VALUATION RULES

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VALUATION RULES:

VALUATION RULES

Valuation rules to determine assessable value:

Valuation rules to determine assessable value Sec.4(1)(b) of the Central Excise Act states that if “Assessable Value” can’t 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 Process of Excisable Goods) Rules ,2000 have been made effective from 1-7-2000.These rules are discussed below-

Value nearest to time of removal if goods not sold:

Value nearest to time of removal if goods not sold If the goods are not sold at the time of removal then the 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].

Applicability of the rule :

Applicability of the rule When price at the time of removal is not available as the goods are not sold by the assessee at the time of removal. This rule applies in case of removal of free samples or supply under warranty claims.In this case duty will be payable on price of identical goods sold by assessee near about the time of removal of the samples.

Non applicability:

Non applicability This rule not applicable in respect of depot transfer or in case of sale to ‘related person’ as specific provisions have been made. It is also not applicable for ‘job work’ as in case of ‘job work’,specific provisions have been made by inserting rule 10 A w.e.f . 1-3-2007. In case of free parts supplied during warranty period excise duty is payable on the parts but not on labour cost involved in fitting such free parts.

Valuation of samples:

Valuation of samples CBE&C,VIDE CIRCULAR no.813/10/2005 has clarified that in case of samples distributed free,valuation should be done on basis of rule 4(earlier it was dine in the basis of rule 8 i.e. cost of production plus 10%).

Meaning of ‘such goods’:

Meaning of ‘such goods’ Such Goods means other goods of same class of same manufacturer.this do not means ‘said goods’ or ‘the goods’.This also do not mean goods which are under valuation.

Goods sold at different place:

Goods sold at different place Some times goods may be sold at place other than the place of removal E.g. in case of FOR delievery contract. In such cases actual cost of transportion from place of removal upto place of delievery of the excisable goods will be allowable as deduction.cost of transportation can be either on actual basis or on equalised basis.[Rule 5]

Valuation when price is not the sole consideration:

Valuation when price is not the sole consideration If price is not the sole consideration for sale,the “Assessable Value” will be the price charged by assessee plus money value of the additional consideration received.[Rule 6 of Central Excise Valuation Rules].

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The buyer may supply any of the following directlry or indirectly ,free or at reduced cost- Materials,components,parts & similar items Tools,dies,moulds,drawings,blue prints etc Materials consumed, including packaging materials

Sale at Depot/Consignment agent:

Sale at Depot/Consignment agent Sec 4(3)©(iii)provides that in case of sale at depot/consignment agent the depot will be the place of removal . As per section 4(3)(cc) in case of sale from depot/place of consignment agent time of removal shall be deemed to the time at which the goods are cleared from factory. Duty will be payable on the price prevailing at the depot as on date of removal from factory. Price at which such goods are subsequently sold from the depot is not relevant for purpose of excise valuation.

Valuation in case of captive consumption:

Valuation in case of captive consumption The valuation shall be done on basis of cost of production plus 10%(it was 15% upto5-8-03)(Rule 8 of valuation rules) Cost of production is required to be calculated as per CAS -4 It means goods are not sold but consumed within the same factory or other of same manufacturer(i.e. inter-unit transfer)

Best judgement assessment :

Best judgement assessment If assessment is not possible under any of the foregoing rules,assessment will be done by ‘best judgement ’. If value of any excisable goods cannot be determined under foregoing rules,the value shall be determined using reasonable means consistent with the principles & general provisions of these rules & sub sction (1) of section 4 of the act(Rule 11)

Sale to a ‘RELATED PERSON’:

Sale to a ‘RELATED PERSON’ As per sec 4(3)(b) of CEA persons shall be deemed to be related if- They are interconnected undertakings They are relatives Amongst them buyer is a relative & a distributor of assessee They are so associated that they have interest directly or indirectly in the business of each other.

Who are not related person:

Who are not related person Brand name owner is not related person Sole distributor or sole agent not necessarily a related person Manufacturer should not be dummy or tax saving device.

Valuation when sale is through related person:

Valuation when sale is through related person If sale is made solely through related person price relevant for valuation will be normal transaction value at which related buyer sales to unrelated buyer . Normal transaction is the transaction value at which the greatest aggregate quantity of goods are sold.

Goods sold exclusively through related person other than interconnected undertaking:

Goods sold exclusively through related person other than interconnected undertaking The relevant price will be normal transaction value of the related person to unrelated buyer.the normal transaction value shall be considered as on date of removal from factory.

Goods sold to related person for captive consumption:

Goods sold to related person for captive consumption In such cases the valuation will be done on basis of cost of production + 10% as per rule 8

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