2008 (12) TMI 177 - AT - Central Excise

Valuation Inclusion / exclusion of freight charges - appellants were clearing their manufactured goods and delivering the same to their customers as per the requirements of the customer and were charging transportation charges separately from the buyers. It is their contention that since the actual freight amount was not known at the time of clearing the goods, an approximate amount was indicated in the invoice separately over and above the price charged for the goods. In some cases, it so happened that the freight amount indicated in the invoice turned out to be more than the actual freight paid by them to the transporter and in such cases, they were paying duty on the differential amount so recovered from the customers Held that - the deduction of freight cannot be denied and duty cannot be demanded on the entire amount of freight. The Com missioner (Appeals) s order is accordingly set aside and the appeal is allowed with consequential relief.

Summary

Issues:
- Interpretation of Rule 5 of the Valuation Rules regarding deduction of transportation charges shown separately in the invoice.
- Application of Board Circular No. 354/81/2000-TRU on the exclusion of transportation costs in cases where freight is not shown separately.

Analysis:
1. The case involved the appellants clearing goods and charging transportation charges separately, based on approximate amounts in the invoice. The Revenue contended that since actual freight was not shown separately, the deduction of freight under Rule 5 of the Valuation Rules could not be claimed. The Revenue relied on Board Circular No. 354/81/2000-TRU, emphasizing the need for showing actual transportation costs separately for deduction purposes.

2. The appellants argued that the spirit of Rule 5 is satisfied as long as freight is separately shown in the invoice, even if it is approximate and not actual. They claimed to have paid duty on amounts exceeding actual freight, meeting the requirements of Rule 5. Additionally, they highlighted that the price was not inclusive of freight and freight was always shown separately, aligning with the Board circular's provisions.

3. The Tribunal considered the submissions and clarified that Rule 5 allows deduction of the actual cost of transportation when transportation charges are shown separately, without mandating the display of the actual cost incurred. As long as the amount shown is the actual amount recovered from the customer, the requirements of Rule 5 are met. The Tribunal noted that the Board circular does not prohibit the deduction of freight when it is shown separately, especially when the price is not inclusive of freight.

4. Consequently, the Tribunal held that the deduction of freight cannot be denied, and duty cannot be demanded on the entire freight amount. The Commissioner (Appeals)'s decision was set aside, and the appeal was allowed with consequential relief for the appellants. The judgment clarified the interpretation of Rule 5 and the application of the Board circular in cases where transportation charges are shown separately in the invoice.