Possibility of despatch of finished goods without bringing to the factory

[G GOSWAMI]

I put this issue before the respected wise forum to have their kind opinion.

Factory A wants to procure order from their customer and to get it manufactured from their another division B at different state. To save freight charge and time A wants to dispatch the said finished goods to their customer or export directly from B factory without bringing it to the factory of A . In this case B will stock transfer the said goods to A raising invoice with payment of excise duty and without payment of sales tax. A will raise invoice to their customer as per the contract price with payment of appropriate duty and sales tax.Whether this transaction is possible keeping in mind the availability of cenvat credit, maintenance of DSA/ER-1, central excise sealing & supervision of export consignment and other relevant legal provisions.Kindly suggest any suitable legal wayout for this transaction or express your views in the matter.

Regards,

G.Goswami

25.11.2015

[Ganeshan Kalyani]

By stock transferring from B you are paying excise duty on removal. Again while invoicing at A you would be paying duty (seems incorrect) and charge Vat. In this way you tend to pay more taxes. Two time excise duty and full Vat. If you send the goods directly from B to customers by invoicing directly then you have to pay excise duty once and Cst @2% only if the customer is interstate. Think again on your thoughts when it is viable in terms of cost and post your query again. Thanks.

[G GOSWAMI]

Respected Sri Ganeshan Kalyani,

Many many thanks for your kind advice. As I was out of station it is delayed to response.

Sir, whether cenvat credit could be availed by 'A' for the despatches of material(stock transfer) by 'B'? To avoid this unnecessary freight expenditure and to save time to supply the material to the customer of A whether there is any legal way out? Kindly give your valued opinion in the matter.

Regards,

G.Goswami

11.12.2015

AI Summary

Direct dispatch from manufacturer can avoid duplicate excise charges but raises cenvat and documentation compliance issues. Dispatching finished goods directly from the manufacturing unit (B) to the customer avoids a second excise levy that can arise if B stock transfers to A and A re-invoices the customer; however, this raises issues of lawful cenvat credit utilisation, adherence to ER-1/DSA and export/central excise sealing or supervision requirements, and applicable interstate sales tax treatment.