Excise duty on Automobiles parts- MRP Based

[Sanjay Sharma]

We manufacturing Tractors for agriculture purpose as well as supplying the Tractor Parts to our customers from our Spare Parts Division situated in the same premises on one registration no. in Central Excise Department from 1st June-06 under cover the notification No. 14/2008-C.E.(N.T.), dated 1.03.08. Tractor is exempted for the payment of Excise duty and the “Parts, components and assemblies of any automobiles “are liable to pay the duty.

For the fulfillment the purpose of supplying the ‘Spare Parts of Tractor’ to the customers, we procure the material from the supplier’s at our “Spare Parts Division”. Some of them are supplying the material in fully packed condition and pasted our MRP stickers, means they are discharging their duty liability on our MRP claiming the abatement.

We receive the fully packed material form them and take the CENVAT Credit of the duty paid to our supplier (on our MRP) & do some labeling re-labeling on the said material and sell to our customers with charging the same duty on the basis of same MRP declared on the product already after claiming the abatement.

We can understand this here as under-

Suppose our product MRP is 216/-
Supplier paid duty on ASV = 151.20 ( after claiming abatement 70 % of MRP)
His duty liability on the clearance from their premises is Rs. 12.46 (including 3 % Cess),

Now, at our side we Charge the duty of Rs. 12.46 (the very same amt. We have availed) while sell the said mat. to the customers.

Q. No.1 Is it a valid transaction in view of the Central Excise Act.?.
Q.No. 2 Are we doing the right practice or some thing wrong in it ?.
Q.No.3 Is there any revenue loss to the Government or not ?
Q.No.4 Is mere labeling or re-labeling without including the declaration or alteration of MRP amounts to manufacture or not ?.

Dear All Experts, pls. clarify ASAP.

Regards,

Sanjay Sharma

AI Summary

Tractor Parts Duty Issue: Repacking and Relabeling Considered Manufacturing Under Rule 10A of Central Excise Valuation Rules, 2000. A company manufactures tractors and supplies spare parts, with tractors being exempt from excise duty while parts are not. They procure parts from suppliers who pay duty based on the Maximum Retail Price (MRP) and claim abatement. The company labels and sells these parts at the same duty rate. Questions arise regarding the legality of this practice under the Central Excise Act, potential revenue loss, and if labeling constitutes manufacturing. An expert responds, stating that paying duty at MRP for industrial users is incorrect and advises following Rule 10A of the Central Excise Valuation Rules, 2000, clarifying that repacking and relabeling can be considered manufacturing.