Valuation of excisable goods for purposes of charging of duty of excise
Section 4 of the Central Excise Act, 1944 deals with valuation of excisable goods for purposes of charging of duty of excise. Where under this Act, the duty of excise is chargeable on any excisable goods with reference to their value, then, on each removal of the goods, such value shall-- (a) in a case where the goods are sold by the assessee, for delivery at the time and place of the removal, the assessee and the buyer of The Act came into force on 28 Feb 1944.
1[4. Valuation of excisable goods for purposes of charging of duty of excise.--- (1) Where under this Act, the duty of excise is chargeable on any excisable goods with reference to their value, then, on each removal of the goods, such value shall--
(a) in a case where the goods are sold by the assessee, for delivery at the time and place of the removal, the assessee and the buyer of the goods are not related and the price is the sole consideration for the sale, be the transaction value;
(b) in any other case, including the case where the goods are not sold, be the value determined in such manner as may be prescribed.
2[Explanation.-- For the removal of doubts, it is hereby declared that the price-cum-duty of the excisable goods sold by the assessee shall be the price actually paid to him for the goods sold and the money value of the additional consideration, if any, flowing directly or indirectly from the buyer to the assessee in connection with the sale of such goods, and such price-cum-duty, excluding sales tax and other taxes, if any, actually paid, shall be deemed to include the duty payable on such goods.]
(2) The provisions of this section shall not apply in respect of any excisable goods for which a tariff value has been fixed under sub-section (2) of Section 3.
(3) For the purposes of this section,--
(a) "assessee" means the person who is liable to pay the duty of excise under this Act and includes his agent;
(b) persons shall be deemed to be "related" if--
(i) they are inter-connected undertakings;
(ii) they are relatives;
(iii) amongst them the buyer is a relative and a distributor of the assessee, or a sub-distributor of such distributor; or
(iv) they are so associated that they have interest, directly or indirectly, in the business of each other.
Explanation.In this clause--
3[(i) "inter-connected undertakings" means two or more undertakings which are inter-connected with each other in any of the following manners, namely---
(A) if one owns or controls the other;
(B) where the undertakings are owned by firms, if such firms have one or more common partners;
(C) where the undertakings are owned by bodies corporate,--
(I) if one body corporate manages the other body corporate; or
(II) if one body corporate is a subsidiary of the other body corporate; or
(III) if the bodies corporate are under the same management; or
(IV) if one body corporate exercises control over the other body corporate in any other manner;
(D) where one undertaking is owned by a body corporate and the other is owned by a firm, if one or more partners of the firm,--
(I) hold, directly or indirectly, not less than fifty per cent of the shares, whether preference or equity, of the body corporate; or
(II) exercise control, directly or indirectly, whether as director or otherwise, over the body corporate;
(E) if one is owned by a body corporate and the other is owned by a firm having bodies corporate as its partners, if such bodies corporate are under the same management;
(F) if the undertakings are owned or controlled by the same person or by the same group;
(G) if one is connected with the other either directly or through any number of undertakings which are inter-connected undertakings within the meaning of one or more of the foregoing sub-clauses.
Explanation I.-- For the purposes of this clause, two bodies corporate shall be deemed to be under the same management--
(i) if one such body corporate exercises control over the other or both are under the control of the same group or any of the constituents of the same group; or
(ii) if the Managing Director or manager of one such body corporate is the Managing Director or manager of the other; or
(iii) if one such body corporate holds not less than one-fourth of the equity shares in the other or controls the composition of not less than one-fourth of the total membership of the Board of Directors of the other; or
(iv) if one or more directors of one such body corporate constitute, or at any time within a period of six months immediately preceding the day when the question arises as to whether such bodies corporate are under the same management, constituted (whether independently or together with relatives of such directors or employees of the first mentioned body corporate) one-fourth of the directors of the other; or
(v) if the same individual or individuals belonging to a group, while holding (whether by themselves or together with their relatives) not less than one-fourth of the equity shares in one such body corporate also hold (whether by themselves or together with their relatives) not less than one-fourth of the equity shares in the other; or
(vi) if the same body corporate or bodies corporate belonging to a group, holding, whether independently or along with its or their subsidiary or subsidiaries, not less than one-fourth of the equity shares in one body corporate, also hold not less than one-fourth of the equity shares in the other; or
(vii) if not less than one-fourth of the total voting power in relation to each of the two bodies corporate is exercised or controlled by the same individual (whether independently or together with his relatives) or the same body corporate (whether independently or together with its subsidiaries); or
(viii) if not less than one-fourth of the total voting power in relation to each of the two bodies corporate is exercised or controlled by the same individuals belonging to a group or by the same bodies corporate belonging to a group, or jointly by such individual or individuals and one or more of such bodies corporate; or
(ix) if the directors of one such body corporate are accustomed to act in accordance with the directions or instructions of one or more of the directors of the other, or if the directors of both the bodies corporate are accustomed to act in accordance with the directions or instructions of an individual, whether belonging to a group or not.
