1、ValuationNotesCHAPTER 3 VALUATION INTRODUCTION1 Basis of valuation: the exercisable goods are those which are charged to duty as per the Tariff. The duty is payable on the bass of any of the following:a. Specific dutyb. Duty based on valuei. Duty based on the tariff valueii. Duty based on the value
2、arrived at on the basis of valuation u/s 4iii. Duty based on the Maximum retail price (MRP)2 Specific duty in case of some goods duty is payable on the basis of certain unit length, weight, volume etc. However this method of levying duty demands frequent revisions in order to increase revenue since
3、while the prices may be increasing, the duty would remain the same quantum when based on length. 3 Presently, specific rates have been specified for:a. Cigarettes on the basis of lengthb. Matches per 100 boxes or packsc. Sugar on the basis of quintald. Marble slabs and dyes on the basis of square me
4、tere. Cement clinker on the basis of per tonne;f. Molasses on the basis of per tonne.4 Duty based on tariff value For certain items government may fix the tariff value as per section 323(2) of CEA 1944. in such cases assessment of duty shall be on the basis of tariff value. As on date tariff value h
5、as been fixed for pan masala (CH.2106) in retail packages.5 The central government has also got the power to alter the tariff value once fixed. The central government can also fix different values for same class or description of the goods but produced or manufactured by different classes of produce
6、rs or manufacturers.BARE ACTSECTION 4. Valuation of excisable goods for purposes of charging of duty of excise. - (1) Where under this Act, the duty of excise is chargeable on any excisable goods with reference to their value, then, on each removal of the goods, such value shall - (a) In a case wher
7、e the goods are sold by the assessee, for delivery at the time and place of the removal, the assessee and the buyer of the goods are not related and the price is the sole consideration for the sale, be the transaction value;(b) In any other case, including the case where the goods are not sold, be t
8、he value determined in such manner as may be prescribed.Explanation. - For the removal of doubts, it is hereby declared that the price-cum-duty of the excisable goods sold by the assessee shall be the price actually paid to him for the goods sold and the money value of the additional consideration,
9、if any, flowing directly or indirectly from the buyer to the assessee in connection with the sale of such goods, and such price-cum-duty, excluding sales tax and other taxes, if any, actually paid, shall be deemed to include the duty payable on such goods.(2) The provisions of this section shall not
10、 apply in respect of any excisable goods for which a tariff value has been fixed under sub-section (2) of section 3.(3) For the purpose of this section,-(a) “assessee” means the person who is liable to pay the duty of excise under this Act and includes his agent; (b) persons shall be deemed to be “r
11、elated” if -(i) they are inter-connected undertakings;(ii) they are relatives;(iii) amongst them the buyer is a relative and a distributor of the assessee, or a sub-distributor of such distributor; or(iv) they are so associated that they have interest, directly or indirectly, in the business of each
12、 other. Explanation. In this clause -(i) “inter-connected undertakings” shall have the meaning assigned to it in clause (g) of section 2 of the Monopolies and Restrictive Trade Practices Act, 1969 (54 of 1969); and(ii) “relative” shall have the meaning assigned to it in clause (41) of section 2 of t
13、he Companies Act, 1956 (1 of 1956);(c) place of removal” means -(i) a factory or any other place or premises of production or manufacture of the excisable goods;(ii) a warehouse or any other place or premises wherein the excisable goods have been permitted to be deposited without payment of duty;(ii
14、i) a depot, premises of a consignment agent or any other place or premises from where the excisable goods are to be sold after their clearance from the factory; from where such goods are removed;(cc) “time of removal”, in respect of the excisable goods removed from the place of removal referred to i
15、n sub-clause (iii) of clause (c), shall be deemed to be the time at which such goods are cleared from the factory;(d) “transaction value” means the price actually paid or payable for the goods, when sold, and includes in addition to the amount charged as price, any amount that the buyer is liable to
16、 pay to, or on behalf of, the assessee, by reason of, or in connection with the sale, whether payable at the time of the sale or at any other time, including, but not limited to, any amount charged for, or to make provision for, advertising or publicity, marketing and selling organization expenses,
17、storage, outward handling, servicing, warranty, commission or any other matter; but does not include the amount of duty of excise, sales tax and other taxes, if any, actually paid or actually payable on such goods.Notes 1. Value under the Central Excise Act, 1944 - Value of the excisable goods has t
18、o be necessarily determined when the rate of duty is on ad valorem basis.2. Transaction value u/s 4 - Section 4 of the CEA came into force from 1st day of July, 2000 (Finance Act 2000).3. This section contains the provision for determining the Transaction value of the goods for the purpose of assess
19、ment of duty. 4. The system that was prevalent before 1/7/2000 was essentially based on the concept of Normal wholesale price”, even though sales were effected at varying prices to different buyers or class of buyers from the factory gate or depots etc.5. For applicability of transaction value in a
20、given case, for assessment purposes, certain essential requirements should be satisfied. If any one of the said requirements is not satisfied, then the transaction value shall not be the assessable value and value in such case has to be arrived at under the Valuation Rules notified for the purpose.
