Transaction Value under the Central Excise Act

For applicability of transaction value in a given case, for assessment purposes, certain essential requirements should be satisfied. If anyone of the said requirements is not satisfied, then the transaction value shall not be the assessable value and value in such case has to be arrived at under the valuation rules notified for the purpose. The essential conditions for application of a

Transaction value are :
(a) The goods are sold at the time of removal from the factory or warehouse.
(b) The transaction is between unrelated parties, i.e, the assessee and the buyer are not related parties
(c) The price the sole consideration for the sale

(i) The goods are sold by an assessee for delivery at the time of place of removal. The term “place of removal” has been defined basically to mean a factory or a warehouse, and will iltclude a depot,
premises of a consignment agent or any other place or premises from where the excisable goods are to be sold after their clearances from the factory.
(ii) The assessee and the buyer of the goods are not related; and
(iii) The price is the sale consideration for the sale.

Transaction value would include any amount which is paid or payable by the buyer to or on behalf of the assessee, on account of the factum of sale of goods.

(1) As per the new Sec.4, transaction value shall include the following receipts/recoveries or charges, incurred or provided for in connection with the manufacturing, marketing, selling of the excisable goods :

(a) Advertising or publicity;
(b) Marketing and selling organization expenses;
(c) Storage;
(d) Outward handling;
(e) Servicing, warranty;
(f) Commission or
(g) Any other matter.

The above list is not exhaustive and whatever elements which enrich the value of the goods before their marketing and were held by Hon’ble Supreme Court to be includible in “value” under the erstwhile section 4 would continue to form part of section 4 value even under new section 4 definition.

(2) Thus if in addition to the amount charged as price from the buyer, the assessee recovers any other amount by reason of sale or in connection with sale, then such amount shall also form part of the transaction value. Where the assessee includes all their costs incurred in relation to manufacture and marketing while fixing price payable for the goods and bills and collects an all inclusive price -as happens in most cases where sales are to independent customers on commercial consideration – the transaction price will generally be the assessable value.

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