Central Excise Duty (CENVAT) is levied on goods manufactured and produced in
India. It is levied under the authority of the Central Excise Act, 1944 at the
rates prescribed in the First Schedule and Second Schedule to the Central
Excise Tariff Act, 1985 as amended by Central Excise Tariff (Amendment) Act,
2004. In addition, education cess at 2 per cent on excise duty amount is
levied by Finance (No. 2) Act, 2004. The effective rates may be lower pursuant
to general /specific notifications issued by the government granting whole or
partial exemption from duty. The duty, in most cases, is levied on the basis
of value of the excisable goods.
Value, for this purpose, with effect from 1 July 2000 is the "transaction
value" which is:
  • For delivery at the time and place of removal;
  • Where buyer is not a related person; and
  • Price is the sole consideration.

CENVAT is payable by the manufacturer but is, ordinarily, recovered from the
buyer as a part of consideration for sale of goods. To reduce the cascading
effect of CENVAT, a scheme known as MODVAT was introduced in 1986, which has
now been renamed as CENVAT (effective 1 April, 2000). Under the CENVAT Scheme,
a manufacturer can avail of the credit of the central excise duties or
additional duties of customs (i.e. CVD) paid on specified inputs and capital
goods used in the manufacture of excisable goods and also service tax paid on
eligible input services and utilize it in discharging central excise duty on
finished excisable goods.