Can we take the mould on lease basis.

[Guest]

Dear Sir,

We are a manufacturer of Electrical Apparatus . If some our Export customer want some unique design for that he want to send us mold on lease basis on his mould we produce one his parts and we making on that parts after tah we sold this material to this customer.

(1) Is this transaction possible in Excise point of view.

(2) Or can we purchase the mould from the customer permanently and we produce it ?

(3) If there is logo of customer on this product in that can we produce this parts with their logo ?

Regards

Swapneswar

[Rajagopalan Ranganathan]

Sir,

If you import the mould from your foreign customer, then you have to pay the appropriate import duties under Customs Act. However you can take the credit of CVD and SAD and utilize the same for payment of duty on excisable goods cleared for home consumption..

Since mould is a capital goods as per rule 4 (3) of Cenvat Credit Rules, 2004 "the CENVAT credit in respect of the capital goods shall be allowed to a manufacturer, provider of output service even if the capital goods are acquired by him on lease, hire purchase or loan agreement, from a financing company.

Since the mould contains the trade mark of your customer I feel he will not sell it to you.

The value of such mould is to be amortised and added to the value of component manufactured for your customer.

I am not able to understand your third question. Please elaborate.

[KASTURI SETHI]

Sh.Swapneswar Muduli Ji,

By question no.3, I think you are asking whether you can use the brand name (logo) on the part manufactured (by you) with the branded/imported mould.You want to you use the brand name of mould on your product (Part). Pl. confirm whether this is the essence of question no.3 so as to enable the experts for posting rply.

[Mahir S]

(1) Yes, after adding amortised cost of the toold and dies to the transaction value.

(2) Yes, you can, if allowed by the customer

(3) Yes, you can emboss the logo of your customer on their goods manufactured by you.

[Guest]

Dear All thanks for your guide.

My 3rd question is if we purchase the mold from customer or take on lease basis if on this mold there brand mane or any logo of this customer in that case are we able to produce the product on his brand name or logo as per legal point of view ?

Because it's one type of brand name of logo used by us of the customer it's will attract the job work or some legal issue also ?

Regards

Swapneswar Muduli

[KASTURI SETHI]

Affixing brand name or embossing logo on the product make t it marketable. Hence a manufacturing process.Sh.Mahir S, Sir has already given reply to your queries.You will export your product to the same supplier. No question of duty. It is not job work.

[Suryanarayana Sathineni]

Dear sirs,

In my view is it really required to purchase or take on lease the subject mould?

can the customer supply free of cost considering that the said mould can be used only for his product and the relevant conditions be incorporated in the export order and to re-export such mould along with the export good.

The above views are to explore the possibility to avoid purchase and amortizatization etc

Regards

Surya

AI Summary

Cenvat credit on leased capital goods permits credit for imported moulds, with amortised cost added to product value. If the mould is imported, customs duties apply but CVD and SAD credit may be taken; Cenvat credit for capital goods is available even when acquired on lease and the mould's cost must be amortised and added to the value of components produced. Embossing a customer's logo on parts is treated as manufacturing (not job work) and is permissible if contractually permitted; exporting the goods back to the supplier would avoid excise. Alternatively, the customer may supply the mould free for re-export with the goods to avoid purchase and amortisation.