2024 (2) TMI 725 - AT - Central Excise

Valuation of goods - manufacture of M.S. Fabricated Hot Dip Galvanized Steel Structures (Tower) - non-inclusion of freight chaged from their buyers in the transaction value in terms of Section 4(3)(d) of the Central Excise Act, 1944 - HELD THAT - The price of goods depends upon the transaction value of goods and the element of freight has no bearing whatsoever on the value of goods. It is the case of the Department that the excess of transportation (Freight Element) of the excisable goods from the factory to the buyer s premises was liable to be included in the assessable value of the goods for computation of duty. Further, in the delivery terms, it is mentioned freight at actual. Accordingly, the place of removal is the factory gate and not the premises of the buyers - the issue is no more res integra and is covered by the decision of this Bench in the case of M/S FLAKTWOODS ACS (INDIA) PVT. LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE S.T., NOIDA-II 2016 (9) TMI 1173 - CESTAT ALLAHABAD where it was held that the, transfer of ownership takes place at the factory gate when the goods are delivered. Therefore, the ld. Commissioner have erred in holding that the goods manufactured and cleared by the appellant, shall not be valued under Section 4(1)(a) but under Section 4(1)(b). As per Rule 5 of the Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000- wherein excisable value of goods are sold in the circumstances specified in clause (a) of sub-section (1) of Section (4) of the Act, except the circumstances in which the excisable value of goods are sold for delivery at a place other than the place of removal, then the value of such excisable value shall be deemed to be the transaction value, excluding the cost of transportation from the place of removal up to the place of delivery of such excisable goods. The Respondent had arranged for the transport of goods to buyer s addresses and the freight charges were mentioned separately in the invoices. The goods after manufacturing in the plant of the Respondent were subject to pre-delivery inspection by the buyer and were ascertained in favour of the particular buyer before the delivery. In the invoices, the Respondent have charged sales tax and have reflected freight separately in most of the cases. The transfer of ownership takes place at the factory gate when the goods are delivered. There are no reasons to interfere with the impugned Order-in-Appeal passed by the learned Commissioner (Appeals) and the same is sustained - appeal of Revenue dismissed.

Summary

Issues:
The issues involved in the judgment are the inclusion of freight charges in the transaction value for excise duty computation and the determination of the place of removal for excisable goods.

Inclusion of Freight Charges in Transaction Value:
The Respondent, engaged in manufacturing steel structures, was audited by the AGUP officers who observed that freight charges were not included in the transaction value as required by Section 4(3)(d) of the Central Excise Act, 1944. Show Cause Notices were issued demanding excise duty for specific periods. The Adjudicating Authority confirmed the demand and imposed penalties. The assessee appealed, and the Commissioner (Appeals) set aside the original order.

Place of Removal for Excisable Goods:
The Revenue appealed the Commissioner's decision to the Tribunal, arguing that transportation charges should be included in the assessable value of goods. The Tribunal found that the price of goods was based on the transaction value, and freight did not impact the value. Citing relevant case law, including decisions of the Hon'ble Supreme Court, the Tribunal held that transportation charges after the sale of goods from the factory gate should not be included in the assessable value. The Tribunal determined that the transfer of ownership occurred at the factory gate, and the freight charges were separately mentioned in the invoices. Consequently, the Tribunal upheld the Commissioner's decision, rejecting the appeal by the Revenue.

*(Order pronounced in open court on 14th February, 2024)*