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Excise applicability on tool cost

vijay (accountant) (24 Points)

23 December 2015

I DEVELOPED SOME SHEET METAL PRESSED COMPONENT TOOLS FOR A CUSTOMER AND STARTED SUPPLYING THE COMPONENT MANUFACTURED OUT OF IT TO THE SAME CUSTOMER. THE CUSTOMER GAVE ME A PO FOR THE COMPONENT COST PLUS THE COST OF AMORTISATION FOR THE TOOL ON SOME FIXED QUANTITY.

NOW THE AMOERTISATION QTY IS COMPLETED AND SO THE CUSTOMER HAS PAID THE WHOLE OF THE TOOL COST TO ME. AND I HAVE PAID THE EXCISE DUTY ON THE TOOL.

THE CUSTOMER HAS NOW GIVEN ME A PO FOR THE COMPONENT ( SUBTRACTING THE TOOL AMORTISATION COST).

DOEA THE TOOL BELONG TO ME NOW? WHETHER SOME EXCISE DUTY IS TO BE PAID FOR THE AMORTISATION OF THE TOOL AS I AM STILL USING THE CUSTOMER'S TOOL TO PRODUCE THE COMPONENT?

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1 Replies

Madhukar N Hiregange (Chartered Accountant) (38934 Points)
Replied 24 December 2015

If you have raised a commercial invoice charging the local VAT / CST then the property is transferred. However as he has paid for the tool cost in full on which the excise has been paid . Once the amortised amount is over- no need to add the tool cost for subsequent supplies under CE.

The VAT/ CST whether paid on the amount being paid is ot clear. If that was paid then the tool becomes the property of the cusotmer. However there is still no need to add the amortised cost for payment of ED.