2023 (1) TMI 448 - AT - Central Excise

Levy of Excise Duty - freight charges collected by the appellant while supplying the goods to their customers on FOR basis - place of removal - HELD THAT - Both the original adjudicating authority and the first appellate authority have held that the factory gate is the place of removal in the instant case. However, the original adjudicating authority has treated the amount of freight collected from the buyers as an additional consideration and demanded central excise duty on the same. The first appellate authority relied on Rule 5 of Central Excise Valuation Rules to hold that the freight charges are includable in the assessable value. The first appellate authority has remanded the matter to the original adjudicating authority. It is noticed that the Commissioner (Appeals) has come to the conclusion that Rule 5 of the Central Excise Valuation Rules, 2000 prescribes that if the goods are sold for delivery at a place other than place of removal then the cost of transportation will be included in the transaction value. It is noticed that the said observation of the Commissioner is opposite to the prescription in Rule which states that the goods are sold for delivery at a place other than the place of removal then the charge of excisable goods shall be deemed to be the transaction value excluding actual cost of transportation from the place of removal upto the place of delivery of such excisable goods. The impugned order does not interpret Rule 5 correctly. In the above facts of the case, the assessment needs to be done on the basis of Rule 5 of Central Excise Valuation Rules. Rule 5 requires that where goods are delivered at a place other than place of removal then the cost of transportation from the place of removal upto the place of delivery of the excisable goods needs to be excluded from the assessable value - Both the lower authorities have not disputed that the factory gate is the place of removal and therefore, the cost of transportation if collected in addition to the price of the goods and shown separately in the invoice, needs to be excluded from the assessable value. Matter remanded to the original adjudicating authority to reassess the issue in terms of Rule 5 of Central Excise Valuation Rules - appeal allowed by way of remand.

Summary

Issues:
Demand of excise duty on freight charges collected by the appellant while supplying goods on FOR basis.

Analysis:
The appeal was filed against the demand of excise duty on freight charges collected by the appellant while supplying goods to customers on FOR basis. The appellant argued that they were discharging excise duty without including the freight amount in the assessable value. Both the original adjudicating authority and the first appellate authority held that the factory gate was the place of removal. The original adjudicating authority treated the freight amount as additional consideration, demanding central excise duty, while the first appellate authority relied on Rule 5 of Central Excise Valuation Rules to include freight charges in the assessable value. The matter was remanded to the original adjudicating authority, leading to the appeal before the tribunal.

The tribunal observed that Rule 5 of Central Excise Valuation Rules states that if goods are sold for delivery at a place other than the place of removal, the cost of transportation should be included in the transaction value. The term 'place of removal' was defined under the Central Excise Act, with the factory gate being considered as the place of removal in this case. The appellant's contention that transportation cost should be excluded from the place of removal to the place of delivery would only be acceptable if it was established that the goods were sold for delivery at the factory gate. However, no documentary evidence was provided to verify this claim.

The tribunal noted that the impugned order did not interpret Rule 5 correctly. It emphasized that if goods are delivered at a place other than the place of removal, the cost of transportation should be excluded from the assessable value, provided it is charged to the buyer in addition to the price of the goods and shown separately in the invoice. As both lower authorities confirmed the factory gate as the place of removal, the cost of transportation, if collected separately and shown in the invoice, should be excluded from the assessable value. Consequently, the tribunal set aside the impugned order and remanded the matter to the original adjudicating authority for reassessment in accordance with Rule 5 of Central Excise Valuation Rules.

In conclusion, the appeal was allowed by way of remand, with the tribunal directing the reassessment of the issue based on the correct interpretation of Rule 5 of Central Excise Valuation Rules.