Valuation of Excisable Goods

[Srivatsan Krishnamachari]

Dear Learned Friends,

Kindly clarify the following query: A company manufacture several goods which are covered under central excise. In order to push up the sales of a particular product (Product A) of its,it offers another of its products (Product B) free of cost to customers/dealers as a combo by paying the applicable excise duty on the transaction value of Product(A) alone and reverse the proportionate cenvat credit taken on the inputs of the Product(B) there by not paying CED on the Product (B) while clearing the Combo (Product A+ Product B) For instance duty is paid on Thermic Jug which is cleared along with "free Items" water bottle or say a "Quilt" with Pillows.Is such type of transaction permissible? I heard there are quite a few decisions by Tribunals and Courts on this kind of "Combo Offer". Kindly let me know the correct procedure.

Thanks and Regards,

K.Srivatsan

AI Summary

Valuation of excisable goods determines whether free bundled items are taxed on transaction value or on printed MRP.
Valuation of excisable goods in combo offers depends on whether the principal product is valued under Section 4 transaction value or under Section 4A MRP-based valuation. Under transaction value, the actual amount charged for the bundle is taxable and cenvat credit on inputs of the free item need not be reversed; under MRP valuation, MRP (less abatement) applies and affects duty computation and credit reversal.