Central Excise Valuation (Determination of Price of Excisable goods) Rules, 2000

Rule 10A to the valuation rules regarding valuation in case of job work was inserted with effect from 1-4-2007 to provide that transaction value of the goods shall be the value on which job worker is required to pay central excise duty in certain cases.

Despite the above insertion, the job workers are continue to pay duty of excise on cost plus method.

Therefore, CBEC has issued a circular no. 902/22/2009-CX. dated 20-10-2009 to clarify that:

………wherever goods are manufactured by a person on job work basis on behalf of a principal, then value for the purpose of payment of excise duty may be determined in terms of the provisions of Rule 10 A of the Central Excise Valuation (Determination of price of Excisable goods) Rules, 2000 subject to fulfilment of the requirements of the said rule. It is requested that the practice followed in your zone may be verified for body builders of motor vehicles and/or other commodities, which are manufactured on job work basis to ensure that duty is paid correctly as per Rule 10A wherever required.

Job work valuation: transaction value governs excise liability, replacing routine cost-plus practices where rule conditions apply. Payment liability for central excise on goods manufactured on a job work basis is to be determined by reference to the transaction value where conditions of the valuation rule are met, following insertion of Rule 10A. A departmental clarification reiterates that Rule 10A applies to job work manufacture and directs verification of field practices to ensure duty is paid according to the rule rather than by a cost-plus method.