VALUATION RULES

[Asked by Guest]

WE ARE ENGAGED IN GALVANIZATION OF M.S. ANGLES, M.S.FLATES AND PLATES. WE ARE GETTING M.S.ANGLES AND M.S.FLATES FREE OF COST FROM SUPPLIER ON DELIVERY CHALLAN AND WE CARRIED OUT HOT DIP GALVANIZATION. WE ARE MAKING INVOICE FOR THE SALES OF ZINC ONLY AND CHARGING EXCISE ON THE VALUE OF SALES OF ZINC AND ALSO AVAILING THE CREDIT OF ZINC PURCHASED BY US. MOST OF THE PARTIES ARE EXCISABLE AND REST ARE SSI UNITS HAVING TURNOVER OF LESS THAN 150 LACS. HOWEVER DEPARTMENT CLAIMING THAT VALUATION SHOULD BE AS PER RULES 10A AND ASSESSABLE VALUE SHALL BE THE GOODS AT WHICH GOODS REMOVED BY THE RAW MATERIAL SUPPLIER.

SO WHAT SHALL BE THE VALUE ON WHICH WE HAVE TO COLLECT EXCISE DUTY...????

AI Summary

Valuation principle: include free inputs and value-added cost when galvanisation amounts to manufacture for excise.
Galvanization that changes the intrinsic character of MS angles, flats or plates qualifies as manufacture, so excise duty is payable on the transaction value of the galvanized product. Valuation must include the value of raw materials supplied free of cost, the cost of galvanization and an element of profit, per Board circulars adopting Supreme Court principles. If processes occur within the same factory premises their cost is includible in factory-gate assessable value; processes outside the factory may not attract additional duty. If activity is not manufacture, service tax rather than excise may apply.