The Central Excise Act, 1944
4. VALUATION OF EXCISABLE GOODS FOR PURPOSES OF CHARGING OF DUTY OF EXCISE.
1[Valuation of excisable goods for purposes of charging of duty of excise.—(1) Where under this Act, the duty of excise is chargeable on any excisable goods with reference to their value, then, on each removal of the goods, such value shall—
(a) in a case where the goods are sold by the assessee, for delivery at the time and place of the removal, the assessee and the buyer of goods are not related and the price is the sole consideration for the sale, be the transaction value;
(b) in any other case, including the case where the goods are not sold, be the value determined in such manner as may be prescribed.
2[Explanation.—For the removal of doubts, it is hereby declared that the price-cum-duty of the excisable goods sold by the assessee shall be the price actually paid to him for the goods sold and the money value of the additional consideration, if any, flowing directly or indirectly from the buyer to the assessee in connection with the sale of such goods, and such price-cum-duty, excluding sales tax and other taxes, if any, actually paid, shall be deemed to include the duty payable on such goods.]
(2) The provisions of this section shall not apply in respect of any excisable goods for which a tariff value has been fixed under sub-section (2) of section 3.
(3) For the purposes of this section,—
(a) “assessee” means the person who is liable to pay the duty of excise under this Act and includes his agent;
(b) persons shall be deemed to be “related” if—
(i) they are inter-connected undertakings;
(ii) they are relatives;
(iii) amongst them the buyer is a relative and distributor of the assessee, or a sub-distributor of such distributor; or
(iv) they are so associated that they have interest, directly or indirectly, in the business of each other.
Explanation.—In this clause—
(i) “inter-connected undertakings” shall have the meaning assigned to it in clause (g) of section 2 of the Monopolies and Restrictive Trade Practices Act, 1969 (64 of 1969); and
(ii) “relative” shall have the meaning assigned to it in clause (41) of section 2 of the Companies Act, 1956 (1 of 1956);
(c) “place of removal” means —
(i) a factory or any other place or premises of production or manufacture of the excisable goods;
(ii) a warehouse or any other place on premises wherein the excisable goods have been permitted to be deposited without 3[payment of duty;]
4[(iii) a depot, premises of a consignment agent or any other place or premises from where the excisable goods are to be sold after their clearance from the factory;] from where such goods are removed;
4[(cc) “time of removal”, in respect of the excisable goods removed from the place of removal referred to in sub-clause (iii) of clause (c), shall be deemed to be the time at which such goods are cleared from the factory;]
(d) “transaction value” means the price actually paid or payable for the goods, when sold, and includes in addition to the amount charged as price, any amount that the buyer is liable to pay to, or on behalf of, the assessee, by reason of, or in connection with the sale, whether payable at the time of the sale or at any other time, including, but not limited to, any amount charged for, or to make provision for, advertising or publicity, marketing and selling organization expenses, storage, outward handling, servicing, warranty, commission or any other matter; but does not include the amount of duty of excise, sales tax and other taxes, if any, actually paid or actually payable on such goods.]
Assessment of value of goods
If a higher discount on goods sold to stockists and a lower discount on goods sold to sub-stockists is allowed and the differential discount is passed on to the stockists then differential discount is not deductible in assessing the value of goods to sub-stockists; Escorts Ltd. v. Collector of Central Excise, Chandigarh, (2003) 4 SCC 285.
Basis of excise duty
Under the Central Excise Act, excise duty is chargeable on the value of the goods. The Value is the normal price, i.e., the price at which such goods are ordinarily sold by the assessee to a buyer, where the buyer is not related person and the price is the sole consideration for sale; Tata Iron & Steel Co. Ltd. v. Collector of Central Excise, AIR 2003 SC 144.
The mere fact of making an interest free advance by a buyer to the manufacturer, by itself will not be a sufficient ground to reload the assessable value with notional interest. It would be necessary for the revenue to show that such advance has influenced in the lowering of the price and that it is not depicting the normal price of the goods; Commr. of Central Excise v. I.S.P. Industries Ltd., 2003 AIR SCW 2264
Freight and insurance charges upto depot would be includible in assessable value for purposes of excise; Prabhat Zarda Factory Limited v. Commissioner of Central Excise, 2002 (146) ELT 497 (SC).
If all the requirements of clause (a) are fulfilled but the allegations in show-cause notice proceeded on the basis as if clause (b) was applicable, the authorities lacks jurisdiction to issue show-cause notice; Union of India v. Hindalco Industries, (2003) 5 SCC 194.
1. Subs. by Act 10 of 2000, sec. 94 , for section 4 (w.e.f. 1-4-2000). Earlier section 4 was substituted by Act 22 of 1973, sec. 2 (w.e.f. 1-10-1975).
2. Ins. by Act 32 of 2003, sec. 136 (w.e.f. 14-5-2003).
3. Subs. by Act 32 of 2003, sec. 136, for “payment of duty,” (w.e.f. 14-5-2003).
4. Ins. by Act 32 of 2003, sec. 136 (w.e.f. 14-5-2003).