2012 (5) TMI 527 - AT - Central Excise

Valuation of goods - Demand of differential duty - Receipt of 3% gross freight charges from their transporters which is in excess of the freight incurred in transferring the finished goods from their factory to their customers premises - Held that - Undisputedly the respondents are collecting/receiving 3% of the total freight turnover or the service rendered by the transporters to the buyers of respondents in transporting their finished goods from the factory till the premises of the buyers. Also it is not in dispute that the condition of sale reflected in the respective invoices is ex-factory. The excess amount of freight collected by the transporters from the customers are passed on to the respondent also not in dispute - duty of excise is a tax on the manufacture and not a tax on the profits made by a dealer on transportation - appellant admittedly sold their goods at the factory gate to the independent wholesale buyers and the Revenue has not been able to produce any evidence on record that apart from the consideration received by the appellant for the sale of such goods at the factory gate any other consideration flowed back to them from the independent wholesale buyers. As such I hold that the 3% flow back is not liable for inclusion in the assessable value - Decided against Revenue.

Summary

Issues:
- Appeal against Order-in-Appeal No. 48/B-I/2006 regarding inclusion of excess freight charges in the assessable value of finished goods.
- Interpretation of Section 4(1)(a) of the Central Excise Act, 1944.
- Application of judgments by the Hon'ble Supreme Court in Indian Oxygen Ltd. and Baroda Electric Meters Ltd.
- Determination of the point of sale and inclusion of excess freight charges in the assessable value.

Analysis:
1. The appeal was filed by the Revenue against an order demanding a differential duty from the respondents due to the inclusion of excess freight charges in the assessable value of finished goods. The respondents had received 3% gross freight charges from transporters, which the Revenue claimed should be added to the value of goods. The Commissioner (Appeals) allowed the appeal, setting aside the order of the adjudicating authority, leading to the Revenue's appeal.

2. The respondents argued that the condition of sale was ex-factory, and the excess freight collected from transporters should not be part of the assessable value of finished goods. They cited judgments by the Hon'ble Supreme Court in Indian Oxygen Ltd. and Baroda Electric Meters Ltd. to support their case.

3. The Revenue contended that the excess freight collected by the respondents should be added to the assessable value of finished goods as per Section 4(1)(a) of the Central Excise Act, 1944. They referred to clauses in the Letters of Award by the respondents to transporters, stipulating a 3% discount on freight turnover, which they believed should be included in the value of goods.

4. The Tribunal noted that the sale took place ex-factory, and the excess freight collected was passed on to the respondents. Citing the judgment in Baroda Electric Meters Ltd., the Tribunal held that excise duty is on manufacture, not on profits from transportation. The Commissioner (Appeals) decision was upheld, as no contrary evidence was presented by the Revenue.

5. Ultimately, the Tribunal upheld the order-in-appeal passed by the Commissioner (Appeals) and dismissed the Revenue's appeal, as they found no deficiency in the reasoning provided. The decision was based on the understanding that the 3% flow back from transporters was not liable for inclusion in the assessable value of finished goods.

This detailed analysis covers the issues raised in the legal judgment comprehensively, highlighting the arguments presented by both parties and the Tribunal's reasoning based on relevant legal principles and precedents.