WHAT IS GRETEST AGGREGATE QUANTITY?

by

 

K. VIJAY KUMAR¹

MA, BL, B.Ed, MBA

Superintendent of Central Excise, Hyderabad

 

As per rule 7 of the valuation rules, when goods are sold from the depot, consignment agent etc., the value shall be the normal transaction value of such goods at or about the same time and where such goods are not sold at or about the same time, at the time nearest to the time of removal of goods under assessment.

Normal Transaction value has been defined under rule 2(c) as the transaction value at which the greatest aggregate quantity of goods are sold. Now the greatest aggregate quantity has not been defined. In a recent seminar, I found there were conflicting opinions on what this concept meant. Somebody said this is the average; somebody said this is the total and somebody said there was confusion.

 

This concept of greatest aggregate quantity is actually from GATT valuation rules. Article 5 of the GATT valuation rules says "If the imported goods or identical goods are sold in the country of importation in the condition as imported, the customs value of the imported goods under the provisions of this Article shall be based on the unit price at which the imported goods or identical or similar imported goods are so sold in the greatest aggregate quantity, at or about the time of the importation ……"

 

The Customs valuation rules have incorporated almost the same words. Rule 7 says " ….. if the goods being valued or identical or similar imported goods are sold in India in the condition as imported at or about the time at which the declaration for determination of value is presented, the value of imported goods shall be based on the unit price at which the imported goods or identical or similar imported goods are sold in the greatest aggregate quantity ………"

 

Fortunately for us the Interpretative Notes to the Customs Valuation Rules have explained with examples what this term means. As this is a new concept to Excise, it may be worthwhile for us to see the explanation as given in the customs.

 

Ex 1

Sale Quantity	Unit price	Number of sales	Total quantity sold at each price
1 – 10 units	100	10 sales of 5 units 5 sales of 3 units	65
11- 25 units	95	5 sales of 11 units	55
Over 25 units	90	1 sale of 30 units 1 sale of 50 units	80

 

The greatest number of units sold at a price is 80, therefore the unit price in the greatest aggregate quantity is 90.

 

Ex 2

Two sales occur. First 500 units are sold at a price of Rs.95 each and second 400 units are sold at Rs. 90 each. The greatest number of units sold is 500 and so the price is Rs. 95.

Ex 3

(a) Sales

Sale quantity	Unit price
40 units	100
30 units	90
15 units	100
50 units	95
25 units	105
35 units	90
5 units	100

 

(b) Totals

Total Quantity sold	Unit price
65	90
50	95
60	100
25	105

 

Here the greatest number of items sold at a particular price is 65 and therefore the price in the greatest aggregate is 90.

 

It will be of interest to note that while the GATT valuation Rules as well as the Customs Valuation Rules speak about the unit price at which the greatest aggregate quantity of goods are sold, the Central Excise Valuation Rules 2000 mentions the transaction value at which the greatest aggregate quantity of goods are sold. Literally taken, this can open up a Pandora's box of litigation and dispute. But on a harmonious construction, the unit price may have to be taken. It would have been nice if the words unit price were there in the statute. Simplification does not mean removing certain important words.

 

Neither the Customs Valuation rules nor the CE valuation rules say anything about a situation where there is more than one greatest aggregate quantity of sales. For example if the following are the sales from a depot

 

Units	Price
500	150
500	175
500	165

 

 

Here the greatest aggregate quantity of goods is 500 units and they are sold at three different prices. What is the value?

 

Then what about situations where the goods are cleared to the depots for the first time and there were no previous sale. What is the value for payment of duty at the time of removal from the factory? Somebody suggested, pay some duty and opt for provisional assessments. Are we going to go for another never ending provisional assessment spree?

Are all depot clearances going to be under provisional assessments?

 

I humbly submit the above views for consideration by all concerned for favour of clarifications/rectifications. EXCISE LAW TIMES – 15 12 2000 – A 133