amortization cost-reg

[Ramakrishnan Seshadri]

We request the experts to clarify my doubt.

We are going to send some mould to our jobworker under jobwork challan. He will maufacture the product and send to us by paying excise duty. After receiving the product we will again use it for manufacturing our final product and pay excise duty and clear the same.

Now our question is whether amoritzation cost has to be charged by the jobworker.since the product is an intermediate product.

Kindly clarify.

Thanks & Regards,

S.Ramakrishnan.

[Mahir S]

Sir,

The question of amortization cost shall not arise in your above case.

[Ramakrishnan Seshadri]

Dear Mahir Sir,

how you are saying that amoritzation cost will not arise in our case?

Thanks

S.Ramakrishnan

[Mahir S]

Sir,

Amortization cost is required to be added/charged only when the moulds and dies are supplied free of cost by the buyer (customer) himself, and when used for the manufacture of finished goods to be to the said buyer (customer).

In your case, the moulds are not supplied free of cost by your buyer of the finished goods.

Hence, the question of charging amortization cost by your job worker or even your charging of the amortization cost from your buyer (customer), does not arise.

Further, such moulds which you have got manufactured from the job worker are not your intermediate products but your own capital goods.

[Mahir S]

Amortization cost is required to be added/charged only when the moulds and dies are supplied free of cost by the buyer (customer) himself, and when used for the manufacture of finished goods to be SUPPLIED to the said buyer (customer).

AI Summary

Amortization cost not payable where moulds remain the manufacturer's capital goods and were not supplied free by the buyer.
Amortization cost applies only where moulds or dies are supplied free of cost by the buyer and used to manufacture finished goods for that buyer. In the jobwork scenario, the moulds are the principal's capital goods, not buyer supplied free tools; therefore amortization cost need not be charged by the jobworker or by the principal to the buyer.