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

[sv bhasker]

 

Dear Mr Sharmaji

Paying duty at MRP rate while supplying goods to your ' spare parts division' is not in accordance with provisions of law as MRP provisions are not applicable to industrial users. The correct thing would have been advising your supplier manufcaturer to discharge duty on MRP in terms of Rule 10A of  Central Excise Valuation Rules,2000 and clear to you depos from their premises without bringing the goods to your division.

Wherever repacking ,re labelling  of automoblie components ,takes place in your division on the goods supplied by others by adopting valuation under Section 4 and not 4A, such process amounts to manufcature in terms of section 2(f)(iii) of CE Act, 1944 and you can clear those goods in unit packs under MRP assessment under Section 4A as the goods are meant for retail sale.

AI Summary

MRP-based excise duty: industrial users cannot be charged MRP duty; repacking may constitute manufacture permitting MRP assessment. MRP valuation is not appropriate for supplies to industrial users or in-house spare parts divisions; such clearances should follow valuation rules applicable to industrial supplies and depot clearances, allowing legitimate CENVAT credit to the receiver. Repacking or relabelling of supplied automobile components may constitute manufacture, and where such processing produces retail unit packs the goods may then be assessed on MRP under the MRP assessment framework.