2017 (9) TMI 1365 - AT - Central Excise

Valuation - freight - includibility - case of Revenue is that assessee did not include additional amount realized from their customers under the garb of freight & insurance charges on sale of the excisable good to their customers as FOR destination sales, resulting in undervaluation of the said goods - Held that - the department has proceeded on the basis that the contracts are on FOR basis. However, on examination of one of the appellants contract available on record with Bhilai Steel Plant, it is found that the contract is on ex-works basis - as per the contract the transportation and insurance are billed by the supplier on the buyer. From the invoices, it is evident that the freight and transportation are separately indicated and excise duty is collected on the basic value excluding the freight and insurance. The matter is squarely covered by the judgement of Hon ble Supreme Court in the case CCE, Aurangabad Vs. Roofit Industries 2015 (4) TMI 857 - SUPREME COURT , where it has been held that once the sale of the goods to the buyer is at the factory gate, the expenses which were incurred after removal of the goods from the factory gate are not to be included in the value of the goods for the purpose of excise duty. Demand set aside - appeal allowed - decided in favor of appellant.

Summary

Issues:
Central Excise duty demand based on undervaluation of goods due to additional freight & insurance charges not included in assessable value.

Analysis:
The appellants, engaged in manufacturing goods falling under Chapter Heading No.84 of the Central Excise Tariff Act, faced a demand for Central Excise duty alleging undervaluation of goods due to not including additional freight & insurance charges in the assessable value for FOR destination sales. The matter was adjudicated, and the demand was confirmed with interest and penalty. In appeal, the order was upheld, leading the appellants to file this appeal challenging the decision.

The appellant's advocate argued that goods were supplied on an ex-factory basis, with freight and insurance costs separately indicated in contracts and invoices. The department's demand was only on the excess amount paid for transportation, indicating acceptance of sale conclusion at the factory gate. The advocate cited relevant case law to support the appellant's position, emphasizing Rule 5 of the Valuation Rules and the place of removal being the factory gate.

The respondent contended that as per Rule 5, actual transportation cost should be included in the assessable value, supporting the findings of the impugned order. Referring to a Tribunal decision, the respondent argued for inclusion of transport charges beyond the contract value in the assessable value.

Upon examination of the contract with a steel plant, the Tribunal found it to be on an ex-works basis, with transportation and insurance costs billed separately to the buyer. The Tribunal noted that the demand was only on excess freight, indicating goods sold at the factory gate. Citing precedents, including a Tribunal judgment and a Supreme Court decision, the Tribunal held that expenses after goods leave the factory gate should not be included in the excise duty value. No stay by a higher judicial forum existed against a relevant judgment, leading the Tribunal to set aside the Commissioner (Appeals) order and allow the appellant's appeal.