Valuation-Central Excise-Spare Parts Division

[Sanjay Sharma]

“A” company purchase the material from “B” company and “B” Co.  repack and labels it and fix the MRP before removed the said goods to “B’ co.’s customers.

 While shipping the said goods “A” company charges the excise duty on” Transaction value” if it is direct from their manufacturing unit and on their MRP if it is from their Spare Parts Division.

 Query- Why should “B” Co.  charge the Excise duty on their MRP basis while I have to pack, re-pack or re-label it,  and then discharge the excise duty on our MRP to the ultimate consumers in the retail market. Pls. enlighten us what is the correct position of law in this regard.

 

Best Regards,

Sanjay Sharma

[YAGAY andSUN]

Spareparts must be falling under Schedule III, and under section 2(f) (iii) of the CEA,1944.

 

[Sanjay Sharma]

MR. Khatri, I would request you to understand the query before reply. What, you are saying I know that.

 

[YAGAY andSUN]

Packing , repacking and relabel tentamount to deemed manufacturing and if you are altering the MRP by removing your supplier's packing and putting your own packing then you would have to pay the C.E. on your MRP.  It is why I asked you to kindly refer the 2f iii.

[YAGAY andSUN]

Further, your company would also have to comply with the provisions as mentioned in the Legal Meterology Act, 2010.

[Sanjay Sharma]

Dear Sir,

We are paying the Exise duty on our MRP but, in my query the question is - under whcih rule supplier is charging excise duty on their MRP.

Regards,

Sanjay Sharma

[YAGAY andSUN]

Automotive components do fall under the provisions of Legal Meterology Act, 2010 (earlier it was known as Standards of Weight and Measurs Act,) .It means on the packing full details about manufacturer and marketed by, Tel No. e-mail id, Expiry etc. is required to be provided.  Further, Automotive components do fall under the Section 4A's Valuation Rules.  If your supplier (say manufacturer ) had manufactured and packed these components for the purpose of selling it to you by affixing the MRP then certaintly he would pay the C.E. Duty on the basis of MRP Valuation.

Further, if you repack it in your own packing for the purpose of selling it to ultimate customer by enhancing the MRP then you would have to pay the excise duty on the enhanced value of such goods.

Kindly also refer the Rule 5 of the CENTRAL EXCISE (DETERMINATION OF RETAIL SALE PRICE OF EXCISABLE GOODS) RULES, 2008 [Notification No. 13/2008-C.E. (N.T.), dated 01-03-2008].

Rule 5 for your kind perusal:-

Where a manufacturer alters or tampers the retail sale price declared on the package of goods after their removal from the place of manufacture, resulting into increase in the retail sale price, then such increased retail sale price shall be taken as the retail sale price of all goods removed during a period of one month before and after the date of removal of such goods:

        Provided that where the manufacturer alters or tampers the declared retail sale price resulting into more than one retail sale price available on such goods, then, the highest of such retail sale price shall be taken as the retail sale price of all such goods.

[sv bhasker]

Dear Shri  Sharma ji

When you are repacking ,relabeling of Automotive parts it amounts to manufacture as clarified by Mr. Khatri and rightly understood by you. so far so good. Charging excise duty on MRP basis by"B" company  to you  who is an industrial consumer is incorrect. They should have assessed duty under Section 4 of CEA only. As clearances to industrial consumers are excluded from the purview of legal metroly as per Rule 2A (b) of  Standards of Weights and Measures (Packaged Commodity Rules) Rules 1977.The definition is like this.Rule 2A: The provisions of this Chapter shall not apply to

(a)........................

(b) packaged commodities meant for industrialconsumers or institutional consumers.

Regards,

[Radha Arun]

The query is, why is excise duty paid on the same goods on the basis of transaction value in one transaction (from factory) and on the basis of MRPin another transaction (from spare parts godown). 

To answer this, one must know what is the packaging in which the parts are sold from the manufacturing unit. If packed for retail sale, the excise duty must be paid on the basis of MRP. If packed for wholesale, the payment of excise duty on the basis of transaction value is correct.

AI Summary

Excise Duty on Repacked Goods: Understanding MRP-Based Valuation Under Legal Metrology Act and Central Excise Valuation Rules. A discussion on the valuation of central excise duties for spare parts involves a query from a company ('A') purchasing materials from another company ('B'). 'B' repacks, labels, and sets the MRP before selling to its customers. The issue raised is why 'B' charges excise duty based on MRP when 'A' also repacks and relabels the goods, charging excise duty on their MRP. Responses clarify that repacking and relabeling constitute manufacturing, requiring excise duty on the new MRP. Legal references include the Legal Metrology Act, 2010, and Central Excise Valuation Rules, 2008, highlighting different excise duty applications based on transaction type.