21、The essential conditions of the TRANSACTION VALUE are:a. There is a sale of goods by an assessee.b. The goods are sold for delivery at the time of place of removal. The term “place of removal” has been defined basically to mean a factory or a warehouse, and will include a depot, premises of a consig
22、nment agent or any other place or premises from where the excisable goods are to be sold after their clearances from the factory.c. The assessee and the buyer of the goods are not related; andd. The price is the sole consideration for sale. 6. The section 4 essentially seeks to accept different tran
23、saction values which may be charged by the assessee to different customers, for assessment purposes so long as these are based upon purely commercial consideration where buyers and sellers have no relationship and price is the sole consideration for sale. 7. Thus it enables valuation of the goods fo
24、r excise purposes on value charged as per the commercial practices rather than looking for a notionally determined value.8. The provisions of this section will not be applicable in respect of excisable goods for which the tariff value has been fixed under Section 3(2) of CEA.9. Transaction value wou
25、ld include any amount which is paid or payable by the buyer to or on behalf of the assessee, on account of factum of sale of goods. 10. In other words, if, for example, an assessee recovers advertising charges or publicity charges from his buyers, either at the time of sale of goods or even subseque
26、ntly, the assessee cannot claim that such charges are not included in the transaction value. The law recognizes such payment to be part of the transaction value.11. As per section 4, the transaction value shall include the following receipts/recoveries or charges, incurred or provided for in CONNECT
27、ION WITH THE MANUFACUTURING, MARKETING, SELLING of the excisable goods:a. Advertising and publicity;b. Marketing and selling organization expenses;c. Storage;d. Outward Handling;e. Servicing, Warranty;f. Commission; org. Any other matter.The above list is not exhaustive and whatever elements which e
28、nrich the value of the goods before their marketing will be includible in the value.12. Thus, if in addition to any other amount charged as price from the buyer, the assessee recovers any other amount by reason of sale or in connection with sale, then such amount shall form part of the transaction v
29、alue. 13. Where the assessee includes all their costs incurred in relation to manufacture and marketing while fixing price payable for the goods and bills and collects an all inclusive price as happens is most of the cases where sales are to independent customers on commercial consideration the tran
30、saction price will generally be the assessable value. 14. However, where the amount charged by an assessee does not reflect the true intrinsic value of goods marketed and total value split up into various elements like special packing charges, warranty charges, service charges, etc it is to be ensur
31、ed that the duty has been paid on the correct value. 15. PACKING CHARGES: Packing charges shall form part of the transaction value as it is a charge in connection with production and sale of goods, recovered from the buyer. Any charges recovered for packing, whether ordinary or special is includible
32、 in the transaction value if the same is not included in the price of the goods. But in case of reusable containers (glass bottles, crates etc) normally the cost is amortized and included in the cost of the product itself. Therefore, the same is not required to be included in the value of the product unless it is found that the cost of reusable container has not be amortized and included in the value of the product.However, rental charges or cost of maintenance of reusable metal containers like gas cylinders etc are to be included
