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Unit 5: Clearances of Excisable Goods

(iv) Value of engineering, development, art work, design work and plans and sketches undertaken Notes
elsewhere than in the factory of production and necessary for the production of such goods.

Explanation 2. - Where an assessee receives any advance payment from the buyer against delivery
of any excisable goods, no notional interest on such advance shall be added to the value unless
the Central Excise Officer has evidence to the effect that the advance received has influenced the
fixation of the price of the goods by way of charging a lesser price from or by offering a special
discount to the buyer who has made the advance deposit.

Example: X, an assessee, sells his goods to Y against full advance payment at 100 per
piece. However, X also sells such goods to Z without any advance payment at the same price of
100 per piece. No notional interest on the advance received by X is includible in the transaction
value.

Example: A, an assessee, manufactures and supplies certain goods as per design and
specification furnished by B at a price of 10 lakhs. A takes 50% of the price as advance against
these goods and there is no sale of such goods to any other buyer. There is no evidence available
with the Central Excise Officer that the notional interest on such advance has resulted in lowering
of the prices. Thus, no notional interest on the advance received shall be added to the transaction
value.
RULE 7. Where the excisable goods are not sold by the assessee at the time and place of removal
but are transferred to a depot, premises of a consignment agent or any other place or premises
(hereinafter referred to as “such other place”) from where the excisable goods are to be sold after
their clearance from the place of removal and where the assessee and the buyer of the said goods
are not related and the price is the sole consideration for the sale, the value shall be the normal
transaction value of such goods sold from such other place at or about the same time and, where
such goods are not sold at or about the same time, at the time nearest to the time of removal of
goods under assessment.
RULE 8. Where the excisable goods are not sold by the assessee but are used for consumption by
him or on his behalf in the production or manufacture of other articles, the value shall be one
hundred and ten per cent of the cost of production or manufacture of such goods.
RULE 9. When the assessee so arranges that the excisable goods are not sold by an assessee
except to or through a person who is related in the manner specified in either of sub-clause (ii),
(iii) or (iv) of clause (b) of sub-section (3) of section 4 of the Act, the value of the goods shall be
the normal transaction value at which these are sold by the related person at the time of removal,
to buyers (not being related person); or where such goods are not sold to such buyers, to buyers
(being related person), who sells such goods in retail:
Provided that in a case where the related person does not sell the goods but uses or consumes
such goods in the production or manufacture of articles, the value shall be determined in the
manner specified in rule 8.
RULE 10. When the assessee so arranges that the excisable goods are not sold by him except to
or through an inter-connected undertaking, the value of goods shall be determined in the
following manner, namely :-

(a) The undertakings are so connected that they are also related in terms of sub-clause (ii) or (iii)
or (iv) of clause (b) of sub-section (3) of section 4 of the Act or the buyer is a holding company or
subsidiary company of the assessee, then the value shall be determined in the manner prescribed
in rule 9.

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