Valuation of Goods For The Purpose Of Excise Duty:-
1. Where the rates of duty are on ad valorem basis, assessable value of the final Goods are unfit for consumption or for marketing has to be found out before the amount of duty leviable thereon is determined and paid.
2. Though the value of goods is required to be declared in assessee's invoice, the invoice value is not necessarily the acceptable value under section 4.
3. The most authoritative exposition of section 4 is contained in the case of Union of India vs. Bombay Tyres International Ltd. . In this case, the Hon'ble Supreme Court had drawn the line at the factory gate up to which all costs incurred to make the Goods complete and marketable had to be included in the price. Costs incurred beyond the factory gate were not includable. Warranty service and advertisement costs are, however an exception to this rule because they make the goods marketable at the factory gate.
1. If the goods are sold at different wholesale prices to different classes of buyers, each such wholesale price is deemed to be an assessable value. Thus excisable goods can have more than one assessable value, with regard to class of buyer.
2. If the goods are sold at different wholesale prices at different places of removal, each such wholesale price is deemed to be an assessable value.
3. If the goods are sold in the course of wholesale trade for delivery at the time and place of removal at a price fixed under any law for the time being in force, or at a price being maximum, fixed under any such law, then such price or maximum price so fixed shall be deemed to be the normal price; viz., assessable value.
4. If the assessee arranges to sale goods in the course of wholesale trade only through a related person, the price at which goods are sold by such related person is taken as assessable value.
Valuation of goods sold at buyer's destination: In the case of M/s. Escorts JCB Limited , the Tribunal, while interpreting the scope of the term place of removal under section 4(4)(b)(iii) of the Central Excise Act, 1944, held that where the property in goods passes from the seller to the buyer only after the goods reached the destination of the buyers, the goods are assessable to duty with reference to value at buyer's destination since the seller continues to be the owner of the goods during transit period.
Non-adoption of price fixed by the Government:
In the case of M/s. Soyabean & Vanaspathi Industries, the Tribunal while interpreting the provisions of section 4(1) (a) (ii) held that the maximum price fixed under the law shall be deemed to be the normal price and in such a case the argument that the goods were actually sold at a price lower than the controlled price will have no relevance in view of the clear provisions of the Law.
Valuation of goods sold through depots:
The Tribunal in the case of Colgate Palmolive India Limited held that where there is no ex-factory sale and entire production is transferred to depots, assessable value is to be determined on the basis of depot sale price.
Inadmissible deduction allowed from assessable value:
Freight charges/transportation charges- The Supreme Court in the case of M/s. Bombay Tyre International, held that expenses incurred on account of the several factors which have contributed to the value of the product upto the date of sale, which apparently would be the date of delivery, are liable to be included in the assessable value of the product.
Discount- As per section 4(4)(d)(ii) of the Central Excise Act, 1944, value in relation to any excisable goods does not include trade discount allowed in accordance with the normal practice of the wholesale trade provided that such discount is not refundable on any account whatsoever. Additional consideration not included in the assessable value: As per the provisions of section 4(1)(a) of the Central Excise Act, 1944, read with rule 5 of the Central Excise (Valuation) Rules, 1975, where the price charged for the excisable goods sold in wholesale trade is not the sole consideration for the sale, the assessable value of such goods shall be determined based on the aggregate of the price and money value of additional consideration flowing directly or indirectly from the buyer to the assessee. In the case of Bombay Tyre International, the Supreme Court held that the value of the article for the purpose of levy of excise duty shall include all costs and expenses which have given the article its marketability.
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