Determining value on which excise duty is payable.

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Meekha (Querist)
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24 December 2009 Can any one please help me to solve the given problems and also explain me the concept?:

i) P ltd. sold goods to Q ltd. at a value of Rs.500 per unit. In turn Q ltd. sold the same to R ltd. at a value of Rs.600 per unit. If P ltd. and Q ltd. are related, whereas Q ltd. and R ltd. are unrelated? [what if P ltd. and Q ltd. are unrelated and Q ltd. and Q and R are related? and P and R are (i)related and (ii)unrelated?]

ii) Indian oil sells motor spirit to Hero ltd. at a value of Rs.36 per liter. But motor spirit has administered price of Rs.30 per liter, fixed by the Central Government.

Please help me Sir/Madam.

SANJAY JAIN

SANJAY JAIN (Expert)
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25 December 2009
Leaving the query, it would be advisable to know the basics.

The Section 4 of the Central Excise Act,1944 is the valuation section which decides the assessable to pay Excise duty. This section says that if these three following contents are satisfied, the transaction value shall be assessable value,
a) sale takes place at the time of removal,
b) assessee and buyer are not related person and,
c) price is the sole consideration.

In absence of any element from the above, entails to the valuation rules. In which removal of goods to the related person is neither a sale nor a independent transaction. Hence in such situation the provision of Rule 8 of comes into operation. As the goods removed by the Assessee is being further used by the purchaser for manufacturing other goods. In this provision, the cost construction method is adopted and 110% of the cost of production is taken as assessable value. Here the cost is determined in CAS4 standard. [ here for the sake of understanding the issue at primarily level, the law laid down by the various judicial forums are kept away]

Regarding despite of administrative rates fixed, the duty is payable on the transaction value in case of motor sprit.

For further query, feel free to write sanjayinfbd@yahoo.com (M-09350048731) or visit, HNO. 2489/8,Faridabad(Haryana)