FREE MTERIAL

[NAGULAVARAM NARSIMHAIAH]

Dear Sir,

Our's is manufacturing unit and also we do job work.Our clients wants to supply some inputs(raw-material) to us on free of cost without Excise Duty and VAT vide challan under excise rule 4(5) (a) which are to be used with our raw materials, but they do not want to charge ED on their free material supplied t us. I am telling that CED  is applicable on both our material and their material.  Could you please guide me the applicability of CED and VAT. I need your guidlines with rules or circulars.

Thanks & Regards.

AI Summary

Central excise duty on job-work supplies: liability depends on sale location and valuation; duty on transaction value or cost.
Where free inputs are supplied to a job-worker under challan and processed goods are returned with quantities reconciled, the consignor who removed inputs under challan and availed CENVAT remains liable for duty; if processed goods are sold at the job-worker's premises or from another place, duty is payable by the job-worker on the transaction value at which the consignor sells; otherwise duty is payable on the value of goods removed by the job-worker including cost of free materials, with valuation by cost of production and CAS-4 certification where applicable.