Machinery manufactured and let out on hire

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Yogesh A.Kulkarni

Chartered Accountant

23 Points Posted on 07 September 2009

Hello members,

One of my clients carries out the following activity:

1. Manufacture of Hydrolic machinery in the factory and leasing the same on hire basis for a fixed rental.

- In this respect, I am inclined to know whether the machinery (capital goods) manufactured by my client (which is leased out and not sold) is leviable to excise duty?

- The activity of leasing out the machinery is of course, leviable to service tax under the category 'Supply of Tangible Goods Service'. But whether manufacture of the same is leviable to excise duty?

- In case, the law is not clear on the said issue, whether removal of the said machinery from the factory for the purpose of leasing out without payment of excise duty, amount to clandestine removal?

Regards,

CA Yogesh A.Kulkarni

Replies (2)

ARUN KUMAR V

201 Points Posted on 07 September 2009

Leviability of Central excise and service tax is different.

In the present case the central excise duty is attracted for manufacture(provided it is excisable) and have to pay duty at the time of removal on the assessed value.

Also if the asset is given on lease service tax is payable on service portion ie. on rentals and not on value of asset.

Yogesh A.Kulkarni

Chartered Accountant

23 Points Posted on 07 September 2009

Sir,

Thank You for your speedy reply.

- As the said activity of manufacture is leviable to excise duty, then should the valuation be done as per Rule 4 of Central Excise(Determination of price of excisable goods) Rules, 2000?