TRADE NOTICE NO.
Sub: Central Excise-Valuation of Goods transferred to Depots-Provisional Assessment - Reg.
In the Regional Advisory Committee
meeting held on 16.09.2002, Members of Trade and Industry, raised certain
doubts about valuation of goods sold through Depots/Consignment Agents and
about adoption of provisional assessment thereon. The issue raised by the
Members were examined and the following clarification are issued for the
benefit of all concerned.
Where a manufacturer sells his goods through Depots/Consignment Agents,
the sale of goods for delivery does not happen at factory gate and so the
valuation can not be done under the provisions of Section 4(1)(a). Therefore,
resort is to be made to the provisions of Section 4(1)(b) under which, Central
Excise Valuation Rules,2000 are notified.
When the sales are through the
Depot/Consignment Agent, the applicable Rule of Central Excise Valuation
Rules, 2000, is Rule 7. Under
that Rule, the value to be adopted is mentioned as "normal transaction
value". The definition for normal transaction value given at Rule 2(b) of
the Rules reads as " Normal Transaction Value means the Transaction Value
at which the greatest aggregate quantity of goods are sold".
It has since been clarified in Board's Circular No:643/34/2002-CX dated
01.07.2002 (Trade Notice No. 62 /2002 dated 19-7-2002) that, the Transaction
Value of the "greatest aggregate quantity" would refer to the price at which, the largest quantity of
identical goods are sold on a particular day irrespective of the number of
buyers. In case the ”normal transaction value" from the depot is not
ascertainable on the day identical goods are being removed from factory, the
nearest day when clearances of the goods were effected from the depot should
be taken into consideration.
The concept of Normal Transaction Value
can also be understood by a reference to the Interpretative Notes to Rule 7
of Customs Valuation (Determination of Price of Imported Goods) Rules, 1998,
wherein similar concept prevails. An example for greatest aggregate quantity
has been given therein which is reproduced below:-
quantity sold at each price
10 sales of 5 units, 5 sales of 3 units
5 sales of 11 units
1 sale of 30 units, 1 sales of 50 units
greatest number of units sold at a price is 80, therefore, the unit price in
the greatest aggregate quantity is Rs. 90/- provided, the sales are to persons
who are not related.
Asssuming the above illustration is the
transactions of a particular day, namely, 1.9.2002, at the Depot, then for all
the clearances from factory to the said Depot on 01.09.2002, excise duty is to
be paid at the value of Rs. 90/- per unit. The Normal Transaction Value may
vary between Depot to Depot also.
A consignment cleared from factory
adopting normal transaction value
may be sold later, at the Depot, at a higher price or lower price. Such
difference in price as regards that consignment is immaterial. In other words,
once the correct Normal Transaction Value is adopted for payment of excise
duty then, the consignment is not
required to be chased to know the ultimate sale price. The valuation ends with
adoption of correct normal transaction value.
the price at which the goods are to be sold at depot are also decided by the
management of the company and in such a situation there may not be much
difficulty in adopting Normal Transaction Value to pay excise duty. However,
it is well known that certain commodities like 'Cotton Yarn' etc. are prone to
wide fluctuation in price within a day, and so it may not be possible for a
manufacturer to ascertain the Normal Transaction Value then and there. In such
situations, assessees may request for provisional assessment, if they desire
so. Finalisation of provisional assessment on account of non-availability of
Normal Transaction Value need not wait for the close of the accounting year
and so it is advised that the assessees may in their own interest furnish the
finalisation proposals to the jurisdictional officers, once in a month where
the number of Depots are less or once in a quarter where the number of Depots
are more, depending on the suitability.
manufacturers grant 'Quantity Discount' depending on the off-take per
consignment and 'Annual Turnover Discount' on the off-take in a year. Such
assessees who make sales through depots may not know the Quantity Discount and
Annual Discount at the time of removal from the factory. In such situation
also, assessee may request for provisional assessment, if they so desire. Here
also it is advised, that the finalisation proposals for the Quantity Discount
may be furnished to the jurisdictional officers once in a month or a quarter
depending on the suitability. As regards to Annual Discount, which are
finalised by the assessee at the end of the year, proposals for finalisation
are to be provided within a reasonable time from the close of the year.
Assessees are requested to explicitly state in clear terms, the grounds
on which provisional assessment is sought to the jurisdictional Divisional
Officer substantiating their claim. Resort to provisional assessment as a
matter of routine or on vague grounds will not be entertained by the
Department. Attention of the Trade and Industry is invited to sub-rule (4) of
Rule 7 of the Central Excise Rules, 2002, wherein it is stipulated that
assessees are liable to pay interest on differential duty payment to
Government, consequent to finalisation of provisional assessment, from the
first day of the month succeeding the month for which such amount is
determined, till the date of payment thereof.
from File C.No. IV/16/33/2002 CX.III)
Department and Trade as per Mailing List.