Page 85 - DCOM308_DCOM502_INDIRECT_TAX_LAWS

Indirect Tax Laws

Notes Explanation. - In this clause “holding company” and “subsidiary company” shall have the same
meanings as in the Companies Act, 1956 (1 of 1956).
(b) in any other case, the value shall be determined as if they are not related persons for the
purpose of sub-section (1) of section 4.
RULE 10A. Where the excisable goods are produced or manufactured by a job-worker, on behalf
of a person (hereinafter referred to as principal manufacturer), then, -
(i) case where the goods are sold by the principal manufacturer for delivery at the time of
removal of goods from the factory of job-worker, where the principal manufacturer and the
buyer of the goods are not related and the price is the sole consideration for the sale, the value
of the excisable goods shall be the transaction value of the said goods sold by the principal
manufacturer;
(ii) case where the goods are not sold by the principal manufacturer at the time of removal of
goods from the factory of the job-worker, but are transferred to some other place from where
the said goods are to be sold after their clearance from the factory of job-worker and where the
principal manufacturer and buyer of the goods are not related and the price is the sole
consideration for the sale, the value of the excisable goods 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 said goods from
the factory of job-worker;
(iii) in a case not covered under clause (i) or (ii), the provisions of foregoing rules, wherever
applicable, shall mutatis mutandis apply for determination of the value of the excisable goods:

Provided that the cost of transportation, if any, from the premises, wherefrom the goods are
sold, to the place of delivery shall not be included in the value of excisable goods.
Explanation.- For the purposes of this rule, job-worker means a person engaged in the manufacture
or production of goods on behalf of a principal manufacturer, from any inputs or goods supplied
by the said principal manufacturer or by any other person authorised by him.

5.9 CENVAT

In 1986, the Central Government introduced Modified Value Added Tax called MODVAT, which
enabled the manufacturers to avail credit of excise duty paid on the inputs used in or relation to
manufacture of the end product. The object of MODVAT was to provide for offset of duty paid on
input stage against the duty payable at the final stage. In 1994, the scheme of MODVAT was
extended to capital goods also. The MODVAT scheme was renamed to be called Central Value
Added Tax Scheme i.e. CENVAT scheme.

Concept of CENVAT

The CENVAT Scheme is a scheme designed to reduce the cascading effect of indirect taxes on
final product. Cascading effect in simple terms mean duty on duty. When a raw material passes
through various stages of manufacture before being available to the ultimate consumer as
finished goods, at every stage, duty is levied and this results in cascading effect on duty.

80 LOVELY PROFESSIONAL UNIVERSITY