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Excise duty charged on service rendered charges

Ajay Raghatate (Sr Executive (Excise & Accounts)) (736 Points)

28 July 2011

Dear all,

We have received a Excise Invoice from a vendor, They have mention discripttion on Invoice 'Inspection Charges on Sale' and they have charged excise duty.

Plz clarify whether this type of invoice can be issue,

In which Rule it is define.

Thanks

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7 Replies

Ritu Sedwal (Chartered Accountant) (407 Points)
Replied 29 July 2011

Ajay Ji,

Inspection charges before the removal of good (i.e. Pre Delivery Inspection Charges) is includible in the transaction value...that means excise duty is leviable on inspection charges but before delivery...so ur vendor can issue such invoice...

But if inspection is done after delivery then:

1)if such post delivery inspection is mentioned in contract with the vendor then it is includible in transaction value

2)if not mentioned in contract then such amt is chargeable to service tax and not excise duty thus not includible in transaction value

Now lets c other members agree with me or not

Ritu

1 Like

CA Unnikrishnan Nair N (Chartered Accountant) (2083 Points)
Replied 29 July 2011

Excellent answer given by Ritu.

1 Like

Ritu Sedwal (Chartered Accountant) (407 Points)
Replied 29 July 2011

Thank You Sir!

1 Like

Ajay Raghatate (Sr Executive (Excise & Accounts)) (736 Points)
Replied 30 July 2011

Thanks, Rituji,

CENTRAL EXCISE VALUATION , (DETERMINATION OF PRICE OF EXCISABLE GOODS) RULES, 2000

RULE 6. Where the excisable goods are sold in the circumstances specified in clause (a) of sub section (1) of section 4 of the Act except the circumstance where the price is not the sole consideration for sale, the value of such goods shall be deemed to be the aggregate of such transaction value and the amount of money value of any additional consideration flowing directly or indirectly from the buyer to the assessee.
Explanation 1 - For removal of doubts, it is hereby clarified that the value, apportioned as appropriate, of the following goods and services, whether supplied directly or indirectly by the buyer free of charge or at reduced cost for use in connection with the production and sale of such goods, to the extent that such value has not been included in the price actually paid or payable, shall be treated to be the amount of money value of additional consideration flowing directly or indirectly from the buyer to the assessee in relation to sale of the goods being valued and aggregated accordingly, namely : -

(i)	value of materials, components, parts and similar items relatable to such goods;
(ii)	value of tools, dies, moulds, drawings, blue prints, technical maps and charts and similar items used in the production of such goods;
(iii)	value of material consumed, including packaging materials, in the production of such goods;
(iv)	value of engineering, development, art work, design work and plans and sketches undertaken elsewhere than in the factory of production and necessary for the production of such goods.

Ritu Sedwal (Chartered Accountant) (407 Points)
Replied 31 July 2011

YA it may cover under Rule6

CA.VATSAL SHAH (SERVICE) (202 Points)
Replied 03 August 2011

fully agree with answer of ritu.

RENGARAJ R.K (ADVOCATE) (7557 Points)
Replied 04 August 2011

Inspection charges along with the product is excisable (transaction value) and if separate invoice is raised it will attract service tax. The receiver of the product is allowed to take input tax in both the cases. There are assessees who do only inspection and raise debit notes for such charges. Therefore any charges on the excisable commodities attract tax. Ritu's answer is correct.

rengaraj r.k