Applicability of transaction value provision for paying duty on sale value

[S S KONAR]

We are in Engineering Manufacturing Sector. Our final products, which is Electrical Furnacs, is built uo using various rawmaterials and components. We also sells thease raw materials / components as spares from our manufacturing stores. Can we apply transaction value provision for paying duty on sale value insted of credit availed on such as such material. We need your opinion supported by case laws.

[Rama Krishana]

If you go by the strict provisions of Cenvat Credit Rules, 2004, you need to pay the equal amount of cenvat credit availed on such input when you are removing such input as such. If you would apply the concept of transaction value on removal of such inputs as such, you would be in a great difficulty because, in every case you have to maintain the details for each consignment. Wherever the transaction value is less that original value or rate of duty is less than original value, you have to reverse the actual cenvat credit. So therefore, try to avoid payment duty on transaction value of inputs removed as such for your own future peace.

[S S KONAR]

Thank you for your idea. In case, we pay more duty, based on my sales price, than the input credit taken,is it a violation of Excise Rules and an offense subjest to be penalized? Expecting your views with case laws in favour.

AI Summary

Transaction value for duty on inputs removed as such risks credit reversal; comply with Cenvat Credit Rules instead.
When inputs are removed as such the Cenvat Credit Rules, 2004 require payment equal to the Cenvat credit availed on those inputs rather than permitting routine use of transaction value; using transaction value imposes detailed consignment-level recordkeeping and can trigger reversal of actual Cenvat credit where transaction value or computed duty is lower than the original credit, creating compliance difficulties.