2017 (8) TMI 213 - AT - Central Excise

Valuation - freight and transportation charges - includibility - Held that - whether the transportation cost shown separately in the invoice or charged separately by way of commercial invoice or debit note, the nature of the transportation cost is not under dispute - merely because the transportation cost is not shown separately in the invoice cannot be the reason for denying the exclusion of the same from the assessable value - appeal allowed - decided in favor of appellant.

Summary

Issues:
Violation of Rule 5 of Central Excise Valuation Rules 2000 by not showing freight and transportation charges separately in excise invoice.

Analysis:
The case involved the appellants clearing excisable goods without showing freight and transportation charges separately in the excise invoice, although they collected these charges through commercial bills or debit notes. The department argued that as per Rule 5 of Central Excise Valuation Rules 2000, if goods are sold for delivery at a place other than the place of removal, the transportation cost should be shown separately in the invoice. A show-cause notice was issued for duty demand on these charges. The initial Order-in-Original dropped the proceedings, but the Commissioner (Appeals) allowed the revenue's appeal, leading the appellants to appeal to the Tribunal.

The appellant's counsel cited the Supreme Court's ruling in Ispat Industries Ltd. case, stating that transportation charges need not be included in the assessable value when goods are sold from the factory, applicable for the period in question. They also referred to the Tribunal's decision in Kappac Pharma Ltd. case.

The Tribunal reviewed the submissions and records, noting that the Commissioner (Appeals) upheld the duty demand on transportation charges because they were not shown separately in the invoice, violating Rule 5. However, the Tribunal emphasized that the transportation cost exclusion from the assessable value is a principle established by the Supreme Court, regardless of how the charges are collected. The Tribunal ruled that the failure to show transportation charges separately in the invoice was a procedural lapse and not a valid reason to deny exclusion from the assessable value. Consequently, the impugned order was set aside, and the appeal was allowed.

In conclusion, the Tribunal's judgment clarified that the exclusion of transportation charges from the assessable value, as per Rule 5 of Central Excise Valuation Rules 2000, is not contingent on the charges being separately shown in the invoice. The key factor is the nature of the transaction, where goods are sold from the factory, warranting the exclusion of transportation costs from the assessable value.