VALUATION RULES

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

• 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].

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%).

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 delivery contract. In such cases actual cost of transportation from place of removal upto place of delivery of the excisable goods will be allowable as deduction. cost of transportation can be either on actual basis or on equalized basis.[Rule 5]

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].

• 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

• Sec 4(3)(c)(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.[Rule 7]

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)

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.

Valuation when sale is through related person

• If sale is made 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.

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)

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