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Computation of closing stock?

Akshath Kj (17 Points)

17 March 2016

DOES EXCISE DUTY FORM PART OF CLOSING STOCK?

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2 Replies

amit patil (Industrial Trainee) (33 Points)
Replied 17 March 2016

Threre is a lot of debae on this matter,

In my opinion it should for part of Closing Stock.

Basis For opinion:

1. Excise duty is levied in manufacture of Excisable goods in India but the collection of duty is posponed to the removal of goods from factory or warehouse. Hense closing stock is goods manufactured, hence excise duty is levied on such.

2.As per Guidence Note 12 revised 2000, is too of such opinion and prescribe the method of journal entry and justification of inclusion of excise duty on closing stock. The said guidence note also populate that in case if the intention is of export under Rule 19 ie without payment of duty then no inclusion is required.

3. As it is well known that guidence note is not mandatory.

4. In case you are company the the provions od Ind AS applicable to you, In which I am not well verge.

Opinion is stricly private and I am not liable to reimberse any cost incurred on implimentation of opinion.

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Amit Kanunga (Article Assistant and Post Gradute) (644 Points)
Replied 17 March 2016

Originally posted by : Akshath Kj
	DOES EXCISE DUTY FORM PART OF CLOSING STOCK?

In a recent judgment in case of Dynavision Limited (SC) the Supreme Court held that AO was not justified while making addition of Excise Duty on stock valuation. The supreme court has upheld the principle of exclusion of excise duty component from valuation of closing stock . Rules laid down in the case of Chainrup Sampatram1953 (10) TMI 2 - SUPREME COURT & Hindustan Zinc Ltd 2007 (5) TMI 195 - SUPREME COURThas been reiterated in the latest decision by observing inter alia on the following lines:

1. the purpose of crediting the value of unsold stock is to balance the cost of the goods entered on the other side of the account (that is debit side of P & L account) so that on cancelling out of the entries relating to the same stock from both sides of the account would leave only the transactions in which actual sales in the course of the year has taken place and thereby showing the profit or loss actually realized on the year’s trading.

2. The entry for stock which appears in the trading account is intended to cancel the charge for the goods bought which have remained unsold which should represent the cost of the goods”.