ValuationNotes.docx
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ValuationNotes.docx
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ValuationNotes
CHAPTER–3VALUATION
INTRODUCTION
1Basisofvaluation:
theexercisablegoodsarethosewhicharechargedtodutyaspertheTariff.Thedutyispayableonthebassofanyofthefollowing:
a.Specificduty
b.Dutybasedonvalue
i.Dutybasedonthetariffvalue
ii.Dutybasedonthevaluearrivedatonthebasisofvaluationu/s4
iii.DutybasedontheMaximumretailprice(MRP)
2Specificduty–incaseofsomegoodsdutyispayableonthebasisofcertainunitlength,weight,volumeetc.Howeverthismethodoflevyingdutydemandsfrequentrevisionsinordertoincreaserevenuesincewhilethepricesmaybeincreasing,thedutywouldremainthesamequantumwhenbasedonlength.
3Presently,specificrateshavebeenspecifiedfor:
a.Cigarettes–onthebasisoflength
b.Matches–per100boxesorpacks
c.Sugar–onthebasisofquintal
d.Marbleslabsanddyesonthebasisofsquaremeter
e.Cementclinkeronthebasisofpertonne;
f.Molassesonthebasisofpertonne.
4Dutybasedontariffvalue–Forcertainitemsgovernmentmayfixthetariffvalueaspersection323
(2)ofCEA1944.insuchcasesassessmentofdutyshallbeonthebasisoftariffvalue.Asondatetariffvaluehasbeenfixedforpanmasala(CH.2106)inretailpackages.
5Thecentralgovernmenthasalsogotthepowertoalterthetariffvalueoncefixed.Thecentralgovernmentcanalsofixdifferentvaluesforsameclassordescriptionofthegoodsbutproducedormanufacturedbydifferentclassesofproducersormanufacturers.
BAREACT
SECTION4.Valuationofexcisablegoodsforpurposesofchargingofdutyofexcise.-
(1)WhereunderthisAct,thedutyofexciseischargeableonanyexcisablegoodswithreferencetotheirvalue,then,oneachremovalofthegoods,suchvalueshall-
(a)Inacasewherethegoodsaresoldbytheassessee,fordeliveryatthetimeandplaceoftheremoval,theassesseeandthebuyerofthegoodsarenotrelatedandthepriceisthesoleconsiderationforthesale,bethetransactionvalue;
(b)Inanyothercase,includingthecasewherethegoodsarenotsold,bethevaluedeterminedinsuchmannerasmaybeprescribed.
Explanation.-Fortheremovalofdoubts,itisherebydeclaredthattheprice-cum-dutyoftheexcisablegoodssoldbytheassesseeshallbethepriceactuallypaidtohimforthegoodssoldandthemoneyvalueoftheadditionalconsideration,ifany,flowingdirectlyorindirectlyfromthebuyertotheassesseeinconnectionwiththesaleofsuchgoods,andsuchprice-cum-duty,excludingsalestaxandothertaxes,ifany,actuallypaid,shallbedeemedtoincludethedutypayableonsuchgoods.
(2)Theprovisionsofthissectionshallnotapplyinrespectofanyexcisablegoodsforwhichatariffvaluehasbeenfixedundersub-section
(2)ofsection3.
(3)Forthepurposeofthissection,-
(a)“assessee”meansthepersonwhoisliabletopaythedutyofexciseunderthisActandincludeshisagent;
(b)personsshallbedeemedtobe“related”if-
(i)theyareinter-connectedundertakings;
(ii)theyarerelatives;
(iii)amongstthemthebuyerisarelativeandadistributoroftheassessee,orasub-distributorofsuchdistributor;or
(iv)theyaresoassociatedthattheyhaveinterest,directlyorindirectly,inthebusinessofeachother.
Explanation.—Inthisclause-
(i)“inter-connectedundertakings”shallhavethemeaningassignedtoitinclause(g)ofsection2oftheMonopoliesandRestrictiveTradePracticesAct,1969(54of1969);and
(ii)“relative”shallhavethemeaningassignedtoitinclause(41)ofsection2oftheCompaniesAct,1956(1of1956);
(c)placeofremoval”means-
(i)afactoryoranyotherplaceorpremisesofproductionormanufactureoftheexcisablegoods;
(ii)awarehouseoranyotherplaceorpremiseswhereintheexcisablegoodshavebeenpermittedtobedepositedwithoutpaymentofduty;
(iii)adepot,premisesofaconsignmentagentoranyotherplaceorpremisesfromwheretheexcisablegoodsaretobesoldaftertheirclearancefromthefactory;
fromwheresuchgoodsareremoved;
(cc)“timeofremoval”,inrespectoftheexcisablegoodsremovedfromtheplaceofremovalreferredtoinsub-clause(iii)ofclause(c),shallbedeemedtobethetimeatwhichsuchgoodsareclearedfromthefactory;
(d)“transactionvalue”meansthepriceactuallypaidorpayableforthegoods,whensold,andincludesinadditiontotheamountchargedasprice,anyamountthatthebuyerisliabletopayto,oronbehalfof,theassessee,byreasonof,orinconnectionwiththesale,whetherpayableatthetimeofthesaleoratanyothertime,including,butnotlimitedto,anyamountchargedfor,ortomakeprovisionfor,advertisingorpublicity,marketingandsellingorganizationexpenses,storage,outwardhandling,servicing,warranty,commissionoranyothermatter;butdoesnotincludetheamountofdutyofexcise,salestaxandothertaxes,ifany,actuallypaidoractuallypayableonsuchgoods.
