17 February 2010
Is excise duty have to be levied on branch transfer sales made by one manufacturing unit enjoying tax holiday to other state branch ? If yes then please support with law evidence. Thanks in advance
21 July 2024
Excise duty on branch or stock transfer sales between units of the same manufacturer is a complex issue and is influenced by several factors including the location of the units, their registration under excise, and the applicability of tax holidays or exemptions. Here’s a detailed explanation based on the general principles and relevant provisions:
### Applicability of Excise Duty on Branch Transfer Sales:
1. **Definition of Manufacture:** Excise duty is levied on the manufacture of goods. According to Section 2(f) of the Central Excise Act, 1944, "manufacture" includes any process incidental or ancillary to the completion of a manufactured product. This definition implies that if goods undergo any process or transformation, excise duty might be applicable.
2. **Branch or Stock Transfer:** - **Interstate Branch Transfer:** If goods are transferred between two branches or units of the same manufacturer located in different states (interstate transfer), and these branches are not registered separately under the Central Excise Act, excise duty is generally not applicable. This is because there is no sale involved, and excise duty is levied on goods sold or manufactured.
- **Intrastate Branch Transfer:** If goods are transferred between branches within the same state (intrastate transfer), excise duty is also not applicable as there is no sale involved. The transaction is treated as a movement of goods for internal organizational purposes.
3. **Tax Holidays and Exemptions:** - If one manufacturing unit is enjoying a tax holiday or exemption (like exemption from payment of excise duty), the goods transferred from that unit to another branch or unit (whether within the same state or interstate) typically continue to enjoy the benefit of the exemption. This is provided that the conditions of the exemption scheme are met, such as utilization of the goods within the specified geographical area or for specific purposes.
4. **Legal Evidence and Reference:** - **Central Excise Act, 1944:** Section 3 of the Act deals with the levy and collection of excise duty on goods produced or manufactured in India. - **Tax Holiday Notifications:** Specific notifications issued by the Central Government under the Central Excise Act provide details about exemptions or concessions applicable to certain manufacturing units or goods. These notifications define the scope of applicability of excise duty exemptions.
### Conclusion: Excise duty is primarily levied on the manufacture of goods and on their sale. For branch or stock transfer sales between units of the same manufacturer, excise duty is generally not applicable, provided there is no sale or transaction involved. The applicability of excise duty hinges on whether the transaction constitutes a sale or a transfer for internal purposes. To ensure compliance, manufacturers should review specific tax holiday notifications and seek guidance from tax experts to determine the precise implications for their branch transfer operations.
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