What rate of duty to be charged in case of price differentia

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Ankur

Job

24 Points Joined August 2008

Q-1) Suppose goods are removed from factory on 01.10.2008 at a price of Rs. 100. Rate of Excise duty at the time of removal was 14.42%. Now say on 01.01.2009 the company got a price revision from the customer with retrospective effect. The new price was Rs. 150. So the company will get price difference of Rs. 50 for the sale done on 01.10.2008. On 01.01.2009 when the invoice will be made for price difference, the rate of duty applicable was 10.3%. Now at what rate the excise will be levied on Rs. 50 (Price Difference). Will it be 14.42% which was applicable at the time of removal or 10.3% applicable at the time of issuing the price differential invoice?

Q-2) In case there is a downward price revision and if the goods are not covered u/s 4A of the Central Excise Act 1944, than can we claim the refund of the excise duty paid on higher price?

Replies (2)

Pavan Jain S

Chartered Accountant

1575 Points Joined December 2008

1. As per section 4 of the Act, Transaction Value, inter alia, includes any amount paid or payable by buyer to seller i.e., it includes even future payments.. So the price differential received subsequently is chargeable to duty.

Duty is leviable at the rate in force on the date of removal of goods. Hence, the price differentia shall be chargeable to duty @ 14.42% i.e., at the rate applicable at the time of removal.

It is recommended to issue a debit note for the price differentia rather than invoice since there is no removal of goods.

2. It has been held in number of cases that the transaction value shall be the value as at the date of removal of goods. Any subsequent price reduction, even at the prerogative of govt., shall not entitle the assessee to refund. However, if at the time of removal of goods, it is likely that there will be price reduction in future but the quantum is not known, the assessee can request the AO for provisional assessment.