2014 (5) TMI 678 - AT - Central Excise

Valuation of goods - Inclusion of freight charges - Whether equalized freight separately charged to be included in the assessable value in case of sale on FOR destination basis for the period from July, 2000 to February, 2003 - Held that - cost of transportation from the place of removal to the place of delivery cannot be included in the assessable value even though cost of transportation has been calculated on average basis and not on actual basis. Same finding was reflected by the Tribunal in the case of Majestic Auto Ltd. cited 2003 (6) TMI 114 - CESTAT, NEW DELHI . We have also perused board s circular wherein it has been stated that the deductions are permissible only for the actual cost so collected from his buyers - Decided against Revenue.

Summary

Issues:
1. Whether equalized freight separately charged should be included in the assessable value in case of sale on FOR destination basis.
2. Interpretation of Section 4 of the Central Excise Act, 1944 and Rule 5 of Central Excise Valuation (Determination of Price of Excisable goods) Rules, 2000.
3. Application of Board's circular F.No.354/1/2008-TRU dated 30.6.2008.
4. Relevance of previous judgments by the Tribunal and the Supreme Court on inclusion of freight charges in the assessable value.

Issue 1: Equalized Freight in Assessable Value
The case involved a dispute where the Revenue challenged the dropping of demand by the Commissioner (Appeals) regarding the inclusion of equalized freight in the assessable value for sales on FOR destination basis. The appellants had charged separate freight but did not include it in the invoices. The Revenue contended that this freight should have been part of the assessable value, leading to demands of Central Excise duty. The Tribunal examined the facts and relevant provisions to determine if the equalized freight should be included in the assessable value.

Issue 2: Interpretation of Relevant Laws
The department raised grounds of appeal questioning the application of Section 4(1)(a) and Rule 5 of Central Excise Valuation Rules. They argued that the exclusion of transportation cost under Rule 5 was conditional and not absolute, emphasizing that the equalized freight was not the actual transportation cost. The Tribunal analyzed the provisions, previous judgments, and the Board's circular to ascertain whether the equalized freight could be deducted from the assessable value as per the law.

Issue 3: Application of Board's Circular
The department cited a Board's circular stating that deductions for transportation costs were permissible only for the actual cost collected from buyers. However, the Tribunal referenced the Supreme Court's judgment in a similar case and a previous Tribunal ruling to support the deduction of equalized freight. The Tribunal considered the circular alongside legal precedents to determine the validity of including equalized freight in the assessable value.

Issue 4: Precedents and Legal Interpretation
The Tribunal referred to previous judgments by the Supreme Court and the Tribunal to support its decision. Specifically, the Tribunal highlighted the Supreme Court's ruling that transportation cost from the place of removal to delivery cannot be included in the assessable value, even if calculated on an average basis. The Tribunal also cited its own judgment, aligning with the Supreme Court's decision, to reject the department's appeal. By relying on legal precedents and interpretations, the Tribunal concluded that the equalized freight should not be included in the assessable value, thereby dismissing the department's appeal.

This detailed analysis of the judgment highlights the issues involved, the arguments presented by the parties, the interpretation of relevant legal provisions, and the application of precedents to reach a conclusive decision in favor of the respondent.