CIR NO.697/13/2003-CX, DT. 27/02/2003

Valuation of goods under Section 4A of the Central Excise Act

Sir,

I am directed to say that instances have been reported to the Board where in respect of commodities notified under Section 4A of the Central Excise Act, 1944 goods are sold only against refundable deposits or against deposit of an empty bottle, container or jar. As for example in the case of sale of soft drinks the soft drink bottle is being sold at the printed MRP only if the buyer leaves some cash deposit for safe return of the bottle or he deposits before hand an empty bottle of the particular brand. Similar cases have been reported in respect of sale of mineral water.

2. In such instances, it can be said that the MRP is not the sole consideration for sale and, therefore, the cash value of the additional consideration (the cash deposit or deposit of the empty bottle) has to be added to the MRP and the assessable value re-determined for payment of duty.

3. The matter has been examined in the Board. It is observed that in respect of sale of all products in containers, which have repeated use, the cost of the container is amortised over the expected durability span of the container. The security deposit basically takes care of the difference between the actual cost of the bottle/container and the amortised cost factored into the product. Thus, the returnable deposit or the deposit of the empty container is not an additional consideration for sale of the particular product.

4. The position has been ascertained from the State Meterology Department also and they have confirmed that receipt of returnable deposit or empty container is not a contravention of the provisions of the Weights and Measures Act, 1976 or the packaged Commodity Rules, 1977, framed thereunder.

5. In view of the above, clarification issued vide Serial No.4 of Board’s Circular No.643/34/2002-CX dated 1.7.2002 will apply to goods assessed under Section 4A also. In other words, if the cost of reusable containers (glass bottles, crates, etc) is amortised and included in the cost of the product itself, the question of adding any further amount towards this account does not arise, except where audit of accounts reveals that the cost of the reusable container has not been amortised and included in the value of product

6. Pending cases may be disposed off on the basis of these instructions.

7. Field formations may be suitably informed.

8. Trade Notices may be issued for the benefit of the Trade.

9. Hindi version will follow.

10 Receipt of these instructions may kindly be acknowledged.

Yours faithfully,

Sd/-
(Suraksha Katiyar)
Under Secretary to the Government of India
Tel.No.2309 2829

F.No.6/26/2002-CX.I

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