Our company is engaged in the manufacturing and trading of engineering equipment. We have raised supplementary invoices on our customers on account of a price revision of goods, with retrospective effect. We would like to know whether the amount recovered through the supplementary invoice would be liable to excise duty and whether interest would be payable on the same?
The amount recovered by the issue of supplementary invoice would have to be included in the transaction value of goods sold. Accordingly, excise duty would be payable on the same.
Based on the Supreme Court judgment in the case of CCE, Pune v SKF India Ltd and High Court judgment in the case of Bharat Heavy Electricals Ltd v CCE, Bangalore III, a company would not be liable to pay interest for the delayed payment of excise duty only in cases where the price revision of goods is on account of a reason beyond its control, such as an increase in electricity duty tariffs with retrospective effect, resulting in an increase in the cost of production.
In case the supplementary invoices are issued in the normal course of business, demanding the balance amounts from customers, the same would be construed to be short-payment of excise duty and accordingly interest would be levied.
Freight is part of sale price
We are a registered dealer under the Uttar Pradesh VAT Act. We purchase certain goods from a registered dealer in Delhi after paying the CST. The Delhi dealer is also charging CST on the freight amount incurred on the transportation of goods. Since the CST charged becomes a cost to the company, we wish to know whether freight is included in the sale price for the purpose of charging CST. Also, whether the CST cost can be reduced by charging freight as a separate component. Please suggest.
As per the Central Sales Tax Act, 1956, ?Sale price? means the amount payable to a dealer as consideration for the sale of any goods, less any sum allowed as cash discount according to the practice normally prevailing in the trade, but inclusive of any sum charged for anything done by the dealer in respect of the goods at the time of or before the delivery thereof other than the cost of freight or delivery or the cost of installation in cases where such cost is separately charged.
The Supreme Court in the case of Hindustan Sugar Mills Ltd Vs State of Rajasthan, held that if the contract is ex-destination or to be delivered at the desired location as directed by the buyer(s), the freight incurred in delivering the goods will form part of the sale price, notwithstanding the fact that it may be charged separately.
Given the above, in case the company?s contract with the Delhi dealer is ex-destination, then the freight charged would form part of sale price liable to CST irrespective of the fact whether the same is billed separately or not.
Duty payment via credit scrip
We manufacture high-end resolution display boards from our factory located in Uttar Pradesh and undertake export of the same. Since our substantial activities are related to exports, we intend to obtain duty credit scrips, taking into consideration that the same would be used to neutralise the incidence of customs duty on the import content. We would like to be cautious and therefore understand whether the customs authorities can, for any reason, demand duty on credit scrips obtained?
The Supreme Court in the case of CCE vs Aafloat Textiles Private Limited has held that in case where the importer has used duty credit scrips for making payment of duty and it is subsequently discovered that the duty credit scrips were forged, following the principle of caveat emptor, the customs authorities can rightly recover the duty not paid on imports by the importer.
Accordingly, the your company should take reasonable precautions prior to procuring duty credit scrips and should ensure that the duty scrips are of proper value and have been obtained validly.
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