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Excise assessment: Special provision for PSUs likely

Hema Ramakrishnan

NEW DELHI, June 4

THE Finance Ministry is likely to come up with special provisions for excise assessment of goods sold by public sector units (PSUs), while moving to the `transaction value-based excise assessment' regime from July 1.

The proposed move comes in the wake of persistent queries from oil PSUs seeking further clarifications on the recently-altered meaning of the term `related party' transactions under the new valuation regime. Senior Finance Ministry officials said that fo rmal representations have been received on this issue.

Despite reverting to what the Finance Ministry holds as a ``time-tested'' meaning of the term `related party', the question which is being posed is whether goods sold by one PSU to another -- both controlled by the Government and with cross-holding of shares -- will be treated as a `related party transaction'.

The same issue, in fact, was raised immediately after the Budget as the new Section 4 of the original Finance Bill had stipulated that persons were deemed to be related if, among other conditions, any person directly or indirectly owned, controlled or he ld 5 per cent or more of the outstanding voting stock or shares of both of them.

After the latest changes, the floor level for stock or shareholding has been raised to 25 per cent. Persons will now be deemed to be related if, among other conditions, they are interconnected undertakings. The term interconnected undertakings has the sa me meaning as in the Monopolies and Restrictive Trade Practices Act, 1969.

Senior officials admit that an enhancement in the floor level of shareholding does not really resolve the basic query raised by PSUs. The problem is likely to be sorted out with the Finance Ministry spelling out special provisions for excise assessment o n sale of goods by PSUs.

This may be done along with the valuation rules which will be announced during the course of this month. Valuation norms will apply for cases which do not come under the ambit of transaction value-based excise assessment.

Transaction value-based excise assessment will apply only in cases ``where the goods are sold by the assessee, for delivery at the time and place of removal, the assessee and the buyer are not related, and the price is the sole consideration for sale.''