Circular No 679/70 /2002-CX
4^th December, 2002

F.No.6 / 7 /2002-CX.I
Government of India
Ministry of Finance
(Department of Revenue)

Subject:-Inclusion of interest on sales tax in the assessable value.

            I am directed to refer to Board’s Circular No. 378/11/98-CX dated 12.3.98 wherein it has been clarified that in situation where deferment of payment of Sales tax for particular period is allowed by State Government as incentive, Sales tax is deductible from the wholesale price for determination of assessable value for levy of Central Excise duty even though it may not be deposited immediately with the State Government.

(2)         Doubts have been raised as to whether in such cases where sales tax, is retained by the assessee, the interest on the money retained, should be treated as additional consideration in terms of Rule 6 of Central Excise ( Valuation) Rules, 2000, or not.

(3)         The matter has been examined in the Board. As per Rule 5 of the earlier Valuation Rules, 1975 & Rule 6 of Central Excise Valuation {Determination of price of Excisable goods} Rules, 2000. "Additional consideration" should flow directly or indirectly from the buyer to the seller. The interest earned, on deferred sales tax, by the manufacturer is not a benefit extended by the buyer to the seller but is an incentive, accruing in pursuance of State Government policy. Therefore, this amount cannot be treated as "additional consideration" under the Central Excise Valuation Rules and the same cannot be added to the Assessable value in terms of Rule 5 of Central Excise Valuation Rules, 1975 or Rule 6 of the Valuation Rules, 2000.

(4)         This circular may be brought to the notice of the field formations.

(5)         Suitable Trade Notice may be issued for the benefit of the Trade.

(6)         Hindi version will follow.

(7)         Receipt of these instructions may be acknowledged.