10 September 2013
It is to be noted that excise duty is payable on removal and not on sale. Therefore even if the goods are removed as a replacement duty is payable on such goods. Now the question is how the duty is to be determined in case of supply under warranty claims or free samples?Section 4(1)(b) of the Central Excise Act states that if Assessable Value' cannot be determined u/s 4(1)(a), it shall be determined in such manner as may be prescribed by rules. Under these powers, Central Excise Valuation (Determination of Price of Excisable Goods) Rules 2000 have been made effective from 1-7-2000.
If goods are not sold at the time of removal, then value will be based on the value of such goods sold by assessee at any other time nearest to the time of removal, subject to reasonable adjustments. [Rule 4]
This rule applies when price at the time of removal is not available as the goods are not sold by the assessee at the time of removal. Thus, this rule should apply in case of removal of free samples or supply under warranty claims. In case of removal of samples or free replacement under warranty claims, duty will be payable on price of identical goods sold by assessee near about the time of removal of the samples.
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