 35H of the Central Excise Act, 1944 (parallel section 130A of the Customs Act), In any other case, which on its own motion on an oral application made by or on behalf of the party aggrieved, immediately after passing of the judgement, the High Court certifies to be a fit one for appeal to the Supreme Court.

2. in an appeal against any order passed by the Appellate Tribunal relating, among other things, to the determination of any question having a relation to the rate of duty of Excise/ Customs or to the value of goods for purposes of assessment under either acts.

The Appellate Tribunal is required to hear and decide every appeal within a period of three years from the date on which the appeal is filed, where it is possible to do so (vide the Finance Act, 2002). But where the Appellate Tribunal has made an order of stay in any proceedings relating to an appeal, the Appellate Tribunal shall dispose of the appeal within a period of one hundred and eighty days (six months approximately) from the date of the stay order. If the appeal is not so disposed of the stay order shall, on the expiry of the said period, stand vacated. However in the case of IPCL vs. CCE Vadodara, 2004 (63) RLT 1, the Hon’ble CESTAT-LB has held that ‘the Tribunal has the jurisdiction to grant stay even after the expiry of 180 days from the date of initial order of stay.’

The procedure for settlement of any dispute with Settlement Commission under the Central Excise Act is as follows:

1. Application for settlement of case — The assessee shall make full and true disclosure of his duty liability which has not been disclosed before the Central Excise Officer by filing the application form declaring the additional excise duty accepted to be payable by him. The application shall be admitted if the applicant has (a) filed return showing production, clearance of excise duty paid in the prescribed manner (b) Received Show cause notice for recovery of duty (c) Additional amount of duty accepted is not less than Rs. 3 lakhs with effect from
   1-6-2007. (d) Paid admitted duty liability and the amount of interest if the application is made after 1-6-2007. (e) Made payment of fee of Rs. 1,000/-.

2. Settlement Commission shall within 7 days on receipt of application, issue notice to the applicant to explain in writing as to why the application made by him should be allowed to be proceeded with and after taking into consideration of the explanation, allow the application to be proceeded with or reject the application as the case may be. If no notice is issued within 7 days the application is deemed to have been accepted.

3. The Settlement Commission shall call for report within 7 days after the application has been accepted from the Commissioner of Central Excise/Customs having jurisdiction over the assessee. The Commissioner shall furnish the report within 30 days from the date of communication. In case no report is received the Settlement Commission shall proceed further in the matter without report.

4. After receipt of report, the Settlement Commission may after examining the report ask / direct the Commissioner (Investigation) to make further enquiry. The Settlement Commission shall issue direction within 15 days from the date of receiving the report from Jurisdictional Commissioner who then shall furnish the report within 90 days from the receipt of communication from Settlement Commission.

5. The Settlement Commission shall grant opportunity, to the applicant and the Commissioner, of personal hearing.

6. The Settlement Commission shall pass final order within 9 months from last date of the month in which the application is made failing which the settlement proceedings will abate and the adjudicating authority shall have the power to dispose of the show cause notice.

7. Every order of the Settlement Commission passed under rule 32F will be final. The Settlement Commission has power to grant immunity of prosecution and penalty under the Central Excise Act or Customs Act.

Section 11B of Central Excise Act provides that any person claiming refund of duty of excise shall make an application for such amount to the Assistant Commissioner of Central Excise or Deputy Commissioner of Central Excise in such form and manner as may be prescribed. The application shall be accompanied by the documentary evidence which evidences payment of duty and also other documents to substantiate that incidence of duty has been borne by the applicant. In case it is not substantiated that the incidence of duty has not been borne by the applicant, the refund amount shall be credited to Consumer Welfare Fund. A refund application should be filed within one year firm the date of payment of Duty. By Finance Act, 2008 even interest paid by the manufacturer can be refunded. The period of one year shall not apply where any duty has been paid under protest.

In case the refund has not been granted within a period of 3 months from the date of application, the applicant shall be entitled to the interest @ 9% of the duty amount from the date immediately after the expiry of 3 months from the date of receipt of such application.

Similarly, interest is also payable on the demand of duty under section 11AB of Central Excise Act. The interest on demand of duty is payable from the date of the month succeeding the month in which duty ought to have been paid under this Act or from the date of erroneous refund granted as the case may be.