Excise Duty Liability on FOC Value PO Rate increase recd from Previous Period

[Guest]

Sir,

we have received Rate difference from our Customer PO Rate is increased from April'13 to Dec'13, we have paid differential excise duty & interest on rate increase amount.

at the time of dispatch of finished goods we have paid excise duty on PO Value + FOC Value + Tooling Amortization & Royalty percent add on (PO Value + FOC Value + Tooling Amortization) as per excise valuation rules.

my query is:

Excise Duty is payable at the time of received of rate increase is payable on.

1- Rate difference received from our Customer Or

2- Rate difference Received + (FOC Value + Tooling Amortization + Royalty percent )

Please guide us in this matter.

Regards,

Rahul Patel

[YAGAY andSUN]

Dear Rahul,

Please choose the option No. 2 for paying the C.E. Duty on rate difference.  This would be according to the Valuation Rules of Central Excise.

Regards,

Team YAGAY & SUN

(Indirect Tax Consultants)

[Guest]

Sir,

Please give any Law Rule reference in this matter.

Regards,

Rahul Patel

[Mahir S]

As the money value of additional consideration flowing directly or indirectly from the buyer to the assessee for e.g. in your case  -   FOC Value + Tooling Amortization & Royalty percent already added in the initial value, hence conditions of  Rule 6 of Central Excise Valuation (Determination of Price of Excisable goods) Rules, 2000, already fulfilled.

Hence, in your case, the differential duty shall be payable on the differential value as described at option No. 01. However, the Royalty per cent  shall be required to be added to the differential value.

However, if the rate differential value is marginal/negligible, then better to opt for option no. 02 to avoid any litigation in the matter.

AI Summary

Excise duty valuation: differential PO rate should include applicable additions like FOC, tooling amortisation and royalty. Whether additional excise duty on a post-contract PO rate increase should be computed only on the rate differential or on the differential plus FOC value, tooling amortisation and royalty percent. One advisor recommends including those value additions under valuation rules; another relies on Rule 6 of the Central Excise Valuation Rules to treat duty as payable on the incremental rate differential with royalty percent added, while suggesting option 2 where the differential is marginal to avoid litigation.