2020 (4) TMI 239 - AT - Central Excise

Valuation - includibility - whether the non-reimbursed portion of the cost of transportation of the input material incurred by the appellant is includable in the assessable value under section 4 of the Central Excise Act, 1944? - HELD THAT - The appellant is entitled to avail CENVAT Credit of the duty paid on all inputs and service tax paid on all input services which they have used, whether or not the same has been reimbursed separately by the buyer. As long as there is a transaction value, the transaction value becomes the assessable value under section 4 of the Central Excise Act, 1944. If there is some additional consideration for sale, then such additional consideration also has to be included to the transaction value to determine the assessable value. This is precisely what the appellant had done. The Department cannot add separately all the costs incurred by the appellant which have not been reimbursed by the buyer in addition to the price. The demand made in the impugned order and the penalties imposed are unsustainable - Appeal allowed - decided in favor of appellant.

Summary

Issues:
Assessable value for Central Excise Duty on transportation costs of input materials.

Analysis:
The case involved a dispute regarding the inclusion of the non-reimbursed portion of transportation costs of input materials in the assessable value for Central Excise Duty. The appellants, manufacturers of pre-stressed cement concrete sleepers, supplied these to Indian Railways under specific agreements. The agreements detailed that the price included costs of labor and input materials, with an additional reimbursement for transportation of raw materials. The Department alleged that the entire transportation cost should be included in the assessable value for Central Excise Duty, issuing a show cause notice demanding duty on the differential amount incurred from 2003 to 2008. The original authority confirmed the demand, including interest and penalties, which was upheld by the first appellate authority, except for a personal penalty.

Upon review, the Tribunal analyzed the applicable law under the Central Excise Act, focusing on the concept of transaction value for determining assessable value post-2000 amendments. The Tribunal highlighted that the assessable value includes the price actually paid or payable for the goods, along with any additional consideration received by the assessee. In this case, the additional consideration was the reimbursement for transportation costs of input materials. The Tribunal emphasized that the appellant had correctly included this reimbursement in calculating the duty payable.

The Department contended that the appellant should pay duty on the unreimbursed transportation costs, despite availing CENVAT Credit on the entire transportation expenses. However, the Tribunal ruled in favor of the appellant, stating that as long as there is a transaction value, it becomes the assessable value, including any additional consideration for the sale. Therefore, the Department's demand for duty on the unreimbursed amount was deemed unsustainable. The Tribunal set aside the impugned order, allowing the appeal with consequential reliefs, if any.

In conclusion, the Tribunal held that the demand made by the Department and the penalties imposed were not justified, as the appellant had correctly included the reimbursed transportation costs in the assessable value for Central Excise Duty. The decision provided clarity on the assessment of Central Excise Duty concerning transportation costs of input materials in sales transactions.