2023 (6) TMI 100 - AT - Central Excise

Levy of Central Excise Duty - collection of outward freight chargers from their customers and paid lesser freight to the transporters - Department was of the view that the appellant has to pay excise duty on the amount of freight charges collected from the customers and not on the lesser freight paid to the transporters. Whether the appellant has to include the surplus freight charges that have been collected from the customers in the assessable value for discharging the Central Excise Duty? HELD THAT - Undisputedly, the freight charges which has been paid to the transporters has been included in the assessable value for discharging excise duty. The issue as to whether the amount that has been collected as surplus and is a profit in the hands of the appellant is required to be added to assessable value was considered by the Honorable Apex Court in the case of Indian Oxygen Ltd. 1988 (7) TMI 58 - SUPREME COURT where it was held that It is clear from Section 4 that the delivery and collection charges have nothing to do with the manufacture as they are for delivery of the filled cylinders and collection of the empty cylinders. These charges have to be excluded from the assessable-value. Insofar as the loading charges Incurred for loading the goods within the factory are concerned, they are to be included in the assessable value, irrespective of who has paid for the same but the loading expenses incurred outside the factory gate are excludible. Duty is excise to a tax on the manufacture, not a tax on the profits made by a dealer on transportation. The demand cannot sustain - Appeal allowed.

Summary

Issues:
The issues involved in the judgment are whether the appellant has to include surplus freight charges collected from customers in the assessable value for discharging Central Excise Duty and whether inspection charges collected from customers should also be included for excise duty calculation.

Issue 1: Surplus Freight Charges

The appellant, engaged in manufacturing concrete sleepers, collected outward freight charges from customers but paid lesser freight to transporters, resulting in a profit. The Department contended that the surplus freight amount should be included in the assessable value for excise duty. The appellant argued that only the amount paid to transporters should be included, citing the decision in the case of Indian Oxygen Ltd. vs Collector of Central Excise. The Tribunal referred to the same case and affirmed that the duty of excise is on the manufacturer, not on profits from transportation. Consequently, the demand for including surplus freight charges in the assessable value was set aside, and the appeal was allowed.

Issue 2: Inspection Charges

The Department also raised a demand for excise duty on inspection charges collected from customers, which the appellant had not paid for a specific period. However, the Commissioner (Appeals) set aside this demand. The Tribunal did not find it necessary to address this issue separately in the judgment, as the focus was primarily on the dispute regarding the inclusion of surplus freight charges in the assessable value. Therefore, the decision on inspection charges remained as per the order of the Commissioner (Appeals).

In conclusion, the Tribunal ruled in favor of the appellant regarding the inclusion of surplus freight charges in the assessable value for excise duty calculation, based on the principles established in relevant legal precedents. The judgment provided clarity on the interpretation of excise duty laws concerning transportation charges and emphasized that excise duty is levied on the manufacturer, not on profits derived from transportation activities.