CAPTIVE CONSUMPTION

[Guest]

Dear Sir,

Can we use a finished goods as a raw material for production of another finished goods within factory if yes, then what is treatment in excise.

How should we mention it in excise return ?

[YAGAY andSUN]

Dear Jay Ram,

Yes, you can. You would have to pay the Central Excise Duty on the final finished goods which would be emerged out of usage of existing finished goods lying the F.G.Area. In the excise return only final goods would be shown. RG-1 would be maintained accordingly.

Regards,

YAGAY and SUN

(Management, Business and Indirect Tax Consultants)

[Guest]

Dear Sir,

Thank you for this information but there is still a bit confusion before me which i am trying to explain with below example.

1. There is a finished product "A" which is consumed as raw material for production of another finished product "B"

2. Both items "A" and "B" are also sold separately

3. We had manufactured 10000Pcs quantity of product "A" in last quarter which had been shown in excise return ER-1 of that quarter (April-June)

4.Now, in this quarter (July-Sep) we have consumed 2000Pcs of product "A" as well as other raw materials for production of 2000Pcs of product "B" and we have also sold 3000Pcs of product "A" and 1000Pcs of product "B" separately in the market.

5.Now, according to my calculation closing balance of both product should be as under

July-Sep
Product	Opening	Mfg.	Home Clearance	Captive Consumption	Balance
"A"	10000	0	3000	2000	5000
"B"	0	2000	0	0	2000

6. But you have told that we need not to mention that manufacturing quantity of product "A" which is consumed for production of "B", but we have already mention in excise return of last quarter So, please give your opinion on this point

Also request you to mention notification no. and its serial related to captive consumption of finished goods

7. also suggest me if i need to mention this notification number and its serial number in excise return

Regards,

JAY RAM SINGH

[YAGAY andSUN]

Dear Jay Ram,

We never opine that Product A would not be shown as Finished Goods but we had opined that you would have to pay the duty on the finished goods which would be emerged out of usage of existing finished goods lying the F.G. Area.

You understanding about how this transaction would take place, has already been depicted by you in your point no.5 and we are in agreement with you on this point. Statutory return and DSA (RG-1) would be adjusted/maintained accordingly.

While submitting the return you would have to mention Notification No. 67/1995/16-03-1995 (Earlier 217/86).

Regards,

YAGAY and SUN

(Management, Business and Indirect Tax Consultants)

[Guest]

THANKS

AI Summary

Using Finished Goods as Raw Materials: Excise Duty Must Be Paid on Final Product, Per Notification No. 67/1995. A user inquired about using finished goods as raw materials for producing other finished goods within a factory and its treatment in excise returns. An expert confirmed it is permissible and clarified that excise duty must be paid on the final product. In the excise return, only the final goods are shown, and RG-1 records are maintained accordingly. The user provided an example involving products A and B, seeking further clarification on reporting requirements. The expert confirmed agreement with the user's understanding and advised mentioning Notification No. 67/1995/16-03-1995 in the excise return.