Century Infrapower Pvt Ltd vs. Commissioner of Central Excise and Service Tax - (Customs, Excise and Service Tax Appellate Tribunal) (07 Jun 2024)

Freight charged separately in the invoices is not includable in the assessable value for the payment of excise duty

MANU/CE/0214/2024

Excise

The Appellant is engaged in manufacture of transformer, aluminium, cables etc. Excise duty amounting to Rs.65,15,338 on the freight value of Rs.5,21,22,700received by the Appellant during the period from March 2016 to March 2017 is alleged to have been short paid by not including the same into the assessable value. The same is alleged to be the violation of Section 4 of Central Excise Act, 1944 read with Rule 4,6 and 8 of Central Excise Act, 2002. The said amount of Rs.65,15,338 therefore is proposed to be recovered from the Appellant along with the interest vide Show Cause Notice. Penalty is also proposed to be imposed.

The said proposal was initially confirmed vide Order-in-Original. The appeal against the said order has been dismissed vide the order under challenge. The issue to be adjudicated in the present case is:"Whether the value of freight and insurance charges should be included in the assessable value of final products."

There was an agreement between the Appellant and its buyers according to which prices were agreed to be on ex work basis as also have been mentioned in the invoices. The goods admittedly got cleared from the factory of Appellant on payment of appropriate sales tax. Invoice were prepared at the factory gate only in the name of the buyer, also, when the goods were handed over to the transporters, later issued the lorry receipts/consignment notes mentioning the buyer as the consignee. These apparent and admitted facts are sufficient to hold that sale of impugned goods had taken place at Appellant's factory gate only.

It has been categorically held by Supreme Court that, buyer's premises can never be the place of removal, hence, the freight charged separately in the invoices is not includable in the assessable value for the payment of excise duty.The demand for the entire period which includes one month of extended period of limitation has wrongly been confirmed. The order under challenge has wrongly held that the freight and insurance charges are includable in the assessable value.

Learned adjudicating authority has absolutely ignored Rule 5 of Determination of Value Rules which makes it clear that when goods are sold for delivery at a place other than place of removal transaction value of excisable goods shall not include actual cost for transportation from the place of removal up to the place of delivery of such excisable goods.The rule enunciates following criteria to allow deduction of cost of transportation from the assessable value:(i) The goods should be sold for delivery at a place other than place of removal.(ii) Cost of freight/insurance should be in addition to the price for the goods.(iii) Cost of transportation should be shown separately in the invoices.

These conditions have been met with in the present case. Hence, cost of transportation/ freight has to be deducted from the assessable value. So is true, in the given circumstances, for the cost of insurance.The order under challenge since has confirmed the demand based on inclusion of freight and insurance amount received by the Appellant, the order is held to not to be sustainable. The order in appeal/ order under challenge is set aside. Appeal allowed.

Tags : FREIGHT INCLUSION DEMAND