Excise transfer from non-excisable firm to excisable firm

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

05 December 2015 Sir,
We have two firms. One is excisable & other is *nonexcisable. But Non-excisable firm receives the excisable material. How to get the set off of that excise duty.
What is Ship to i.e different Buyer & consignee concept?

Arun Kumar Singh

Arun Kumar Singh (Expert)
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08 December 2015 If excisalbe goods used in the manufacturing of non-excisable final products then credit will not be available.

Querist : Anonymous

Querist : Anonymous (Querist)

09 December 2015 Sir, final product is also excisable. how to transfer excise duty from non-excisable firm to excisable form. what will be the accounting treatment?

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Asha Kanta Sharma

Asha Kanta Sharma

(Expert)
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21 July 2024 Based on your queries, it seems you have two firms: one is excisable (Firm A) and the other is non-excisable (Firm B). Firm B receives excisable materials which are used in the production of excisable final products.

Here's how you can manage the excise duty and accounting treatment between the two firms:

### 1. Receiving Excisable Material by Non-Excisable Firm (Firm B)

When Firm B receives excisable material from Firm A (the excisable firm), it needs to account for the excise duty paid on these materials. Since Firm B is not excisable, it cannot directly claim CENVAT credit on the excise duty paid.

### 2. Set Off of Excise Duty

To get the benefit of excise duty paid by Firm A (on behalf of Firm B), typically the process involves:

- **Transfer of Goods**: Firm A invoices the excisable goods to Firm B, including the excise duty amount.
- **Accounting Treatment by Firm A**: Firm A will charge excise duty on the invoice issued to Firm B.
- **Billing and Reimbursement**: Firm B pays Firm A for the goods including the excise duty. This payment should reflect the excise duty amount as a separate line item.
- **Documentary Evidence**: Both firms maintain proper invoices and records to substantiate the transaction and the excise duty paid.

### 3. Ship to (Different Buyer & Consignee)

The concept of Ship to (Different Buyer & Consignee) is relevant when the buyer and the consignee of the goods are different entities. In your case:

- **Different Buyer & Consignee Scenario**: Firm A (excisable) sells goods to Firm B (non-excisable), where Firm B is the buyer of the goods and also the consignee (receiver of the goods). This is a common scenario where the same entity buys and receives the goods.

### 4. Accounting Treatment in Non-Excisable Firm (Firm B)

For Firm B (non-excisable), the accounting treatment typically involves:

- **Debit Entry**: Debit the purchase account (for the cost of goods including excise duty).
- **Credit Entry**: Credit the bank or payable account for payment to Firm A.

### 5. Transfer of Excise Duty to Excisable Firm (Firm A)

Since Firm A is excisable and will eventually manufacture excisable final products, it can claim CENVAT credit for the excise duty paid on inputs (including those transferred to Firm B). The accounting entry for Firm A would include:

- **Debit Entry**: Debit the receivable account (for the sale of goods including excise duty).
- **Credit Entry**: Credit the sales account (for the total sale value) and the excise duty payable account (to record the excise duty liability until it's adjusted against CENVAT credit).

### Conclusion

To summarize, excisable materials received by Firm B from Firm A should be invoiced with excise duty included. Firm A will account for the excise duty paid and later claim CENVAT credit. Firm B, being non-excisable, cannot directly claim CENVAT credit but can pass on the cost (including excise duty) in its final product pricing.

Proper documentation, invoicing, and compliance with excise regulations are crucial to ensure smooth operations and compliance with excise duty requirements. It's advisable to consult with a tax advisor or excise consultant to tailor the approach based on specific regulations and business needs.