VALUATION IN CENTRAL EXCISE

ASSESSABLE VALUE(AV) = TRANSACTION VALUE(TV) CONDITIONS TO ACCEPT TV AS AV Delivery should be at the time and place of removal Assessee and the buyer should not be “related persons” Price should be the sole consideration for the sale There should be a sale

WHAT IS TRANSACTION VALUE?  Price actually paid or payable for the goods;  includes any amount the buyer is liable to pay to the assessee in connection with the sale  whether payable at the time of sale or at any other time EXAMPLES any amount charged for  advertising or publicity  marketing and selling organisation expenses  storage, outward handling, servicing  warranty, commission or any other matter.

Any other matter - includes  Third party inspection charges  Royalties and Commissions  Erection and Commissioning charges  Advertisement borne by dealers  All types of packing cost  Accessories  Design, development and engineering charges

EXCLUSIONS ALL TAXES INTEREST ON DELAYED PAYMENTS OPTIONAL WARRANTY ANNUAL MAINTENANCE CHARGES BANK CHARGES, INCLUDING HUNDI CHARGES DISCOUNTS, MADE KNOWN AT THE TIME OF REMOVAL AND IS PASSED ON TO THE BUYER

WHAT IF THE CONDITIONS ARE NOT SATISFIED?  If there is no sale  If the time of removal and delivery is different  If the place of removal and delivery is different  If the assessee and buyer are related  If the price is not the sole consideration Take the help of VALUATION RULES

VALUATION RULES, 2000 Rules 1, 2 and 3 Preliminaries Rule 7 Place of removal is different from factory Rule 4 If there is no sale Rule 8 Captive Consumption Rule 5 If place of delivery is different from place of removal Rule 6 Where price is not the sole consideration Rule 11 Best judgement Rule 9 and 10 If the buyer is a related person or inter connected undertaking

RULE 4 THIS RULE WILL APPLY WHEN THE GOODS ARE NOT SOLD AND IF NOT SPECIFICALLY COVERED BY ANY OF THE OTHER RULES IN SUCH CASES THE ASSESSABLE VALUE SHALL BE BASED ON THE VALUE OF “SUCH GOODS” SOLD BY THE ASSESSEE AT ANY NEAREST POINT OF TIME

GOODS UNDER ASSESSMENT GIVEN FREE OF COST TODAY “SUCH GOODS” WERE SOLD IN THE NEAREST PAST, ON AT FACTORY GATE AT Rs.900/- PER PIECE THIS PRICE AT NEAREST POINT OF TIME SHALL BE THE ASSESSABLE VALUE OF THE GOODS UNDER ASSESSMENT

RULE 5 IF THE GOODS UNDER ASSESSMENT ARE NOT DELIVERED AT THE PLACE OF REMOVAL, BUT DELIVERED AT A DIFFERENT PLACE, THE ASSESSABLE VALUE SHALL BE EXCLUSIVE OF THE ACTUAL COST OF TRANSPORTATION FROM THE PLACE OF REMOVAL TO THE PLACE OF DELIVERY. EXCLUSION OF COST OF TRANSPORTATION IS PERMITTED ONLY IF IT REPRESENTS ACTUALS AND IS SHOWN IN THE INVOICE

GOODS UNDER ASSESSMENT REMOVED FROM FACTORY AT CHENNAI FACTORY GATE PRICE RS.1000 PER PIECE TO BE DELIVERED AT DELHI PRICE CHARGED RS.1200 PER PIECE INVOICE IS RAISED AS BELOW: PRICE OF GOODS RS.1000/- COST OF TRANSPORTATION RS.200/- AS THE COST OF TRANSPORTATION IS SHOWN SEPERATELY IN THE INVOICE THE ASSESSABLE VALUE SHALL ONLY BE RS.1000/- PER PIECE REMEMBER : THE CONCEPT OF EQUALISED FREIGHT IS NO LONGER THERE !

RULE 6 IF THERE IS ADDITIONAL CONSIDERATION THE MONEY VALUE OF ANY ADDITIONAL CONSIDERATION FLOWING DIRECTLY OR INDIRECTLY FROM THE BUYER TO THE ASSESSEE SHALL BE ADDED TO ARRIVE AT THE ASSESSABLE VALUE

EXAMPLES OF ADDITIONAL CONSIDERATION VALUE OF MATERIALS, COMPONENTS, PARTS AND SIMILAR ITEMS RELATABLE TO THE GOODS UNDER ASSESSMENT VALUE OF TOOLS, DIES, MOULDS, DRAWINGS, BLUE PRINTS, TECHNICAL MAPS, CHARTS AND SIMILAR ITEMS USED IN THE PRODUCTION OF SUCH GOODS VALUE OF MATERIALS CONSUMED, INCLUDING PACKAGING MATERIALS, IN THE PRODUCTION OF SUCH GOODS VALUE OF ENGINEERING, DEVELOPMENT, ART WORK, DESIGN WORK AND PLANS AND SKETCHES UNDERTAKEN ELSEWHERE THAN IN THE FACTORY OF PRODUCTION AND NECESSARY FOR THE PRODUCTION OF SUCH GOODS THE ABOVE GOODS / SERVICES MAY BE SUPPLIED BY THE BUYER EITHER DIRECTLY OR INDIRECTLY EITHER FREE OF CHARGE OR AT REDUCED COST FOR USE IN CONNECTION WITH THE PRODUCTION AND SALE OF SUCH GOODS