Explanation II.-- If a group exercises control over a body corporate, that body corporate and every other body corporate, which is a constituent of, or controlled by, the group shall be deemed to be under the same management.
Explanation III.-- If two or more bodies corporate under the same management hold, in the aggregate, not less than one-fourth equity share capital in any other body corporate, such other body corporate shall be deemed to be under the same management as the first mentioned bodies corporate.
Explanation IV.-- In determining whether or not two or more bodies corporate are under the same management, the shares held by financial institutions in such bodies corporate shall not be taken into account.
Illustration
Undertaking B is inter-connected with undertaking A and undertaking C is inter-connected with undertaking B. Undertaking C is inter-connected with undertaking A; if undertaking D is inter-connected with undertaking C, undertaking D will be inter-connected with undertaking B and consequently with undertaking A; and so on.
Explanation V --- For the purposes of this clause, "group" means a group of--
(i) two or more individuals, associations of individuals, firms, trusts, trustees or bodies corporate (excluding financial institutions), or any combination thereof, which exercises, or is established to be in a position to exercise, control, directly or indirectly, over any body corporate, firm or trust; or
(ii) "associated persons".
Explanation VI.--- For the purposes of this clause,--
(I) a group of persons who are able, directly or indirectly, to control the policy of a body corporate, firm or trust, without having a controlling interest in that body corporate, firm or trust, shall also be deemed to be in a position to exercise control over it;
(II) associated persons--
(a) in relation to a director of a body corporate, means--
(i) a relative of such director, and includes a firm in which such director or his relative is a partner;
(ii) any trust of which any such director or his relative is a trustee;
(iii) any company of which such director, whether independently or together with his relatives, constitutes one-fourth of its Board of Directors;
(iv) any other body corporate, at any general meeting of which not less than one-fourth of the total number of directors of such other body corporate are appointed or controlled by the director of the first mentioned body corporate or his relative, whether acting singly or jointly;
(b) in relation to the partner of a firm, means a relative of such partner and includes any other partner of such firm; and
(c) in relation to the trustee of a trust, means any other trustee of such trust;
(III) where any person is an associated person in relation to another, the letter shall also be deemed to be an associated person in relation to the former;]
(b) "relative" shall have the meaning assigned to it in clause (41) of Section 2 of the Companies Act, 1956 (1 of 1956);
(c) "place of removal" means--
(i) a factory or any other place or premises of production or manufacture of the excisable goods;
(ii) a warehouse or any other place or premises wherein the excisable goods have been permitted to be deposited without 4[payment of duty;] 5[(iii) a depot, premises of a consignment agent or any other place or premises from where the excisable goods are to be sold after their clearance from the factory,] from where such goods are removed;
5[(cc) "time of removal", in respect of the excisable goods removed from the place of removal referred to in sub-clause (iii) of clause (c), shall be deemed to be the time at which such goods are cleared from the factory;]
(d) "transaction value" means the price actually paid or payable for the goods, when sold, and includes in addition to the amount charged as price, any amount that the buyer is liable to pay to, or on behalf of, the assessee, by reason of, or in connection with the sale, whether payable at the time of the sale or at any other time, including, but not limited to, any amount charged for, or to make provision for, advertising or publicity, marketing and selling organization expenses, storage, outward handling, servicing, warranty, commission or any other matter; but does not include the amount of duty of excise, sales tax and other taxes, if any, actually paid or actually payable on such goods.]
