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 salewhether payable at the time of sale or at any other time

EXAMPLESany amount charged foradvertising or publicity

marketing and selling organisation expensesstorage, 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 REMOVALAND 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 3Preliminaries

Rule 7 Place of removal is

different from factory

Rule 4If there is no sale

Rule 8 Captive Consumption

Rule 5 If place of delivery

is different fromplace 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 VALUESHALL 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 THENEAREST PAST, ON 17.5.2002

AT FACTORY GATE AT Rs.900/- PER PIECE

THIS PRICE AT NEAREST POINT OF TIME SHALL BE THE ASSESSABLEVALUE 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 FROMFACTORY AT

CHENNAI

FACTORY GATE PRICERS.1000 PER PIECE

TO BE DELIVERED ATDELHI

PRICE CHARGEDRS.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 INVOICETHE 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 INDIRECTLYFROM THE BUYER TO THE ASSESSEE

SHALL BE ADDEDTO ARRIVE AT THE

ASSESSABLE VALUE

EXAMPLES OF ADDITIONAL CONSIDERATION

VALUE OF MATERIALS, COMPONENTS, PARTS AND SIMILAR ITEMS RELATABLETO 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 ANDPLANS 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 GOODSSOLD AT SUCH OTHER PLACE (DEPOT, ETC)

AT OR ABOUT THE SAME TIMEOR AT A TIME NEAREST TO THE

TIME OF REMOVAL

RULE 7

FACTORY DEPOTGOODS CLEARED

TODAY

WILL BE SOLDSUBSEQUENTLY

WHAT IS THE ASSESSABLE VALUE TO

BE ADOPTED TODAY

?

DEPOT

THE FOLLOWING SALES WERE MADE FROM THE DEPOT

11.05.2002 700 PIECES Rs.110 per piece

16.05.2002

17.05.2002

900 PIECES Rs.120 per piece

1000 PIECES Rs.90 per piece

17.05.2002 800 PIECES Rs.100 per piece

THE ASSESSABLE VALUE FOR THE CLEARANCE ON 25.05.2002SHALL BE RS.90 PER PIECE I.E. THE NORMAL TRANSACTION VALUE

AT THE NEAREST TIME OF REMOVAL AT WHICH GREASTESTAGGREGATE QUANTITY OF GOODS ARE SOLD AT DEPOT

BEWARE OFSEC.11 D

RULE 8

115 %

OF

COST OFPRODUCTION

OR MANUFACTURE OF SUCH GOODS

IF THE GOODSARE NOT SOLDBUT ARE USED

FOR CONSUMPTION

BY THE ASSESSEEOR ON HIS

BEHALF

IN THE PRODUCTIONOR MANUFACTURE

OF OTHERARTICLES

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

RULE 9

RULE 9

If the goods are not sold by an assesseeexcept 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 thenormal 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 PRICEAT WHICH THE GOODS ARE SOLD BY

SUCH BUYERS (BEING RELATED PERSONS)

WHO SELLS SUCH GOODS IN RETAIL

IF THE “RELATED PERSON” DO NOT SELLTHE GOODS BUT USES/CONSUMES THEM

IN THE PRODUCTION OR MANUFACRTURE OF ARTICLES,

THE ASSESSABLE VALUE SHALL BE DETERMINEDAS PER RULE 8

RULE 10

INTERCONNECTED UNDERTAKINGS

They shall also be

Relativesor

Relative and distributoror sub-distributor of such distributor

or one having interest in the business of each otheror holding or subsidiary company

to each other

In such cases the valuation has to be doneas in Rule 9

EXAMPLESFOR

RELATED PERSONSTRANSACTIONS

ASSESSEE

A

“B”CAPTIVELY CONSUMES

“B” SELLS TO A RELATED PERSON

“D” WHO SELLSIN RETAIL

“B” SELLSTO NON RELATED

PERSON “C”

RELATED PERSON

B

SELLS GOODS TO

TV SHALL BE THE PRICECHARGED BY

“B” TO “C”

TV SHALLBE THE PRICECHARGED 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 PRINCIPLESAND GENERAL PROVISIONS

OF THESE RULES & SEC.4(1) OF THE CEA,1944

BEST JUDGEMENT