Production Storage and Accounting of Finished Goods manufactured - Central Excise Practice Manual (OLD) - Central Excise

ACCOUNTING AND STORAGE OF FINAL GOODS According to Rule 4(1) of Central Excise Rules, goods cannot be removed from the place of manufacturing or production without payment of duty. Thus goods can be stored in place of manufacture without payment of duty (with no time constraint). However proper records have to be maintained by the assessee, of the goods manufactured in an account called 'Daily Stock Account' [earlier in RG-1 register]. Storage outside the factory without payment of duty: Goods (and inputs received under cenvat) can be stored in other premises outside the factory, only after taking permission from jurisdictional authority, having regard to nature of goods or shortage of storage premises of the manufacture where goods are manufactured otherwise, the goods will be liable to confiscation. However commissioner can impose certain conditions to safeguard the revenue. For e.g. a bond may be asked to secure the duty liability. Accounting of final product produced: 1. The records should be maintained on daily basis for 'fully manufactured goods' by making one entry at the end of the day and not several entries for the same day, indicating following particulars: Description of goods manufactured Opening balance Quantity produced Quantity cleared/removed Closing balance Assessable value Duty payable details (i.e. amount, rate etc.) In case of assessee working in 3 shifts, they can enter fully manufactured goods in daily Stock Account before completion of 1 st shift of the day. 'Fully manufactured goods' is defined to include all activities incidental or ancillary to the completion of a manufactured products. For e.g. packing and testing activities has been considered as part of manufacturing process. Thus goods can be entered in daily stock account only when goods has been fully manufactured, duly packed and tested. Records of unfinished goods need not be entered at every stage. 2. The daily stock account should be duly authenticated by the following: The producer or manufacturer, or The any authorized agent. 3. Such records should be kept or preserved for 5 years [Rule 10(3)]. 4. Separate daily stock account should be maintained by the assessee for each product manufactured by him, even if he manufactures several grades/qualities of the same products. Accounting of goods taken out for Reprocessing without payment of duty: 1. Goods shall be taken out for reprocessing only after making entry in Daily Stock Account. 2. It is advisable to show this fact by way of note in ER-1 / ER-2 return [though not legally required. 3. Defective Bottles: defective bottles can be removed from store for making fresh bottles, without payment of duty. But in case duty is paid, credit will be available to the manufacturer. Storage for trading activity: Though there is no prohibition on the manufacturer if wants to undertake trading activity from his factory but it is advisable if he stores the goods in separate premises especially if he trades in goods manufactured by him. In other case he has to observe the following: 1. Proper records should be maintained. 2. The fact should be disclosed in part-II of Form A-1 (which is an application for registration). 3. Separate registration certificate as 'dealer' should be obtained if he intends to issue cenvatable invoice. 4. Separate series of invoices may be used as 'dealer's invoice' and inform to the department. Remission of duty: If goods stored in stock room are damaged /destroyed, remission of duty can be obtained.