19th August, 2003
F. No. 332/19/2003-TRU
Government of India
Ministry of Finance
Department of Revenue
(Tax Research Unit)
Subject: Levy of excise duty on readymade garments on the basis of Retail Sale Price (RSP)-reg.
The undersigned is directed to state that certain doubts have been raised as to whether readymade garments should be assessed to duty on the basis of RSP or on the basis of transaction value.
2. As you are aware, the provisions of Section 4A do no apply to the readymade garments, as they have not been notified under that section. But under notification No. 20/2001-C.E. (N.T.) dated 30.4.2001, tariff value (at the rate of 60% of the retail sale price declared or required to be declared) was fixed on readymade garments and other articles of apparel. Vide Board’s letter F. No. B.3/4/2003, dated 01.04.2003, it was clarified that for valuation, the provision of section 4 i.e. transaction value, would apply in case the RSP is not required to be declared and is not declared.
3. It has been brought to the notice of Board that some officers in the field are insisting that all types of garments (even those cleared in bulk or in unpacked condition) should be affixed with RSP and should be valued in terms of the retail sale price. In certain cases, written communications have been sent to the assessees that such items attract the provisions of Section 4A.
4. Section 39 of the Standards of Weights & Measures Act, 1976 applies to commodities, which are cleared, sold, distributed etc. in packed condition. In terms of Rule 1 (l) of the Standards of Weights & Measures (Package Commodity) Rules, 1977, a ‘pre-packaged commodity’ means a commodity, which, without the purchaser being present, is placed in a package so that the quantity of goods contained therein, has a pre-determined value and such value cannot be altered without opening the package. Further, in terms of the said Rules, the term ‘package’ is to be construed as package containing such pre-packed commodity. Therefore, only when such pre-packed commodities are sold in retail packages, the provisions of Standards of Weights & Measures Act and rules regarding declaration of the retail sale price (and consequently valuation of the goods based on such RSP) arises. Many a times garments are cleared in bulk where the manufacturer neither packs the same nor declares the retail sale price therein. Such garments are ultimately displayed in the retailer’s outlets, which may or may not attach a price tag thereto. Some times the dealer/retailer packs, re-packs, labels or re-labels the goods, which may result in such goods fall within the purview of Standards of Weights and Measures (Packaged Commodity) Rules. However, in such cases central excise valuation is not important, as such activities undertaken on duty paid goods are fully exempt vide notification No. 38/2003-CE dated 30.04.2003. Thus, it is clear that in such cases, the manufacturer of the garments is under no legal obligations to declare the retail sale price while clearing the garments from his factory in bulk and in unpacked condition.
5. The above instructions supersede any instruction to the contrary issued in the past. Suitable instructions may be issued to the field formations to avoid any further harassment to the trade.