2010 (1) TMI 992 - AT - Central Excise

Valuation - equalized freight - includibility - whether during the period from 1-7-2000 to 1-8-03, the equalized freight was excludible from the assessable value of the goods? - Held that - Since as per the provisions of Section 4(1)(a) as it stood during period w.e.f. 1-4-2000, the assessable value of the goods is the transaction value in respect of the sale for delivery at the time and place of removal, if the transaction value is for delivery at a place other than the place of removal, if the transportation cost from the place of removal to the place of delivery, the evidence about which has to be produced by the Assessee, has to be excluded from the assessable value. The deduction of the freight charged by the Appellant from their customers on equalized basis and which is shown separately in the invoices cannot be disallowed on the ground that it is equalized freight. Appeal allowed by way of remand.

Summary

Issues:
- Exclusion of equalized freight from the assessable value of goods under Central Excise Duty from 1-7-2000 to 1-8-03.

Analysis:
1. Background: The Appellant manufactures Electrical Transformers subject to Central Excise Duty under heading 85.04. They supply transformers to State Electricity Boards, charging averaged/equalized freight. Dispute arises regarding the exclusion of equalized freight from the assessable value during the period in question.

2. Legal Provisions: The Department argues that Rule 5 of the Central Excise Valuation Rules, 2000 allows deduction of only actual freight if charged separately in invoices. The Board's Circular No. 354/81/2000-TRU emphasizes exclusion of transportation cost for actual cost charged from buyers.

3. Consideration of Arguments: The Department contends that averaged freight exceeds actual for short distances and is less for long distances. The Commissioner (Appeals) upheld disallowance of equalized freight deduction based on these arguments.

4. Judicial Interpretation - Pre-2000: Before 1-7-2000, Section 4(2) of the Central Excise Act allowed exclusion of transportation cost even if charged on averaged basis. The Supreme Court's judgment in Union of India v. Bombay Tyre International clarified the deduction of averaged freight for excisable goods.

5. Post-2000 Legal Framework: From 1-7-2000, new Section 4 and Central Excise Valuation Rules, 2000 replaced old provisions. Rule 5 allowed deduction of actual transportation cost until amended in 2003 to include averaged freight based on generally accepted costing principles.

6. Tribunal's Decision: The Tribunal interprets that exclusion of averaged/equalized freight from assessable value is permissible if determined using accepted costing principles. The Tribunal cites previous cases and Supreme Court judgments to support this interpretation.

7. Conclusion: The impugned order is set aside, and the matter is remanded to the adjudicating authority for proper analysis based on the principles discussed. The Tribunal emphasizes the importance of determining the averaged freight correctly as per costing principles for exclusion from the assessable value.

This detailed analysis clarifies the legal framework, interpretations, and implications regarding the exclusion of equalized freight from the assessable value of goods under Central Excise Duty during the specified period.