Stock transfer

[Krishna Kumar]

Sir,

We have a manufacturing unit at Alappuzha and a sales depot at Mumbai. We would like transfer goods from Factory to depot .Our Marketing staff takes orders from Maharashtra. We would like to raise invoices for the transferred goods from Maharashtra. Kindly advice the procedure in detail. right from Stock transfer.

Thanking you

Krishna Kumar

[MUKUND THAKKAR]

We would like transfer goods from Factory to depot -----. please raised excise invoice name and address of your depot. please clearly mention in invoice stock Transfer. need not charge to VAT/ CST. your Maharashtra depot.must be registered with under sales tax dept. your Maharashtra depot will be issue F from.

After receiving Maharashtra depot raise invoice in favour of your Maharashtra customer with applicable Taxes likes VAT from Maharashtra depot.

[Krishna Kumar]

Sir,

CST to be charged while moving goods from Factory ? Vat when selling to a customer in Maharashtra ? AM i right ?

/

[MUKUND THAKKAR]

Remember basic concept of VAT and CST.. same is applicable in case of sales. as you mention that you are just doing stock transfer in such transaction owner ship of goods is remain same. sales from depot to customer owner ship of goods will be change.. so what ever tax VAT/ CST same is chargeable from depot, not from your place..

[Krishna Kumar]

Sir,

You mean to say that I can move the goods out of factory without paying duty if it is stock transfer

Regards,

Krishna Kumar

[MUKUND THAKKAR]

we are discussing about VAT and CST. in case of stock transfer.

excise duty need to charge in case of stock transfer.

[Rajagopalan Ranganathan]

Sir,

Section 4 (3) (c) (iii) of Central Excise Act, 1944 [as amended with effect from 14.5.2003] provides that in case of sale at depot/consignment agent, the depot/place of consignment agent will be the 'place pf removal'. As per section 4 (3) (cc) of Central Excise Act, 1944, in case of sales from depot/consignment agent, 'time of removal' shall be deemed to be the time at which the goods are cleared from the factory.

In other words, in case of sale from depot/place of consignment agent, duty will be payable on the price prevailing at the depot/place of consignment agent as on date of removal from the factory. Price at which such goods are subsequently sold from the depot is not relevant for the purpose of excise valuation.

As per Explanation 2 to rule 5 of Central Excise Valuation Rules, if factory is not the "place of removal', cost of transportation from the factory to place of removal shall not be excluded for the purpose of determining the value of excisable goods. In other words cost of transportation and handling from factory up to depot/place of consignment agent will have to be added for the purpose of valuation, as depot/place of consignment agent is 'place of removal'.

When goods are sold through depot/consignment agent, there is no 'sale' at the time of removal from the factory. As per rule 7 of Valuation Rules in such cases, price prevailing at depot/consignment agent (but at the time removal from the factory) shall be the basis of Assessable Value. The value should be "normal transaction value' of such goods sold from the depot at the time removal or at the nearest time of removal from factory.

For example, if an assesse 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 ₹ 15000 per metric ton to unrelated buyers, where price is the sole consideration for sale, the consignment cleared from the factory at Delhi on 5.7.2000 shall be assessed to duty on the basis of ₹ 15000 per ton as assessable value.

[Ganeshan Kalyani]

Nicely explained by Sri Mukund Ji and Sri Rajagopalan Sir.

For Excise, i totally agree with Sri Rajagopalan Sir. And for VAT/ CST i agree with Sri Mukund Ji. VAT /CST is not applicable on stock transfer of goods from factory at Kerala to Depot. And applicable VAT shall be levied on sale from depot in Maharashtra.

However, there are litigation in this case. Sri Krishna Ji has mentioned in his query that the factory at Kerala receives order from the depot at Maharashtra and based on the same they send the goods to their depot. Here the law says that if customers are predetermined i.e. before doing stock transfer the prospective customers are known then the transaction would be Interstate sale and applicable CST would be levied.

Thus CST @2% would be levied on the value of transaction from factory at Kerala to depot in Maharashtra if the customers are able to issue you declaration in Form C. Otherwise CST at full rate applicable for that goods would be applicable.

This is my view. Thanks.

[YAGAY andSUN]

In the matter of Stock Transfer, proportionate ITC shall also be reversed. Further, intended goods must be incorporated in the VAT/CST Registration Certificate prior to such transfer at the both locations i.e. Factory/Depot.

[KASTURI SETHI]

Dear Querist,. Stock transfer does not involve the element of sale whether Central Excise or VAT. If VAT is paid at the factory gate, it is sale and not stock transfer. Place of removal is factory gate. Go through Board' circular no. 999/6/2015- CX dated 28.2.15 based on the judgement of Hon'ble Supreme Court. If place of removal is changed, valuation will be changed. It is in context of present position of law.

[YAGAY andSUN]

We are sharing with your following two relevant judgements to validate the views as shared by Respected Kasturi Sir:-

Depot Price not relevant if ordinary sales were from different depots.	Brakes India v CCE 2005 (184) ELT 179 (CESTAT). = 2005 (1) TMI 211 - CESTAT, CHENNAI
In terms of Rule 7, in case goods not sold from the factory but transferred to the depot the price prevailing at depot at the time of removal of the goods from the factory shall apply as transaction value.	M/s. Mahindra & Mahindra Ltd. versus Commissioner of Central Excise and Customs, Nashik 2015 (4) TMI 603 - CESTAT MUMBAI

[Himansu Sekhar]

Sir,

In this case

1. Apply for provbisdionasl assessment

2. Raise the invoice and pay the duty on the goods while clearting from thefactyory at the rate prevailing at the depot for simillasr goods

3. If there is no clearance on the day take the nearest price of the depot

4. If more clearances are there take the rate where the highest quantity is cleared.

5. If the depot price is not ascertainable pay the duty on a provisional price and calculate the actual price later on invboicewise

6. If something more is paid against an invoice you cannot addjust it

Thanks

AI Summary

Place of removal determines excise valuation for stock transfers; depot transaction value governs duty liability on removal. Stock transfers to a depot invoke central excise liability with the depot as the place of removal, requiring duty assessed on the depot's prevailing transaction value at the time of removal, including transport and handling to the depot where applicable. VAT/CST is generally chargeable on subsequent sales from the depot, not on the transfer itself, but predetermined customer consignments may attract CST. Depots must be sales-tax registered, reverse proportionate input tax credit when required, and procedural mechanisms such as provisional assessment may be used pending ascertainment of depot prices.