Section 4, The Central Excise Act, 1944 (Act 1 of 1944).
Cross-references
Extracted from the operative text of the enactments themselves. Every destination below exists in our corpus.
This section refers to
Related judgements & precedents
These are some judgments that construed this section, and hold precedence value. They hold authority on how to read, interpret and use this section.
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Commnr. of Central Excise, Chandigarh vs Pepsi Foods LTD
Court's Decision & Legal Precedent
When an assessee sells excisable goods to a related person under Section 4(1)(a)(iii) of the Central Excise Act, 1944, the assessable value is deemed to be the price at which the related person ordinarily sells such goods to wholesalers in the course of wholesale trade. This change in the basis of valuation does not alter the place of removal, which continues to be the factory gate of the assessee. Consequently, freight charges incurred between the factory of the assessee and the depot of the related person cannot be deducted from the assessable value, as such deduction would defeat the anti-evasion object of the proviso. Additionally, penalty under Section 11 AC can be imposed only upon proof of fraud, collusion, wilful mis-statement, suppression of facts, or deliberate intent to evade duty, as mens rea is a necessary ingredient of the offence; penalty cannot be imposed without such proof.
On this section: Defines 'normal price' of excisable goods as the price at which goods are ordinarily sold by assessee to a buyer in the course of wholesale trade for delivery at time and place of removal where buyer is not a related person
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Commissioner of Central Excisae Vapi vs Kraftech Products INC
Court's Decision & Legal Precedent
Rule 34(b) of the Standards of Weights and Measures (Packaged Commodity) Rules, 1977 applies to multi-piece packages containing commodities, and if the commodities are sold by weight or measure and the combined net weight of all pieces in the multi-piece package is 10 grams or less, the manufacturer is exempt from the requirement to declare Retail Maximum Price and is not subject to Section 4A of the Central Excise Act, 1944; instead, valuation under Section 4 applies. The combined weight should be considered for determining applicability of the Rule 34(b) exemption because Rule 2(j)'s illustration explicitly directs consideration of combined net weight for determining the applicability of the rules.
On this section: Establishes normal price valuation method for excisable goods where duty is charged with reference to value; applied as the relevant valuation method for commodities sold by weight or measure
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The Commissioner of Central Excise, Visakhapatnam vs Andhra Pradesh Paper Mills LTD
Court's Decision & Legal Precedent
A manufacturer who has paid excise duty is entitled to claim deduction from the sale price for trade discounts given to buyers, but is not entitled to claim refund of such duty if he has passed on the incidence of such duty to his buyers at the time of sale. The right to refund is not a matter of statutory right but is conditional upon the applicant establishing that the incidence of duty was not passed on to any other person, which includes verification up to the ultimate consumer. Where the burden of duty has been passed on from manufacturer to buyer and from buyer onwards, the manufacturer cannot claim refund as he would be unjustly enriched. The doctrine of unjust enrichment prevents any person from claiming duty refund from both ends - i.e., from his purchaser at one end and from the State on the ground that it has been collected from him contrary to law. If the ultimate consumer cannot be identified as the person who actually bore the duty burden, the unclaimed duty amount should be credited to the Consumer Welfare Fund for consumer benefit rather than refunded to the manufacturer who did not bear the actual burden.
