2017 (9) TMI 209 - AT - Central Excise

Refund - Valuation - includibility - freight - area based exemption - N/N. 56/02-CE dt.14.11.2002 - whether the inclusion of outward freight in assessable value for purposes of section 4 of Central Excise Act, 1944 is in accordance with law? - Held that - the purchase orders placed on record are on FOR destination basis - The period involved is after 14.5.2003 when the definition of place of removal was amended to reintroduce the concept of extended place of removal in Section 4(3) (c) (iii) of the Act. That being so, the place of removal in this case is the premises of the buyers and outward freight has therefore been rightly included in the assessable value - similar issue decided in the case of Krishi Rasayan Exports (P.) Ltd. Versus Commissioner of Central Excise, Jammu & Kashmir 2015 (3) TMI 202 - CESTAT NEW DELHI , where it was held that where an assessee was required to pay duty on FOR price which would include the element of freight from the factory gate to the customers premises, the provisions of Section 4(3)(c) would apply, to identify the place of removal as the place of delivery to the customer s place on FOR price of the transaction - appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Inclusion of outward freight in assessable value for Central Excise Act compliance.

Analysis:
The case involved the appellant, a manufacturer of organic surfactant availing area-based exemption under a specific notification. During an audit, it was discovered that the appellant had included outward freight in the assessable value of their products, leading to an excess refund claim. A show cause notice was issued, demanding the excess refund amount along with interest and penalty under the Central Excise Act. The matter was adjudicated, confirming the demand, interest, and imposing a penalty. The appellant, aggrieved by the decision, appealed to the Commissioner (Appeals) but did not receive any relief, prompting them to file this appeal.

The primary issue to be decided in this appeal was whether the inclusion of outward freight in the assessable value for compliance with Section 4 of the Central Excise Act was lawful. The appellant argued that the goods were sent to the buyer on a FOR basis, with the place of removal being the buyer's premises, justifying the inclusion of freight in the assessable value. The appellant relied on a judgment by the Tribunal in a similar case to support their argument.

Upon examination, the Tribunal found that the goods were indeed sent on a FOR basis, with purchase orders indicating the same. Considering that the concept of extended place of removal had been reintroduced in the Act post a specific date, the Tribunal concluded that the place of removal in this case was the buyer's premises, justifying the inclusion of outward freight in the assessable value. The Tribunal referred to a previous judgment involving a similar matter, where it was established that duty paid on a FOR price includes the freight element to the customer's premises. Consequently, the Tribunal set aside the Commissioner (Appeals) order, ruling in favor of the appellant and allowing their appeal.