Valuation of Excisable goods – An overview - Central Excise Practice Manual (OLD) - Central Excise

VALUATION OF EXCISABLE GOODS: AN OVERVIEW After the goods are identified/ classified under the tariff heading, the next step is to establish the value of such excisable goods in order to calculate the excise duty payable on the goods. Excise duty is either quantity based or value- based. Duty on excisable goods is payable on one of the following basis: A. Specific duty (quantity-based) B. Duty based on value (ad-valorem) Tariff value u/s 3(2) Transaction value u/s 4 Maximum Retail Price u/s 4A I. Specific duty: - it is the duty based on specific unit say, volume, weight, length, thickness etc. Due to its inflexibility specific duties are restricted to certain tariff items only and some of these are: Cigarette (duty on cigarettes is payable on the basis of its length), Sugar (on per Quintal basis) Matches (on per 100 boxes/packs basis) Marble slabs tiles (on square metre basis) Colour T.V. (on the basis of screen size in cms when MRP is not the sole consideration) Molasses (on per ton basis) In case of duty based on weight some variation in actual weight and weight as indicated on the package is invariable which is known as 'maximum permissible error'. Like - 1% for package of 15kg or more 1.5% for package of 1kg or more 3% for package above 300 gms 4.5% for package above 100 gms 9% for package upto 50 gms II. Duty as a percentage of Tariff value u/s 3(2): - For certain commodities tariff values has been fixed by the Central Govt. by issue of notification. Duty on goods covered u/s 3(2) is payable as the percentage of the tariff value fixed for the commodity. Government can fix different tariff values for different classes of goods or goods manufactured by different manufacturers or sold to different classes of buyers. Pan Masala packed in retail packs of less than 10gms per pack [Notification no. 16/98]. Because of the need to make frequent changes in the tariff values fixed as price rises, only few selected commodities are covered under this section and these are: Readymade Garments falling under heading 6101.00 or 6201.00 [Notification no. 20/2001] III. Duty as a percentage of transaction/ assessable value u/s 4: - under this section, duty is payable as a percentage of transaction value on each removal of goods provided the conditions stated under section 4(1)(a) is fulfilled. This had come into effect from 1 st July 2000. Before this date valuation under this section was based on the principle of 'normal wholesale price' means the transaction value at which the greatest aggregate quantity of goods are sold. IV. Duty as a percentage of Retail Sale Price (MRP) u/s 4A: - under this section, duty is payable as a percentage of Retail Sale Price as indicated on the package after giving permissible deduction. Compound Levy Scheme As per Rule 15 of Central Excise Rules, 2002 Central Government may, by notification, specify the goods in respect of which an assessee shall have an option to pay duty of excise on the basis of specified factors relevant to production of such goods and at specified rates. The scheme is presently applicable to stainless steel pattas/partties and Aluminium circles. These articles are not eligible for SSI exemption.