XYZ Ltd., sold machinery to ABC at a price of ₹5 lacs on 18th August, 2016 which was removed from its factory at Jaipur. The rate of excise duty applicable is 12.36% on the date of removal. ABC refused to take delivery o

CS Professional · Advanced Tax Laws and Practice · PYQS · June 2017
XYZ Ltd., sold machinery to ABC at a price of ₹5 lacs on 18th August, 2016 which was removed from its factory at Jaipur. The rate of excise duty applicable is 12.36% on the date of removal. ABC refused to take delivery of the machine when it reached destination. Meanwhile XYZ Ltd. increased the price of the same type of machinery to ₹6 lacs with effect from 19th August, 2016. The machinery as refused to by ABC has been sold on 26th August, 2016 to Mr. Lal at the revised price of ₹6 lacs. The excise duty including education cess applicable when the machine was sold to Mr. Lal was 15.45%. Explain the following with reasons: (iv) Does cost of production have any bearing on the assessable value?

Answer & Explanation:

The cost of production has no bearing on the assessable value in the present case. The Central Excise valuation can be below the manufacturing cost if the price is the sole consideration and dealing between seller and buyer are at arm's length, assessable value will be decided on the basis of selling price, even if it is below manufacturing cost. So cost of manufacturing will not change the assessable value.

Topics: Central Excise Law

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