My client is a excise registered manufacturing unit operating in a rented premises. He started his business on 1st Sept 2013 & complied with excise registeration formalities. By Jan.14 no manufacturing activity had commenced but we had purchased raw material & fixed assets & had availed the excise credit there on. He commenced production activity in first week of feb.14 & unfortunately the unit caught fire in second week of Feb.14. The entire unit was completely burnt down including the raw material, finished goods, capital assets & the rented premises.
One of the conditions of rent agreement was that the tenant will indemnify for the loss to the rented premises.
Now the client had invited tenders for sale of scrap on raw material & finished goods, capital assets ( scrap is just the iron parts left after the fire was extinguished ) & the left over of the rented premises. Our question is :-
Are we liable to pay excise duty on scrap sold ?
my contention is
1. since the scrap of raw material & finished goods is not arising out of manufacture process, it is not liable to excise duty.
2. scrap of capital goods are not capital goods cleared as such & hence it is not liable for excise duty.
3. scrap of rented premises is not liable for excise duty as we are not the owners of it, Infact we have to construct the whole building again & handover it to the owner.
Kindly let me know if my contention are right. If not please correct me with the correct provisions.
CAclubindia
