2011 (6) TMI 638 - AT - Central Excise

Assessable value - recovery of differential duty on the ground that the sale price of the respondents to M/s Zuari Cement Ltd. showed value and Rs.0.05 per bag towards freight as per the terms and conditions of the relevant purchase order and goods were cleared to the buyers as per contract for which actual freight was different from consignment to consignment Held that - respondents have cleared the goods on the basis of purchase order and the goods have been sold at their factory gate on a contract price and transportation cost has been shown separately, transportation cost is not includable in the assessable value, Appeal filed by the Revenue is dismissed

Summary

Issues:
1. Whether transportation cost should be included in the assessable value for excise duty calculation.

Analysis:
The case involved a dispute where the Revenue appealed against the decision of the Commissioner (Appeals) to drop demands related to the inclusion of transportation cost in the assessable value for excise duty calculation. The Revenue argued that the valuation of goods should be based on transaction value as per new Valuation laws effective from 1.7.2000. The Revenue contended that the respondents should pay excise duty on the freight element shown in the invoices, which was on an equalized basis. The respondents had cleared goods at their factory gate, with the price and transportation cost shown separately in the purchase order.

Upon examination, the Tribunal found that the goods were indeed sold at the factory gate as per the purchase order, with transportation costs to be borne by the buyer and shown separately. Referring to the new Valuation Rules, it was established that if goods are cleared at the factory gate, transportation costs are not includable in the assessable value. The Tribunal noted that the department did not prove that the amount charged for transportation was excessive or not based on actual expenses incurred. The Tribunal cited a previous judgment in Majestic Auto Ltd. where a similar issue was decided.

Ultimately, the Tribunal upheld the decision of the lower appellate authority, ruling that transportation costs should not be included in the assessable value for excise duty calculation. The appeal filed by the Revenue was dismissed, and the impugned order dropping the demands was upheld.