Excise on Packing & Forwarding charges

[Samik Chaudhuri]

I would like to know whether excise will be applicable on packing and forwarding charges of excisable material at the time of invoicing? Please confirm me at earliest.

With thanks

Samik Chaudhuri.

[Rajagopalan Ranganathan]

Dear Mr. Samik Chaudhuri,

According to Section 4 (3) (d) of Central Excise Act, 1944, "transaction value" means the price actually paid or payable for the goods, when sold, and includes in addition to the amount charged as price, any amount that the buyer is liable to pay to, or on behalf of, the assessee, by reason of, or in connection with the sale, whether payable at the time of the sale or at any other time, including, but not limited to, any amount charged for, or to make provision for, advertising or publicity, marketing and selling organization expenses, storage, outward handling, servicing, warranty, commission or any other matter but does not include the amount of duty of excise, sales tax and other taxes, if any, actually paid or actually payable on such goods.

Therefore transaction value includes packing and forwarding charges of excisable material for payment of excise duty on the finished goods cleared from the "place of removal."

[Mahir S]

Yes Sir, Packing charges shall form part of the assessable value as it is a charge in connection with production and sale of the goods, recovered from the buyer. Hence, any charges recovered for packing, whether ordinary or special is includible in the transaction value if the same is not included in the price of the goods.

In the case of reusable containers (glass bottles, crates etc.), normally the cost is amortized and included in the cost of the product itself. Therefore, the same is not required to be included in the value of the product unless it is found that the cost of reusable container has not been amortized and included in the value of the product.

However, rental charges or cost of maintenance of reusable metal containers like gas cylinders etc. are to be included in the value since the amount has been charged by reason of, or in connection with the sale of goods.

Similarly, cost of containers supplied by the buyer will be included in the transaction value of the goods.

AI Summary

Transaction value includes packing and forwarding charges, making such recovered charges part of the assessable value for excise. Transaction value for excise includes amounts charged in connection with the sale, so packing and forwarding charges recovered from the buyer are part of the assessable value; reusable containers whose cost has been amortized into product cost need not be separately included, but where amortization is absent, and where rental or maintenance of reusable metal containers or containers supplied by the buyer are charged, those amounts must be included.