Exempted and dutiable goods – credit – can 10% be collected from customers?
When credit is taken on inputs used in the manufacture of exempted and dutiable goods, as is well known 10% of the price of the final product has to be paid to the department. Now can this 10% be collected from the customers? You can, but the government will collect that also from you. May be if you collect it as excise duty, the government will pounce on you, but if the invoice says, it is some amount required to be paid under some rules, Section 11D will not be attracted. Tribunal benches have taken contradictory views and the
Bangalore bench had observed, This amount is not considered as duty. There is no law, which says that they should not collect this amount of 8% from the buyer of the goods.
Yesterday the Chandigarh Central Excise Commissioner issued a press note that manufacturers supplying pipes to water projects in
Punjab and Himachal Pradesh have evaded excise duty to the tune of Rs. 4.5 Crores. They were availing the exemption and still collecting this 10% from the state governments and according to him failed to pay this 10% to the government. The Commissioner observed another modus operandi - the manufacturer, to keep the mischief under cover, inflated the prices of goods to the extent of 10 per cent, and showed the clearances at nil rate of duty. Any problem?