LOAN LICENSE, Central Excise

[VAISHALI JOHSI]

Dear All,

I need detailed excise procedure for the following business model:

Company XYZ manufacture their product on loan license basis at premises of Company ABC

ABC buys the complete raw material and packaging material for XYZ on their name

XYZ needs to take the finished goods delivery to their Warehouse and cut the Excise gate pass on their name only.

Is stock Transfer procedure in this case is valid

Please advice correct excise procedure

Posts / Replies

[KASTURI SETHI]

SH.VAISHALI JOHSI Ji,

In this case, first of all it is to be ascertained who is, de fecto, manufacturer ? It depends upon the terms and conditions of the agreement between both the parties. If the agreement is on principal to principal basis, (and not of principal and agent), ABC is a manufacturer and stock transfer procedure is valid. This is in view of the judgement of the Apex Court which is appended below:-

2015 (318) E.L.T. 545 (S.C.) - 2015 (4) TMI 355 - SUPREME COURT  COMMISSIONER OF C. EX., GOA Versus COSME FARMA LABORATORIES LTD.

[KASTURI SETHI]

Regarding the procedure of removal of goods to warehouse on stock transfer basis (without payment of CE duty), it has been laid down in Chapter 10 Part-I of CBEC's Supplementary Manual. Board's Circular Nos.579/16/2001-CX dated 26.6.2001 and 581/18/2001-CX dated 29.6.2001 and 976/10/2013-CX dated 12.12.2013.