2017 (10) TMI 1173 - AT - Central Excise

Valuation - freight and insurance shown separately on the invoices - The department was of the view that duty has likely to be paid on equalised freight recovered from the customers - Held that - There is no dispute that the sales were at the factory gate and the amount of freight, though charged at equalised basis, was being separately mentioned in the invoices - when the sales are at the factory gate, the deduction of freight has to be allowed even if the freight is charges at equalised basis - appeal allowed - decided in favor of appellant.

Summary

Issues:
Interpretation of duty payment on equalized freight recovered from customers.

Analysis:
The appellant, a manufacturer of electricity supply meters, sold goods to Electricity Boards under a rate contract where goods were delivered at the customer's place, but the freight and insurance were charged on an equalized basis and shown separately in the contract. The department demanded duty payment on the equalized freight recovered from customers, leading to the appellant filing an appeal against the duty demand.

The appellant argued that the issue had been settled in their favor by the Supreme Court's judgments in VIP Industries vs. CC&C. Ex, Aurangabad and CCE, Noida vs. Accurate Meters Ltd., emphasizing that when sales are at the factory gate and freight charges are separately mentioned in the invoices, there is no justification for including the freight element in the assessable value.

The Tribunal noted that the sales were at the factory gate, and even though freight was charged on an equalized basis, it was separately mentioned in the invoices. Relying on the Apex Court's judgment in Union of India vs. Bombay Tyre International and the cases of VIP Industries Ltd. and Accurate Meters Ltd., the Tribunal held that the deduction of freight must be allowed when sales are at the factory gate.

Referring to the Supreme Court's decision in the case of CCE, Noida vs. Accurate Meters Ltd., the Tribunal reiterated that transportation charges and insurance cannot be considered for determining the value of the goods supplied. The Tribunal also highlighted conflicting Supreme Court judgments but ultimately set aside the impugned order, allowing the appeal filed by the appellant.

In conclusion, the Tribunal ruled in favor of the appellant, emphasizing that when sales are at the factory gate and freight charges are separately mentioned in the invoices, the deduction of freight must be allowed, in line with established legal precedents and judgments.