2016 (12) TMI 1387 - AT - Central Excise

Valuation - the goods were sold for delivery at a place (the buyer s premises) other than the place of removal (the factory gate) - whether the transportation charges to be included in assessable value or not? - Held that - we find that freight have been charged separately and received separately. We also take notice that the buyers of the goods-State Electricity Board have issued purchase order specifying the price for the goods separately and also specifying the transportation cost on per Kilometer basis for the supply of goods. Accordingly, appellant have supplied and raised separate invoices for the price of goods and the transportation. Thus, it amounts to showing the cost of transport separately in the invoices - transport charges not includible in the value of the goods - appeal dismissed - decided against Revenue.

Summary

Issues:
1. Interpretation of Central Excise Act, 1944 regarding the valuation of goods sold on FOR destination basis.
2. Application of Rule 5 of the Central Excise Valuation (Determination of price of Excisable goods) Rules, 2000 in determining transportation charges.
3. Consideration of equated freight as actual transportation cost for valuation purposes.
4. Determination of transportation cost when charged on an average basis.
5. Assessment of separate invoicing for goods and transportation charges.

Analysis:

1. The appeal raised concerns regarding the interpretation of the Central Excise Act, 1944, specifically whether the sales were made on a FOR destination basis falling under Section 4(1)(b) rather than Section 4(1)(a). The Commissioner (Appeals) was criticized for not considering the clear terms of the contracts and records establishing the sales were made for delivery at the buyer's premises, not the factory gate.

2. The application of Rule 5 of the Central Excise Valuation Rules, 2000 was disputed, emphasizing that the exclusion of transportation cost is conditional and subject to specific requirements. The deduction of transportation charges was argued to be permissible only to the extent of the actual cost charged to the buyer and shown separately in the invoice.

3. The issue of equated freight as the actual transportation cost for valuation was debated, with reference to a Board's clarification stating that exclusion is only allowed for the actual cost of transportation charged to buyers. The Commissioner (Appeals) was faulted for not recognizing that equated freight does not qualify as actual transportation cost.

4. Concerning transportation cost charged on an average basis, it was contended that the law permits deduction only for the actual transportation cost, not an average amount. The Tribunal highlighted that if an assessee has a system of pricing inclusive of equated freight, no deduction for the freight element is permissible.

5. The Tribunal's decision was influenced by separate invoicing for goods and transportation charges, indicating that the cost of transport was shown distinctly in the invoices. This separate invoicing practice led to the conclusion that transport charges were not to be included in the value of the goods, ultimately resulting in the dismissal of the revenue's appeal.