2017 (11) TMI 1289 - AT - Central Excise

Valuation - freight - includibility - goods cleared from the warehouse and sold from the depot - Held that - in terms of Rule 5 of Central Excise (Determination of price of Excisable goods) Rule 2005, if the goods are sold for delivery at a place other than the place of removal, then the cost of transportation up to the place of delivery shall be excluded - As per the sample invoices perused by us, freight is not included in the transaction value and sale is ex-warehouse, consequently we find no justification for adding the freight amounts recovered separately from the customers - demand set aside. In the light of the claim of the assessee that the depot price includes the element of freight from warehouse to the depot; there appears no justification to add further amount towards freight. However, we are unable to extend such relief in the absence of verification of such claim - appeal allowed by way of remand.

Summary

Issues:
- Inclusion of freight charges in the assessable value of goods cleared to other Oil Marketing Companies (OMCs).
- Valuation of goods sold from the depot under Rule 7 of the Central Excise Valuation Rules.

Analysis:

Issue 1: Inclusion of freight charges for goods cleared to OMCs
The appellant, engaged in refining and marketing petroleum products, appealed against the demand of differential duty raised by the department. The dispute revolved around whether the freight charges incurred by the appellant for delivering goods to OMCs should be included in the transaction value for payment of duty. The appellant contended that the freight charges were separately reimbursed by the buyers and were not part of the transaction value. The tribunal examined sample invoices and noted that the goods were sold ex-warehouse, with freight costs excluded from the transaction value. Relying on Rule 5 of the Central Excise Rules, the tribunal held that if goods are sold for delivery at a place other than the removal site, transportation costs should be excluded from the assessable value. Consequently, the tribunal set aside the demand related to clearances to OMCs.

Issue 2: Valuation of goods sold from the depot
Regarding the valuation of goods sold from the depot, the appellant argued that the depot price already included the cost of transportation from the warehouse to the depot, as per Rule 7 of the Central Excise Valuation Rules. However, the tribunal noted that the Adjudicating Authority did not verify this claim despite a previous remand for verification. The tribunal emphasized the need for proper verification and directed the appellant to provide necessary documentary evidence to substantiate their claim. Due to the lack of verification, the tribunal remanded the matter for further proceedings, instructing the Adjudicating Authority to promptly conduct the necessary verification and issue orders accordingly.

In conclusion, the tribunal allowed the appeal by way of remand, emphasizing the importance of verifying claims related to the inclusion of freight charges and valuation of goods sold from the depot, ensuring compliance with the Central Excise Valuation Rules.