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Plz.... help - Excise on Tool Amortisation

CA. BIJENDER KR. BANSAL (ACA, B.COM) (8148 Points)

10 October 2007

Dear All,

As a manfacturer , we have charged Excise duty on tool amortisation cost on mould of Vendor company. i.e Assesable Value for Excise duty is Sales price plus tooling cost per unit. We charged Excise duty on it and deduct tooling cost from total bill amount.

Now our new vendor asked us regarding Rules/Notification/ Circular of Excise in which is it mentioned that Excise duty is to be charged on Tooling cost.

Plz ......... Help me . It is urgent.

Thanks & Regards

CA. B.K.Bansal

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11 Replies

Pradip B Vaidya (Service) (59 Points)
Replied 12 October 2007

Pl refer CBEC circular no 170/4/96 dated 23-1-1996. [also refer 1996 ( 82) ELT T5

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Shaily Jain (Chartered Accountants) (1054 Points)
Replied 12 October 2007

Tools included in capital goods so b can take the creedit of it n also excise is applicable on it

CA. BIJENDER KR. BANSAL (ACA, B.COM) (8148 Points)
Replied 12 October 2007

HI, THANK FOR REPLY. BUT MY QUESTION IS REGARDING TO TOOLING AMORTISATION. IN THIS CASE TOOL IS ASSET OF CUSTOMER WHICH IS SENT BY HIM FOR PRODUCTION OF FG. WE HAVE TO ADD TOOLING AMORTISATION COST PER UNIT IN SELLING PRICE FOR ASSESSABLE VALUE FOR EXCISE PURPOSE. YOUR REPLY IS REGARDING PURCHASE OF CAPITAL GOODS. tHANKS CA. B.K.BANSAL

Sanjay Dwivedi (Advocates & Consultants C. Ex) (13 Points)
Replied 16 October 2007

Dear Mr. Bansal, The question of amortisation will arise only if the tooling was supplied free by the customer (or if it's cost is recovered separately by the manufacturer). In such a situation, the cost of tooling becomes an additional consideration for sale. Rule 6 of the C. Excise Valuation (DPEG) Rules, 2000 requires addition of the 'money value of additional consieration' to the transaction value. The explanation 1 to the said rule reads as under, and makes the thing more clear: Explanation 1 - For removal of doubts, it is hereby clarified that the value, apportioned as appropriate, of the following goods and services, whether supplied directly or indirectly by the buyer free of change or at reduced cost for use in connection with the production and sale of such goods, to the extent that such value has not been included in the price actually paid or payable, shall be treated to be the amount of money value of additional consideration flowing directly or indirectly from the buyer to the assessee in relation to sale of the goods being valued and aggregated accordingly, namely:- (i) value of materials, components, parts and similar items relatable to such goods; (ii) value of tools, dies, moulds, drawings, blue prints, technical maps and charts and similar items used in the production of such goods; (iii) value of material consumed, including packaging materials, in the production of such goods. (iv) value or engineering, development, art work, design work and plans and sketches undertaken elsewhere than in the factory of production and necessary for the production of such goods. Pls feel free to mail me for any further clarification. Sanjay R. Dwivedi Advocate

(Guest)

Originally posted by :Pradip B Vaidya
"	Pl refer CBEC circular no 170/4/96 dated 23-1-1996. [also refer 1996 ( 82) ELT T5	"

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sunil (excise incharge) (56 Points)
Replied 07 August 2009

Originally posted by :CA. B.K.BANSAL
"	Dear All, As a manfacturer , we have charged Excise duty on tool amortisation cost on mould of Vendor company. i.e Assesable Value for Excise duty is Sales price plus tooling cost per unit. We charged Excise duty on it and deduct tooling cost from total bill amount. Now our new vendor asked us regarding Rules/Notification/ Circular of Excise in which is it mentioned that Excise duty is to be charged on Tooling cost. Plz ......... Help me . It is urgent. Thanks & Regards CA. B.K.Bansal	"

We are a DTA unit , We had charged excise duty for Tool Cost to another DTA unit, but the tool is with me only. Is excise duty applicable for this. The Customer had informed me that Excise duty is not applicable for this.Kindly explain.

Rgds

Sunil

K.M. Rama Naik (Manager - Accounts) (32 Points)
Replied 17 September 2009

Dear Sir,

We are a DTA Unit We are having LUT(Letter of Undertaing) from Central Excise to Export the manufactured items.

If possible Pl provide notification under Central excise

K.M. Rama Naik (Manager - Accounts) (32 Points)
Replied 17 September 2009

Dear Sir,

We are a DTA Unit We are having LUT(Letter of Undertaing) from Central Excise to Export the manufactured items.

Our Question We have made a tool for our abroad customer, we want to raise the invoice for tooling cost but tool will not be exported, by using the tool customer items will be manufactured and sent, it can be cleared it under LUT with nil rate of Excise Duty? means only export invoice will be raised for tool cost and excise duty will not be charged under LUT, tool will not be sent, is this permited or not.

If possible Pl provide notification under Central excise

K.M. Rama Naik (Manager - Accounts) (32 Points)
Replied 09 December 2009

Originally posted by :K.M. Rama Naik

Dear Sir,
We are a DTA Unit We are having LUT(Letter of Undertaing) from Central Excise to Export the manufactured items.
Our Question We have made a tool for our abroad customer, we want to raise the invoice for tooling cost but tool will not be exported, by using the tool customer items will be manufactured and sent, it can be cleared it under LUT with nil rate of Excise Duty? means only export invoice will be raised for tool cost and excise duty will not be charged under LUT, tool will not be sent, is this permited or not.
If possible Pl provide notification under Central excise

please help me out by answering my above clarifications early.

Rajesh Kumar (Advocate- Tax) (7806 Points)
Replied 12 December 2009

@ Rama.

The transaction is a valid commercial transaction. The question is as to how to go about it.

In this transaction you shall be receiving Foreign exchange without export of goods. Take a certificate of bank with respect to exemption of GR.

For the purposes of excise, no excise duty is payable as goods are not leaving the factory gate. The tool shall be used for further manufacture and hence exemption under 67/95 is available. Ownership of goods are irrelevant.

When the further manufactured product are exported, as per excise law, amortised cost of this tool should be added. If however you do it, value on ARE-1 and shipping bill will differ and you will need to do whole lot of explianing to custom and bank. Excise duty portion is irrelevant as even is excise duty is assed on higher value, no duty shall be payable for export under bond. In such situation even worng application of law (by not adding amortisation cost) may be preferable at the time of export.

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sudeep batta (MD) (21 Points)
Replied 02 February 2010

URGENT

Dear sir,

We are manufacturer of “hand pump” in india and our product HS code is :- 84139140 and this manufacturing unit is 100% export unit here we would like to confirm we have to register with EXCISE or not under this HS code and our product is hand pump.

And kindly let us know what the procedure of claiming Drawback on our above is mentioned product and HS code and how much is the drawback on each hand pump.

and kindly let us know can we claim both drawback and depb also as our excise on our product is nill and we have to pay excise on purchase and we can not claim what is the procedure of claming

We will really appreciate for your quick response.

Thanks and regards

Sudeep batta