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 !

AI Summary

Excise duty on warranty replacements: cenvat credit reversal on re-removal and duty when fresh parts are supplied.
If defective parts are returned and duty was paid at removal, the manufacturer may claim Cenvat credit by self-invoicing for repair/reconditioning; on re-removal the assessee must disclose and levy an amount equal to the Cenvat credit taken in accordance with Rule 16(2) compliance rather than label it simply as excise duty. If a fresh new part is supplied under warranty, excise duty is leviable on that fresh good. Manufacturers may alternatively clear small-value warranty parts free with nil duty by referencing the OEM invoice and serial number and retaining costing records.