Excise duty can be added in inventory cost in case of 23d

This query is : Resolved

karishma mittal (Querist)
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24 September 2015 Goods are imported by the trader worth Rs.1000 and CVD charged is 400.
On sale of goods dealer will pass on CVD credit to customer .

Now what will be the valid accounting entry

Inventory 1000
CVD credit 400
To vendor 1000
To duty payable 400

sale:

Customer 2000
To sales 1600
To duty transfer account (CVD)400

Can it be possible to include CVD duty in inventory cost and in revenue value.

Inventory 1400
to vendor 1000
To duty payable 400

Sales

Customer 2000
To revenue 2000

Second case is possible or not?

Arun Kumar Singh

Arun Kumar Singh (Expert)
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24 September 2015 You can pass the CVD and SAD to your customer. You can value addition of the price of the goods but duty will be passes same.

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karishma mittal

karishma mittal (Querist)
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24 September 2015 Is there any governing law for the addition of excise duty in price of goods and to be book in revenue as well?

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Asha Kanta Sharma

Asha Kanta Sharma

(Expert)
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21 July 2024 Yes, there are specific laws and regulations governing the addition of excise duty to the price of goods and its treatment in revenue recognition. Here are the key aspects:

1. **Central Excise Duty Act, 1944:**
- The Central Excise Duty Act, 1944 provides the legal framework for the levy and collection of excise duty on goods manufactured in India.
- Under this Act, excise duty is levied on the manufacturing of goods at the point of manufacture, and it is typically included in the price of the goods.

2. **Valuation Rules under Central Excise:**
- The Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000 govern how the value of excisable goods is determined for the purposes of levying excise duty.
- According to these rules, excise duty is generally included in the assessable value of goods, which forms part of the sale price.

3. **Revenue Recognition:**
- Excise duty collected on goods forms part of the revenue of the government and is accounted for as such.
- From the perspective of a manufacturer or seller, excise duty collected from customers is usually accounted for as part of the total revenue from sales, though it is not revenue earned by the business itself but rather a pass-through tax collected on behalf of the government.

4. **Accounting Treatment:**
- In accounting terms, excise duty collected is not considered revenue of the business but is a liability to be remitted to the government.
- Typically, businesses will record excise duty collected separately from the sales revenue and will remit this amount to the government as required by law.

5. **Compliance and Reporting:**
- Businesses are required to comply with the provisions of the Central Excise Act, including timely payment and reporting of excise duty liabilities.
- The excise duty collected and payable must be reported accurately in the statutory returns filed with the excise department.

In conclusion, the addition of excise duty to the price of goods is mandated by the Central Excise Duty Act, and its inclusion in the price and revenue treatment are governed by specific rules and regulations under this Act. Businesses must adhere to these legal provisions to ensure compliance with excise duty laws and proper accounting practices.