Valuation of Goods under the Central Excise Act

Excise duty is payable on one of the following basis :

• Duty based on production capacity – Some products (e.g. pan masala, rolled steel products) are perceived to be prone to duty evasion. In case of such products, Central Government, by notification, can issue notification specifying that duty on such notified products will be levied and collected on the basis of production capacity of the factory [section 3A(1) of Central Act inserted w.e.f. 10th May 2008]. When such notification is issued, annual capacity will be determined by Assistant Commissioner [section 3A(2)(a) of CEA]. Factors relevant to determine production capacity will be specified by rules issued by Central Government [section 3A(2)(b)(i)].

• Specific Duty – It is the duty payable on the basis of certain unit like weight, length, volume, thickness etc. For example, duty on Cigarette is payable on the basis of length of the Cigarette, duty on sugar is based on per Kg basis etc.

• Tariff value – In some cases, tariff value is fixed by Government from time to time. This is a “Notional Value “ for purpose of calculating the duty payable. Once ‘tariff value’ for a commodity is fixed, duty is payable as percentage of this ‘tariff value’ and not the Assessable Value fixed u/s 4.

• Duty based on basis of Maximum Retail Price printed on carton after allowing deductions – section 4A of CEA.

• Compounded Levy Scheme – Normal excise procedures and controls are not practicable when there are numerous small manufacturers. Rule 15 of Central Excise Rules provides that Central Government may, by notification, specify the goods in respect of which an assessee shall have 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 only to stainless steel pattas/pattis and Aluminium circles. These articles are not eligible for SSI exemption.

• Duty as % based on Assessable Value fixed under section 4 ( ad valorem duty ) (If not covered in any of above)

Value of the excisable goods has to be necessarily determined when the rate of duty is on ad-valorem basis.
Accordingly, under the Central Excise Act, 1944. the following values are relevant for assessment of duty.
Transaction value is the most commonly adopted method.
(i) Transaction value under Section 4 of the Central Excise Act

(ii) Value determined on basis of maximum Retail Sale Price as per Section 4A of the Act, if applicable to a given commodity.

(iii) Tariff value under Section 3, if applicable.

Details of all the methods of valuation are discussed below :

1.Transaction Value

2.Value based on Retail Sale Price (MRP)


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