2012 (11) TMI 259 - AT - Central Excise

assessable value of the goods - manufacturers were selling a part of their final products at the factory gate - such goods they were collecting a percentage of the sale price of the goods as freight and insurance - whether the amounts collected as freight and insurance is to be taken to form part of the assessable value Held that - A simple approach of confirming the duty on the entire amount realized towards freight stating the reason that it is on equalized basis cannot prima facie succeed - Since excise duty cannot be charged on freight collected whether charged on equalized basis or otherwise - application for waiver of pre-deposit allowed

Summary

Issues:
Assessable value determination based on freight and insurance charges collected by manufacturers of yarn under Chapter 55 of the Central Excise Tariff. Interpretation of Section 4(4)(b) and Section 4(1)(a) of the Central Excise Act, 1944 regarding the place of removal and assessable value. Contention over whether equalized freight should be included in the assessable value. Legal position on excise duty payment for goods sold from a depot and the relevance of freight charges in the assessable value. Analysis of past judgments related to the inclusion of equalized freight in the assessable value. Consideration of the Revenue's argument on the excess freight charges collected and its impact on the assessable value. Evaluation of the department's approach in confirming duty on the entire freight amount without sufficient evidence. Determination of the correct application of excise duty on freight charges and the waiver of pre-deposit of dues during the appeal process.

Assessment:
The case involved manufacturers of yarn facing a dispute regarding the assessable value of their goods, particularly concerning the inclusion of freight and insurance charges collected during sales. The issue arose from the interpretation of Section 4(4)(b) and Section 4(1)(a) of the Central Excise Act, 1944, regarding the place of removal and assessable value determination. The manufacturers contended that the freight and insurance charges were for transportation from depot to customers, supported by declarations from customers. The Revenue argued that the charges exceeded actual freight but failed to specify the excess amount clearly. The Tribunal noted the legal position that excise duty for goods sold from a depot is based on the value at the depot during clearance from the factory, without deduction for factory-to-depot freight. However, freight from depot to customers should not be part of the assessable value.

The Tribunal considered past judgments, including C.C.E. v. Accurate Meters Ltd. and Baroda Electric Meters Ltd. v. C.C.E., highlighting the unsuccessful challenges by Revenue on including equalized freight in the assessable value. The Tribunal emphasized that merely charging equalized freight does not allow an assessee to avoid excise duty unless it can be proven that the value of goods was collected as freight. The department's approach of demanding duty on the entire freight amount without substantial evidence was deemed insufficient. The Tribunal concluded that excise duty cannot be charged on freight collected, whether equalized or not, supporting the appellant's argument and granting a waiver of pre-deposit of dues during the appeal process.

In summary, the judgment addressed the complexities of determining the assessable value based on freight charges, emphasizing the legal provisions and past precedents. It underscored the necessity for substantial evidence to support duty demands and clarified the correct application of excise duty concerning freight charges, ultimately ruling in favor of the appellant and granting relief during the appeal process.