2019 (7) TMI 1792 - AT - Central Excise

Valuation - inclusion of freight charges for the period September 2012 to June 2017 - interpretation of Rule 5 of Central Excise valuation (Determination of Price of Excisable Goods) Rules 2000 - HELD THAT - The said rule has already been held ultra vires. Though, reliance has also been placed upon COMMISSIONER, CUSTOMS AND CENTRAL EXCISE, AURANGABAD VERSUS M/S ROOFIT INDUSTRIES LTD. 2015 (4) TMI 857 - SUPREME COURT , but it is observed that the Hon ble Apex Court recently in the case of COMMISSIONER OF CUSTOMS AND CENTRAL EXCISE, NAGPUR VERSUS M/S ISPAT INDUSTRIES LTD. 2015 (10) TMI 613 - SUPREME COURT has held that freight charges and transit insurance should not be included in the assessable value for the purpose of payment of excise duty and that the term any other place under the definition of place of removal has reference only to the place from which goods are to be sold by manufacturer and has no reference to the place of delivery, which may be a buyer s location. It is not the case of Department that the invoice were not prepared at the time of goods leaving the factory which means property in goods passed from the appellant to its buyer at the time when he removed his goods from the factory. As a result circular no. 999/6/2015-CEX dated 28.2.2015 also becomes applicable to the given facts where it has been clarified that In most of the cases, therefore, it would appear that handing over of the goods to the carrier / transporter for further delivery of the goods to the buyer, with the seller not reserving the right of disposal of the goods, would lead to passing on of the property in goods from the seller to the buyer and it is the factory gate or the warehouse or the depot of the manufacturer which would be the place of removal since it is here that the goods are handed over to the transporter for the purpose of transmission to the buyer. It is in this backdrop that the eligibility to Cenvat Credit on related input services has to be determined. Appeal dismissed - decided against Revenue.

Summary

Issues:
- Interpretation of Rule 5 of Central Excise Valuation Rules 2000
- Inclusion of freight charges in assessable value for excise duty calculation
- Definition of "place of removal" under Central Excise Act
- Applicability of Supreme Court judgments on valuation of excisable goods

Interpretation of Rule 5 of Central Excise Valuation Rules 2000:
The appeal filed by the Department challenges the order setting aside the demand of Central Excise duty based on Rule 5 of Valuation Rules. The Department argued that the FOR price should be considered as part of the transaction value. The original adjudicating authority upheld the demand, citing relevant rules and circulars. However, the Commissioner (A) set aside the demand, leading to the appeal. The Department contended that the Commissioner (A) ignored relevant provisions, urging the appeal to be allowed.

Inclusion of freight charges in assessable value for excise duty calculation:
The Department maintained that the freight charges should be included in the assessable value for excise duty calculation, as per Rule 5 of Central Excise Valuation Rules. They argued that the appellant had excluded freight charges while calculating excise duty, despite including them in VAT calculations. The Department emphasized the importance of considering the definition of place of removal and circulars issued by the Department in determining assessable value.

Definition of "place of removal" under Central Excise Act:
The respondent's advocate argued that the place of removal under the Excise Act applies only to the manufacturer and not the buyer of excisable goods. They contended that freight charges beyond the place of removal should not form part of the assessable value. The advocate supported the Commissioner (A)'s decision to dismiss the demand, stating that the freight charges beyond the place of removal cannot be included in the assessable value.

Applicability of Supreme Court judgments on valuation of excisable goods:
The Tribunal observed that the demand was based on the interpretation of Rule 5 of Central Excise Valuation Rules, which was held ultra vires. Referring to Supreme Court judgments, the Tribunal highlighted the decision in Commissioner of Customs & Central Excise Nagpur Vs. Ispat Industries, which held that freight charges should not be included in the assessable value for excise duty payment. The Tribunal upheld the Commissioner (A)'s decision, citing the binding precedence of the Ispat Industries case and dismissed the Department's appeal.