2008 (7) TMI 316 - AT - Central Excise

Allegation that actual freight is not indicated in the invoices but only freight at flat rate is mentioned - freight has been agreed to between the appellant and buyers on the basis of contract - not shown that the amount of freight was inflated with a view to reduce the assessable value moreover, appellant actually paid more transportation charges to the transporters than what they actually collected as freight at flat rate from buyer commissioner is not justified in disallowing abatement

Summary

Issues: Interpretation of contract terms regarding freight charges; Applicability of abatement on freight charges in excise duty calculation; Admissibility of differential duty and penalty imposed.

In the present case, the appellant manufactured transformers and supplied them to U.P. Power Corporation under a contract where a consolidated freight amount was agreed upon for each piece supplied, regardless of the delivery location. The original authority held that since the invoices only mentioned a flat rate for freight as per the contract, without indicating the actual freight, the freight element cannot be abated. Consequently, a demand for differential duty and a penalty were imposed. The Commissioner (Appeals) upheld this decision. The appellant argued that they paid more transportation charges to the transporters than what they collected as freight from U.P. Power Corporation, citing precedents where equalized freight was allowed. The Tribunal noted that transformers are heavy products involving significant freight costs, agreed upon in the contract between the appellant and buyers. The appellant demonstrated that the actual freight incurred exceeded the amount collected from buyers, justifying interference in the case. Consequently, the Tribunal set aside the Commissioner (Appeals) order, allowing the appeal and providing consequential relief to the appellant.