Packing material supplied by buyer to be included in excise

Transaction value

EXPLAIN how the following are dealt with while arriving at the transaction value under Section 4 of the CE Act, 1944: i) discounts, and ii) packing charges.

Discounts: In the definition of `transaction value', no direct reference has been made as regards discounts, which is not necessary as the duty is chargeable on the net price paid/payable. Thus, if any discount is declared and actually passed on to the b uyer of the goods as per common trade practice, discount of any type or descripttion thus given will not form part of the transaction value. For example, cash discount for prompt payment, quantity discount for goods purchased, and so on. However, it shoul d be established that the discount has actually been passed on to the buyer of the goods.

Differential discounts: These, extended as per commercial considerations on different transactions to unrelated buyers, cannot be objected to and, thus, different actual prices paid/payable for various transactions are to be accepted for working out the assessable value. However, when the assessee claims that the discount of any descripttion for a transaction is not readily known, but would be known only subsequently -- for example, turnover and year-end discounts -- then the assessment for such transact ions may be made on a provisional basis, provided the assessee discloses his intention for allowing such a discount through a letter, making also a request for provisional assessment.

Packing charges: Section 4 does not make any specific reference to packing charges, which does not mean that they will not form part of the assessable value. It was held by the Supreme Court in the Bombay Tyre International (1983) case that any expense i ncurred for the marketability of the goods shall form part of the value of the goods. This decision holds good as regards Section 4, too, from July 1, 2000.

In commercial practice, the price for the goods charged will normally include the cost of packing charges. Even if separate charge may be billed for special packings as per customer's requirement, it is obvious that such charges for packing are recovered in relation to the sale of the goods under assessment and will, therefore, form part of the transaction value.

In fine, it is immaterial whether packing is ordinary or special. Whatever amount is charged from the buyer for packing, if not already included in the price, will have to be included while determining the assessable value.