Basis For Levy Of Excise Duty

Excise duty is levied on the basis of:

• Specific duty:  In the case of specific rate of duty, the basis of levy is a specific quantity of goods such as weight, length, volume, number of units produced, etc.  Thus specific rate of duty has no relevance to the selling price of the goods and is, in fact, independent of it.
• Duty based on value (advalorem duty): In the case of advalorem rate of duty, the basis of levy is the value of the goods.  Thus, it is necessary to determine the value of excisible goods and then apply the advalorem rate of duty, which is a fixed percentage of the value, say 10% advalorem.  It is to be noted that value is not the assessable value always.  Some additions or subtractions might be done to get the assessable value.  Assessable value is the value on which the rate of duty is applied and duty liability is found.
• Duty based on the Tariff value: Section 3(2) of the Central Excise Act gives the Central Government two powers.
  • To fix tariff value.
  • To alter Tariff value already fixed.
  These powers have to be exercised through a notification in the official gazette.
• Duty based on maximum retail price: MRP valuation is adopted in case of notified commodities or goods.  The notification issued in this behalf indicates the extent of Abatement to be allowed for arriving at the assessable value.  Notified goods are always covered by Standard weights and measures Act.  That is to say that they are sold in a “prepacked condition”.  None can know what is inside without opening the package.  Therefore, the standard weights and Measures Act forces the manufacturer/ seller/ packer to label the packages and provide the information about the contents and the manufacturer.
• Duty based on transaction value:  Transaction Value means the price actually paid or payable for the goods, when sold.  It includes, in addition to the amount charges as price:
  Any amount that the buyer is liable to pay by himself or on behalf of the assessee, by reason of or in connection with the sale whether payable at the time of sale or at any other time, including, but not limited to any amount charges for or to make provisions for (a) advertising or publicity, (b) Marketing and Selling, (c)organization expenses, (d) storage, (e) outward handling, (f) servicing, (g) warranty, (h) commission.