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Depot transfer

Jeevesh Mehta (Advocate- Corporate Commercial & Indirect Tax Advisory)   (861 Points)

19 July 2010  

Dear All,

 

Kindly read as belo:

Manufacturrer A in noida wants to open a sales office in Haryana.

At the time of clearing the goods from factory at noida to sales office at Haryana... what would be the implications under excise... can this transfer be done without payment of duty?

Or it has to be duty paid transfer under provisional asessment?

 

 

Please advise...

 

Regards


 13 Replies

U S Sharma (glidor@gmail.com) (21031 Points)
Replied 21 March 2011

Haryana sales office has to get Dealer's registration, and Noida has to issue invoice for dealers, in this context haryana will issue dealers invoice to pass on the cenvat duty.

C.V.R.SARMA (SERVICE) (90 Points)
Replied 27 March 2011

It is presumed that it is a ' Depot'. Under Central Excise, Depot includes place of removal. Hence, whatever the value that is being charged from the depot, the same value is to be adopted in the factory for the subsequent clearances. In other words, Haryana Sales Office is to get registered as ' Manufacturers' Depot, if no other goods are being dealt at Haryana Sales Office. If you want to deal other goods also, then you have to register as ' Dealer'.  From Noida, you can raise the invoice to your depot at Haryana and from Haryana, you can raise a depot/dealer invoice to the customers. If there is an increase in the value that is charged from Haryana, then you have to pay the differential duty along with interest.

satya (Executive Excise) (1834 Points)
Replied 30 March 2011

Dear CVR Sharma sir,

If mfr cleares a 50 tons to a HARYANA As Mfrs depot, in month, @ 25000 pmt, means mfr raises a Invoices for 50*25000=Rs.1250000. in this invoice 10.3% is charged.

after that while the final clearance from HARYANA depot, price is raised @ 30000 pmt , but in this month he clares only part quantity, 

Please give clarification, how to adjust the duty payable /paid at MFRS end.

Pankaj Arora (Learner) (3129 Points)
Replied 30 March 2011

 

Manufacture will issue supplementary invoice to depot and than manufacturer will pay duty on price raise by depot.

satya (Executive Excise) (1834 Points)
Replied 30 March 2011

Dear CVR Sharma sir,

If mfr cleares a 50 tons to a HARYANA As Mfrs depot, in month, @ 25000 pmt, means mfr raises a Invoices for 50*25000=Rs.1250000. in this invoice 10.3% is charged.

after that while the final clearance from HARYANA depot, price is raised @ 30000 pmt , but in this month he clares only part quantity, 

Please give clarification, how to adjust the duty payable /paid at MFRS end in the end of the month i.e., RG1 & ER1 returns.

C.V.R.SARMA (SERVICE) (90 Points)
Replied 30 March 2011

Dear Sathya

DEPO SALES:

 

 

Under Central Excise law, ‘ Depo’ / premises of consignment agent etc., includes place of removal. As the assesses have established depos, while selling the products from their depos, its natural that the depo expenses have to be included in the value and further a profit margin at depo level. In such a case, the question is ‘ how to comply with the Excise procedures’.

 

One method is to get the depo also registered under Central Excise and you can issue depo invoices from there. You can avail the cenvat credit on the factory invoice and if any increase in price is there, you pay the duty on the value addition from the depo. Only thing is that, you have to start filing the excise returns from there also and the records of the depos are also liable to scrutiny by the respective central excise authorities.

 

Alternately, you can pay the duty on differential price from your factory itself, which is explained below.

In terms of Rule 7 of the Central Excise (Valuation ) Rules,2000, where the excisable goods are not sold by the assessee at the time and place of removal but are transferred to a depot, premises of a consignment agent or any other place or premises from where the excisable goods are to be sold after their clearance from the place of removal and where the assessee and the buyer of the said goods are not related and the price is the sole consideration for the sale, the value shall be the normal transaction value of such goods from such place.

 

In accordance with the Valuation Rules, 2000, CBEC has issued a Board’s Circular No. 251/85/96 dated 14.10.96. It has been clarified in the Board’s Circular that the assessee may be asked to declare and pay duty at the price prevailing at such other place of removal on the date such goods meant for that place of removal are cleared from the factory gate. An illustration has also been given in the Board’s Circular stating that , if the factory is at Bombay and the storage depot is at Ahmedabad, then for a consignment meant for Ahmedabad depot, cleared from Bombay factory on , say 1st January, the price at which an earlier consignment of goods of the same destination, is sold from Ahmedabad Depot on 1st January will be the basis for arriving at the assessable value of the goods cleared from Bombay on 1st January. If this consignment cleared on 1st January is sold, say on the 1st March from Ahmedabad depot at a lower or higher price, such a price will be the basis for valuation of clearances on 1st March and so on.

