subject: Valuation: if the goods are not sold at the time of Removal [print this page] Valuation: if the goods are not sold at the time of Removal
But still there are certain areas which do not straight forward fall either in the domain of valuation based on transaction value or in the MRP based valuation and they have been given separate treatment in the statute book, for example valuation in the case of depot sale, sale at consignment agent's place, stock transfer, captive consumption etc are done separately as they do not follow the plain valuation rule i.e .Transaction value based valuation or MRP based valuation. This paper will examine the cases in which goods are not sold at the factory gate and how these goods are valued for the purpose of excise duty.
Sec 4 of the Central Excise Act deals with the valuation and Sec 4(1) (a) with certain riders and limitation says that if the goods are sold for delivery "at the time and place of removal" the valuation will be done on the basis of transaction value. If we read the sec 4 of the Central Excise Act 1944, we find that for doing valuation on the basis of transaction value three requirements are must they are as follows:-
a) The goods are sold by the assessee for delivery at the time of place or removal.
b) The assessee and buyer of the goods are not related, and the price is sole consideration for the sale.
The Sec further says that in any other cases value of the goods will be determined as per Rules prescribed. So in all cases in which goods are not sold at the factory gate or at the time of removal, the value has to be determined as per valuation (determination of price of excisable goods) Rule 2000. Broadly we can divide the removal of goods in the following categories when the goods are not sold initially but they are removed from the factory premises for the purpose of sale or self consumption:-
A) Removal for the purpose of depot sale/Stock transfer:- Rule 7 of the Central Excise valuation Rule 2000 says that if the excisable goods are not sold at the time of removal but are transferred to the depot or any other place for the purpose of sale and if parties are not related each other then the valuation will be done at the normal transaction value of such goods sold from such other place at about the same time. It plainly says that prevailing price at depot or any other place at a particular time will be relevant factor and goods will be valued according at the factory gate at the same time for the purpose of payment of duty. [Steel Authority of India Vs CCE 2006(199) E.L.T 112 CESTAT]
In case of stock transfer the valuation of the goods will be done on the basis of price prevailing at the depot at the same time.
B) Captive Consumption: - if the goods are not sold by the assessee but are consumed by him in the process of manufacture or production the value shall be 110% of the cost of production or manufacture of such goods.[Rule 8 of the Central Excise valuation Rule 2000]. The cost of production of captively consumed goods will be done strictly in accordance with CAS-4 [Circular No. 692/08/2003-CX Dated 13.02.2003].
C) Goods are sold to the related person:- if the assessee sales the goods only through a person who is related to him in the manner specified in Sec 4 (3) (b) of the Act, then the value shall be normal transaction value at which the goods are sold to the independent buyer by the related person of the assessee. [Rule 9 and 10 of the Cental Excise valuation Rules 2000.]. if the related person doesn't sale the goods but used it in manufacturing of the other goods, the value shall be 110% of the cost of production. For the purpose of Rule 9 of valuation rule 2000 the related person means following:-
i) Relatives.
ii) Buyer is a relative and distributor of the assessee or sub-distributor of such distributor or
iii) Person having interest directly or indirectly in the business of each other.
D) Removal by Job worker: - in the case if the goods are sold or transfer for delivery from the factory of Job worker itself and if principle manufacturer and buyer of the goods are not related as per Sec 4(3) (d) Central Excise Act the goods can be removed at the transaction value. Rule [10 (a) Central Excise valuation Rule]. The position has been further clarified through a circular of department which says that when goods are received by the principal manufacturer and then sent back to the depot of principal manufacturer by the Job worker the valuation will be done on the basis of transaction value adopted by the principle for the sale from the depot/other premises [CBEC Circular No. 902/22/2009-CX Dated 20.10.09].
E) Goods transfer to own/sister unit:- When the goods are transferred to the sister unit to another or another unit of the same company valuation will be done as per proviso of Rule 9 of the Central Excise valuation Rule i.e. 110% of the cost of production.
F) Goods partly sold to the related person and partly to the unrelated buyer:- although no specific rule in this regard is available in the statute book judicial pronouncement in this regard has held that the assessment should be done on the basis of sale to the third party.i.e. Sale to the independent buyer. So, in this case the relevant factor for valuation will be the price paid by the independent buyer to the manufacturer. Some of the judicial pronouncement are as follows:-
i) [CCE Vs Aquamall water solution Ltd. 2006 (193) E.L.T A197 SC]
ii) [ Ishpat industries Vs CCE 2006(202) E.L.R 561 SC]
