Sales of Used oil from transformer

[Asked by Guest]

Dear Sir,

We are a manufacturer and we used the electrical transformer in our factory for our home use.

We sale the used oil from our factory which we have used in electrical transformer.

When we purchase the lubricant oil at that time we taken credit 14%.

So the time of sale how much % Excise we will charge in this transaction and is this TCS will applicable on this transaction as we are sale this material as a scrap.

Regards

Swapneswar Muduli.

[Ganeshan Kalyani]

The used lubricant oil does not loose it's character of lubricant and can be used as lubricant by the buyer hence it ia still a petroleum product and excise duty is payable at the rate at which it was purchased. Secondly if you remove used oil as scrap then 'scrap' attracts 1% TCS to be collected from the payment to be received from buyer.

[Ganeshan Kalyani]

correction ' * 'at the rate at which it was purchased' to read as "at prevailing rate".

[YAGAY and SUN]

In vikrant Tyres v CCE 2004 171 ELT 23 (CESTAT),= 2004 (7) TMI 113 - CESTAT, BANGALORE it was held that waste oil does not emerge from process of manufacture and hence is not dutiable.

[rajkumar shukla]

is it duty payment or reversal of credit.

[Himanshu Sharma]

Hi!

The question here is ED payable on Spent Lube

Answer is yes as this is generated out of manufacturing process. Secondly it is marketable and movable without loosing it identity.

Question ED % <> Rate of duty prevailing the the time of disposal

Please be noted TCS @ 1.133% will be applicable

Himanshu

[Rajagopalan Ranganathan]

Sir,

Electrical transformer is a capital goods. Transformer oil used in the said transformer also qualifies as capital goods as definition of 'Capital goods' contained in rule 2 (a) (A) (iii) of Cenvat Credit Rules, 2004 since transformer oil is an accessory of the transformer on the ground that without transformer oil the transformer cannot function.

As per rule 5A (b) “input service” means any service, -

(i) used by a provider of ²⁶[output service] for providing an output service; or

(ii) used by a manufacturer, whether directly or indirectly, in or in relation to the manufacture of final products and clearance of final products upto the place of removal,

As per sub-rule 5 (A) (b) of rule 3 of Cenvat Credit rules, 2004, if the capital goods are cleared as waste and scrap, the manufacturer shall pay an amount equal to the duty leviable on transaction value.

In view of the above you have ti discharge duty on the transaction value @ 12.5%.

[Ganeshan Kalyani]

Thanks for the information.

AI Summary

Excise duty on used transformer oil may apply; classification as capital goods or scrap affects duty and TCS obligations.
Sale of used transformer oil may be taxable because the oil can remain a marketable petroleum product; contributors state excise duty is payable at the prevailing rate on disposal. Alternatively, if transformer oil is treated as capital goods and cleared as scrap, cenvat rules require payment of duty equal to that leviable on transaction value. TCS on scrap receipts is also noted as applicable.