Excise duty on Freight

Excise duty will be charge on transaction value. You can't charge excise duty on freight.

Our one supplier charge duty on freight also.

In this transaction unit price is Rs 4.30 Per Kg & Freight Rs 1.95 per kg.

Kindly update on this

when goods are cleared at factory gate, assasable value is the at factory gate, and transport charges must not be mentioned in the invoice( excise and commercial both), separate debit notes may be issued for transport charges.

but if goods are sold on the FOR destination terms, i.e. the ownership of goods would get transfered at certain point other than factory gate, ( either client premises/ FOB customs port as the case maybe) then freight upto the point of transfer of ownership is integral part of the assessable value and duty is to be levied on inclusive transport.

@ US Sharma: Sir,i'v a ques in my mind....in the 2nd case,if Excise duty is to be charged on the value of transport then,dnt u think that there will be "tax on tax"?? Cz,as per Service tax act s.t. will be charged on transport service..if we consider the S.Tax part in "Cost of Goods" & charge e.duty on that,den dere will b excise duty on that portion of S.tax.isnt it???

Plz clarify this point..
i want to learn more in this topic

Thnks,

CMA.Pralay Chakraborty

(Cost & Management Accountant)

yes, excise is charged on transportation, its double taxation, but one has to remember that excise duty input credit is available to dealer paying duty, where the duty of service tax on GTA is also available, 

ibce the GTA servie is included in assessable value, this is qualified as "input service" and hence the service tax paid on such service is available for input credit , so no real impact of double tax.

Sorry sir, am nt getting u....u said,input credit of ED(including on ST) as well as ST both are available....

Its confusing to me...cud u plz explain with an eg.?????

Actually what i got that,,suppose Cost upto factory gate  = 800;Transport Cost(ex ST) = 160;ST on Transport = 40 then Cost to client may be = 800+160+40 = 1000. Now ED(say 10%) is = 100.

My Ques is the ED amt of 100 incldes Rs 4(10% ED on 'ST on Transport cost')

of course if any one pay 100 (whatever it is ST or ED) he will get input credit..but wheather that is a solution of Cascading effect?????

CMA. Pralay Chakraborty

(Cost & Managemant Accountant)

thnks sir.................

Hi, i am also in the same problem.....please see the quires and give your opinion please bocz. we have received POs where freight is separate, but we have collected the fright in the invoice.......

Breakups of the  Purchase Order : Where in freight charges is extra

Excisable Goods : 10 MT x Rs.30000/-PMT   =  Rs.3,00,000/-

                              Add : Excise @ 12.36%        =  Rs.   37,080/-

                              Add : Sales Tax @ 5%           =  Rs.   16,854/-

                              Freight @ 200/-PMT             =  Rs.    2,000/-

                                                    Total                    :  Rs.3,55,934/-

Here the Purchaser has placed the order where the freight is separate, for convenient way of business the Purchaser ordered to the Saller to arrange the lorry in favour of the Purchaser. The Saller sales the 10 MT materials worth of Rs.353934/- and claims Rs.2000/- separately in the invoice towards arrangement of transportation which will be reimbursed to the transporter.  After getting delivery of the materials, the transporter comes to the Saller for transportation charges and the Saller makes the payment to transporter, the same transaction reflects as “freight & forwarding” expenses in the salers book which attracts Service Tax. The Saller pays the due Service Tax also and never takes the credit of the Tax as it is not the inward service.

Here, the A.G.Audit asks that the above freight charges attracts Excise Duty why because the Saller has arranged the lorry and send the materials to the purchasers door step. The Audit Says under Clause (d) of sub-section (3) of sections 4 of the CE Act, 1944, the transaction value means the price actually paid or payable for the goods, when sold and includes in addition to the amount charged as price, any amount that the in addition to the amount charged as price, any amount that the buyer is liable to pay to, or on behalf of. The assesses, by reason of, or in connection with the sales whether payable at the time of sale or at any other time, including, but not limited to, any amount charged for, or to make provision for, advertising or publicity, marketing and selling organization expenses, storage, outward handling, servicing, warranty,, commission or any other matter. Further as per clause c(III) of sub section (3) of the same act, “Place of removal” means a depot, premises of a consignment agent or any place or premises from where the excisable goods are to be sold after their clearance from the factory. As per explanation 2 of rule 5 of CE valuation rules, 2000 the cost of transportation from the factory to the place of removal, where the factory is not the place of removal, shall not be excluded for the purpose of determining  the value  of excisable goods.

i think the transction value is restricted i.e. of Rs.30,000/- which attract excise duty, freight is reimburesable by the purchaser and it is the expense of the purchaser. Hence the AG Audits remak is baseless because this freight transction routed through the seller only, the transction is neither one income, nor one expense for the seller.

Now the point is, if it is not one expense for the seller, how it attracts excise duty.......

others comments is required...............please.........

department is right, when the value is fixed under the purchase order for transporation , its to be added to the transaction value, and it is not incidental charge.

if you clear the goods without adding the transport charge and make seperate debit note for same, after paying the actual transportation charge( ST is diff issue), then it would be excluded, as you are unware of the charges at 1st instance, thereafter either the consignee pays the freight and service tax, or the consiger pays the freight plus service tax does not makes it added to clearance value, but you are displaying the same before sending the gods to consignee( which may be +/- diff with the actual cost of transport), hence its to be admitted to assesable value.