Excise query unanswered

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abhishek

Service

66 Points Joined December 2008

1) 1) We are ABC Pvt Ltd. registered under central excise for manufacturing division. We have received a order from BBC Pvt Ltd for manufacturing SOV Box our offer value is of Rs 500000/- where BBC Pvt Ltd is providing the part of raw material panel on free basis which is costing to Rs 550000/- because BBC Pvt ltd has a rate contract with his supplier and he gets panel at cheaper rate has compared to other suppliers. So how this transaction will be done without violating the excise rules.

2) 2)Same as above Question no 1 only difference is we have received order from BBC Pvt Ltd. but Consignee is XYZ Pvt Ltd which is a SEZ Unit and excise duty is not applicable under ARE 1. So how this transaction will be done without violating the excise rules.

3) 3) Can inputs used for supply to SEZ & Export orders can be used against as set off of excise payable for other local orders. W.e.f from April’11 RULE 6/6 has come what it is?

Replies (2)

CA Unnikrishnan Nair N

Chartered Accountant

2083 Points Joined February 2011

As a manufacturer, ABC is liable to excise duty on gross value of the resultant goods including the value of panel supplied by BBC. Regarding the cenvat credit of the panel supplied by BBC, ABC can claim the credit but may be challenged by the department. I hope that you can fight it out as long as the same has been used by ABC in manufacture and the value of the same goes to the value of resultant goods.

ED is exempted on sale to SEZ units. Inputs used for SEZ sale and export are eligible for cenvat credit. No restriction under Rule 6. But if the subject goods are otherwise wholly exempted or bearing nil rate of duty, cenvat is inadmissible.

U S Sharma

glidor@gmail.com

21068 Points Joined January 2010

There are two contracts

1) between ABC and BBC for doing manufacture of "excisable goods" in which the gross value is 10.5L (5.0 L contract of ABC+5.5L suppplies from BBC)

2) between BBC and XYZ(SEZ), to supply the excisable goods under CT-1/3 and ARE1, obviously the contract between XYZ and BBC is higher than 10.5L

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now

if BBC supplies the goods under cover of challan prescrived under cenvat rules / under notification 214/86, then ABC would be treated as job worker

if BBC has merely supplied the free goods to ABC, then ABC is liable for duty on whole 10.5L

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There is no bar on cenvat credit, unless the goods are either zero rated or free in CETA

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if XYZ issues CT-1/3 to ABC, then only ABC can supply the goods to XYZ under cover of ARE-1, but as the BBC is in between the transaction, discuss the issue with BBC. in absence of such CT1/3, ABC has to clear the whole consignment on duty payment only.

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BBC may get B-1 bond with security with Division of ABC, and can issue CT-1 to ABC and then supply the goods to XYZ