 

However, it is somewhat cumbersome procedure and sometimes impractical also. General practice being followed by the trade in respect of depo sales is as follows.

 

Let the goods cleared from the factory to the depo in the month of Feb’2010 at a price of Rs 100/-. On reaching the depo, the said goods have been sold at Rs 150/- in the same month itself. Due date for payment of duty pertaining to the month of Feb’2010 is Mar 5th. The assesses have to include the Rs 50/- extra consideration in the assessable value and can discharge the duty payment without any interest liability.

 

Alternately, if the goods cleared in the month of February have been sold in the month of , say March. Then, differential duty of this particular consignment is to be paid along with interest that is to be calculated from 5th of March and till the date of payment of duty.

 

Usually, what is the procedure being followed in respect of depos is as follows.

 

Depo staff of Assessees once in a month or two months, prepares ‘ sale pattis’ and the same will be sent to the factory. They are nothing but documents which shows the details of invoices from the factory and the subsequent sale invoice from the depo.

 

  

Sl No

Lot received from the factory under

invoice No & date

Assessable value

Qty received

Subsequent

sale from

depo under invoice No & date

 

 

Qty sold from the depo

Assessable value Adopted at depo

 

 

Differential price

 

 

 

 

There is no any prescribed format for this. I have given you just to have an idea of the system. You can use your own format which is best suited for you. Some times, I have seen in certain cases, whenever there is a reduction in price ( though such a situation is unlikely) between factory and depo, while calculating the differential price, the manufacturers adopts the following method.

 

  

Sl No

Lot received from the factory under

invoice No & date

Assessable value

Qty received

Subsequent

sale from

depo under invoice No & date

 

 

Qty sold from the depo

Assessable value Adopted at depo

 

 

Differential price

 

 

 

1

45/23.02.2010

1000

150

23/26.02.2010 ( depo)

100

1050

+ 5000

 

 

2

 

 

 

26/28.02.2010

50

950

- 2500

 

 

Net : Rs 2500/-

 

In this connection, I would like to suggest the following.

 

a) Please note that no such suo-motu adjustment mechanism in the Central Excise.

b) If the value is reduced due to some unforeseen circumstances, then proper course is to claim refund separately, rather than adjusting the short value in your records.

c) Hence, it is proper to pay the duty on the enhanced value and to bear the loss in case of short fall in price. I presume, such situations are very rarely occur. In case, if the reduction in price is resulting in susbstantial excess payment of duty, then we can thought of filing the refund claim before the proper authority.

 

 

1 Like

Lakhpati Patil (ICWA Final) (57 Points)
Replied 30 March 2011

can manufacturer clear goods from factory to sales depot under 57F4 without payment of duty 

U S Sharma (glidor@gmail.com) (21031 Points)
Replied 31 March 2011

57F4 is not related to clrearence, but sending and return back of goods. to and from job worker. 

depot transfer / clearence is not covered under 57F4

satya (Executive Excise) (1834 Points)
Replied 31 March 2011

Thanks  C.V.R.Sharma sir, for clear reply, all my doubts have been  clarified sir.

Chetna (Cluster Finance Advisor)   (21 Points)
Replied 05 February 2016

Very clear response..thanks sir..

Chandrashekhar Laddha (CA & CS) (98 Points)
Replied 30 July 2016

Dear CVR Sir,

I am taking the query a step forward. 

Considering your example only :

"Let the goods cleared from the factory to the depo in the month of Feb’2010 at a price of Rs 100/-. On reaching the depo, the said goods have been sold at Rs 150/- in the same month itself. Due date for payment of duty pertaining to the month of Feb’2010 is Mar 5th. The assesses have to include the Rs 50/- extra consideration in the assessable value and can discharge the duty payment without any interest liability."
 

Suppose at depot, invoice is prepared this way : Basic price INR 200 and discount INR 50 = Net consideration 150 plus state taxes. In this case differential duty is to be paid on 100 (200 - 100) or 50 (150 - 100). 

Looking forward to your immediate attention and guidance

Regards

Chandrashekhar Laddha

+91 99252 37250

 

 

 

 

 

 

Madhukar N Hiregange (Chartered Accountant) (38934 Points)
Replied 31 July 2016

There is a different view with regard to depot 

2 methods

 

A. Provisional assessment- remove at estimated value and pay CED. At depot sale at more value liable for difference. If sold at less apply for refund.

This is very cumbersome and rarely industries opt for this.

B. Value at depot on date of removal from factory is provided under rule7. Here once we remove at a particular value then subsequent higher or lower value of sale not relevant. NO DIFFRENTAIL DUTY need be paid. 

The explanation discussed maybe followed practically- but wouldbe subject to dispute if dept finds any revenue loss. However the same may be leading to payment of duty.

satya (Executive Excise) (1834 Points)
Replied 01 August 2016

Thank you sir for your valuable suggession.


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