Rate of Duty Effect on Stock transfer

[Vivek anandhan]

Dear Experts

We are Stock transferring our manufactured goods to other state (Selling Point / Godown) on duty payment at present rate of duty and selling to end customer from stock point.

What is the impact of duty rate in case of increase or decrease in Budget for stock available at our stock point.

Regards

Vivekanandhan

[Rajagopalan Ranganathan]

Sir,

Rate of duty and valuation of excisable goods will be the rate and transaction value prevailing on the date of removal from the factory gate even if you remove the same to your stock point (Depot). if the rate of duty is enhanced or reduced on the date selling your goods from stock point will not affect the duty already paid on the goods at the time of removal from the factory.

[Ganeshan Kalyani]

Central Excise duty is on removal of goods from factory gate. Therefore the rate prevalent at the time of dispatch of the goods from the factory will be applicable. If the goods manufactured before the before Budget and if at all the duty rate changes the new rate will become applicable.

[Ganeshan Kalyani]

Further if you remove the goods from factory by paying excise duty and the goods are lying at the selling point/godown then there is no impact on the goods lying at later place with the change in excise duty rate in the Budget as duty is already been paid.

[Mahir S]

Sir,

There are 2 aspects to the query.

1. Subsequent Price reduction of goods cleared from factory and lying at depot.

When the goods are cleared to depot on stock-transfer basis from where the goods are thereafter ordinarily sold, then the price prevalent at the same time or at the nearest point of time at the depot should be ascertained and on that price duty liability has to be discharged.

2. Impact of duty rate in case of increase or decrease due to Budget for stock available at depot.

The goods shall be cleared at the duty rate prevalent on the date of its clearance from the depot, irrespective of its duty rate at the time of its clearance from factory gate.

[KASTURI SETHI]

Dear all Experts,

Sh.Vivek Anandhan has ignited an issue which is interesting and thought provoking.

In order to ascertain whether there is any impact of increase or decrease of rate of Central Excise duty on Budget day on the excisable goods stock-transferred to selling point/depot or not, the place of removal is a vital factor. The place of removal has to be determined in pursuance of the judgement of Supreme Court in the case of Ispat Industries Ltd. Vs. CCE Nagpur reported as 2015 (324) ELT 670 (SC) = 2015 (10) TMI 613 - SUPREME COURT read with Board's Circular Nos. 999/6/2015-CX, dated 28-2-2015 & 988/12/2014-CX, dated 20-10-2014.The essence of the judgement and these circulars is that the place of removal has to be determined in terms of Sale Goods Act, 1930.In the subject case, the place of removal is depot/selling point. Hence the rate of duty in force on the date of clearance from the depot would be applicable on the stock-transferred goods.

In view of the above, I am of the view that there would be impact of rate of duty whether increased or decreased on Budget Day on the stock transferred goods. Hence I fully agree with Sh.Mahir S, Sir. At the same time I request Sh.Ganeshan Kalyani, Sir and Sh.Rajagopalan Ranganathan, Sir to throw more light on their reply so as to enable me to understand whether I am right or in the wrong.Thanks a lot.

 

[Rajagopalan Ranganathan]

Sir,

Section 4 (3) (c) (iii) of Central Excise Act, 1944 stipulates that "place of removal" means a depot, premises of a consignment agent or any other place or premises from where excisable goods are to be sold after their clearance from the factory (as amended with effect from 14.05.2003)

Section 4 (3) (cc) of Central Excise Act, 1944 stipulates that "time of removal", in respect of the excisable goods removed from the place of removal referred to in sub-clause (iii) of clause (c) shall be deemed to be the time at which such goods are cleared from the factory.

In other words, in case of sale from selling point/Depot duty will be payable on the price prevailing at selling point/Depot as on date of removal from factory. Price at which goods cleared to selling point/Depot are subsequently sold from selling point/Depot is not relevant for purpose of excise valuation.

According to Explanation-2 to rule 5 of Central Excise Valuation (Determination of Price of Excisable goods) Rules, 2000, "the cost of transportation from the factory to the place of removal, where the factory is not the place of removal, shall not be excluded for the purposes of determining the value of the excisable goods.

According to rule 7 of Central Excise Valuation (Determination of Price of Excisable goods) Rules, 2000, "where the excisable goods are not sold by the assessee at the time and place of removal but are transferred to a dept, premises of a consignment agent or any other place or premises (hereinafter to as "such other place") from where the excisable goods are to be sold after their clearance from the place of removal and where the assessee and the buyer of the said goods are not related and the price is the sole consideration for the sale, the value shall be the normal transaction value of such goods sold from such other place at or about the same time and, where such goods are not sold at or about the same time, at the time nearest to the time of removal of goods under assessment.

Para 19 (2) of CBEC' s letter F.No. 354/81/2000- TRU , Dated. 30/06/2000 illustrates that if an assessee transfers a consignment of paper to his depot from Delhi to Agra on 5.7.2000, and that variety and quality of paper is normally being sold at the Agra depot on 5.7.2000 at transaction value of ₹ 15,000 per tone to unrelated buyers, where price is the sole consideration for sale, the consignment cleared firm the factory at Delhi on 5.7.2000 shall be assessed to duty on the basis of ₹ 15,0000 per tone as the assessable value. If assuming that on 5.7.2000 there were no sales of that variety from Agra depot but the sales were effected on 1.7.2000, then the normal transaction value on 1.7.2000 from the Agra depot to unrelated buyers, where price is the sole consideration shall be the basis of assessment.

It is held by Supreme Court in Wallace Flour Mills Co. Ltd vs.CCE [1989 (9) TMI 106 - SUPREME COURT OF INDIA] that rate applicable at the time of clearance from the factory will be applicable for payment of duty. Therefore once the excisable goods cleared from the factory paying duty at a particular rate, the Department is precluded from collecting additional duty in view of enhancement of duty rate in the Budget or the assessee is not eligible to claim refund on the ground that the rate of duty had been lowered in the Budget. This is my opinion. Contrary views are welcome to expand my knowledge.

[KASTURI SETHI]

Sh.Rajagopalan Ranganathan Ji,

Sir, You have not touched Board's Circular dated 28.2.15 and the judgement of the Supreme Court in the case of Ispat Industries Ltd mentioned in my reply above. Emphasis has been laid on, "Place of removal is to be determined on the basis of Sale of Goods Act". In other words, Sale of Goods Act not be brushed aside.If the place of removal is to be determined on the basis of Sale of Goods Act, time of removal, considering factory gate as place of removal etc. are relegated into the background.

Will you please oblige me by commenting upon the above aspect ? Thanks a lot.

AI Summary

Place of removal principle governs excise duty for stock transferred goods; depot clearance date can determine applicable rate. Whether Budget day changes in excise rate affect stock transferred goods depends on the place of removal and time of removal. If depot/selling point is the place of removal, duty and value are fixed by the depot clearance date and prevailing rate; if factory gate is treated as place/time of removal, the factory clearance date and rate govern and subsequent changes do not alter duty already paid. Statutory definitions, valuation rules, CBEC guidance and judicial authority inform this determination.