2019 (6) TMI 501 - AT - Central Excise

Valuation of cess on jute products - inclusion of Departmental charges for inspection as well as supply in the ex-factory price of their products - HELD THAT - The supply orders placed by DGS D indicate that Service Tax @ 12.36% is payable on such Departmental charges - The appellant has supplied the goods as per the supply orders placed by DGS D and issued sale invoices. Such sale invoices indicate only exfactory price of the goods and nothing extra is indicated or collected from the buyers in the nature of Departmental charges. There is no justification to include such departmental charges in the assessable value under Section 4(3)(d) of the Act - appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Inclusion of Departmental charges in the assessable value for payment of cess on jute products.

Analysis:
The case involved appeals against orders passed by the Commissioner of CGST & CX (Appeal-I), Kolkata, regarding the inclusion of Departmental charges in the transaction value of jute products supplied by the appellants to Government agencies. The appellants were found to have not included all price elements, such as Banding charges, Safety stitching charges, Departmental charges (supply), and Departmental charges (inspection), in the transaction value. The Department issued show cause notices proposing to demand a differential amount of cess by including these elements. The original and first Appellate Authority upheld the demand, leading to the present appeals.

The appellants argued that the Departmental charges were not justified to be included in the transaction value as they were payable by the purchasing department to Directorate of Supplies and Disposals (DGS&D), not to the appellants. They presented orders from the Commissioner (Appeals) in their favor for subsequent periods and a clarification letter from DGS&D stating that the charges were paid to DGS&D and the Service Tax Department, indicating no basis for extra cess.

On the other hand, the Revenue justified the inclusion of Departmental charges in the assessable value under Section 4(3)(d) of the Central Excise Act, 1944, as any amount the buyer is liable to pay on behalf of the assessee should be included.

The Tribunal examined the submissions and records, noting that the sale invoices by the appellants only indicated the ex-factory price of the goods without any indication or collection of extra charges like Departmental charges from the buyers. The Tribunal found no justification to include such charges in the assessable value, as it was not established that charges payable by the purchasing department to DGS&D should be part of the transaction value. The Commissioner (Appeal) was noted to have made an erroneous finding that these charges were recovered from the appellants by the buyers. Consequently, the Tribunal set aside the impugned orders for the inclusion of Departmental charges, allowing the appeals.