VALUATION UNDER EXCISE & SERVICE TAX
CHANGING TRENDS & BUSINESS IMPACT
“Your values become your destiny” - Mahatma Gandhi
Speaker
Siddharth Srivastava – Advocate
SKS Associates- Indirect Tax Consultants & Solicitors
Address: 431/D-22, II Floor, Chattarpur Hills, New Delhi ,110074
Contact: 011-647-111-00 ; 9560111577
E- Mail:
siddharth.srivastava@sksassociates.in
mail@sksassociates.in
Valuation Concepts
__________________________________________
Historical Background under Central Excise
 Pre 1975
Price of goods sold / capable of being sold
 1.10.1975 to 30.6.2000
Normal price in wholesale trade
 1.7.2000 onwards
Transaction value
Historical Background under Service tax
 Till 15.07.2001
Section 67 contained different provisions for different taxable services
 16.07.2001 to 17.04.2006
Gross amount charged
 From 18.04.2006
- Gross amount charged
- Ascertainable consideration in monetary & non-monetary form
- As per Valuation Rules where consideration not ascertainable
CHANGING CONCEPT UNDER CENTRAL EXCISE
NORMAL PRICE (Till 01.07.2000)
TRANSACTION VALUE (FROM 01.07.200)
4. Valuation of excisable goods for purposes of
charging of duty of excise:
4. Valuation of excisable goods for purposes of charging of
duty of excise. –
(1) Where under this Act, the duty of excise is
chargeable on any excisable goods with
reference to value, such value shall, subject to
the other provisions of this section be deemed
to be -
(1) Where under this Act, the duty of excise is chargeable on
any excisable goods with reference to their value, then, on
each removal of the goods, such value shall -
(a) the normal price thereof, that is to say, the
price at which such goods are ordinarily sold by the
assessee to a buyer in the course of wholesale trade
for delivery at the time and place of removal,
where the buyer is not a related person and the
price is the sole consideration for the sale
(a) in a case where the goods are sold by the assessee, for
delivery at the time and place of the removal, the assessee
and the buyer of the goods are not related and the price is
the sole consideration for the sale, be the transaction value
Section 4(3)(d) defines “Transaction Value” as follows:
“(d) “transaction value” means the price actually paid or payable for the goods, when sold, and includes in addition
to the amount charged as price, any amount that the buyer is liable to pay to, or on behalf of, the assessee, by
reason of, or in connection with the sale, whether payable at the time of the sale or at any other time, including, but
not limited to, 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; but does
not include the amount of duty of excise, sales tax and other taxes, if any, actually paid or actually payable on such
goods.”
CONTROVERSIAL DECISIONS
JUDGMENT
RATIO
Tribunal Larger Bench Order In Case
Of MARUTI SUZUKI INDIA LTD.
Rendered In 2010
 Any indirect benefit resulting from the payment made by the buyer to the
dealer in connection with or by reason of the sale transaction between dealer
and manufacturer will have to be included in the assessable value of
manufacturer.
 The concept of transaction value relates to the manufacturing cost inclusive of
any other amount received or receivable directly or indirectly to make the
product marketable.
Bombay High Court Order In Case Of
TATA MOTORS Rendered In 2012
Supreme Court Decision In Case Of
FIAT
INDIA
PRIVATE
Rendered In 2012
LIMITED
 “In our view, it is not necessary for us to record our views on the correctness of
the judgment delivered by the Larger Bench in the case of Maruti Suzuki
(supra).”
 “Loss making price” continuously for more than five years while selling more
than 29,000 cars is not “normal price” or the price at which the goods are
“ordinarily sold” by the assessee to a buyer in the course of wholesale trade
 Fiat’s strategy to penetrate the market by selling below cost was resulting in
an extra commercial consideration and price is not the sole consideration.
 Since price is not the sole consideration, the ruling will equally apply even
under TV regime. The Court held that in such cases, the residuary or bestjudgment method under Central Excise Valuation Rules can be applied.
CHANGING CONCEPT UNDER SERVICE TAX
OLD VALUATION (Till 17.04.2006)
NEW VALUATION (From 18.04.2006)
Section 67 of Finance Act
Section 67 of Finance Act
“For the purposes of this Chapter, the
value of any taxable service shall be the
gross amount charged by the service
provider of such service provided or to be
provided by him.”
(1) Subject to the provisions of this Chapter, where service tax is
chargeable on any taxable service with reference to its value, then
such value shall,i.
in case where the provision of service is for a consideration in
money, be the gross amount charged by the service provider or to be
provided by him;
ii. in case where the provision of service is for a consideration not
wholly or partly consisting of money, be such amount in money as ,
with the addition of service tax charged is equivalent to the
consideration;
iii. in a case where the provision of service is for a consideration which
is not ascertainable be the amount as may be determined in the
prescribed manner.
VALUATION RULE 3 – Where value is not ascertainable
(a) Value equivalent to the gross amount charged for providing similar
service to any other person in the ordinary course of trade and the
gross amount charged is the sole consideration;
(b) where the value cannot be determined in accordance with clause (a),
the equivalent money value which is not less than the cost of
provision of such taxable service.
CONTROVERSIAL DECISIONS
RATIO
JUDGMENT
Delhi
High
Court
INTERCONTINENTAL
In
Case
CONSULTANTS
Of
 It held that Rule 5(1) of the Rules runs counter and is repugnant to
Sections 66 and 67 of the Act and to that extent it is ultra vires.
&
TECHNOCRATS PVT. LTD. Rendered In 2012
Bombay High Court Order In Case Of INOX
AIR PRODUCTS LTD. Rendered in 2012
Punjab & Haryana High Court Decision In
Case
Of
PUNJAB
EX-SERVICEMEN
CORPORATION Rendered in 2012
 It held that the fact that cost of electricity used in manufacture of
oxygen was includible in valuation thereof does not mean it has to be
included in value of taxable services
 Profit motive is not necessary for imposition of Service tax. Neither
charging section nor provision for valuation prescribe it.
BUSINESS IMPACT
 Understanding the ever developing concept of extra
commercial consideration
 Whether consideration can flow from a person other than
from buyer to seller
UNDER CENTRAL EXCISE
 What happens to introductory prices and discount /
incentive schemes
 Whether one time transactions also open to scrutiny
under best judgment assessment . What is the criteria for
prolonged use?
BUSINESS IMPACT
 Whether all reimbursable expenditure can be excluded.
Is service tax on profit only?
UNDER SERVICE TAX
 Difference between reimbursement and Pure Agent
transactions
 Whether will be the true extent and meaning of ‘similar
services’ in cases of pure intellectual services like
consultants, lawyers, etc
 Whether it is possible to provide a free service to anyone
in light of extra commercial considerations like market
share, goodwill and introductory phase of business?
PRESENTED
BY
IN
ASSOCIATION
WITH
For any details & inquiries:
SKS Associates- Indirect Tax Consultants & Solicitors
Address: 431/D-22, II Floor, Chattarpur Hills, New Delhi ,110074
Contact: 9560111577
E- Mail: siddharth.srivastava@sksassociates.in