Sole Delearship

Valuation when sale through ‘related person’

Price to unrelated buyer relevant

If goods are sold through related person, value for purpose of excise will be the price at which the related buyer sales goods to unrelated buyer.

Inter connected undertaking

An inter-connected undertaking will be treated as ‘related person’ for excise valuation only if there is holding subsidiary relationship [Inter-connected undertaking means 25% common control]

Holding and subsidiary

A holding and subsidiary are ‘related persons’,

Rate legal entities

A mere distributor is not a related person.

A company or firm is a separate legal entity and cannot be a ‘related person’ of other company or firm.

Piercing corporate veil

Even if the buyer does not fall within the definition of ‘related person’, sale price to him can be rejected by piercing the corporate veil. His selling price can be considered if it is found, by piercing corporate veil, that the transaction is not at arms length i.e. price is not the sole consideration.

Valuation in case of entire sale through related person

If goods are sold solely through related person (except in case of inter connected undertaking, unless there is holding subsidiary relationship), valuation will be ‘normal transaction value’ at which the related buyer sales to unrelated buyer [rules 9 and 10 of Valuation Rules]

Supply of goods to related person for captive consumption

If goods are supplied to related person for captive consumption, valuation will be on basis of cost of production plus 10%.

Partial sale through related person

If sale is partly to related person and partly to unrelated person, valuation shall be done on ‘reasonable basis’ by residual method under rule 11.

If related person is only one of the buyers and substantial sales are made to unrelated persons at same price, that price can be considered for valuation in respect of sale to related person also.