2023 (10) TMI 163 - AT - Central Excise

Valuation of goods - value of freight charged separately on the invoices has to be excluded from the assessable value or not - Rule 5 of the Central Excise (Valuation) Rules - non-speaking order - violation of principles of natural justice - HELD THAT - The finding in the impugned order are not supported by the exact provisions / clauses of the contracts examined. It is not understood from which clause of the contract or purchase order these conclusions have been reached. The impugned order reaches to the conclusions without stating the exact provisions on the contract from which these conclusions have been reached. In this background, it is not found that the impugned order is a speaking order. The impugned order is therefore set aside and matter remanded to the Commissioner (Appeals) for fresh adjudication after giving exact reasons along with evidence for reaching the conclusions arrived at therein. Appeal allowed by way of remand.

Summary

Issues:
The appeal against the demand of Central Excise duty due to differing interpretations of the terms of sale and valuation rules.

Valuation Rules Interpretation:
The Chartered Accountant for the appellant argued that as per Rule 5 of the Central Excise (Valuation) Rules, the value of freight charged separately on invoices should be excluded from the assessable value when goods are delivered on FOR basis. Emphasizing that the place of removal is the factory gate and not the buyer's premises.

Contention of Authorized Representative:
The Authorized Representative relied on the impugned order which held that the buyer's premises, where delivery is made on FOR basis, is considered the 'place of removal.'

Judicial Interpretation:
The order-in-original referred to the decision of the Hon'ble Apex Court in the case of Roofit Industries Limited, emphasizing that the place of removal depends on when the ownership in the goods is transferred from the seller to the buyer. The order-in-original concluded that the property in goods was intended to pass to the buyer at the buyer's premises upon delivery.

Comparison of Contracts:
The order-in-original compared three contracts, noting that while the terms and conditions were identical, the price quoted in two contracts mentioned freight charges separately, leading to differing interpretations of ownership transfer and valuation.

Impugned Order Analysis:
The impugned order found that ownership of goods remained with the appellant until delivery and acceptance by the client, citing clauses related to payment terms, losses, transit damage responsibility, and inspection requirements. However, the order was criticized for not specifying the exact contract provisions supporting these conclusions.

Remand Decision:
The Tribunal set aside the impugned order, remanding the matter for fresh adjudication by the Commissioner (Appeals) with a requirement to provide precise reasons and evidence for the conclusions reached. The appellants were granted the opportunity for natural justice in the fresh adjudication process.