RULE 7 IF THE SALE IS NOT MADE IN THE PLACE OF REMOVAL, BUT AT A DIFFERENT PLACE LIKE DEPOT, ETC. IN SUCH CASES THE ASSESSABLE VALUE SHALL BE THE NORMAL TRANSACTION VALUE OF SUCH GOODS SOLD AT SUCH OTHER PLACE (DEPOT, ETC) AT OR ABOUT THE SAME TIME OR AT A TIME NEAREST TO THE TIME OF REMOVAL

RULE 7 FACTORYDEPOT GOODS CLEARED TODAY WILL BE SOLD SUBSEQUENTLY WHAT IS THE ASSESSABLE VALUE TO BE ADOPTED TODAY ?

DEPOT THE FOLLOWING SALES WERE MADE FROM THE DEPOT PIECESRs.110 per piece PIECESRs.120 per piece 1000 PIECESRs.90 per piece PIECESRs.100 per piece THE ASSESSABLE VALUE FOR THE CLEARANCE ON SHALL BE RS.90 PER PIECE I.E. THE NORMAL TRANSACTION VALUE AT THE NEAREST TIME OF REMOVAL AT WHICH GREASTEST AGGREGATE QUANTITY OF GOODS ARE SOLD AT DEPOT B E W A R E O F S E C. 1 1 D

RULE % OF COST OF PRODUCTION OR MANUFACTURE OF SUCH GOODS IF THE GOODS ARE NOT SOLD BUT ARE USED FOR CONSUMPTION BY THE ASSESSEE OR ON HIS BEHALF IN THE PRODUCTION OR MANUFACTURE OF OTHER ARTICLES THE AV SHALL BE

RELATED PERSONS INTER CONNECTED UNDERTAKINGS (As defined in the MRTP Act) BUYER BEING A RELATIVE AND A DISTRIBUTOR OF THE ASSESSEEOR A SUB-DISTRIBUTOR OF SUCH DISTRIBUTOR RELATIVES (As defined in the Companies Act) BEING SO ASSOCIATED THAT THE ASSESSEE AND BUYER HAVE INTEREST IN THE BUSINESS OF EACH OTHER, DIRECTLY OR INDIRECTLY RULE 10 RULE 9

If the goods are not sold by an assessee except to or thorough a “related person” (relatives, relative and distributor or sub distributor of such distributor & persons having interest in the business of each other) The Assessable Value shall be the normal transaction value at which these goods are sold by the “related person” at the time of removal to non related persons. RULE 9

IF THE “RELATED PERSON” SELLS THE GOODS ONLY TO ANOTHER “RELATED PERSON” THE ASSESSABLE VALUE SHALL BE THE PRICE AT WHICH THE GOODS ARE SOLD BY SUCH BUYERS (BEING RELATED PERSONS) WHO SELLS SUCH GOODS IN RETAIL IF THE “RELATED PERSON” DO NOT SELL THE GOODS BUT USES/CONSUMES THEM IN THE PRODUCTION OR MANUFACRTURE OF ARTICLES, THE ASSESSABLE VALUE SHALL BE DETERMINED AS PER RULE 8

RULE 10 INTERCONNECTED UNDERTAKINGS They shall also be Relatives or Relative and distributor or sub-distributor of such distributor or one having interest in the business of each other or holding or subsidiary company to each other In such cases the valuation has to be done as in Rule 9

EXAMPLES FOR RELATED PERSONS TRANSACTIONS

ASSESSEE A “B” CAPTIVELY CONSUMES “B” SELLS TO A RELATED PERSON “D” WHO SELLS IN RETAIL “B” SELLS TO NON RELATED PERSON “C” RELATED PERSON B SELLS GOODS TO TV SHALL BE THE PRICE CHARGED BY “B” TO “C” TV SHALL BE THE PRICE CHARGED BY “B” TO “D” TAKE RECOURSE TO RULE 8

RULE 11 IF THE VALUE CANNOT BE DETERMINED UNDER THE FOREGOING RULES THE VALUE CAN BE DETERMINED USING REASONABLE MEANS CONSISTENT WITH THE PRINCIPLES AND GENERAL PROVISIONS OF THESE RULES & SEC.4(1) OF THE CEA,1944 BEST JUDGEMENT