Central Excise Valuation is important to understand as Central Excise Duty is payable based on different criteria. As per Central Excise Act, 1944 the Central Government made some rules for the purpose of determination of the price of excisable goods. Below there is a brief description of these Central Excise Valuation Rules, i.e., from rule 1 to rule 11. These rules give you the complete information regarding the valuation of goods, Inclusion and Exclusion in Cost of Production, etc.
Central Excise Valuation Rules, 2000 (Determination of Price of Excisable Goods)
Rule 1 of Central Excise:
- These rules created for the determination of the price of excisable goods may be called the Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000.
- They came into force on and from the 1st day of July 2000.
Rule 2 of Central Excise Duty:
This rule includes the definitions of various terms such as “Act”, “normal transaction value”, “value”, etc.
- “Act” means the Central Excise Act, 1944.
- “normal transaction value” means the value at which the greatest aggregate quantity of goods is sold.
- “value” means the value referred to in Sec 4 of the Act.
Rule 3 of Central Excise Valuation Rules:
The value of any excisable goods shall be determined by these rules, for the purposes of clause (b) of sub-section (1) of section 4 of the Act.
Rule 4: Value of goods is not known at the time and place of removal
The value of excisable goods shall be based on the value of such goods sold by the assessee for delivery at any other time nearest to the time of removal of goods. Eg: Situation like the removal of free samples.
Rule 5: Valuation in case of excisable goods is sold for delivery at a place other than place of removal
In case excisable goods are sold for delivery at a place other than the place of removal, then the value of such excisable goods shall be considered to be transaction value except the cost of transportation from the place of removal up to the place of delivery.
Rule 6: Price is not sole consideration for sale
Where excisable goods are sold in the circumstance where price is not sole consideration for sale the value of such goods shall be deemed to be aggregate of
- Such transaction value.
- The value of money of any additional consideration flowing indirectly or directly from the buyer to the assessee.
Rule 7: Goods are sold from Depo or Branch
Assessable value = Normal transaction value of identical goods prevalent at Depo or Branch etc.
Rule 8 of Central Excise Valuation Rules: Valuation in case of a captive consumption
Where excisable goods are not sold by the assessee but are used for consumption by him or on his behalf in the manufacture of articles the value shall be 110% of the cost of production of manufacture of such goods.
- The cost of production to be calculated as per CAS-4 (Cost Accounting Standards) issued by ICWAI (Institute of Cost & Works Accountants of India).
- Inclusion in Cost of Production: The cost of tools, patterns, etc. received free of cost shall be included in the cost of production.
- Exclusion from Cost of Production: Interest & financial charges shall not be considered to be a part of product and abnormal cost are also not included. Eg: Heavy breakdown of plants, wastages, scrap, etc.
- The cost of material to be taken net off excise duty.
Rule 9 of Central Excise: Valuation in case of sale of goods to or through related person
When assessee did not sell excisable goods to unrelated parties, then the value of goods shall be normal transaction value at which these are sold by an assessee to buyers (not related person).
Rule 10 of Central Excise Valuation Rules:
When the taxpayer so arranges that the excisable goods are not sold by him/her except through an inter-connected undertaking, the value of goods shall be determined in the following manner, namely:
- If the undertakings are so connected that they are also related in terms of sub-clause (ii) / (iii) / (iv) of clause (b) of sub-sec (3) of sec 4 of the Act or the buyer is a subsidiary company or holding company of the taxpayer, then the value of goods shall be defined in the manner prescribed in rule 9.
- In any other case, the value shall be determined as if they are not related persons for the purpose of sub-section (1) of section 4.
Rule 11 of Central Excise Rules:
If the value of any excisable goods can’t be determined under the preceding rules, the value shall be defined using reasonable means consistent with the principles & general provisions of these rules and sub-sec (1) of section 4 of the Act.