2008 (6) TMI 466 - AT - Central Excise

Summary

Issues:
1. Assessment of freight charges in determining assessable value for heavy machinery supply contracts.

Analysis:
The appeal before the Appellate Tribunal CESTAT, NEW DELHI involved a dispute regarding the assessment of freight charges in determining the assessable value for supply contracts of heavy machinery. The appellant, engaged in the design, manufacture, and supply of electrical, mechanical, and electronic equipment for power generation, transmission, and utilization, had contracts with various entities for the supply of machinery. The Commissioner, in the impugned order, held that the appellant had not separately indicated freight charges in their invoices, leading to a demand for additional payment and imposition of penalties.

The appellant argued that the actual freight incurred was higher than the amount collected from customers, as acknowledged by the adjudicating authority. They contended that the sales were for delivery FOR factory, making them eligible for freight abatement. The appellant also cited a previous decision by the Bangalore Bench of the Tribunal in their favor. On the other hand, the Department argued that freight should have been indicated in the invoices for claiming abatement, as the sale was deemed complete only upon delivery at the site.

Upon careful consideration, the Tribunal noted that the provision requiring separate indication of freight in invoices aimed to prevent artificial reduction of assessable value. In this case, the appellant was incurring higher freight costs than collected from customers, with the freight amount based on a separate contract and billed separately. The Tribunal observed that the Department did not dispute the actual freight costs incurred by the appellant or claim that inflated amounts were being charged. Referring to a previous decision in the appellant's favor, the Tribunal concluded that the order of the Commissioner could not be upheld. Consequently, the Tribunal set aside the order and allowed the appeal, providing consequential relief to the appellant.

In summary, the Tribunal's decision favored the appellant, emphasizing that the appellant's practice of separately billing freight charges, despite not indicating them in the invoices, did not artificially reduce the assessable value. The Tribunal's analysis highlighted the discrepancy between the actual freight costs incurred by the appellant and the amounts collected from customers, ultimately leading to the decision to overturn the Commissioner's order and grant relief to the appellant.