2007 (5) TMI 408 - AT - Central Excise

Valuation (Central Excise) - Freight - Includibility of, when shown separately - Demand - Limitation - Suppression of fact alleged

Summary

Issues:
1. Inclusion of freight from factory to depot in assessable value.
2. Applicability of Rule 5 and Rule 7 of Central Excise (Valuation) Rules, 2000.
3. Challenge to duty demand based on limitation period.

Inclusion of Freight in Assessable Value:
The judgment dealt with the issue of whether freight from the factory to the depot should be included in the assessable value during the disputed period of August 2000 to February 2003. It was noted that the depot was not considered a place of removal during this period. The amendments to Rule 5 on 1-3-2003 included the depot as a place of removal. The appellant argued that during the disputed period, there was no provision for including freight in the assessable value, and they were entitled to deduction under Rules 5 and 7 if the freight was shown separately, supported by invoices and the minutes of R.A.C. of Mumbai-II Commissionerate. Reference was made to a Tribunal decision that transportation cost from factory to depot was not includible since the depot was not a place of removal.

Applicability of Rule 5 and Rule 7:
The judgment analyzed the applicability of Rule 5 and Rule 7 of the Central Excise (Valuation) Rules, 2000. It was observed that under these rules, there was no requirement to add freight to the assessable value if it was shown separately. The Tribunal's decision in a previous case supported this view. The judgment emphasized that prior to the amendments on 1-3-2003, the appellant's case fell within the ambit of Rule 5 and Rule 7, allowing for the deduction of freight if shown separately. The judgment highlighted that the appellant's case had merit under these rules.

Challenge to Duty Demand Based on Limitation:
Regarding the challenge to the duty demand based on the limitation period, the appellant contended that the show cause notice issued on 17-5-2005 for the period of August 2000 to February 2003 was time-barred. The appellant argued that the price was declared in August 2000 with a claim for deduction towards freight, and there was no suppression of information from the Department. The assessments were finalized within the normal period, and the show cause notice issued beyond one year was considered time-barred. The judgment agreed with the appellant's argument on the limitation period, stating that there was no justification for invoking the extended time limit given the known clearance of the appellant and the declaration made to the Department regarding the intention to claim deduction towards freight.

In conclusion, the judgment set aside the impugned orders and allowed all eight appeals based on the merits of the case and the grounds of limitation. The decision was in favor of the appellants, emphasizing their entitlement to deduction under Rules 5 and 7, and the time-barred nature of the duty demand notice.