Classification of Goods under Central Excise Act
Central Excise Duty is chargeable on the goods, which are manufactured in India and are subject to excise duty.
However, all goods cannot be charged with the same rate of duty. Therefore, the goods need to be grouped into separate categories and sub-categories, for which the rate of excise duty may be determined.This identification of goods through groups and sub-groups is called classification of goods.
The rate of duty is found out by classifying the product in its appropriate heading under Central Excise Tariff.
The Central Excise Tariff Act, 1985 (CETA) classifies all the goods under 96 chapters and specific code is assigned to each item. CETA is based on International convention of Harmonised System of Nomenclature (HSN), which is developed by World Customs Organisation (WCO) (That time called as Customs Cooperation Council). This is an International Nomenclature standard adopted by most of the Countries to ensure uniformity in classification in International Trade. HSN is a multi purpose 6 digit nomenclature classifying goods in various groups. Central Excise Tariff is divided in 20 broad sections. Section Notes are given at the beginning of each Section, which govern entries in that Section. Each of the sections is divided into various Chapters and each
Chapter contains goods of one class. Chapter Notes are given at the beginning of each Chapter, which govern entries in that Chapter. There are 96 chapters in Central Excise Tariff. Each chapter and sub-chapter is further divided into various headings and sub-headings depending on different types of goods belonging to same class of products.
The Central Excise Tariff Act, 1985 (CETA) came into force w.e.f. 28th February, 1986.
The main features of the Excise Tariff are :
(a) The Central Excise Tariff has been made very detailed and comprehensive as all the technical and legal aspects in relation to goods have been incorporated in it.
(b) The Excise Tariff is based on the Harmonised System of Nomenclature, which is an internationally accepted product coding system formulated under the GATT.
(c) The goods of the same class have been grouped together to bring about parity in treatment and restrict the dispute in classification matter.
(d) The Central Excise Tariff provided detailed clarificatory notes under each section/chapter.
(e) The interpretation of the Tariff have been provided for at the beginning of the Schedule. All the section notes, chapter notes and rules for interpretation are legal notes and/therefore serve as statutory guidelines in classification of goods.
(f) The Tariff is designed to group all the goods relating to one industry under one chapter from one raw material in a progressive manner.