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(AV)
This rule should not apply in respect of depot transfer or branch transfer or in case of
sale to 'related person' as specific provisions have been made. This provision should also
not apply for 'job work' as indeed in case of 'job work' there is no 'sale' of goods.
2. Goods sold at different place - Some times, goods may be sold at place other than the
place of removal e.g. in case of FOR delivery contract. In such cases, actual cost of
transportation from place of removal upto place of delivery of the excisable goods will be
allowable as deduction, if these are charged separately in invoice on actual basis. [rule
5]. - . - In short, if transport charges are collected separately in the Invoice on actual
basis, these will be allowed as deduction.
3. Provision when price is not the sole consideration - If price is not the sole
consideration for sale, the 'Assessable Value' will be the price charged by assessee, plus
money value of the additional consideration received. The buyer may supply any of the
following directly or indirectly, free or at reduced cost.
4. Sale at depot / consignment agent - When goods are sold through depot, there is no
'sale' at the time of removal from factory. In such cases, price prevailing at depot (but at
the time of removal from factory) shall be the basis of Assessable Value. The value
should be 'normal transaction value' of such goods sold from the depot at the time of
removal or at the nearest time of removal from factory. [rule 7]
For example, if an assessee transfers a consignment of paper to his depot from Delhi to
Agra on 5.7.2000, and that variety and quality of paper is normally being sold at the
Agra depot on 5.7.2000 at transaction value of Rs. 15,000 per tonne to unrelated
buyers, where price is the sole consideration for sale, the consignment cleared from the
factory at Delhi on 5.7.2000 shall be assessed to duty on the basis of Rs. 15,000 per
tonne as the assessable value. If assuming that on 5.7.2000 there were no sales of that
variety from Agra depot but the sales were effected on 1.7.2000, then the normal
transaction value on 1.7.2000 from the Agra depot to unrelated buyers, where price is
the sole consideration shall be the basis of assessment. [Illustration given in the
departmental circular dated 30-6-2000].
In short, price ruling at the depot, but at the time of removal from the factory will
be relevant. It does not matter if subsequently the goods are actually sold from depot at
higher or lower price.
At times, there are wide fluctuations in prices and depot prices may change frequently.
This eventuality is indeed not envisaged in 'stock transfer' as 'stock transfer' or 'branch
transfer' is envisaged only of standard products with fixed ex-depot prices. However,
fluctuations in prices at depot is a practical reality. In such cases, assessee may resort to
assessment on provisional basis.
Thus, the formula for determining value is simple. If the cost of production based upon
general principles of costing of a commodity is Rs. 10,000 per unit, the assessable value
of the goods shall be Rs. 11,500 per unit.
7. Goods sold solely through related person - If goods are sold solely through a 'related
person', price at which such related person makes onward sale to an independent buyer
will be the 'Assessable Value'. Definition of 'related person' as contained in section 4(3)
(b) covered 'inter connected undertakings' as defined under MRTP Act. This would have
affected many assessees. However, the definition has been made almost ineffective in
Valuation Rules. Provisions in respect of sale to related buyer are covered in rules 9 and
10 of Central Excise Valuation Rules, 2000. For sake of convenience, these are discussed
under 'Related Person' and hence are not discussed here.
8. Best judgment Assessment - If assessment is not possible under any of the foregoing
rules, assessment will be done by 'best judgment'. If the value of any excisable goods
cannot be determined under the foregoing rules, the value shall be determined using
reasonable means consistent with the principles and general provisions of these rules
and sub-section (1) of section 4 of the Act. [Rule 11]