TMI BlogCentral Excise –Section 4- Transaction Value- Regarding.X X X X Extracts X X X X X X X X Extracts X X X X ..... has been fixed under sub-section (2) of Sec.3. 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; and ii. "relative" shall have the meaning assigned to it in Clause (41) of Section 2 of the Companies Act, 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 or premises wherein the excisable goods have been permitted to be deposited without payment of duty, from where such goods are removed; (d) "transaction value" means the price actually paid or payable for the goods, whe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... whatever elements which enrich the value of the goods before their marketing and were held by Hon’ble Supreme Court to be includible in "value" under the erstwhile section 4 would continue to form part of section 4 value even under new section 4 definition. It may also be noted that where the assessee charges an amount as price for his goods, the amount so charged and paid or payable for the goods will form the assessable value. If, however, in addition to the amount charged a price from the buyer, the assessee also recovers any other amount by reason of sale or in connection with sale, then such amount shall also form part of the transaction value for valuation and assessment purposes. Thus, if assessee splits up his pricing system and charges a price for the goods and separately charges for packaging, the packaging charges will also form part of assessable value as sit is charge in connection with production and sale of the goods recovered from the buyer. Again, if any assessee charges warranty charges for any goods in particular transaction, then the warranty charges shall be included in the transaction value for the goods and duty will be payable on this part value recovered fr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng trade practice in this regard, charges for interest under a financing arrangements entered between the assessee and the buyer relating to the purchase of excisable goods shall not be regarded as part of the assessable value provided that: a. the interest charges are clearly distinguished from the price actually paid or payable for the goods; b. the financing arrangements is made in writing; and 2. where required, assessee demonstrates that such goods are actually sold at the price declared as the price actually paid or payable. 3. As regards discounts, the definition of transaction value does not make any direct reference. In fact, it is not needed by virtue of the fact that the duty is chargeable on the net price paid or payable. Thus if in any transaction a discount is allowed on declared price of any goods and actually passed on the buyer of goods as per common practice, the question of including the amount of discount in the transaction value does not arise. Discount of any type or description given on any normal price payable for any transaction will, therefore, not form part of the transaction value for the goods, eg.. quantity discount for goods purchased or cash ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... disputes often arose whether certain packing in relation to particular goods is secondary or primary and whether its value is to be added for assessment purposes, under the new section4, such issues are no longer relevant. Any charges recovered for packing are obviously charges recovered in relation to the sale of the goods under assessment and will form part of the transaction value of the goods. In short, it is immaterial whether packing is ordinary or special. Whatever amount is charged from the buyer for packing and if not already included by the assessee in the price payable for the goods will be included while determining the transaction value of the goods for assessment to duty. 13. It is felt that where the assessee includes all their costs incurred in relation to manufacture and marketing while fixing price payable for the goods and bills and collects an all inclusive price- as happens in most cases where sales are to independent customers on commercial consideration- valuation should not pose any problem as the transaction price wil generally be the assessasble value. Nevertheless, there could be situations where the amount charged by an assessee does not reflect the t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ods at the depot, etc. at or about the same time on which the goods as being valued are removed from the factory or warehouse. It may be pertinent to take note of the definition of "normal transaction value as given in the valuation rules. What it basically means is the transaction value" as given in the valuation rules. What it basically means is the transaction value at which the greatest aggregate quantity of goods from depots etc., are sold at or about the time of removal of the goods being from the factory/warehouse. If, however, the identical goods are not sold by the assessee from depot/consignment agent’s place on the date of removal from the factory/warehouse, the nearest date on which such goods were sold or would be sold shall be taken into account. In either case if there are series of sale at or about the same time, the normal transaction value for sale to independent buyer will have to be determined and taken as basis for valuation of goods at the time of removal from factory/warehouse. It follows from the Valuation that in such categories of cases also if the price charges is with reference to delivery at a place other than the depot. Etc., then the actual cost of tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anation has been added in the new rule only to remove any doubts with respect to its scope. 23. Where goods are sold through related persons, the transaction value is not applicable. However, there is some change in the definition of ‘related persons’ vis-ŕ-vis the old definition. It includes "inter-connected undertakings" as defined in the Monopolies and Restrictive Trade Practices Act, 1969. The definition of interconnected undertaking in the said Act reads as follows: "Inter-connected undertakings" means two or more undertaking which are inter-connected with each other in any of the following manner, namely:- i. if one owns of controls the other, ii. where the undertakings are owned by firm, if such firms have one or more common partners. iii. Where the undertakings are owned by bodies corporate, a. if one body corporate manages the other body corporate, or b. if one body corporate is a subsidiary of the other body corporate, or c. if the bodies corporate are under the same management, or d. if one body corporate exercise control over the other body corporate in any other manner; i. where one undertaking is owned by a body corporate and the other is owned by a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ourth) of the total voting power(in relation to ) each of the two bodies corporate is exercised or controlled by the same individual (whether independently or together with his relatives) or the same body corporate (whether independently or together with its subsidiaries); viii. If not less than (one-fourth) of the total voting power (in relation to ) each of the two bodies corporate is exercised or controlled by the same individuals belonging to a group or by the same bodies corporate belonging to a group, or jointly by such individual or individuals and one ore more of such bodies corporate; or ix. If the directors of the one such body corporate are accustomed to act in accordance with the directions or instructions of one or more of the directors of the other, or if the directors of both the bodies corporate are accustomed to act in accordance with the directors or instructions of an individual, whether belonging to a group or not. Explanation II- If a group exercises control over a body corporate, that body corporate and every other body corporate, which is a constituent of or controlled by, the group shall be deemed to be under the same management. Explanation-III- If t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion for sale are satisfied. If any of the two aforesaid conditions are not satisfied then, quite obviously, value in such cases will be determined under the relevant rule. 13. In essence, notwithstanding the change in definition of "related" person in the new section 4, for practical applications, its scope has been restricted and but for small variation it would not be much different from that covered under the old section 4 definition. The Commissioner may, however examine carefully whether any other situation described in the definition of inter-connected undertakings need to be excluded for satisfying the qualification of mutuality of interest. The actual revenue potential in such situations may be estimated and a report sent in due course. 14. The Application of new section 4 and the valuation rules made thereunder to petroleum products may how be mentioned. Under the provisions of the existing section 4 and rules made thereunder, the practice being followed is to assess the price administered petroleum products like motor spirit, HSD, SKO (domestic) and LPG to duty on the ex-storage sale prices that are fixed by the Oil Co-ordination Committee (OCC) from time to time. The ..... X X X X Extracts X X X X X X X X Extracts X X X X
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