2017 (12) TMI 429 - AT - Central Excise

Valuation - allowability - outward freight - cash discount - Held that - the transaction does not include the cost of transportation of goods from the factory gate to either depot or place of delivery. The transaction value has included all the expenses incurred such as storage and outward handling but did not include expenses incurred on transportation of goods from the factory gate outwards. It clearly indicates that the concept was clearance at the factory gate and expenses incurred after clearance from factory gate do not become part of transaction value - in the present case, cost of transaction or expenses incurred on transportation were not part of transaction value and, therefore, Central Excise duty on the same cannot be collected. In respect of cash discount for the period subsequent to 01.07.2000 if it is established that cash discount was passed on and was not realised then it does not become the part of transaction value - matter requires re-examination. Appeal allowed by way of remand.

Summary

Issues:
Provisional assessments finalization, admissibility of deductions on freight and cash discounts, interpretation of Section 4 of Central Excise Act, 1944, applicability of transaction value concept, remand to Original Authority.

Analysis:
The case involved a challenge against the Order-in-Appeal dated 28.08.2006 passed by the Commissioner (Appeals) concerning the finalization of provisional assessments for the year 2000-2001. The appellant, engaged in manufacturing laminated sheets, contested the disallowance of deductions on account of cash discounts and freight expenses by the Original Authority. The appellant argued that there was no requirement under Section 4 of the Central Excise Act, 1944 to separately indicate freight charges in invoices post-01.07.2000, citing precedents like Godavari Explosives Ltd. v/s Commissioner of Central Excise and Commissioner of Central Excise-III v/s TVS Motor Company Ltd. The appellant also contended that cash discounts should be allowed if established to have been passed on, supported by relevant documentation.

Regarding the interpretation of Section 4 of the Central Excise Act, 1944, the Tribunal noted the substitution of the section on 01.07.2000, emphasizing the concept of transaction value. The definition of transaction value excluded transportation costs beyond the factory gate, indicating that such expenses were not part of the transaction value for excise duty calculation. The Tribunal held that if cash discounts were proven to have been passed on but not realized, they should not be included in the transaction value. Consequently, the matter was remanded to the Original Authority for further examination based on the appellant's submission of relevant documents within 90 days, specifically for the admissibility of cash discounts previously denied.

In conclusion, the Tribunal set aside the Order-in-Appeal, allowing the appeal partially by remanding the decision on cash discount deductions and permitting deductions for transportation costs beyond the factory gate. The appellant was directed to provide necessary documentation to the Original Authority, who would reassess the admissibility of cash discounts. The appellant was entitled to consequential relief as per the law, as determined by the findings of the Original Authority.