Circular No. 251/85/96-CX
Government of India
Ministry of Finance
Department of Revenue, New Delhi
Subject: Determination of assessable value – Changes made in the Budget 1996-97- Regarding.
In the Finance Act of 1996, definition of “place of removal” has been amended to included depot, consignments agent or any other place or premises from where the goods are sold by or on behalf of the assessee within its scope. However, time of removal for these other places of removal added in Section 4 shall be deemed to be the time at which such goods are cleared from the factory.
The significance of these changes is that sale price at any of the “places of removal” will be the normal price for levy of excise duty and there can be different assessable values for the same excisable goods depending upon the place of removal. It also means that duty will be required to be paid at the time of clearance of goods from the factory for those goods which are sold by the manufacturer at depot, consignment agents or any other place etc. at a sale price of the place of removal i.e. depot, consignment agents etc. Where the goods are sold at the factory gate, there would be no problem.
In view of the budgetary changes, certain doubts have been raised regarding determination of assessable value where the goods are sold from storage depots etc.
These doubts are clarified below :-
Point of Doubt
How assessable value will be determined at the factory gate in respect of goods to be cleared from other places of removal such as depot etc.
Assessments need not kept provisional till the actual sale price of the excisable goods cleared from places of removal other than factory gate is known. The assessee may be asked to declare and pay duty at the price prevailing at such other place of removal on the date such goods meant for that place of removal are cleared from the factory gate. To illustrate, if the factory is at Bombay and the storage depot is at Ahmedabad, then for a consignment meant for Ahmedabad Depot, cleared from Bombay factory on, say, 1st January, the price at which an earlier consignment of goods of the same destination, is sold from Ahmedabad Depot on 1st January will be the basis for arriving at the assessable value of the goods cleared from Bombay on 1st january. If this consignment cleared on 1st january is sold, say on the 1st march from Ahmedabad Depot at a lower or higher price, such a price will be the basis for valuation of clearances on 1st March and so on. this will apply mutatis mutandis to cases of provisional assessments also where at the time of clearance of 1st January the sale price from the depot on 1st January is not known.
If the prevailing price at the depot etc. on the date goods are being cleared at factory gate is not available/ known for unavoidable reasons, or the price fluctuates frequently the provisional assessment can be resorted to and all efforts should be made to finalise the assessment at the earliest.
Point of Doubt
Whether one normal price will have to be worked out for all depots or different normal prices for different depots may be accepted for assessment purposes.
If the goods are sold by the assessee from different depots at different normal prices, each such normal price shall be assessable value for the goods sold from each such depot.
Point of Doubt
Whether differential Central Excise liability will have to be collected/ refunded if the goods are transferred from one sale depot to other sale depot.
In case of inter-depot transfer of goods, duty may be initially charged with reference to place of removal from where the goods are actually removed / in tended to the sold and by charging differential duty, if any, on the basis of assessable value prevalent at the actual “place of removal” i.e. the storage depot etc. from which the goods are finally sold.
Point of Doubt
Whether transport cost from factory gate to the other places of removal such as depot etc. will form part of the assessable value, particularly when no amendment has been made in Section 4(2) of CEA.
In view of the change in definition of place of removal, sale price at the place of removal such as depot etc. has to be taken as normal sale price for determination of assessable value. A sale price at any place of removal other than factory gate has to take into account all the expenses incurred towards transport including freight, insurance etc. from factory gate to such place of removal and other expenses incurred in maintaining and running the said place or removal and thus all these expenses will form part of the sale price for determination of assessable value.
After amendment of Section 4, depots etc. have been declared as “places of removal” and as such sale price prevailing at such depots etc. which will include transport charges etc. will be known at the “place of removal” i.e. the storage deports etc. and as such Section 4(2) will not be applicable in such cases. Section 4(2) is applicable only in cases when sale price is not known at the place of removal.
Point of Doubt
Whether there will be change in the valuation of goods manufactured on job work basis.
It an independent job worker processes the goods and returns it back to the supplier of goods, the prescription of other “places of removal” in the Budget will not make any difference in such cases. For such goods the valuation can be done on the basis of price of comparable goods under Rule 6(b) (i) or failing that under Rule 6(b)(ii) of the Valuation Rules, on the basis of the basis of the cost of manufacture plus notional profit, in order to arrive at the nearest ascertainable equivalent of the price (stipulated under Section 4(1)(a)) as envisaged under Section 4(1)(b) of Central Excise Act. This should include the landed cost of the goods received for job work, the processing (job work) charges and the normal profit which the processed goods would have earned if the goods were being sold by the job worker himself at the “place of removal”. However, instead of returning the goods to the supplier of goods if the goods are removed/ sold by the independent processor itself, then the assessable value will depend upon the sale price at the “place of removal” from where the goods are sold as is the case in case of other manufacturers.