Excise of Free items supplied under a special offer.

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Vijayaganesh Sampathkumar (Querist)
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30 July 2008 I have the below query:

Suppose ABC Ltd. has a special scheme to sell things. They have the following offer to their customers:

If any customer buys 100 Nos. of Item A before 31st December 2008, they will automatically get 10 nos. of Item B as free.

The normal selling price of item A is 100 and that of B is 200.

Please note that the items A and B are NOT covered under any specific duty / tariff value / retail sale price based valuation.

Transaction Value based valuation is applicable in the given scenario. All rules applicable for using transaction value like Unrelated buyer and seller, price is the sole consideration etc. are satisified.

In this scenario, Using this special offer, Is it ok to ship Item B with ZERO as assessable Value and by paying ZERO excise duty

OR

the item B has to suffer excise duty based on the value of Rs.200 or some other value as per valuation Rules?

Would the answer be any different if Item B is purchased outside or manufactured by ABC Ltd.?

If anyone could clarify, it would be great.

Thanks / Vijay

santosh k singh

santosh k singh (Expert)
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05 November 2008 Dear Vijayaganesh,
In the present situation you can not remove item B without payment of duty.
You have to value item B at a price which is charged to narmal customer, whon is not a related party and price is the sole consideration of sale.
To answer your second query, if item B is not manufactured but purchased from outside there is no question of duty liability.

Regards,
Santosh K. Singh

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