Accessible value

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Gaurav singla (Querist)
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07 November 2013 Duty to be paid is the Actual value at which we have imported goods or the MRP value at which it is sold in the market.

RAMESH KUMAR VERMA

RAMESH KUMAR VERMA (Expert)
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09 November 2013 (i) In respect of all other goods which are not covered by the above-mentioned provisions, their assessable value would be in terms of "transaction value" as provided in section 4 of the Act. The assessable value would be the transaction value when the goods are sold by an assessee for delivery at the time and place of removal, where the assessee and the buyer are not related and price is the sole consideration. In all other cases, which do not fulfil the aforesaid conditions, value shall be determined as per the Central Excise Valuation Rules, 2000. The definition of transaction value as per section 4(3)(d) 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 pay to or on behalf of, the assessee by reason of or in connection with the sale, whether at the time of sale or any other time. The definition gives an inclusive but not exhaustive list of additions and deductions from the invoice price in respect of certain amounts.

(ii) The valuation rules have to be followed when transaction value cannot be determined under section 4(1); which are enumerated below:

(a) If goods are not sold at the time of removal, the value of excisable goods shall be value of goods sold by the manufacturer for delivery at any other time nearest to the time of removal of goods except in cases of stock /branch transfer, sale to related person, job work where specific provisions have been made. (Rule 4)

(b) In case goods are sold for delivery at any other place other than the place of removal, the value will be the price less the actual cost of transportation from place of removal to the place of delivery. (Rule 5)

(c) In case the price is not the sole consideration in respect of any transaction, the value of goods shall be the aggregate of such transaction value and the amount of money value of additional consideration flowing directly or indirectly from buyer to the assessee. (Rule 6)

(d) In case where goods are cleared to depot, consignment agent etc., transaction value shall be the normal transaction value of such goods sold from such other place at or about the same time. The normal transaction value is the price at which the greatest aggregate quantity of goods are sold. (Rule 7)

(e) In case of consumption of goods captively; i.e., consumed by the assessee or on his behalf, the value shall be 110% of the cost of production. (Rule 8)

(f) In case of sale of goods to a related person, the value shall be the price at which the related person has sold the goods to an unrelated person. In case a related person does not sell the goods but uses or consumes the goods in production or manufacture of the article, the value shall be 115% of the cost of production. (Rule 9)

(iii) The following deduction can be made from the transaction value for determination of value under section 4

(a) Trade discount

The Board has clarified as follows: —

"Discount of any type or description given on any normal price payable for any transaction will not form part of the transaction value for the goods; e.g., quantity discount for goods purchased or cash discount for the prompt payment etc. will therefore not form part of the transaction value. However, it is important to establish that the discount has actually been passed on to the buyer of the goods. The different type of discounts extended as per commercial considerations on different transactions to unrelated buyers if extended is also permissible and different actual prices paid or payable for various transactions are to be accepted."

"The Larger Bench of Tribunal in the case of Arvind Mills Ltd. 2006 (204) ELT 570 (Tri LB) has held that even the new section 4 introduced w.e.f. 1-7-2000, quantum of cash discount offered to the customer should be allowed as deduction even if some of the customers has not availed the benefit of cash discount. Cash discount in such case will not be passed on to the customers as the customers has not paid within the stipulated period".

(b) Tax and duties

The definition of transaction value stipulate that excise duty, sales tax and other taxes paid or payable shall be excluded from the transaction value.

(c) Freight

The cost of transportation can be excluded even when freight is averaged and also there is no condition that the cost of transportation should be shown separately in the invoice. The cost of transportation will include the cost of insurance during transportation of goods.

(d) Interest for delayed payment

Interest for delayed payments is a normal practice in industry. Interest under a financing arrangement entered between the assessee and the buyer relating to the purchase of excisable goods shall not be regarded as part of the assessable value provided that:

The interest charges are clearly distinguished from the price actually paid or payable for the goods.

The financing arrangement is made in writing; and Where required, assessee demonstrates that such goods are actually sold at the price declared as the price actually paid or payable.

(e) Erection, installation and commissioning charges

If the product after erection, installation and commissioning is not excisable the question of including these charges in the assessable value of the product does not arise.

(iv) Inclusion in the price

Some of the expenditures like packing charges, designing and engineering charges, handling charges incurred within the factory are required to be included in the price if they are not already included.