Service tax issue - design and devlopment charges

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

06 January 2016 we are mfg. printing paper label, we are one time plate design develop in house when we made excise invoice in first time we show in excise invoice under head "Design and Devlopment Charges A/c" collect some charges and on this said head we collect excise duty + Local vat Tax and pay to department.

My query we collect said charges any service tax liability yes or no which already we collect excise duty and pay to department. we cross the service tax exemption limits during the year

Devang Shah

CA. Divyansh Agarwal

CA. Divyansh Agarwal (Expert)
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06 January 2016 As per valuation rule such charges are included on additional money payable as per Rule-6 thereby excise duty would be levied.No liability of service tax.
Rule 6.
Where the excisable goods are sold in the circumstances specified in clause (a) of sub section (1) of section 4 of the Act except the circumstance where the price is not the sole consideration for sale, the value of such goods shall be deemed to be the aggregate of such transaction value and the amount of money value of any additional consideration flowing directly or indirectly from the buyer to the assessee.
Explanation 1 - For removal of doubts, it is hereby clarified that the value, apportioned as appropriate, of the following goods and services, whether supplied directly or indirectly by the buyer free of charge or at reduced cost for use in connection with the production and sale of such goods, to the extent that such value has not been included in the price actually paid or payable, shall be treated to be the amount of money value of additional consideration flowing directly or indirectly from the buyer to the assessee in relation to sale of the goods being valued and aggregated accordingly, namely : -
(i)
value of materials, components, parts and similar items relatable to such goods;
(ii)
value of tools, dies, moulds, drawings, blue prints, technical maps and charts and similar items used in the production of such goods;
(iii)
value of material consumed, including packaging materials, in the production of such goods;
(iv)
value of engineering, development, art work, design work and plans and sketches undertaken elsewhere than in the factory of production and necessary for the production of such goods.