2013 (11) TMI 688 - AT - Central Excise

Undervaluation of goods or not inclusion of transportation charges since appellant has accrued profit from transportation charges - Held that - Duty is payable in respect of each and every clearances and transportation cost necessary for making delivery under the term FOR destination is necessarily to be included in the assessable value without any average calculation method when such average cost of transportation is not permissible under law - What that is permissible in the law is that actual cost incurred for the delivery at the buyers point is necessarily to be included in the assessable value. Profit accrued from transportation charges adopting average cost process is not determining factor while actual cost incurred in respect of each consignment under consideration needed testing to make an allegation of undervaluation. While deciding the appeals of the assessee learned Commissioner has made observation that whatever transportation charges was paid that has suffered service tax - When this was available on records and service tax being levied on transportation cost from 2006 onwards, adjudicating authority should have considered that aspect to examine assessable value - But that was also not done Decided in favour of Assessees and against Revenue.

Issues Involved:
1. Assessment of transportation costs in the assessable value for tax purposes.
2. Allegations of undervaluation of goods based on transportation charges.
3. Examination of evidence and submissions regarding transportation costs.
4. Decision on including transportation charges in the assessable value.
5. Discrepancies in the adjudication process and decision-making.
6. Consideration of actual cost incurred versus average cost for transportation.
7. Impact of service tax on transportation charges.
8. Appeal outcomes for both the assessee and the revenue department.

Issue 1: Assessment of transportation costs:
The appeals involved common issues related to the inclusion of actual transportation costs in the assessable value for tax assessment purposes. The appellants argued that the cost of transportation incurred for delivering goods to buyers was included in the assessable value, especially when the transportation was undertaken by them. The contention was that any difference between the average billed cost and the actual incurred cost should be appropriately reflected in the assessable value.

Issue 2: Allegations of undervaluation:
The Revenue department alleged undervaluation of goods based on transportation charges, claiming that excess realization through transportation charges constituted additional consideration forming part of the assessable value. However, the adjudicating authority's decision was questioned for not thoroughly examining the evidence provided by the appellants regarding the actual expenses incurred on freight compared to what was recovered from customers.

Issue 3: Examination of evidence and submissions:
The evidence presented during adjudication included detailed contracts showing that the appellants had sometimes incurred more expenses on freight than what was recovered from customers. Despite clear submissions and evidence, the adjudicating authority did not adequately address the issue, leading to a lack of thorough examination and a hasty conclusion regarding the liability of freight charges in the assessable value.

Issue 4: Decision on including transportation charges:
The Commissioner (Appeals) held that undervaluation charges required tangible and cogent evidence, noting that the appellants had paid service tax on the amount recovered as transport charges. The Commissioner concluded that the alleged undervaluation was profit and not liable to be included in the assessable value, contrary to the Revenue's position.

Issue 5: Discrepancies in adjudication process:
The decision-making process of the adjudicating authority was criticized for not focusing on the substance of the allegations and for considering extra transport charges as profit without thorough examination. The lack of a clear exercise for each clearance to determine undervaluation without sufficient evidence was highlighted, leading to a decision favoring the assessee.

Issue 6: Actual cost versus average cost for transportation:
The argument centered on the necessity of disclosing the actual cost incurred for each clearance to add it to the assessable value, emphasizing that duty is payable for every clearance. The use of an average calculation method for transportation costs was deemed impermissible under the law, highlighting the importance of including the actual cost incurred for delivery at the buyer's point in the assessable value.

Issue 7: Impact of service tax on transportation charges:
The observation was made that transportation charges subjected to service tax should have been considered while examining the assessable value. However, the adjudicating authority failed to address this aspect, contributing to the decision in favor of the assessee due to the lack of cogent evidence and material facts for each clearance.

Issue 8: Appeal outcomes:
Ultimately, all appeals of the assessee were allowed, while the Revenue's appeals were dismissed. The decision was based on the inadequacies in the adjudication process, the lack of thorough examination of evidence, and the failure to establish undervaluation allegations convincingly. The time factor and the difficulties in conducting a re-adjudication exercise were also considered in the final judgment.

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