LIVE GST Certification Course by CA Arun Chhajer begins 27th April. Register Now!!

Buying of raw materials without excise for export

Gautam Joshi (Partner) (361 Points)

01 September 2012

Hi,

Company "A" purchases excisable raw materials from Company "B".

Company "A" further manufactures it; the final goods are exempted and removes such EXEMPTED excisable goods to Company "C".

Company "C" exports it to foreign market as merchant exporter.

Therefore, situation of Company "A" is that it has no excise duty to pay on final goods but have to pay excise duty on raw materials as purchase costs.

Question is can Company "A" buy excisable goods without levy of excise on raw materials for production of exempted goods which are going to be exported further?

Thanks in advance.

Reply
Follow
Share

7 Replies

Arun Kumar Singh (GST Advocate) (15188 Points)
Replied 02 September 2012

A manufacturer of export goods can get his inputs without payment of central excise duty under rule 19(2). Input-output ratio should be informed to AC/DC, goods can be procured without payment of duty by following procedure prescribed under the central excise rule. However, instead of giving bond or gurantee, a simple letter of undertaking can be given. Final product can be exported through merchant exporter also.

Sunil Kumar G (AGM Taxation) (373 Points)
Replied 03 September 2012

Rule 19 (2) of Central Excise Rules talks about Export without payment of duty. For getting raw material without payment of duty, one should go for Rule Central Excise (Removal of Goods at Concessional Rate of Duty for Manufacture of Excisable Goods) Rules, 2001.

Gautam Joshi (Partner) (361 Points)
Replied 14 September 2012

Arunkumarji,

I absolutely agree with the Rule 19(2) and Removal of goods at Concessional rate of duty rules.

My question is - are these rules applicable only to last supplier in the supply chain of final export? or are they applicable to the whole export supply chain?

i.e. raw material supplier-->manfacturer-->merchant exporter-->final buyer outside India.

Please guide me if in the above chain manufacturer can any how take benefits of exemption on excise paid on raw materials?

U S Sharma (glidor@gmail.com) (21056 Points)
Replied 14 September 2012

@ Gautam

the procedure is applicable for 1-2-3 basis only where the manufactureer is 2, factory of manufacture is 1 and overseas buyer or SEZ is 3

as the bond is executed by factory of manufacture, for zero rated or concessional rate of duty, and every abc is not permitted to get such bond and maintain the bonded premises for seperate storage of such goods. so the chance of on transit leakage and pilferage of such goods is high, hence the whole duty liability is on the 2 to maintain the process and in case of failure he is only liable to pay the duty.