2006 (11) TMI 90 - AT - Central Excise

Valuation(Central Excise) Department contended that differential amount of freight was includible in the assessable value and accordingly demand for differential duty Commissioner(Appeal) rejecting the department contention and set aside the demand

Summary

Issues: Valuation dispute involving freight and insurance charges collected by the assessee from buyers, applicability of Apex Court's judgment in Baroda Electric Meters Ltd. v. Collector of Central Excise, inclusion of excess freight in assessable value, interpretation of Section 4(2) of the Central Excise Act.

In this case, a valuation dispute arose concerning the inclusion of excess freight collected by the assessee from buyers in the assessable value of goods sold to State Electricity Boards and Power Corporations under contracts where freight charges were not based on actuals but mutually agreed terms. The department raised a demand for differential duty based on the excess freight collected. The Commissioner (Appeals) allowed the assessee's appeal, citing the Apex Court's judgment in Baroda Electric Meters Ltd. v. Collector of Central Excise, which held that the excess freight collected was not dutiable as it constituted profit and was not related to the manufacture of goods.

The main ground of appeal by the department was that since the actual freight was not known at the time of goods removal from the factory, the price for delivery at the place of removal was also unknown. It was argued that the cost of transportation to the customers' site should be included in the assessable value under Section 4(2) of the Central Excise Act, as the sale was completed only upon delivery at the customers' site. The learned Consultant for the appellant contended that the Apex Court's decision was against them, as the excess freight collected was considered profit and not dutiable.

After careful consideration, the Tribunal found that the excess freight collected by the assessee was merely profit and not related to the manufacture of goods, aligning with the Apex Court's decision. While the concept of 'equalized freight' from the cited case was not directly applicable, the principle that excise duty is on manufacture and not on profit from transportation was upheld. The Tribunal upheld the Commissioner (Appeals) decision, dismissing the appeal of the department. The judgment emphasized that the excess freight collected did not impact the manufacture of goods and therefore should not be included in the assessable value.