Excise duty - Goods scrapped - Not returned by the Customer.

Scenario:

A manufacturer sells goods to the customer and accounts for the Excise duty on the same to Excise duty payable account.  But the goods gets damaged in transit.  The manufacturer asks the customer not to send back the goods as the transportation costs are higher than the value of the damaged material but agrees to give full credit to the customer account. 

Questions: 

1. What should happen to the excise duty? 
2. Should the Excise duty be accounted to Excise duty expense account? 
3. Does this apply on VAT also?