2018 (4) TMI 1302 - AT - Central Excise

Valuation - job-work - inclusion of reimbursement expenses - Freight - place of removal - testing charges - Held that - the place of removal and the conversion charges were fixed on ex factory basis. Therefore, freight or profits earned in transportation cannot be part of the assessable value of the goods in terms of Rule 5 of the Central Excise Valuation (Determination in Price of Excisable Goods) Rules, 2000 read with Section 4 (3) (d) i.e. definition of transaction value . The testing is mandatory and without testing the goods cannot be cleared from the factory. The amount received by the respondent towards compensation for the charges is not includible in the transaction value Appeal dismissed - decided against Revenue.

Summary

Issues:
- Whether the transport charges should be added to the value of the products for excise duty purposes.

Analysis:
The appeal was filed against the Order-in-Appeal passed by the Commissioner (Appeals), Central Excise & Service Tax, Ranchi. The respondent, a manufacturer of glued insulated rail joints used by Indian Railways, had to conduct a mandatory pull-out resistance test on 4% of the joints for quality inspection. The Department contended that transport charges should be included in the value of the products for excise duty. However, the Tribunal found that the place of removal and conversion charges were fixed on an ex-factory basis. Therefore, any freight or profits earned in transportation should not be part of the assessable value of the goods as per Rule 5 of the Central Excise Valuation Rules. The Tribunal also noted that the compensation received by the respondent for charges was not includible in the transaction value, citing relevant case law.

The Tribunal observed that the testing was mandatory for clearing the goods from the factory, and any excess transportation charges should not be added to the transaction value. Relying on precedents like CCE Vs. Gulf Oil Corporation Ltd. and Baroda Electric Meters Ltd. Vs. Collector of Central Excise, the Tribunal concluded that there was no reason to interfere with the impugned order. Consequently, the appeal filed by the Department was dismissed, and the cross objection was disposed of.