Removal of goods from factory

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CA BISHAN AGARWAL (Querist)
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17 December 2011 What is the procedure for removal of Excise able goods from factory to a depot of the same company which is not registered under central excise.

U S Sharma

U S Sharma (Expert)
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18 December 2011 depot of the company if he owns the same, must have to be registered,

otherwise he can remove goods on invoice, but he can not pass the excise benefit to next buyer as he would not be in position to issue excise invoice for same goods removed to his unregistered godown.

valuation rules also apply, as he has to clear the goods on paying duty at maximum rate on which he intend to sell the goods to his buyer.

CA BISHAN AGARWAL

CA BISHAN AGARWAL (Querist)
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18 December 2011 We will not pass on Excise Duty to buyer from our Depot. we want to know the procedure for removal from factory to depot, invoicing from our factory and valuation of goods to be transfered to depot.

Asha Kanta Sharma

Asha Kanta Sharma (Expert)
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21 July 2025 You're dealing with removal of excisable goods from a factory to an unregistered depot (as of December 2011, i.e., pre-GST regime, under Central Excise Act, 1944). Let's walk through the procedure, invoicing, and valuation rules applicable in such a situation.

✅ Scenario:

You're removing excisable goods from your factory.
Goods are transferred to your own depot, which is not registered under Central Excise.
You do not intend to pass on excise duty benefit to the final buyer from the depot.
You want to know the correct procedure and valuation method.
🏭 1. Excise Duty Liability

Under Rule 4 of the Central Excise Rules, 2002, excise duty is payable at the time of removal from the factory, even if it's not a sale (like in your case — transfer to depot).

So:

✅ You must pay excise duty when removing goods from the factory to depot.
🧾 2. Invoicing Procedure

Even if the depot is unregistered:

You will remove the goods on a Central Excise invoice (Rule 11 invoice).
The invoice must include:
Name and address of the depot (as consignee).
Description and classification of goods.
Quantity, assessable value, and excise duty charged.
Mention that the goods are for stock transfer, not sale.
💸 3. Valuation of Goods for Excise

Since the depot is not a registered premises (i.e., not a place of removal under Rule 2(l) of the Excise Rules), and you are not passing on credit, the following applies:

✅ Valuation Rule Applicable: Rule 7 of Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000
Rule 7 says that if goods are not sold at the factory gate but are transferred to a depot/branch, and sold from there, then the transaction value at the depot is taken as the assessable value.
✅ Your Case:
Since the depot is not excise-registered, and you won’t issue excise invoices from there, and goods are removed on payment of duty from the factory, you must assess duty at the price at which goods are expected to be sold from the depot.

That means: Use the depot selling price (to unrelated buyers) on the date of removal from factory, as the assessable value.
If that price is not yet known, use:

The latest available selling price of identical goods from depot.
If even that's not available, use cost of production + notional profit (say, 10%) under Rule 8.

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