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Excise duty liability on stock transfer from plant to depot

Prashanth Rai (Associate Manager) (29 Points)

07 August 2012

I have 2 questions with respect to the liability of Excise Duty during Transfer of goods from Plant to Depot.

1) Is the liability to pay Excise Duties is at the time of removal of goods from the plant to Depot or is at the time of actual sale.

2) We are transporting the goods from Plant to Depot (through Stock Transfer Order) and the Sale Price of the Excisable goods at the Depot during the transfer is 1000Rs.
But due to some reason, When during the actual sale of the goods from Depot, if there was a price escalation and the sale price is 1200Rs, how do we calculate excess Excise Duty?
Should there be a fresh Supplementary Excise Invoice issued from the plant?

Could anyone help.

-Prashanth

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10 Replies

shruti goyal (cs) (122 Points)
Replied 07 August 2012

HI......

ans. a) it will at the time of removal from factory and not actual sale

b) actual sale is totaly irrelevant in this case only price at time of removal from factory is relevant..so it will be rs.1000 n dont even think about rs.1200.

see rule 7 of valuation rule

hope u r clear now.

U S Sharma (glidor@gmail.com) (21056 Points)
Replied 08 August 2012

Originally posted by : shruti goyal
	HI...... ans. a) it will at the time of removal from factory and not actual sale b) actual sale is totaly irrelevant in this case only price at time of removal from factory is relevant..so it will be rs.1000 n dont even think about rs.1200. see rule 7 of valuation rule hope u r clear now.

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.

https://www.cbec.gov.in/excise/cxrules/cx-rules-valuation.htm

DAYANANDA K N (ACCOUNTS EXCECUTIVE) (575 Points)
Replied 08 August 2012

Ans for Q1 - Duty to be paid at the time of removal from factory.

Ans for Q2 - Plain reading of Rule 7 suggest it should be paid on the price prevaling at depot when goods are cleared from factory. So in your case it should be Rs.1000. But it is prudent to take expert opnion it there is high volume of transation.

U S Sharma (glidor@gmail.com) (21056 Points)
Replied 08 August 2012

1st of all, i have to put my understanding to the query, the goods are removed from factory to the depot and paid duty on 1000/- but its not the clearance point, where the clearance point is depot, so the duty would be levied at the value taken at the time of clearance from depot at actual sale,

hence in my opinion as well as interpretation of the rules, duty is payable on 1200/-

Siddharth Gupta (Article) (39 Points)
Replied 09 August 2012

The duty is chargeable when goods are manufactured but the time of collection is postponed till removal of goods. Therefore, if there is a manufacture of excisable goods, the excise duty will be levied on completion of such manufacture. However, the collection of duty will be postponed till the time of removal of goods from factory or from warehouse where such goods have been allowed to be stored without payment of duty. In such a case, goods transferred to depot from sale thereon will not be meant to be goods stored in a warehouse and as such duty will be paid at the time of removal of goods from the factory itself.

Further, as per valuation rule 7, the goods which are removed from factory for sale at depot are to be valued on normal transaction value prevailing at depot at the time of removal of goods from the factory. In this case, the normal transaction value is Rs. 1000/-. Therefore, the goods will be valued at Rs. 1000/-.

Hope this is clear.

U S Sharma (glidor@gmail.com) (21056 Points)
Replied 09 August 2012

if the depot belong to the factory then removal to self owned warehouse does not confirms removal, unless its sold to 1st unrelated consignee/party,customer.

storing without payment of duty or with payment of duty does not differ the situation, as the pricing method is always adopted on 1st unrelated party sale..

Siddharth Gupta (Article) (39 Points)
Replied 09 August 2012

As per Central Excise act, transfer of goods to depot from sale thereon is included in definition of removal of goods. In normal cases, the valuation is done on transaction value. But in above case, the goods shall be valued on normal transaction value. The normal transaction value is determined on the basis of largest aggregate quantity sold within a day to unrelated buyers.

sharma.ctc@gmail.com (Sr Manager-Acs & Fin) (423 Points)
Replied 27 September 2013

If the goods are not sold at the factory gate or at the warehouse but they are transferred by the assessee to his depots or consignment agents or any other place for sale, the assessable value in such case for the goods cleared from factory/warehouse shall be the normal transaction value of such goods at the depot, etc. at or about the same time on which the goods as being valued are removed from the factory or warehouse. It may be pertinent to take note of the definition of "normal transaction value as given in the valuation rules. What it basically means is the transaction value" as given in the valuation rules. What it basically means is the transaction value at which the greatest aggregate quantity of goods from depots etc., are sold at or about the time of removal of the goods being from the factory/warehouse. If, however, the identical goods are not sold by the assessee from depot/consignment agent’s place on the date of removal from the factory/warehouse, the nearest date on which such goods were sold or would be sold shall be taken into account. In either case if there are series of sale at or about the same time, the normal transaction value for sale to independent buyer will have to be determined and taken as basis for valuation of goods at the time of removal from factory/warehouse. It follows from the Valuation that in such categories of cases also if the price charges is with reference to delivery at a place other than the depot. Etc., then the actual cost of transportation will not be taken to be a part of the transaction value and exclusion of such cost allowed on similar lines as discussed earlier, when sales are effected from factory gate/warehouse.

avinash chitnis (partner) (28 Points)
Replied 25 May 2015

what about the goods to be exported ...... from the same stock, how does the mechanism of excise duty work

we have regular exports and would like to export from our own depot which is serving the domestic market and but is near the transport hub town away from the factory town