Concept of value :
Section 2(41) of the Customs Act, 1962, defines value in relation to any goods as the value thereof determined in accordance with the provisions of sub-section (1) or sub-section (2) of section 14.
Some of the values commonly known to the public are:
(i) Cost price to the manufacturer: It is the total cost incurred by the manufacturer of an article or product in producing or manufacturing the product.
(ii) Sale price of the manufacture: It is the price at which the manufacturer is selling the goods to the buyer.
(iii) There are two sale prices namely
(a) a domestic sale price
(b) an export price in the course of international trade.
(iv) In the course of sale, there are two situations namely, wholesale transactions and retail trade. Thus we have (a) Whole sale price and (b) retail price
(v) The sale may be on down right cash basis, or payment on delivery of the goods or the title documents or deferred payment say either on installments or after 30 or 90 days.
These situations give rise to (a) cash price; (b) payment by sight draft; (60 or 90 days draft).
(vi) There are situations where the manufacturer himself may not be exporting the goods in the course of international trade. This gives rise to the concept of suppliers. As a result we have supplier‘s price.
(vii) In the course of international trade, where the buyer is in another country, the seller has often to resort to price list or catalogues. This is in turn gives rise to list price.
(viii) There is always a negotiation between the buyer and the seller. The contracted price is arrived at by giving discounts to the list price. Such discounts are given for various considerations. We have therefore terms like
(i) Trade discount
(ii) Quantity discount
(iii) Prompt payment cash discount
(iv) L/C discount
(v) Special discount
(ix) There are situations where the goods are defective, sub – standard or there is a glut of stock and the goods have to be sold at the best price available. This yields disposal price.
(x) The price may vary from consignment from consignment even though there may not be any underhand dealing in the transaction. Such a price is called transaction value.
(xi) There may be a clear understanding between the overseas seller and the Indian buyer of the goods. They may have a special relationship, such as, the Indian buyer may be the sole selling agent for the goods of the overseas seller. He may be the sole distributor. He may even be a branch or subsidiary of the seller and the sale may be a stock transfer. In such a situation, the price is known as dealer‘s price.
(xii) Lastly, if we have no information of any of the matters relating to the transaction and we have only the commercial invoice used in the transaction, the price is invoice price.