2013 (3) TMI 260 - AT - Central Excise

Valuation - inclusion of Differential freight - place of removal - appellant supplying Thermit Powder and Thermit Welding equipment to Indian Railways against the supply contracts - two types of contract in the first type the price is on FOR destination price which includes element of freight & in second type there is the factory gate price plus freight on per pieces basis - duty demand with equivalent penalty - period of dispute 1992-93 to 1994-95 - Held that - During the period of dispute the place of removal was the factory gate or the warehouse where the goods have been permitted to be stored without payment of duty. Thus in accordance with the definition of place of removal , in the present case the it would be factory gate, and hence, the value of the goods would be the price for delivery at the factory gate. Therefore there is no question for inclusion of freight charge in the assessable value even if the appellant have received the more amount towards the freight than the expenses on freight actually incurred. In case where the price quoted was on FOR price, the appellant have paid duty on the FOR price without claiming any deduction. Thus there is no short payment. As decided in Baroda Electric Meters Ltd. (1997 (7) TMI 126 - SUPREME COURT OF INDIA) where freight amount charged by the manufacturer from the buyer is more than the freight charged in the expenses incurred on differential is not includible - no positive evidence to show that the appellant had deliberately suppressed the assessable value and had inflated the freight amount - in favour of assessee.

Summary

Issues:
- Inclusion of differential freight in assessable value for excise duty calculation
- Time-barred duty demand
- Applicability of Baroda Electric Meters Ltd. judgment
- Alleged suppression of facts by the Appellant

Inclusion of Differential Freight in Assessable Value:
During the period in question, the Appellant manufactured items chargeable to central excise duty and supplied them to Indian Railways under different types of contracts. The Department alleged that the freight amount recovered from the Railways was higher than the actual freight expenses incurred by the Appellant. This led to a show cause notice for recovery of differential duty and imposition of penalties. The Appellant argued that as per Section 4 of the Central Excise Act, the assessable value should exclude freight from the place of removal to the customer's premises. The Tribunal found that the place of removal in this case was the factory gate, and thus, the value of the goods should be based on the factory gate price. Therefore, even if the Appellant received more freight than incurred, it should not be included in the assessable value. Citing the Baroda Electric Meters Ltd. judgment, the Tribunal held that the differential freight is not includible when the freight charged is more than the actual expenses incurred.

Time-Barred Duty Demand:
The Appellant contended that the duty demand was time-barred as they had filed price lists and declarations under Rule 173C, with prices duly approved by the Assistant Commissioner. They argued that there was no suppression of facts. The Tribunal agreed with this argument, stating that the duty demand was not sustainable as there was no evidence of deliberate suppression of assessable value by the Appellant.

Applicability of Baroda Electric Meters Ltd. Judgment:
The Department argued that the Baroda Electric Meters Ltd. judgment was not applicable to the present case, emphasizing the admission by the Appellant's authorized signatory regarding the difference between freight charged and actual expenses. However, the Tribunal found that the principles laid down in the Baroda Electric Meters Ltd. case were indeed relevant to the current scenario, supporting the Appellant's position that the differential freight should not be included in the assessable value.

Alleged Suppression of Facts:
The Department alleged that the Appellant had suppressed relevant facts, leading to the issuance of a show cause notice invoking the proviso for section 11AC. However, the Tribunal found no positive evidence to suggest deliberate suppression of assessable value by the Appellant. As a result, the impugned order was set aside, and the appeal was allowed in favor of the Appellant.