2013 (10) TMI 1302 - AT - Central Excise

Demand of differential duty - Revenue was of the view that the appellant was liable to discharge excise duty liability on freight charges borne by NTPCL in terms of Rule 5 of the Central Excise Tariff Rules, 2000, inasmuch as in the relevant invoices, the appellant did not indicate the freight charges separately and also what was permissible to be deducted was only the actual cost of transportation and not equalized freight @ ₹ 600/- per MT - Held that - The primary condition for invoking Rule 5 is that the excisable goods should be sold. In the present case, the transaction is one of job work and there is no sale of goods involved of the material supplied by the NTPCL. The appellant has undertaken certain processes and returned the goods to NTPCL after collecting their conversion charges. The invoice raised clearly shows that no sales tax has been paid in these transactions. In other words, there is no sale transaction involved. Therefore, the contention of the ld. Counsel for the appellant that Rule 5 cannot be invoked ab initio is correct. In any case, the appellant has discharged excise duty liability on a price which is equal to or higher than that arrived under the Ujagar Prints formula and this is not disputed. If that be so, the appellant has discharged the duty liability correctly. - Decided in favour of assessee.

Issues:
- Discharge of excise duty liability on freight charges in a job work transaction.
- Applicability of Rule 5 of the Central Excise Valuation Rules.
- Correctness of the order of the lower appellate authority.

Discharge of Excise Duty Liability on Freight Charges:
The appellant, M/s. Sharda Ispat Ltd., undertook the conversion of M.S. Billets into Tor Steel on a job work basis. The dispute arose regarding the excise duty liability on freight charges borne by the supplier, NTPCL. The Revenue contended that the appellant should discharge excise duty on the freight charges as per Rule 5 of the Central Excise Tariff Rules, 2000. The appellant argued that the duty should be based on the Ujagar Prints formula, including raw material cost and conversion charges. The appellant maintained that since there was no sale involved, Rule 5 should not apply. The appellate authority upheld the Revenue's view, leading to the current appeal.

Applicability of Rule 5 of the Central Excise Valuation Rules:
Rule 5 of the Central Excise Valuation Rules states that excisable goods sold should have transportation costs separately indicated in the invoice for the rule to be invoked. In this case, the appellant was engaged in job work, not sales, with NTPCL. The appellant processed the materials and returned them without any sales transaction. As no sales tax was paid, the rule's conditions were not met. The appellant correctly discharged duty based on the Ujagar Prints formula, which was not disputed. Consequently, the invocation of Rule 5 was deemed incorrect by the tribunal.

Correctness of the Lower Appellate Authority's Order:
The lower appellate authority's decision to uphold the Revenue's demand was challenged by the appellant. The appellant argued that the duty liability was discharged correctly based on the Ujagar Prints formula and that Rule 5 should not apply due to the nature of the job work transaction. The tribunal agreed with the appellant, setting aside the lower authority's order as unsustainable in law. The appeal was allowed, granting consequential relief as per the law.

In conclusion, the tribunal found in favor of the appellant, M/s. Sharda Ispat Ltd., ruling that the excise duty liability on freight charges in a job work transaction was correctly discharged. The tribunal held that Rule 5 of the Central Excise Valuation Rules did not apply in this scenario due to the absence of a sale transaction. The tribunal set aside the lower appellate authority's order, allowing the appeal with consequential relief as per the law.

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