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Unit 3: Classification and Valuation of Excisable Goods

normally sold along with such cases. Further, packing materials and containers are also to be Notes
classified with the goods except when the packing is for repetitive use (This provision is obviously
made to ensure that the packing and the goods are charged at same rate of duty).
Rule 6
Classification of goods in sub-headings shall be determined in terms of those sub-headings.
Only sub-headings at the same level are comparable.

!
Caution In order to determine the rate of excise duty on goods, classification is prerequisite.
Excise duty payable is based on the classification of goods given in the Central Excise
Tariff Act, 1985 (CETA).

Self Assessment

Fill in the blanks:

1. CETA consists of two schedules, the first schedule gives ..............................
2. The .............................. Excise Tariff Act was amended in 2004.
3. .............................. system define as excisable goods list in India and goods are classified
systematically following the footsteps of HSN.
4. The CE Act .............................. does not provide any guidelines for classification of goods.
5. The linkage between Central Excise Act 1944 and Central Excise Tariff Act ..............................
as amended by the Central Excise Tariff Act 2004.
3.2 Valuation of Excisable Goods

Duty at ad valorem rates is charged on a wide range of excisable commodities. Valuation of such
goods is governed by section 4 of the Central Excise Act, 1944, read with the Central Excise
Valuation (Determination of Price of Excisable Goods) Rules, 2000. Valuation with reference to
the retail sale price in respect of specified excisable goods is governed by section 4A of the above
Act. A few cases of short levy of duty due to incorrect valuation involving revenue of 12.42
crore, are illustrated in the following paragraphs. These observations were communicated to
the Ministry through 23 draft audit paragraphs. The Ministry/department has accepted (till
December 2009) the audit observations in 15 draft audit paragraphs with a revenue implication
of 7.65 crore, of which 3.33 crore has been recovered.
Incorrect determination of cost of excisable goods Rule 8 read with proviso to rule 9 of the
Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000 envisages that
where excisable goods are not sold by the assessee but are consumed by it or by a related person
of the assessee in the manufacture of other articles, the assessable value of such goods shall be
one hundred and ten per cent of the cost of production or manufacture of such goods. Further,
the Board had clarified (13 February 2003) that the value of goods consumed captively should be
determined in accordance with the Cost Accounting Standard (CAS-4) method only.
M/s BSNL (Telecom factory), in Kolkata V Commissionerate, engaged in the manufacture of
telecom tower, SS drop-wire etc., cleared goods to its different telecom circles paying duty on
the assessable value arrived at on ‘cost basis’. Scrutiny of records indicated that the assessable
value was determined by adopting value of raw materials which was lower than the actual
value. This resulted in short levy of duty of 20.40 lakh during the period from May 2005 to
March 2006.

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