Excise records to be maintained when finished goods sold to related persons.

[vinay wakde]

We are selling our finished goods to related persons as well as to non-related persons. The value of goods sold to related persons determined as per Rule 10 of the valuation rules i.e. excise duty would be payable on 110% of cost of production of such goods. Notification No. 14/2013 - CE (N.T.) dated November 22, 2013 with effect from 01.12.2013 onwards.

Kindly give your valuable guidance for keeping Excise record to avoid any litigation & to satisfy the Excise auditors during the audit of our unit.

Regards,

VINAY

[Ganeshan Kalyani]

Sir the working of cost plus ten percent for removal of goods to related is required to get certified from Cost Accountant. Thus, in my view the said certificate should suffice the audit requirement for such transactions. Thanks.

[KASTURI SETHI]

Sh. Vinay Wakde Ji,

I endorse the views of Sh.Ganeshan Kalyani, Sir. Further the Audit Officers would examine the accuracy of certificate to be issued by the Cost Accountant.Certificate is more than sufficient but the Officers can go to any extent. They may check the basis of the certificate i.e those docs on the basis of which Cost Accountant would issue certificate. So keep those records ready. It is pertinent to advise that all the relevant records asked for by the Cost Accountant must be produced before him. Nothing should be skipped.

[Suryanarayana Sathineni]

Dear Wakde,

I am afraid you might be clearing the goods to your related parties/other units of your company under Rule 8 read with Rule 11 for which value of 110% based on CAS4 certificate is prescribed.

Even under Rule 10 also if 110% is prescribed , then the views expressed by our friends are correct and not require any further inputs.

Best Regards

Suryanarayana

[vinay wakde]

Kindly give us proforma of CAS-4 certificate. Kindly inform us whether we have to obtain CAS-4 certificate on quarterly basis to avoid any interest or after completion of financial year/finalization of accounts.

Regards,

VINAY

[Ganeshan Kalyani]

Sir anyway you will have to appoint Cost Accountant, who will fulfill all the requirement as per cost accounting standards. Thus our intervention is not required. Hope you got my point. Even then if you need it we will make available for you. Thanks.

[KASTURI SETHI]

CAS-4 Certificate has to be obtained whenever there is a change in the cost structure of the product. Prescribed Pro forma is available on the internet. However, final solution is with Cost Accountant as rightly advised by Sh.Ganeshan Kalyani, Sir.

[vinay wakde]

As per Circular No. 975/9/2013-CX dated 25.11.2013, the valuation to be done ( as per rule 8 of the Valuation Rules i.e. the assessable value will be 115% of the “cost of production” of the goods) in cases of captive consumption (i.e. consumed within the same factory) including transfer to a sister unit or another factory of the same company/firm for further use in the manufacture of goods. Kindly go through the same and confirm whether Assessable value will be @ 110% or @115%.

AI Summary

Related party valuation: obtain a cost accountant certificate certifying the prescribed mark up and retain supporting records. Related party sales must be supported by a Cost Accountant certificate (CAS 4) certifying the prescribed mark up on cost and by the underlying cost records; auditors may examine the basis of the certificate. CAS 4 should follow cost accounting standards and be obtained when cost structure changes. Engage a cost accountant to determine assessable value and timing of certification. An administrative circular prescribing a different mark up for captive consumption raises a question whether that mark up or the related party provision governs transfers within group units.