On this section: Provision regarding determination of value for assessment of excise duty; cited for deductions from wholesale price
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Jayanti Food Processing (p) LTD vs Commnr. of Central Excise, Rajasthan
Court's Decision & Legal Precedent
Section 4A of the Central Excise Act, 1944 applies to packaged excisable goods only when all five conditions are satisfied: (i) the goods are excisable; (ii) they are sold in packages; (iii) there is a statutory requirement under the Standards of Weights and Measures Act, 1976 or Rules made thereunder to declare the retail sale price on the package; (iv) the Central Government has specified such goods by notification in the Official Gazette; and (v) the valuation is based on the declared retail sale price less any abatement allowed by the Central Government. The nature of sale (bulk versus retail) is irrelevant to the application of Section 4A. What is determinative is whether there is a statutory requirement to print the maximum retail price on the specific packages being sold. Voluntary printing of MRP does not create a statutory requirement. Rule 34 of the Standards of Weights and Measures (Packaged Commodities) Rules, 1977 exempts packages specially packed for the exclusive use of any industry for servicing that industry, and this exemption is broadly interpreted to include supply of goods to industries for their operational use.
On this section: Basic valuation provision for excisable goods; provides mechanism for determining valuation under various circumstances including wholesale trade and sales at different prices. Court held that Section 4 applies when goods are not required to have MRP printed under SWM Act.
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Escorts Jcb LTD vs Comnr. of Central Excise, Delhi-ii
Court's Decision & Legal Precedent
The arrangement of transit insurance by a manufacturer on behalf of a buyer does not, by itself, indicate that the manufacturer has retained ownership of the goods or that the sale is incomplete. The transfer of ownership and the arrangement of insurance are separate matters that need not necessarily coincide. Where goods are sold on ex-works terms with separate charging of freight and insurance, and delivery is made to a carrier at the factory gate, the place of removal for excise duty purposes is the factory gate, not the buyer's location. Insurance can be arranged by one party on behalf of another without the arranging party retaining ownership, as established by principles of insurance law.
On this section: Valuation of excisable goods for charging duty with reference to value; specifically the definition of 'normal price' and 'place of removal' which determines the taxable value and location of duty imposition
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Commnr. of Central Excise, Meerut vs Bharat Petroleum Corpn. LTD
Court's Decision & Legal Precedent
An appeal under Section 35-L(b) of the Central Excise Act, 1944, is maintainable only when it involves determination of any question having relation to the rate of duty of Excise or to the value of goods for the purpose of assessment. A question concerning whether a dealer (as opposed to a manufacturer) is liable to pay excise duty does not relate to the rate of duty or value of goods and therefore falls outside the appellate jurisdiction conferred by Section 35-L(b). Consequently, an appeal raising only such a question is not maintainable, and the appellate court may dismiss it on jurisdictional grounds without engaging the substantive merits. Additionally, new grounds of challenge not raised before the lower appellate authority cannot be introduced for the first time before the Supreme Court.
On this section: Newly invoked by revenue before Supreme Court as alternative ground; Supreme Court noted this was not raised before the Tribunal and related to a period after the substitution effective April 1, 2000, which was outside the case's scope
The holding above is the ratio decidendi as extracted from the judgment by eCourts India, reproduced unaltered — it is a rendering of the court's reasoning, not a substitute for its words. Read the order itself before relying on it.
Made under this section, and citing it
1 instrument states that it was made under this provision — the power to make it comes from here, so a change to any of them changes what this section requires in practice. Newest first.
Another 39 instruments name this provision in its title or its text without being made under it.
