Indirect taxes are the mainstay of India's tax system. The central excise duty, leviable on the production or manufacture of goods ranging from aerated waters to zip fasteners, is the single most important source of revenue, accounting for about one-third of consolidated (the Central, State and Union Territory Government) tax revenues and about one-fourth of current revenues. Ten major commodities (e.g., crude oil, motor spirit, cement) currently account for 52.6% of the total central excise duty collections. This study documents the growth in excise revenue from these commodities and examines the question of how much of the growth in excise revenue from them can be attributed to growth of tax base and how much to growth of tax rate. Four points emerge from the study. First, the cess on indigenous crude oil, levied under the provisions of the Oil Industry (Development) Act of 1974, currently makes the largest contribution (11.4% in 1987/88) to the total central excise collections. Indeed, the increase in cess collections in 1987/88 (Rs. 9,122.9 million) accounted for about one-half of the increase in that year's total excise collection! Although the base for the cess has also grown, with clearances of crude oil rising from 9.7 million tons in 1980/81 to 31.5 million tons in 1987/88 and with the base price of crude (fixed by the Government of India) rising from Rs. 203.41 per ton in 1980/81 to Rs. 1,021 per ton in 1987/99, most of the growth in revenues from the cess in recent years has resulted from growth of the cess rate-the cess rate has risen from Rs. 100 per ton during the period July 11, 1981-February 14, 1983 and Rs. 300 per ton during the period February 15, 1983-February 28, 1987 to Rs 600 per ton beginning March 1, 1987. Of the growth in cess collections between 1981/82 and 1987/88, 86% has resulted from growth of the cess rate and the balance from growth of the cess base (value of crude clearances). Second, the official data do not fully capture the incidence of excise duties on motor spirit and high speed diesel oil. This is because of the Government of India recent practice of raising resources through various devices (e.g., cost and freight surcharge, contribution to product price adjustment account) which, there is reason to believe, are akin to excise duties and get reflected in Oil Coordination Committee's resources, not in excise collections. Given the magnitude of the resources being raised, this practice may be contributing in a major way to distortions in Indian firms' decisions regarding input choices. This needs to be looked into. Third, the liberalization in cement pricing policy introduced beginning March 1982 has resulted into substantial growth in cement clearances which, in turn, have contributed to substantial growth in excise collections. Upward revisions in excise duty-from Rs 71.50-Rs 135 per ton in 1981/82 to Rs 162.75-Rs 225 per ton in 1987/88-have also made a major contribution: of the growth in excise revenues from cement between 1981/82 and 1987/88, 52.3% has resulted from growth of the tax base (value of cement clearances) and the balance from growth of the excise duty ratet. Finally, one does not see much of a growth in excise collections from sugar. This is due to the growth of tax base (value of sugar clearances) offset to a large extent (52%) by reductions in the average incidence of excise duty (excise collections as % of value of clearances) from 13.5% in 1980/81 to 8.9% in 1987/88.