2016 (9) TMI 278 - AT - Central Excise

Valuation - inclusion of cost of transportation of pipes in the assessable value - pipes sold at the factory gate being place of removal - non-mentioning of freight separately in the invoice - Held that - it is found that the department filed appeal against the said original order on the ground that cost of transportation from the place of removal to the place of delivery is available provided, the same is shown separately in the invoice. Since the assessee has not shown such amount separately, the deduction in terms of rule 5 is not available. On such appeal the present impugned order was passed. The lower appellant authority held that the deduction of cost of transportation is not available as the same is not shown separately. The Tribunal in the appellants case held that the freight charges are permissible for deductions from assessable value even when the freight amount has not been shown separately in the sale invoice. Therefore, by considering the factual finding of the original authority and the tribunals decision, the impugned order is unsustainable. - Decided in favour of appellant

Summary

Issues involved:
1. Inclusion of cost of transportation of pipes in the assessable value for central excise duty.
2. Determining the point of sale for excise purpose in a case involving a composite contract for sale and laying of pipelines.

Issue 1: Inclusion of cost of transportation in assessable value
The appeal was against an order regarding the inclusion of the cost of transportation of concrete and steel pipes in the assessable value for central excise duty. The appellant argued that the sale of pipes occurred at the factory gate, which was the place of removal, and any further transportation or handling did not impact the transaction value for excise purposes. The appellant contended that the provisions of Rule 5 of Valuation Rules did not apply in their case. They also cited precedents where the non-mentioning of freight separately in the invoice did not disentitle them from abatement of transport charges for duty purposes. The Tribunal noted that the original authority had determined that the point of sale was indeed the factory gate, and any subsequent activities such as transportation for laying pipelines did not affect the assessable value. The Tribunal found the impugned order unsustainable and allowed the appeal.

Issue 2: Determining the point of sale in a composite contract
The issue involved determining the point of sale for excise purpose in a case where a composite contract was in place for the sale and laying of pipelines. The appellant argued that the sale of pipes was completed at the factory gate, which was the place of removal, and any further activities such as transportation and laying of pipelines did not impact the transaction value for excise purposes. The appellant contended that the sale was complete at the site due to the composite nature of the contract. The Tribunal considered the factual findings of the original authority, which clarified that the point of sale was indeed the factory gate, and any subsequent activities did not affect the assessable value. The Tribunal also referenced previous decisions where freight charges were permissible for deductions from the assessable value even if not shown separately in the sale invoice. The appeal was allowed based on the factual findings and precedents cited.

This judgment clarifies the treatment of transportation costs in the assessable value for central excise duty and emphasizes the importance of determining the point of sale in cases involving composite contracts for sale and related activities. The Tribunal's decision highlights the significance of factual findings and relevant precedents in resolving disputes related to excise valuation rules.