2014 (3) TMI 917 - AT - Central Excise

Valuation - Whether the freight though charged in addition to the price of the goods and shown separately in the invoices, but charged on equalized basis is excludible from the assessable value - Held that - Though the new Section in force w.e.f. 1-7-2000, does not have a provision specifically providing for exclusion of the cost of transportation from the place of removal to the place of delivery if the transaction value at the place of removal is not known, the cost of the transportation from the place of removal to the place of delivery has to be excluded as, as per the provisions of Section 4(1)(a), the transaction value has be for delivery of the goods at the time and place of removal. In fact for this reason only Rule 5 of the Central Excise (Valuation) Rules, 2000 specifically provides for exclusion of the cost of freight from the place of removal the place of delivery when it is charged from the customer in addition to the price and is mentioned separately in the invoices. The provisions of Rule 5 of the Valuation Rules, 2000 can thus, be said to be analogous to the provisions of sub-section (2) of Section 4, as it stood during period prior to 1-7-2000 - Decided in favour of assessee.

Summary

Issues:
1. Stay application for waiver of differential duty amount.
2. Interpretation of Rule 5 of the Central Excise Valuation Rules, 2000.
3. Exclusion of equalized freight from the assessable value of goods.

Analysis:
1. The appellant filed a stay application requesting waiver of the differential duty amount until the final disposal of the appeal. A demand of Rs. 95,253/- was confirmed against the appellant with interest and a penalty of Rs. 10,000/- under Rule 25 of the Central Excise (No. 2) Rules, 2001.

2. The dispute revolved around the appellant, engaged in the manufacture of ACSR/AAA conductors, charging freight including transit insurance on an equalized basis of length of cable sold, irrespective of the distance factor. The Department alleged a violation of Rule 5 of the Central Excise Valuation Rules, 2000, stating that the equalized freight was not deductible while determining the assessable value of the goods. The appellant's appeal against the Assistant Commissioner's order was dismissed by the Commissioner of Central Excise (Appeals), leading to the current appeal.

3. The Tribunal analyzed Rule 5 of the Central Excise Valuation Rules, 2000, which provided for the exclusion of the actual cost of transportation from the place of removal to the place of delivery, if charged to the buyer separately and shown on the invoices. The Department argued that only actual freight could be excluded, not equalized freight. However, referring to precedents like the Union of India v. Bombay Tyre International Ltd. case, the Tribunal held that even if charged on an equalized basis, the freight from the place of removal to the place of delivery is deductible. The Tribunal also cited the VIP Industries Ltd. case and the Majestic Auto Ltd. case to support their interpretation.

4. Consequently, the Tribunal found the impugned order unsustainable and set it aside. The appeal and stay application were allowed, with the waiver of the requirement of pre-deposit. The judgment highlighted the applicability of legal precedents in interpreting the exclusion of transportation costs from the assessable value of goods, ultimately ruling in favor of the appellant.