2012 (9) TMI 600 - AT - Central Excise

Demand of differential duty - additional income shown by the Respondent Assessee in the Balance Sheet arising out of the transportation charges/freight charges Sales to Government/Semi-Government organizations were effected as per DGS&D rate contract, where price of the goods is exclusive of freight charges, and terms of delivery of the goods include both the terms - freight to pay and pre-paid freight with a provision to realize cost of transportation through commercial invoices - Held that - DGS&D rate contract is ascertainable ex-factory price, and extra realization on account of freight has come out as profit on such account, which cannot form part of assessable value - demand of differential duty is not sustainable.

Summary

Issues:
Demand of differential duty and additional income arising from transportation charges/freight charges.

Analysis:
The issue in this case revolves around the demand of differential duty and additional income shown by the Respondent Assessee in the Balance Sheet, specifically related to transportation charges/freight charges. The Commissioner (Appeals) analyzed the situation and concluded that there could not be any demand of duty on the Respondent Assessee. The Commissioner highlighted various aspects, including the examination of Annual Reports, Certified Audit files, commercial invoices, and the realization of freight charges. The Commissioner noted that the realization of freight charges was not reflected in statutory Central Excise Records, and the sales to Government/Semi-Government organizations were based on DGS&D rate contracts. The Commissioner emphasized that the pricing for sales to different buyers was not differentiated, and the extra realization on account of freight did not lead to under-valuation of goods. The Commissioner also referred to relevant case laws to support the decision.

The Revenue, represented by Shri S.Mishra, argued that the excess realization of nearly Rs. 2.00 crore in transportation charges by the Assessee should be considered as part of the assessable value, as it was not solely based on the factory gate price. The Revenue contended that the extra realization was recorded in the Balance Sheet as other income, collected under the guise of packing and forwarding charges. The Revenue disagreed with the reliance placed on a previous Tribunal decision by the Respondent's Counsel.

On the other hand, the Advocate for the Respondent Assessee argued that there was no evidence of price depression and that the additional amount from transportation/freight charges was shown as income. The Respondent's Counsel also relied on the Tribunal's decision in the case of Baroda Electric Meters and other similar cases to support their position.

After considering the arguments from both sides and examining the records, the Tribunal found that the Department lacked sufficient evidence to prove any depression of prices due to the excess transportation charges realized by the Respondent Assessee. The Tribunal agreed with the Commissioner (Appeals) that there was no evidence supporting the Revenue's claim. Therefore, the Tribunal upheld the Commissioner's decision, stating that it was correct, legal, and without any flaws. Consequently, the Appeal filed by the Revenue was rejected.

In conclusion, the judgment focused on the interpretation of assessable value in relation to transportation charges/freight charges and the absence of concrete evidence to establish under-valuation or price depression. The decision highlighted the importance of evidence in such cases and emphasized the need for a clear link between the additional income and its impact on the valuation of goods.