Assessees concerned over 'transaction value' norm

By Our Special Correspondent

CHENNAI, APRIL 16. The All India Tax Payers Association (AITPA) has called for dissemination among industries of the rules being framed for enforcement of the `transaction value' norm for purposes of excise assessment.

In a memorandum submitted to the Central Board of Excise and Customs (CBEC), Mr. Ashok Kumbhat, President of the AITPA-Tamil Nadu chapter, said enforcement of the `transaction value' norm under Sec. 4 of the Central Excise Act would have far-reaching implications and might give room for litigation unless the rules were framed properly after getting feedback from assessees.

The concept of transaction value was likely to create problems particularly in cases where payment was made by the buyer or where the goods removed from the factory of the manufacture were not received by the buyer. Similarly, a reduction in the transaction value subsequent to the date of clearance of goods on purely commercial considerations might involve refunds and such refunds might not accrue to the assessees in view of restrictions under Sec. 11B of the Act.

It was true that application of the transaction value norm was a prerequisite for implementation of full-fledged value added tax (VAT). But assessees feared that as long as duty was levied on an ad valorem basis, the value could not exceed the wholesale price in view of Constitutional provisions. The transaction value concept might lead to levy of duty even on the retail price and industry might be deprived of some statutory entitlements under Sec. 4.

Mr Kumbhat said the enlarged definition of ``related persons'' under the new Sec.4 might have far-reaching implications as some of the transactions between assessees and their customers which were not transactions between related persons were likely to be viewed by the department as transactions through related persons.

The memorandum said rules relating to Cenvat credit did not contain any provision for inputs directly sent to job workers for further processing. Since Cenvat credit was only a modified version of Modvat credit on inputs and capital goods, assessees should be allowed to avail themselves of Cenvat credit for inputs directly sent from the place of procurement to the premises of job workers. The facility of transfer of Cenvat credit should be extended to inputs contained in finished products.

The rules did not provide for extending transitional credit to small-scale industries (SSIs) which might cross the Rs. 100-lakhs limit and pay the normal rate of 16 per cent with Cenvat credit facility on inputs and capital goods. Since SSIs were bound to have some inputs incorporated in the finished products, transitional Cenvat credit needed to be extended to them. There appeared to be no provision for disposal of the scrap arising out of Cenvat inputs at the job worker's end. Under the Modvat rules, there was a provision for payment of duty by the job worker on the inputs not returned to the final product manufacturer. A similar provision needed to be inserted in the Cenvat rules.

The memorandum said the restriction with regard to Cenvat credit for capital goods to the extent of 50 per cent of the duty paid should be removed at least in respect of certain capital goods like refractory bricks and materials which had a very short life span. In such cases, the assessee should be allowed to take full credit.

Assessees should be allowed to remit duty for the second fortnight of every month until the fifth day of the subsequent month. In view of the delay in the receipt of the Notification (No. 27, 2000 CE-NT) dated March 31, 2000, caused by intervening holidays, non-compliance with procedures in the transition period should be viewed leniently, the memorandum said.

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