05 May 2012
AN SSI is showing 'nil' balance in ER3 with respect to closing stock, but they are showing closing stock in final accounts. The reason they mention for the same is that "The stock is not a complete good for the purpose of Excise and therefore is not shown in ER3". Goods (shown as finished goods in account) should undergo sterilisation process before it is made eligible for sale. Clafication on the same is required
21 July 2024
It seems there is a discrepancy between how the closing stock is being reported in the final accounts and in the ER-3 return for an SSI (Small Scale Industry) under the Central Excise rules. Here’s a clarification based on the information provided:
1. **Nature of Closing Stock**: - In the context of excise regulations, the closing stock reported in the ER-3 return should typically include only goods that are fully manufactured and ready for sale. These are considered as "finished goods" under excise rules.
2. **Sterilisation Process**: - If the goods undergo a sterilisation process before they are considered ready for sale, they might not qualify as finished goods until that process is completed. This means they should not be included in the closing stock reported in ER-3 if they are still in an intermediate stage and not ready for sale.
3. **Accounting Treatment vs. Excise Reporting**: - The final accounts may classify these goods as finished goods because they are part of the production cycle and are expected to be sold after sterilisation. However, for excise reporting purposes (like ER-3), only goods that meet the criteria of being fully manufactured and ready for sale should be included in the closing stock.
4. **Compliance and Clarification**: - It’s important for the SSI to ensure that their ER-3 return accurately reflects excisable goods that are ready for sale as per excise regulations. - If the goods are not yet considered finished under excise rules (due to pending sterilisation), they should not be included in the closing stock for ER-3 purposes. - It might be necessary to seek guidance from a qualified excise consultant or auditor to ensure proper compliance with excise laws while aligning with accounting practices.
In summary, while the goods may be classified as finished goods in the final accounts due to their production status, they should only be reported in ER-3 if they meet the excise definition of finished goods (fully manufactured and ready for sale). If the sterilisation process is a required step before they are considered finished under excise rules, they should not be reported in ER-3 until that process is complete.
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