Notes
1.ValueundertheCentralExciseAct,1944-Valueoftheexcisablegoodshastobenecessarilydeterminedwhentherateofdutyisonadvalorembasis.
2.Transactionvalueu/s4-Section4oftheCEAcameintoforcefrom1stdayofJuly,2000(FinanceAct2000).
3.ThissectioncontainstheprovisionfordeterminingtheTransactionvalueofthegoodsforthepurposeofassessmentofduty.
4.Thesystemthatwasprevalentbefore1/7/2000wasessentiallybasedontheconceptof‘Normalwholesaleprice”,eventhoughsaleswereeffectedatvaryingpricestodifferentbuyersorclassofbuyersfromthefactorygateordepotsetc.
5.Forapplicabilityoftransactionvalueinagivencase,forassessmentpurposes,certainessentialrequirementsshouldbesatisfied.Ifanyoneofthesaidrequirementsisnotsatisfied,thenthetransactionvalueshallnotbetheassessablevalueandvalueinsuchcasehastobearrivedatundertheValuationRulesnotifiedforthepurpose.TheessentialconditionsoftheTRANSACTIONVALUEare:
a.Thereisasaleofgoodsbyanassessee.
b.Thegoodsaresoldfordeliveryatthetimeofplaceofremoval.Theterm“placeofremoval”hasbeendefinedbasicallytomeanafactoryorawarehouse,andwillincludeadepot,premisesofaconsignmentagentoranyotherplaceorpremisesfromwheretheexcisablegoodsaretobesoldaftertheirclearancesfromthefactory.
c.Theassesseeandthebuyerofthegoodsarenotrelated;and
d.Thepriceisthesoleconsiderationforsale.
6.Thesection4essentiallyseekstoacceptdifferenttransactionvalueswhichmaybechargedbytheassesseetodifferentcustomers,forassessmentpurposessolongasthesearebaseduponpurelycommercialconsiderationwherebuyersandsellershavenorelationshipandpriceisthesoleconsiderationforsale.
7.Thusitenablesvaluationofthegoodsforexcisepurposesonvaluechargedasperthecommercialpracticesratherthanlookingforanotionallydeterminedvalue.
8.TheprovisionsofthissectionwillnotbeapplicableinrespectofexcisablegoodsforwhichthetariffvaluehasbeenfixedunderSection3
(2)ofCEA.
9.Transactionvaluewouldincludeanyamountwhichispaidorpayablebythebuyertooronbehalfoftheassessee,onaccountoffactumofsaleofgoods.
10.Inotherwords,if,forexample,anassesseerecoversadvertisingchargesorpublicitychargesfromhisbuyers,eitheratthetimeofsaleofgoodsorevensubsequently,theassesseecannotclaimthatsuchchargesarenotincludedinthetransactionvalue.Thelawrecognizessuchpaymenttobepartofthetransactionvalue.
11.Aspersection4,thetransactionvalueshallincludethefollowingreceipts/recoveriesorcharges,incurredorprovidedforinCONNECTIONWITHTHEMANUFACUTURING,MARKETING,SELLINGoftheexcisablegoods:
a.Advertisingandpublicity;
b.Marketingandsellingorganizationexpenses;
c.Storage;
d.OutwardHandling;
e.Servicing,Warranty;
f.Commission;or
g.Anyothermatter.
Theabovelistisnotexhaustiveandwhateverelementswhichenrichthevalueofthegoodsbeforetheirmarketingwillbeincludibleinthevalue.
12.Thus,ifinadditiontoanyotheramountchargedaspricefromthebuyer,theassesseerecoversanyotheramountbyreasonofsaleorinconnectionwithsale,thensuchamountshallformpartofthetransactionvalue.
13.Wheretheassesseeincludesalltheircostsincurredinrelationtomanufactureandmarketingwhilefixingpricepayableforthegoodsandbillsandcollectsanallinclusiveprice–ashappensismostofthecaseswheresalesaretoindependentcustomersoncommercialconsideration–thetransactionpricewillgenerallybetheassessablevalue.
14.However,wheretheamountchargedbyanassesseedoesnotreflectthetrueintrinsicvalueofgoodsmarketedandtotalvaluesplitupintovariouselementslikespecialpackingcharges,warrantycharges,servicecharges,etcitistobeensuredthatthedutyhasbeenpaidonthecorrectvalue.
15.PACKINGCHARGES:
Packingchargesshallformpartofthetransactionvalueasitisachargeinconnectionwithproductionandsaleofgoods,recoveredfromthebuyer.Anychargesrecoveredforpacking,whetherordinaryorspecialisincludibleinthetransactionvalueifthesameisnotincludedinthepriceofthegoods.
Butincaseofreusablecontainers(glassbottles,cratesetc)normallythecostisamortizedandincludedinthecostoftheproductitself.Therefore,thesameisnotrequiredtobeincludedinthevalueoftheproductunlessitisfoundthatthecostofreusablecontainerhasnotbeamortizedandincludedinthevalueoftheproduct.
However,rentalchargesorcostofmaintenanceofreusablemetalcontainerslikegascylindersetcaretobeincluded
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