Excise Duty on tools cost - Regarding

[SAKTHIVEL PONNUSWAMY]

Dear All,

Could you please give your views in the following situation on applicability of central excise duty or not?

A Ltd. is the manufacturer of automobile components, whereas its customer, B Ltd., requested for components suited for their requirements. To manufacture such a components a special purpose tool required to be developed. A Ltd. developed tools in its factory with the facility available in the A Ltd.'s factory.

Now A Ltd. is raising an invoice for the tools developed for B Ltd.'s Components and requested B Ltd. to pay the invoice upfront. A Ltd. Clearly communicated to B Ltd. that it will not amortize tool cost in the final invoice of components manufacture by using those tools.

In this scenario,

1. A Ltd need to charge Excise duty in the tool invoice?

2.If A ltd. charges excise duty in the tool invoice, B Ltd. is not agreeing for the same on the ground that the movement of goods not involved, hence they cannot take cenvat credit of the duty charged in the tools invoice

3.is it required to sent back the tools within 2 years, if so, from which date the 2 years period can be calculated.

Regards,

SAKTHIVEL PONNUSWAMY

AI Summary

Automobile Parts Maker A Ltd. Faces Excise Duty Query on Tool Development Costs for B Ltd. under Notification Rules A Ltd., an automobile components manufacturer, developed special tools for B Ltd. to meet specific requirements. A Ltd. invoiced B Ltd. for the tool development without amortizing the cost in the final product invoice. The query revolves around whether A Ltd. should charge excise duty on the tool invoice. One response suggests that A Ltd. need not pay duty on the tools as they are captively consumed under a specific notification, but if returned, duty on the depreciated value is payable. Another response indicates the department may require excise duty on the tool's amortization cost, even if not charged by A Ltd.