2016 (9) TMI 1173 - AT - Central Excise

Valuation - includability - freight incurred in transportation of goods manufactured - post clearance from the factory to the place or site of the buyers - Held that - it is evident that the goods have been delivered to the buyer at the factory gate as is evident from the invoice and the purchase Orders by reading together. In the invoices, the appellants have charged sales tax and have also reflected the freight separately in most of the cases. Further, it is an admitted fact that in most of the cases of clearance, the goods after manufacturing in the plant of the appellant, are subject to pre delivery inspection by the buyer and are ascertained in favour of the particular buyer before the delivery. Accordingly, we hold that the, transfer of ownership takes place at the factory gate when the goods are delivered. Therefore, the ld. Commissioner have erred in holding that the goods manufactured and cleared by the appellant, shall not be valued under Section 4(1)(a) but under Section 4(1)(b). We hold that the valuation shall be done in the appellants case only under Section 4(1)(a), as explained by Hon ble Supreme Court in the case of C.C.E. Mumbai Vs. Official Liquidator for Brimco Plastic Machinery Pvt. Ltd. 2015 (10) TMI 2281 - SUPREME COURT . - Decided in favour of appellant with consequential relief

Summary

Issues:
- Inclusion of freight for transportation of goods in the assessable value.

Analysis:
1. Inclusion of Freight in Assessable Value:
- The appellant, a manufacturer of Air Handling Units (AHU), appealed against an Order demanding duty on freight incurred in transporting goods to buyers' premises post-clearance from the factory. The issue revolved around whether the freight for transportation of goods from the factory to the buyers' premises should be included in the assessable value.

2. Factual Background and Dispute:
- The Revenue Audit alleged that the act of manufacturing AHUs was completed at the buyers' premises as assembly and installation were done there. The appellant took Cenvat Credit for service tax on installation services. The Revenue contended that goods were chargeable under Section 4(1)(b) instead of Section 4(1)(a) due to freight not being included in the assessable value.

3. Appellant's Arguments:
- The appellant manufactured most AHU components, with some bought and used after duty payment. Purchase orders indicated delivery terms, pre-inspection, and transfer of title at the factory gate. The appellant argued that goods were ascertained to buyers pre-delivery, transferring ownership at the factory gate, not buyers' premises.

4. Revenue's Position:
- The Revenue relied on the Commissioner's findings but failed to establish that ownership transferred at the buyers' premises. The Commissioner erred in valuing goods under Section 4(1)(b) instead of Section 4(1)(a).

5. Tribunal's Decision:
- The Tribunal found that goods were delivered at the factory gate, evident from invoices and purchase orders. Ownership transferred at the factory gate before delivery. The Tribunal disagreed with the Commissioner's valuation under Section 4(1)(b) and held it should be under Section 4(1)(a) based on the Supreme Court ruling.

6. Conclusion:
- The Tribunal allowed the appeal, setting aside the impugned order and directing valuation under Section 4(1)(a) with consequential benefits to the appellant. The decision clarified that ownership transfer occurred at the factory gate, justifying the exclusion of freight from the assessable value.