Branch transfer

[S.C. WADHWA]

Dear Expert,

We are manufacturers of food products and paying duty on one product at MRP less abatement @Rs.1.30
and transfer the same item to our Delhi Depot @ 0.55 paise per piece. Where as from Delhi the said item is
being sold at 0.59 paise to small retailers and @0.54 to big buyers.
Now my query is whether selling of higher rate than transfer in our case is objectionable to any deptt. Please
give your expert opinion.
Regards,
WADHWA

[Rajagopalan Ranganathan]

Sir,

According to Explanation 2 (b) of Section 4 A of Central Excise Act, 1944,where the retail price, declared on the package of any excisable goods at the time of its clearance from the place of manufacture, is altered to increase the retail sale price, such altered retail sale price shall be deemed to be the retail sale price.

In your case you are transferring the goods to your Delhi Depot @ Rs, 0.55 whereas your Delhi Depot sells the same to small retailers @ 0.59. Since your selling price to small retailers from Delhi Depot is higher than the price adopted by you at the time clearance from place of manufacture then you have discharge the differential duty.

[rajkumar shukla]

what is MRP of product.

[S.C. WADHWA]

Dear Experts,

MRP of product is ₹ 2/- and we are paying duty on ₹ 1.30 after getting abatement.

Now please confirm whether we should have to pay differential of duty between 0.55 and 0.59 paise.

Regards,

WADHWA

[rajkumar shukla]

Unless there is any change in MRP from the depot , no differential duty would be payable as duty in case of goods being assessed under section 4A would depend upon MRP only and not on actual sale / transfer price so long as it is not more than MRP

AI Summary

Retail price alteration may trigger differential excise duty when post-transfer sales exceed the price adopted at clearance. If the retail price declared on packaging at clearance is increased after clearance, the altered retail sale price is deemed the retail sale price for excise valuation; consequently, transfers to a depot at a lower price followed by sales from the depot at a higher price than the price adopted at clearance can attract differential excise duty, though an alternative practical position notes that if the declared MRP is unchanged, valuation may depend on the declared MRP rather than actual transfer price.