Excise duty on under Warranty replacement

[Dhananjay Kadam]

We are the manufacturer of SPM's, we provide warranty for 1 yr against supply of goods to customer, whereas warranty supply is considered / value added in transaction value of original supply of machine.

Now, if part gets failed during warranty of Machine & need to replace free of Cost. whether Excise duty is payable on the free replacement ? which cost is included in the transaction value of original supply of Machine.

Experts comments !

[Mehul Pandya]

I am assuming that the part (that is damaged can be repairable), If the damaged goods bought into the factory ,assuming that duty has been paid at the time of removal,for remade, reconditioned or for any other reason(repair) then you are entitled to claim such Cenvat Cr which have been paid by you at the time of removal, as under excise such credit can be availed on the basis of your self invoicing. 2. Assessee is liable to levy "Amount equal to Cenvat Credit taken" at the time of removal of such good.(In invoice on re-removal of such repaired good, you should mention on your invoice "Amount payable in terms of second part of Rule 16(2) of CER,2002" instead of "ED payable") 3. Due to emergence , fresh good is given to the buyer then, on such good ED is to be levied.

Read more at: http://www.caclubindia.com/forum/free-replacement-272859.asp

[PARTHASARATHY V]

Normally the machine cost may include the warranty parts cost also in built with the price from 2% to 5%. This parts of the warranty re-placement can be cleared free of cost with Nil ED provided you have to refer the OEM Invoice No and if the machine is having any serial Number.

But also pl ensure that the Free Part for warranty may not exceed @2%. In addition to this, you please keep the Costing of the machine ready with you, in case if the department ask the warranty cost inclusion details in the OEM

AI Summary

Excise Duty Clarification: Replacement Parts Under Warranty and Cenvat Credit Eligibility Explained A manufacturer of special purpose machines (SPMs) raised a query regarding excise duty on parts replaced under warranty. When a part fails during the warranty period and is replaced free of charge, there is uncertainty about whether excise duty is applicable. One expert, Mehul Pandya, suggests that if the damaged part is repairable and returned to the factory, the manufacturer can claim Cenvat credit. However, if a new part is supplied, excise duty must be levied. Another expert, Parthasarathy V, notes that warranty parts costs are typically included in the machine's price and can be replaced free of duty if properly documented.