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Unit 3: Classification and Valuation of Excisable Goods

buyer in this case is not in connection with the sale but in connection with the transportation Notes
as the sale is over at the factory gate itself. Transit insurance will also not be included in
the assessable value as delivery of goods to transporter is prima facie delivery of goods to
buyer hence sale gets over at the factory gate itself. [Escorts JCB Ltd. v. CCE 2002 146 ELT
31 (SC)]. Profit of 250 earned on transportation charges will not be included in the
assessable value [Baroda Electric Meters Ltd. v. CCE 1997 (94) ELT 13 (SC)].
(ii) Discount of 1000 is given on 15000 (agreed price) i.e., the discounted price is 14000
however, as in this case price is not the sole consideration, the extra discount of 1000.00
will be included in the assessable value.

(iii) Interest of 800 will not be included in the assessable value as the payment of such interest
is not in connection with the sale but in connection with the payment of the consideration
for sale. CBEC Circular No. 643/34/2002-CX dated 1.7.2002 has confirmed that delayed
payment charges will not be includible in the assessable value, if shown or indicated
separately in invoice and charged over and above the sale price.
(iv) Packing charges will form part of the assessable value.
(v) Charges for 'free after sale service' during warranty period are includible in the assessable
value.
(vi) Dharmada charges are includible in the assessable value [CBEC Circular No. 763/79/2003
C.X. dated 21.11.2003].

(vii) Value of such lubricant will not be included in the assessable value as it is a purely trading
activity and the sale of main article (motor) is independent of sale of optional bought out
item (lubricant). Even the profit earned on such bought out item is not included in the
assessable value of manufactured product [Triveni Engineering v. CCE 2000 (122) ELT 386
CEGAT].
Therefore, the assessable value will be:
14000 + 1000 + 1300 + 500 + 200 = 17000.00.

Self Assessment

State whether True or False:

6. Duty at ad valorem rates is charged on a wide range of excisable commodities.
7. Valuation of such goods is governed by section 4 of the Central Excise Act, 1944.
8. Incorrect determination of cost of excisable goods Rule 134 read with proviso to rule 9 of
the Central Excise Valuation. (Determination of Price of Excisable Goods) Rules, 2000.
3.3 Valuation under Central Excise

After duty liability is established and after the product is correctly classified, the next question
is ‘What is the Excise Duty payable ?’ If you refer to CETA, you will find that some rates are fixed
on per Kg or per quintal basis, while some rates are based on ‘%’ basis. This percentage is the %
of ‘Assessable Value’ of goods fixed as per section 4 of Central Excise Act.

Excise duty is payable on one of the following basis :
 Specific duty
 Duty as % of Tariff Value fixed under Section 3(2).

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