TOOL AMMORTISATION MATTER

[NIMISH SHAH]

DEA SIR,

WE NEED PROPER CLARITY ON FOLLOWING.

We are still puzzled & confused about TOOLINGS AMMORTISATION VALUE TO BE CHARGE IN INVOICE.

PROCEDURE IS AS FOLLWS.

1. WE GET ENQUIRY FROM BUYER, QUOTE SEND EX. 250000.00 & FINALISED FOR MAKING TOOLING FOR SUPPLY OF CASTINGS.
2. BUYER ISSUES P.ORDER FOR DEVELOPMENT OF TOOLING RS. 2,50,000.00 PLUS EXCISE DUTY 12.5 5 PLUS 2 % CST TOTAL RS. 2,86,875.00.
3. BUYER PAYS 25 % ADVANCE.
4. WE MAKE TOOL IN 2 MONTHS, RAISE INVOICE OF RS. 2,87,875.00 & TOLL SEND TO BUYER WITH INVOICE.
5. BUYER PAYS BALANCE TOWARDS TOOL DEVELOPMENT.
6. BUYER RETURNS TOOL UNDER 57 F 4 & PLACE ORDER FOR SUPPLY OF CASTING 1,00,000 PCS IN ONE YEAR AT FINAL PRICE OF COMPONENT RS. 100.00 , THIS COST INCLUDES ON LY RAWMATERIAL VALUE & OUR PROCESSING CHARGES ONLY.
7. WE SUPPLY CASTINGS AT RS. 100.00 COMPONENT COST PLUS 12.5 % EXCISE DUTY & 2 % CST TOTALS TO RS. 114.75 P.P.

DEPT. CONTENTION IS THAT WE HAVE TO CHARGE TOOL AMMORTISATION VALUE ON FINAL COMPONENT VALUE OF RS. 100.00, SAY EX. RS. 1.00 AS TOOL AMMORTISATION COST, TOTALS RS. 101.00 P.P. ON THAT EXCISE DUTY NEED TO BE PAID.

WHILE ON TOOL DEVEOLEMENT EXCISE DUTY IS PAID & AGAIN ON EACH COMPONENT TOOL AMMORTISA VALUE TO BE ADDED IN THE FINAL COST OF COMPONENT & EXCISE DUTY TO BE PAID ON SAME.

IS IT CORRECT ?

WE ARE CONFUSED & WHAT IS CORRECT PROCEDURE ?

REGARDS

NIMISH SHAH

AI Summary

Clarification on Tool Amortization: Excise Duty Already Paid on Tool Development, No Additional Charges Required A participant raised a query regarding the correct procedure for charging tool amortization value in invoices related to castings. The process involves quoting and finalizing tooling costs, receiving an advance, creating and invoicing the tool, and supplying castings. The department contends that tool amortization should be added to the component cost, requiring excise duty on the total. The participant is confused about whether this is correct since excise duty was already paid on tool development. A respondent clarified that excise duty was already charged and deposited, and the department should not demand additional charges for amortization.