Deemed manufacture in case of goods covered under MRP provis

This query is : Resolved

Sanjay Sharma (Querist)
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22 July 2009 We manufacturing Tractors for agriculture purpose as well as supplying the Tractor Parts to our customers from our Spare Parts Division situated in the same premises on one registration no. in Central Excise Department from 1st June-06 under cover the notification No. 14/2008-C.E.(N.T.), dated 1.03.08. Tractor is exempted for the payment of Excise duty and the “Parts, components and assemblies of any automobiles “are liable to pay the duty.

For the fulfillment the purpose of supplying the ‘Spare Parts of Tractor’ to the customers, we procure the material from the supplier’s at our “Spare Parts Division”. Some of them are supplying the material in fully packed condition and pasted our MRP stickers, means they are discharging their duty liability on our MRP claiming the abatement.

We receive the fully packed material form them and take the CENVAT Credit of the duty paid to our supplier (on our MRP) & do some labeling re-labeling on the said material and sell to our customers with charging the same duty on the basis of same MRP declared on the product already after claiming the abatement.

We can understand this here as under-

Suppose our product MRP is 216/-
Supplier paid duty on ASV = 151.20 ( after claiming abatement 70 % of MRP)
His duty liability on the clearance from their premises is Rs. 12.46 (including 3 % Cess),

Now, at our side we Charge the duty of Rs. 12.46 (the very same amt. We have availed) while sell the said mat. to the customers.

Q. No.1 Is it a valid transaction in view of the Central Excise Act.?.
Q.No. 2 Are we doing the right practice or some thing wrong in it ?.
Q.No.3 Is there any revenue loss to the Government or not ?
Q.No.4 Is mere labeling or re-labeling without including the declaration or alteration of MRP amounts to manufacture or not ?.

Pls. Clarify.

Madhukar N Hiregange

Madhukar N Hiregange (Expert)
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24 July 2009 You require to take expert guidance.

Trading in goods would not allow you to avail the credit at all. Only manufacture would enable you to take the credit. Automaobile parts fall under 3rd Schedule [ confirm this in the CET} and therefore processes such as you describe may amount to manufacture.
If manufacture then relabelling re pricing etc are acceptable.