2012 (7) TMI 473 - HC - Central Excise

Reduction of the cost freight and insurance charges incurred for carrying the goods from the depot to the customer s end would make the wholesale price available ? - Held that - The assessee become liable to pay excise duty at the time of removal of the manufactured goods from its factory, but such duty is leviable on the wholesale price of the manufactured goods. The assessee does not have any wholesale market either outside its factory gate or at anywhere else, the Law authorizes reduction from the retail price, such amount, as is necessary and reasonable to arrive at wholesale price - while there is no direction that the freight and insurance charges for carrying the goods from the factory to the depot is to be reduced from the retail price, there is no bar in reducing the same and, while doing so, as provided in the proviso, the proper officer is required to take note of the nature of the excisable goods, the trade practice in that commodity and other relevant factors. The instant matter stood closed as far back as in 2003 decided in favour of the assessee, it would not be appropriate to interfere with the judgment of the Tribunal - but in future it will be permissible for the revenue to go into the question whether the entire freight and insurance, as paid by the assessee, for carrying the goods from its factory to different depots would stand the test of necessity and reasonableness having regard to the nature of the goods dealt with, the trade practice in the commodity and other relevant factors.

Issues:
1) Liability to pay excise duty on goods removed from factory premises.
2) Determination of value of excisable goods based on retail price.
3) Interpretation of provisions regarding reduction of freight and insurance charges.
4) Whether reduction of freight and insurance charges from depot to customer's end affects wholesale price.
5) Consideration of necessary and reasonable expenses for determining wholesale price.

Analysis:
1) The judgment addresses the liability of the assessee to pay excise duty on goods removed from the factory premises located in Uttarakhand. The assessee, having only one customer who sells the goods in retail, is considered a related person. The related person sells the goods to the ultimate customer, and there is no dispute regarding these factual matters.

2) The issue revolves around the determination of the value of excisable goods based on the retail price. The contention arises regarding the reduction of freight and insurance charges incurred for transporting goods from the factory to depots. The relevant provisions of the Central Excise Act, 1944, and the Central Excise (Valuation) Rules 1975 are examined to ascertain the appropriate method for determining the value of goods.

3) The interpretation of provisions regarding the reduction of freight and insurance charges is crucial. The argument presented by the assessee emphasizes that retail price includes all expenses necessary to make the goods available at the selling price. On the other hand, the Revenue contends that only expenses incurred for affecting the sale should be considered for reduction, excluding costs from the factory to the depot.

4) The question raised in the proceeding is whether the reduction of freight and insurance charges from the depot to the customer's end would impact the wholesale price of the goods. The judgment delves into the distinction between expenses incurred for transportation within the factory premises to depots and those from depots to the customer's location.

5) The judgment clarifies that excise duty is leviable on the wholesale price of manufactured goods, and the reduction from retail price to arrive at wholesale price is permissible. It emphasizes the importance of considering necessary and reasonable expenses for determining the wholesale price, taking into account the nature of goods, trade practices, and other relevant factors. The decision highlights the need for assessing the reasonableness of freight and insurance charges based on specific factors before making deductions.

In conclusion, the judgment dismisses the central excise reference while allowing the revenue to examine the necessity and reasonableness of freight and insurance charges for transporting goods to different depots in future cases. The decision underscores the importance of considering various factors in determining the wholesale price of excisable goods.

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