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2014 (4) TMI 336 - AT - Central ExciseValuation - area based exemption - allegation of payment of duty on higher value - Exemption under notification no.56/2002-CE dated 14.11.2002 - Whether the appellant were required to pay duty on the FOR price which would include the element of freight from the factory gate to the customer s premises, or the appellant were required to pay duty on the value of the goods at the factory gate i.e. FOR price minus freight charges from the factory gate to the customer s premises - Held that - The show cause notice while mentioning in para-6 that the sales of the appellant are on FOR basis, still invokes Rule 5 of the Central Excise Valuation Rules, 2000 for excluding the element of freight from the factory gate to the customer s premises from the assessable value and on this basis alleges that the appellant in order to avail higher quantum of exemption have deliberately paid duty on the higher value. Stand taken by the department is contradictory, as once the department accepts that appellant s sales are on FOR basis, the sales would take place at the customer s premises and in such a situation, in accordance with the provisions of Section 4(3)(c) of the Central Excise Act, 1944, it is the customer s premises, which would be the place of removal and accordingly, the assessable value of the goods would include all the expenses incurred upto the customer s premises including the freight charges. Rule 5 of the Central Excise Valuation Rules, which provides of exclusion of freight from the place of removal to place of delivery, has no application to this case and as such, has been wrongly invoked. The appellant, therefore, have correctly paid the duty on the FOR price and have correctly availed the exemption - Decided in favour of assessee.
Issues:
- Whether duty should be paid on the FOR price including freight charges or only on the value at the factory gate? - Interpretation of Rule 5 of the Central Excise Valuation Rules, 2000. - Validity of exemption availed under notification no.56/2002-CE. Analysis: Issue 1: The main issue in this case was whether the appellant should pay duty on the FOR price, which includes freight charges to the customer's premises, or only on the value at the factory gate. The department argued that the assessable value should not include freight charges, relying on Rule 5 of the Central Excise Valuation Rules, 2000. However, the appellant contended that since sales were on FOR basis, the customer's premises should be considered the place of removal, and all expenses up to that point, including freight charges, should be included in the assessable value. The Tribunal agreed with the appellant's interpretation, stating that Rule 5 was wrongly invoked, and the duty was correctly paid on the FOR price. Issue 2: The interpretation of Rule 5 of the Central Excise Valuation Rules, 2000 was crucial in this case. The department used Rule 5 to exclude the element of freight from the assessable value. However, the Tribunal found that Rule 5, which deals with the exclusion of freight from the place of removal to the place of delivery, was not applicable in this situation where sales were on FOR basis. The Tribunal concluded that the appellant correctly paid duty on the FOR price, and Rule 5 was wrongly invoked by the department. Issue 3: The validity of the exemption availed under notification no.56/2002-CE was also a significant aspect of the case. The appellant had availed exemption under this notification, which required duty to be paid to the extent possible by availing cenvat credit and only the balance amount through PLA. The department alleged that the appellant had paid more duty than required to avail higher exemption. However, the Tribunal found that the appellant had correctly paid duty on the FOR price, in line with the exemption notification, and therefore, the exemption was validly availed. In conclusion, the Tribunal set aside the impugned order, allowing the appeal and stay application, as the appellant had correctly paid duty on the FOR price, including freight charges, and correctly availed the exemption under notification no.56/2002-CE.
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