Value of supply of goods made or received through an agent :
The value of supply of goods between the principal and his agent shall – (a) be the open market value of the goods being supplied, or at the option of the supplier, be ninety per cent of the price charged for the supply of goods of like kind and quality by the recipient to his customer not being a related person, where the goods are intended for further supply by the said recipient (b) where the value of a supply is not determinable under
clause (a), the same shall be determined by application of rule 4 or rule 5 in that order – rule 3 of Valuation Rules.
Illustration: Where a principal supplies groundnut to his agent and the agent is supplying groundnuts of like kind and quality in subsequent supplies at a price of Rs. 5,000 per quintal on the day of supply. Another independent supplier is supplying groundnuts of like kind and quality to the said agent at the price of Rs. 4,550 per quintal. The value of the supply made by the principal shall be Rs. 4,550 per quintal or where he exercises the option the value shall be 90% of the Rs. 5,000 i.e. is Rs. 4,500 per quintal.
This really covers only C&F Agents who store and sale goods on behalf of Principal. This does not cover distributor or selling agents who purchase goods from Principal and then sale on their own. Here, their relations are on Principal to Principal basis.