- Circular No. 1063/2/2018-CXCircular 2018
- Circular No.1065/4/2018-CXCircular 2018
- CENTRAL EXCISE RULES, 2017Rule 2017
- CENVAT CREDIT RULES, 2017Rule 2017
- No. 19/2017 - Central Excise (N.T.)Notification 2017
- No. 20/2017 - Central Excise (N.T.)Notification 2017
- No. 23/2017 - Central Excise (N.T.)Notification 2017
- Circular No. 1020/8/2016 - CXCircular 2016
- No. 37/2016 - Central Excise (N.T.)Notification 2016
- Notfn No 14/2013-CX (NT)Notification 2013
- circular no.975/9/2013-CXCircular 2013
- Notfn No 04/2012-CX (NT)-HindiNotification 2012
- Notfn No 28/2012-CX (NT)Notification 2012
- Notification No.03/2011-CE (N.T)Notification 2011
- Notification No.15/2011-CE (N.T)Notification 2011
- Notification No.16/2011-CE (N.T)Notification 2011
- Notification No. 05/2010 - C.E(NT)Notification 2010
- Circular No. 901/21/2009-CXCircular 2009
- Circular No. 909/29/2009-CXCircular 2009
- Circular No. 909/29/2009-CXCircular 2009
- Circular no.661/52/2002-CXCircular 2002
- Circular no.670/61/2002-CXCircular 2002
- Circular no.671/62/2002-CXCircular 2002
- Circular no.673/64/2002-CXCircular 2002
- Circular no.681/72/2002-CXCircular 2002
- Notification No.04/2002-CE (N.T)Notification 2002
- Notification No.05/2002-CE (N.T)Notification 2002
- circular no. 619/10/2002-CXCircular 2002
- circular no. 643/34/2002-CXCircular 2002
- Notification No.06/2001-CE (N.T)Notification 2001
- Notification No.09/2001-CE (N.T)Notification 2001
- Notification No.30/2001-CE (N.T)Notification 2001
- Notification No.31/2001-CE (N.T)Notification 2001
- Notification No.36/2001-CE (N.T)Notification 2001
- Notification No.48/2001-CE (N.T)Notification 2001
- Notification No.51/2001-CE (N.T)Notification 2001
- Circular no. 563/59/2000-CXCircular 2000
- Notification No.14/2000-CE (N.T)Notification 2000
- Notification No.45/2000-CE (N.T)Notification 2000
Questions about Section 4
What have the courts held on Section 4 of the Central Excise Act?
Commnr. of Central Excise, Chandigarh vs Pepsi Foods LTD (10 Dec 2010) is the leading judgment on this section among those set out below: Defines 'normal price' of excisable goods as the price at which goods are ordinarily sold by assessee to a buyer in the course of wholesale trade for delivery at time and place of removal where buyer is not a related person. Another 5 judgments on this section are set out below, all of them from the Supreme Court. They run from 2002 to 2016.
How do I find court cases under Section 4 of the Central Excise Act?
In judgments and charge sheets this section is written several ways, and each form finds a different set of orders. These search the full text of every order eCourtsIndia holds, best matches first: Central Excise Act 1944 4, section 4 Central Excise Act 1944, section 4 of the Central Excise Act. People searching for it also type section 4 central excise act and section 4a central excise act. Each opens the full list of orders on eCourtsIndia, where it can be narrowed by court, year and outcome. 6 reported judgments on this section are set out on this page, beginning with Commnr. of Central Excise, Chandigarh vs Pepsi Foods LTD (10 Dec 2010).
What should I read with Section 4 of the Central Excise Act, and has it changed?
Its own text turns on section 3 (Duty specified in the Fourth Schedule to be levied), so none of them can safely be read on its own. 1 other provision in this corpus refers back to it. The rules and notifications made under it are where it actually bites, and there is one: most recently No. 11/2015-Central Excise (N.T.) (2015).
When did Section 4 of the Central Excise Act come into force?
Section 4 of the Central Excise Act, cited as Central Excise Act 1944 4, came into force on 28 Feb 1944, having been enacted on 24 Feb 1944. It is in force as at the date shown on this page.
Other sections of this Act
- 11A. Recovery of duties not levied or not paid or short-levied or short-paid or erroneously refunded1442 words
- 11B. Claim for refund of duty and interest, if any, paid on such duty1342 words
- 35B. Appeals to the Appellate Tribunal1302 words
- 32F. Procedure on receipt of an application under Section 32-E1167 words
- 11AC. Penalty for short-levy or non-levy of duty in certain cases1093 words
- 35E. Powers of Committee of Principal Chief Commissioner of Central Excise or Chief Commissioners of Central Excise or Principal Commissioner of Central Excise or Commissioners of Central Excise to pass certain orders1020 words
Source and method. Compiled from the enactments of Parliament and of the State legislatures as published on India Code, and republished together with commentary and other original matter under section 52(1)(q)(ii) of the Copyright Act, 1957. Structured, cross-referenced and maintained by eCourtsIndia. Text as in force on 17 Oct 2026. This page is not a substitute for legal advice.