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

[varun arora]

I think you have already charged Excise duty and deposit the same to the government while handed over to the Customer.

Now Question of Amortisation arise in case of Customer only.

Deptt. can not raise a demand on you on another 1/- as you mentioned iin your case.

AI Summary

Tooling amortisation does not create fresh excise liability for manufacturer when excise on tool was already paid. A manufacturer paid excise duty when invoicing for tooling supplied to a buyer; later the buyer returned the tool and ordered components priced without tooling cost. The department argues tooling amortisation must be added to component value and excise charged per piece, but the advisory reply indicates excise was already paid on the tool and the amortisation issue pertains to the buyer's accounting rather than creating a fresh excise liability for the manufacturer.