Removal of small components after delivery and invoice is raised for main machine

[Anubhav Gupta]

Hi,

We are in process of delivering a machine under an invoice. However, few smaller components of them same will be removed after delivery of main machine. The cost of these components is built into the main invoice. How can we remove these goods without payment of excise as excise duty will be paid on the main invoice.

[Rajagopalan Ranganathan]

Sir,

Para 10 of chapter 4 of CBEC's Excise Manual stipulates that-

"Considering the difficulties faced by the manufacturers in documentation where a consignment of capital goods like heavy machinery, etc. which are first assembled by the manufacturer and are later disassembled only

for the convenience of transport is loaded in more than one vehicle and carried separately or at intervals, the following procedure should be followed :-

(i) The manufacturer will intimate, on case to case basis, his option to avail this special procedure in writing for the complete machinery sought to be cleared in a number of individual part consignments after first being assembled, to the jurisdictional Deputy/Assistant Commissioner of Central Excise with a copy to the jurisdictional Superintendent of Central Excise along with the description of such machinery/equipment giving its tariff classification and list of components of such machinery/equipment in dis-assembled form and its value and an undertaking in the following format :-

I / We _____________________ hereby undertake that only those components of a 'complete machinery' in terms of rule 2(a) of the interpretative rules to CETA which have first been assembled and constitute complete machinery falling under a single heading or sub heading, and which are later dis-assembled only for the convenience of transport shall be cleared under this procedure on payment of entire duty as per the classification of such machinery / equipment and no 'parts' not satisfying this criterion shall be transported with such components unless appropriate Central Excise duty as prescribed for 'parts' under the Central Excise Tariff Act, 1985 is paid.

Date:

Place:

(Authorised Signatory)

These intimations shall be given at least 48 hours prior to the removal on any working day.

(ii) Though separate verification need not necessarily be made for each and every consignment, before the removal of the first consignment, the Deputy/Assistant Commissioner should verify that the various part consignments are indeed constituents of the complete machinery which has been first assembled.

(iii) A separate invoice shall be made out in respect of each conveyance on which the part consignment is loaded.

(iv) The manufacturer will pay the entire duty on the first such invoice (hereinafter referred to as "Parent invoice") on the basis of entire value of the machinery unit/equipment. This parent invoice shall be prepared quoting all vehicle numbers, total value/duty of the consignment. An inventory shall be annexed to the invoice giving detailed item-wise description as loaded in different vehicles.

(v) The details of removals and duty payment shall be entered in Daily Stock Account.

(vi) Photocopy of the duplicate copy of the parent invoice duly attested by the authorised signatory of the Company shall accompany each conveyance.

(vii) CENVAT credit, if any, shall be taken only on receipt of parent invoice and the entire consignment.

(viii) Where the part consignments travelling in a convoy or separately do

not constitute" complete machinery" falling under a single heading or sub-heading, each such consignment will be classified on merits, say, as 'parts' and also a separate invoice showing the separate value arrived at under Section 4 of Central Excise Act, 1944 and the duty amount, must accompany each such consignment."

You may follow the above procedure.

[YAGAY andSUN]

If the cost of spare parts of the machinery under warranty clause on which excise duty already been paid while removal of machinery then such spare parts can be removed without payment of Central Excise Duty. It is a settled legal position.

AI Summary

Removal of machine components without additional duty: parent invoice procedure permits paying duty on the whole machinery and separate part consignments. A manufacturer may, after notifying the jurisdictional officer and furnishing an undertaking, disassemble a machine first assembled for transport and treat its parts as part consignments under a parent invoice. The manufacturer pays the entire duty on the parent invoice, annexes an itemised inventory, issues separate invoices per conveyance, records removals in Daily Stock Account, and CENVAT credit is available only on receipt of the parent invoice and full consignment.