Differential duty calculation as per excise laws

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Bommana Vamsidhara Reddy

Article Assisstant

73 Points Joined June 2015

Hi,

I have one doubt regarding differential duty in excise. One of my client is a manufacturing entity. It is having yards (warehouses) and also depots.They are sending goods to yards and from there goods will be despatched to depots and from there final sale will be done. Initially they are sending goods to yards for e.g Rs.1000. From yards to depot price will be 1200. From depot to final customer, price will be 1500. Now on which price ultimately we should calculate differential duty. Client is paying excise duty initially on Rs 1000 and differential duty on yard price i.e. (1200-1000=200). It is not paying on depot price. Manufacturing place and also yards are registered with excise department but not depots. Now is it correct?

Another doubt is as per service tax they have registered as Input Service Distributors where it includes depots aslo. They are taking CENVAT credit on depo security charges saying that it is also registered under service tax. Is it correct ?

Thanking you in advance.

B Vamsi

Replies (4)

Harshal

106 Points Joined June 2012

Hi Friend,

First of all you should take into consideration some legal provisions: -

1. Excise duty is paid on removal of goods from factory & not on sales (Rule 4 of Central Excise Rules)

2. RULE 7. 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 (hereinafter referred to as “such other place”) 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 sold from such other place at or about the same time and, where such goods are not sold at or about the same time, at the time nearest to the time of removal of goods under assessment.

In your case goods are sold from depots & not from Yards or Factory so Rule 7 is applicable to you. You have to pay duty at the time of removal from factory but duty will be paid on Price prevailing at Depo at the time of removal.

.

Harshal

106 Points Joined June 2012

& Regarding Input Credit on CenVAT Credit on Security charges paid at Depo, yes they can very well avail input credit for Service Tax Paid for the same.