Excise & Cess duty payable on testing charges

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This query is : Resolved

Mridula (Querist)

22 October 2007 Dear Freinds,

Iam working in forging (Engineering items) manufacturer Company. My query is:
Acc. to terms & conditions of purchase order, the goods is to be delivered after testing of goods. we charged the testing charges on goods sold to the client and it was mentioned in the Purchase order that taxes on testing charges will be applicable as per govt rules.

Now at the time of payment the client has not made the payment of excise & taxes on testing charges.

In my opinion Excise & taxes should be paid by the client because testing is the precondition for despatch of goods.

Kindly solve my problem.

Dayal

Dayal (Expert)

22 October 2007 Your service is associated with sales, I understand that your product cost should include such cost.

If ou are recovering this cost then excise duty would become applicable and payable by the client

In my opinion excise duty is payable by the client along with cess in view of transaction value, that includes all cost associated to sale of goods.

S.RAVICHANDRAN

S.RAVICHANDRAN (Expert)

23 October 2007 The concept of excise and taxes is that it is collectible from the consumer and paid to the government. It is not your out of pocket costs.

But as for sales is concerned, the cost of production should include everything ie taxes and duties. You should have clearly mentioned in your purchase order the cost elements and terms of Sales etc.
Had youd done that, the buyer would not dispute now.

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