Duty Liability

This query is : Resolved

Mahendra Naik (Querist)
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14 March 2009 We are a SSI manufacturer of Pharmaceutical Formulations clearing goods under basic exemption of upto 1.5 crore turnover.
We have signed an agreement with a party who intends to supply products manufactured by us to the Government under the following terms:
1. Products will be manufactured by us under our own mfg licence granted by FDA (no Loan Licence).
2. All inputs required will be procured by us (No Job work or contract mfg)
3. Agreement mentions that sale is on Principal to Principal Basis
4. The product packaging states Manufactured by us and Marketed by the other party.
5. Since goods are for Govt supply there is no MRP printed, instead the pack says "Not for Sale".

My query is
1. Can we clear the goods so manufactured under our available exemption limit?
2. If yes, is the assesable value the transaction value between us and the buyer or is it the rate at which the buyer sells to the Govt?
3. If no, then what is the assesable value?

Thanks in anticipation.
Regards.

Rajesh Kumar

Rajesh Kumar (Expert)
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14 March 2009 If no trade mark, brand name of the buyer is there on the goods, SSI exemption is available.
Value will be transaction value under Section 4 of Central Excise Act.

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Reetika Goel

Reetika Goel (Expert)
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14 March 2009 As per the detail provided by you, i have drawn the following facts:
- SSI Unit
- Specific Contract for ultimate supply to Govt. (via a mediator)
- Production in your own name
- Ur own production facilities
- Ur own Material, No job work
- Production of MRP Based product.

On the basis of above facts,
- U can claim your SSI Exemption limit
- If your product is covered by SWMA Act & is notified by CG under section 4A of CEA, 1944, then the price you normally specify on the label of your product will be considered as Assessable Value.
- Otherwise, the price negotiated by you with the other party contracted will be considered as Assessable Value.
- Marketing by some other person will not affect your liability under excise.

Lastly, the fact that the product's label carries "NOT FOR SALE", will not affect your liability, because you don't generally offers your product for free, it being a specific performance and that too its a third party (Govt.) decision to offer it for free and not yours.

Hope you got your answer.
For further clarifications, mail me at ca.reetika_goel@hotmail.com

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Mahendra Naik

Mahendra Naik (Querist)
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14 March 2009 Our Excise range is claiming that we cannot utilise our SSI exemption but have to clear the goods under full rate of duty.

Can any expert guide me as to what reply can be given to them in technical terms quoting relevant provisions of C.Excise act to show that the SSI exemption is indeed applicable to such clearances.

Thanks & Regards

Rajesh Kumar

Rajesh Kumar (Expert)
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18 March 2009 To claim SSI exemption, no brand name of other person should be there on the goods. In your case, the name of marketing company will be there. However, that does not amount to brand name. You can take a legal opinion from some advocate/expert, you can advice you after examining the issue in detail.

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