Excise Duty implication on Scrap Drums

[Manish Shukla]

Dear Sir,

I am purchasing empty drums from the local traders who are giving by charging sales tax ( Local Vat)

After filling my manufactured item in that ( Which attracts excise Duty), I am selling the material.

I am preparing two invoices:

1) Excise invoice for  Material

2) Drum Invoice ( Non Excisable)

Whether drum invoice attract any excise, if not case laws please...

Regards

Manish 

 

 

 

[GANTI SARMA]

As per your query, you are clearing drums as such that means your are not modifying them. As per Rule 3(5) of Cenvat Credit Rule, 2004, when inputs or capital goods, on which CENVAT credit has been taken, are removed as such from the factory shall pay an amount equal to credit availed other wise no need to reverse the duty. In your case there is no effect of excise duty.

 

[Sunil Vaidya]

It appears that in your case the drums are returnable packing material. Earlier, there are number of judgments wherein it has been held that the cost of returnable packing material is deductible from the value of the goods being cleared(erstwhile sec.4(4)(d). However, since 2003 the Govt. introduced concept of transaction value under sec. 4 of the C. Ex. Act. Therefore now the value of the goods includes any amount, directly or indirectly paid to the manufacturer, in relation to the goods being cleared. In your case it appears that there is no intention to return the drums by the buyers. As such the cost of the drum should form part of the value for payment of C.Ex. duty. As you are purchasing the drums from local market you may not be able to get any CENVAT credit on it. 

[YAGAY and SUN]

In case of returnable packaging the amortisation cost of the drumps should be included in the assessable value of the finished goods otherwise, the cost of packaging material should be included in the assessable value of the finished  goods if the packaging material is one time used in packing of finished goods.

AI Summary

Assessable value: packaging cost included where drums are not returnable, creating excise liability and CENVAT reversal risk.
Excise liability on drums depends on whether their cost forms part of the assessable value of cleared goods or they qualify as returnable packing material. If drums are not returned, their cost is included in transaction value and attracts duty; local purchase may bar CENVAT credit. If CENVAT credit was availed and drums are removed as such, Rule 3(5) requires reversal equal to credit taken. For returnable packaging amortisation of cost is included in assessable value; one time packaging cost is included in full.