Excise: India

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Extracted from:

Encyclopaedia of India


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Excise, like salt, is not only a department of revenue collection, but also to a great extent a branch of the executive. In other words, excise duties in India are not a mere tax upon the consumer, levied for convenience through the manufacturer and retail dealer, but a species of government monopoly. The only excisable articles are intoxicants and drugs; and the avowed object of the state is to check consumption not less than to raise revenue. The limit of taxation and restriction is the point at which too great encouragement is given to smuggling. Details vary in the different provinces, but the general plan of administration is the same. The right to manufacture and the right to retail are both monopolies of government permitted to private individuals only upon terms. Distillation of country spirits is allowed according to two systems - either to the highest bidder under strict supervision, or only upon certain spots set apart for the purpose. The latter is known as the sadr or central distillery system. The right of sale is also usually farmed out to the highest bidder, subject to regulations fixing the minimum quantity of liquor that may be sold at one time. The brewing of beer from rice and other grains, which is universal among the hill tribes and other aboriginal races, is practically untaxed and unrestrained.

The European breweries at several hill stations pay the same tax as imported beer. Apart from spirits, excise duties are levied upon the sale of a number of intoxicating or stimulant drugs, of which the most important are opium, bhang, ganja and charas. Opium is issued for local consumption in India from the government manufactories at Ghazipur and Patna in the Behar and Benares Agencies, and sold through private retailers at a monopoly price. Bhang, ganja and charas are three different narcotic drugs prepared from the hemp plant (Cannabis sativa, var. indica). Scientifically speaking, bhang consists of the dried leaves and small stalks, with a few fruits; ganja of the flowering and fruiting heads of the female plant; while charas is the resin itself, collected in various ways as it naturally exudes.

The plant grows wild in many parts of India; but the cultivation of it for ganja is practically confined to a limited area in the Rajshahi district of eastern Bengal, and charas is mainly imported from Central Asia. The use of bhang in moderation is comparatively harmless; ganja and charas when taken in excess are undoubtedly injurious, leading to crime and sometimes to insanity. In accordance with the recommendations of the Hemp Drugs Commission, the government of India passed an act in 1896 providing that, in regard to ganja and charas, cultivation of the plants should be restricted as much as possible, and that a direct quantitative duty should be levied on the drugs on issue from the warehouse in the province of consumption; while as regards bhang, cultivation of the hemp for its production should be prohibited or taxed, and collection of the drug from wild plants permitted only under licence, a moderate quantitative duty being levied in addition to vend fees. No duty whatever is now levied upon tobacco in any part of India. The plant is universally grown by the cultivators for their own smoking, and, like everything else, was subject to taxation under native rule; but the impossibility of accurate excise supervision has caused the British government to abandon the impost. In1907-1908the total gross revenue from excise amounted to £6,214,000, of which more than two-thirds was derived from spirits and toddy.

Since 1894 a uniform customs duty of 5% ad valorem has been levied generally on imported goods, certain classes being placed on the free list, of which the most important are food-grains, machinery, railway material, coal, and cotton twist and yarn (exempted in 1896). Most classes of iron and .steel are admitted at the lower rate of i %. Cotton goods are taxed at 32%, whether imported or woven in Indian mills. Special duties are imposed on liquors, arms and ammunition and petroleum, while imported salt pays the same duty as salt manufactured locally. From 1899 to 1904 a countervailing duty was imposed on bounty-fed beet sugar. There is also a customs duty at the rate of about 3d. per 82 Ib on exported rice. In1907-1908the total customs revenue amounted to £4,910,000, of which £664,000 was derived from the export duty on rice and £ 22 3,73 0 from the excise on cotton manufactures.

Since 1886 an assessed tax has been levied on all sources of income except that derived from land. The rate is a little more than 2l % on all incomes exceeding £133 a year, and a little more than 2% on incomes exceeding £66, the minimum income liable to assessment having been raised in 1903 from £33. The total number of persons assessed is only about 260,000. In1907-1908the gross receipts from income tax amounted to £1,504,000.

Other sources of revenue are stamps, levied on judicial proceedings and commercial documents; registration of mortgages and other instruments; and provincial rates, chiefly in Bengal and the United Provinces for public works or rural police. The rates levied at a certain percentage of the land revenue for local purposes are now excluded from the finance accounts. In1907-1908the gross receipts amounted to: from stamps, £4,259,000, of which more than twothirds was derived from the sale of court fee stamps; from registration, £415,000; and from provincial rates, £526,000.

Commerce and Industries

India may almost be said to be a country of a single industry, that industry being agriculture. According to the census of 1901 two-thirds of the total population were employed in occupations connected with the land, while not one-tenth of that proportion were supported by any other single industry. The prosperity of agriculture therefore is of overwhelming importance to the people of India, and all other industries are only subsidiary to this main occupation. This excessive dependence upon a single industry, which is in its turn dependent upon the accident of the seasons, upon a favourable or unfavourable monsoon, has been held to be one of the main causes of the frequent famines which ravage India.

Toothpaste vs tooth-whitener

The Times of India, Aug 06 2015

Dhananjay Mahapatra

People using toothpaste or tooth-whitener may not understand the fine difference between the two but the Supreme Court has ruled that the two are quite apart from each other and cannot be classified by the revenue department as the same product, attracting identical excise duty. It takes 120 minutes to produce a tube of toothpaste, while it takes 155 minutes to manufacture a tube of toothwhitener, the court said, relying on an expert's opinion.And there are minor additional ingredients in toothwhitener which, according to the Supreme Court, changes its characteristics from that of a toothpaste.

Global Health Care Products in partnership with Hindustan Lever Ltd has been manufacturing and marketing several toothpaste brands under the names `Close-Up' and `Pepsodent'. In 2001, it introduced a new product `Close-Up Whitening' and classified it under oral healthcare category , which attracted lesser excise duty than toothpaste.

The revenue department questioned this classification and slapped a penalty of Rs 22 lakh for wrong classification, alleging that toothpaste and tooth-whitener fell in the same category .

It said the difference in raw material used in manufacturing toothpaste and tooth-whitener was the “additional presence of 2.8% and 0.2% silicon agglomerate and bluer agglomerates in tooth-whitener“ and absence of 0.1% of a composition of diphenyl ether.

The revenue department took a position that “aforesaid differences did not change the essential character of the product in question which still remained toothpaste and therefore attracted the same excise duty“. After doing the rounds at the tribunal, the case finally reached the Supreme Court in 2005.

After 10 years, the court gave its verdict ruling against the revenue depart ment. A bench of Justices A K Sikri and R F Nariman said, “We may record that a finding was arrived at by the tribunal to the effect that `Close-Up Whitening' is not a toothpaste but a dental cleaner.“

“Another important aspect, which has to be kept in mind, is that in the instant case, even Food and Drug Authorities from where prior permission is needed for manufacturing toothpaste and sale thereof, had not registered the product in question as toothpaste but as a dental cleaner,“ the SC said, dismissing the revenue department's appeal against the tribunal order.

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