2008 (4) TMI 245 - HC - Central Excise

Held that even after the amendment of Section 4 of the CEA, 1944, cost of transportation from the factory to the Depot and the transit insurance paid on the goods in relation to that part of the transportation of the goods are not includable in the value of the goods for the purpose of levy of excise duty matter remanded to Ad. Authority to decide whether payment of duty by the petitioner which was the subject matter of the controversy in this litigation was paid under provisional assessment

Issues Involved:
1. Entitlement to refund on merit.
2. Diversion of refund amount to the Consumer Welfare Fund.
3. Provisional assessment of duty payment.
4. Availability of alternative remedy under Section 35G of the Central Excise Act, 1944.

Detailed Analysis:

1. Entitlement to Refund on Merit:
The petitioner challenged the order dated 29.8.2005 and the rectification order dated 15.6.2006 of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT). The core issue was whether expenses incurred for transportation and insurance from the factory gate to the depot were includable in the assessable value post the amendment of Section 4 of the Central Excise Act, effective from 28.02.1996. The adjudicating authority and the Commissioner (Appeals) held that these expenses were includable, rejecting the petitioner's defense that the amendment did not apply to uniform depot sales without factory gate sales. The Tribunal, however, reversed this finding, relying on the Apex Court's decision in VIP Industries Ltd. v. Commissioner of Cus. & C. Ex., Aurangabad, which stated that where prices are uniform nationwide, transportation costs are not includable in the assessable value.

2. Diversion of Refund Amount to the Consumer Welfare Fund:
The adjudicating authority did not address this issue, as it had already rejected the refund claim on merits. The Commissioner (Appeals) also decided against the petitioner, stating that the petitioner had not produced evidence to show that the incidence of duty had not been passed on to another person. The Tribunal upheld this finding, dismissing the appeal on the basis that the petitioner failed to establish that the duty incidence had not been passed on to consumers.

3. Provisional Assessment of Duty Payment:
The petitioner contended that the duty was paid under provisional assessment and relied on the Apex Court's decision in Allied Photographics India Ltd., which distinguished between amounts paid during provisional and final assessments. The Tribunal, however, found no evidence of provisional assessment and dismissed the petitioner's appeal. The petitioner's application for rectification of mistake was also rejected, as it was deemed a request for review, not rectification.

4. Availability of Alternative Remedy under Section 35G of the Central Excise Act, 1944:
The respondent argued that the petition under Article 226 should not be entertained due to the availability of an alternative statutory appeal. The petitioner countered that the Tribunal was required to decide the factual question of provisional assessment, which goes to the root of the matter. The Court agreed, stating that the Tribunal should have allowed the petitioner to present evidence on provisional assessment and remanded the matter to the adjudicating authority for this purpose.

Conclusion:
The Court set aside the orders of the adjudicating authority, Commissioner (Appeals), and the Tribunal regarding the merits of the first issue, affirming that transportation and insurance costs are not includable in the assessable value based on the Apex Court's decision in VIP Industries Ltd. The second issue, regarding whether the duty was paid under provisional assessment and the potential diversion of the refund to the Consumer Welfare Fund, was remanded to the adjudicating authority for further consideration. The adjudicating authority was instructed to allow both parties to present evidence on this issue and decide accordingly. The petition was allowed to this extent, with no order as to costs.

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