Value of the excisable goods has to be necessarily determined to levy the duty on the goods. Under the Central Excise Act, 1944, the following methods of valuation of goods are considered for the assessment of Duty.
Ad Valorem/ Transaction Value: Transaction value means the value of goods which are sold at the time and place of removal and in addition to the amount charged as price, it includes , any amount that the buyer is liable to pay, including any amount charged for, or to make provision for, advertising or publicity, marketing and selling, organization expenses, storage, outward handling, servicing, warranty, commission or any other matter.
Transaction value, on each removal of goods shall be determined on the fulfillment of following conditions:
The goods should be sold at the time and place of removal
Buyer and Assessee should not be related
Price should be the sole consideration for the sale
Each removal will be treated as a separate transaction and 'value' for each removal will be separately fixed.
Ad Quantum: In case of Ad Quantum the duty is payable on the basis of certain unit Like Weight, Length, volume etc.
Example: Duty on cigarette is payable on the basis of length of the cigarette, duty on Sugar is based on per Kg.
Value determined on the basis of Maximum Retail Sale Price: Retail sale price means the maximum price at which the excisable goods in packaged form may be sold to the ultimate consumer and includes all taxes local or otherwise, freight, transport charges, commission payable to dealers, and all charges towards advertisement, delivery, packing, forwarding and the like, as the case may be, and the price is the sole consideration for such sale.
Factors needs to be considered while determining the value on the basis of maximum retail sale price are:
Where on the packages of any excisable goods, more than one retail sale price is declared, the maximum of such retail sale price shall be deemed to be the retail sale price
Where the retail price, declared on the package of any excisable goods at the time of its clearance from the place of manufacture, is altered to increase the retail sale price, such altered retail sale price shall be deemed to be the retail sale price.
Where different retail sale prices declared on different packages for the sale of any excisable goods in packaged form in different areas, each such retail price shall be the retail sale price for the purposes of valuation of the excisable goods intended to be sold in the area to which the retail sale price relates.