2024 (2) TMI 1078 - AT - Central Excise

Valuation - inclusion of secondary packing charges recovered by the Respondent from their customers in the assessable value - Freight Cost recovered by the Respondent from their customers for the onward movement of the goods from the factory gate to Railway Station is includable in the assessable value or not - HELD THAT - On going through the OIA, it is found that the Commissioner (Appeals) has given very detailed findings on the issue raised in the Show Cause Notice - it was held that When the appellant has sold the goods at the factory gate, then such charges which are collected for providing services beyond the factory gate cannot be added to or included in the assessable value. It is not the case of the Department, that the appellant is collecting these as part of the price of the goods and in the guise of forwarding charges. Such a proposition would be contrary to evidence as there is uniform sale price of goods at the factory gate and inclusion of such forwarding charges to be declared price would lead to differential price of goods. Hence, such forwarding charges cannot be included in the assessable value of goods. In case of UNION OF INDIA ORS. ETC., ETC. VERSUS BOMBAY TYRE INTERNATIONAL LTD. ETC., ETC. 1983 (10) TMI 51 - SUPREME COURT , the Hon ble Supreme Court has held If any special secondary packing is provided by the assessee at the instance of a wholesale buyer which is not generally provided as a normal feature of the wholesale trade, the cost of such packing shall be deducted from the wholesale cash price. These decisions are squarely applicable to the facts of the present Appeals. Therefore, there are no reason to interfere with the detailed findings and conclusion arrived at by the Commissioner (Appeals). The Appeals filed by the Revenue is dismissed.

Summary

Issues Involved:
1. Includibility of secondary packing charges in the assessable value.
2. Includibility of freight cost in the assessable value.
3. Legality of the earlier finalization of provisional assessment confirming the demand of Rs. 3,01,72,409/-.

Summary:

1. Includibility of Secondary Packing Charges:
The Commissioner (Appeals) held that secondary packing charges recovered by the Respondent from their customers are not includable in the assessable value. The Tribunal referenced the Supreme Court's judgment in Union of India & Ors, Vs. Bombay Tyre International Ltd. (1983) and Union of India & Others Vs. Godfrey Philips India Ltd. (1985), which clarified that if goods are marketable at the factory gate without secondary packing, the cost of such packing is not includable. The Tribunal noted that a substantial percentage of goods were sold without secondary packing, indicating that secondary packing was not essential for marketability. Therefore, the cost of secondary packing provided at the behest of customers does not form part of the assessable value.

2. Includibility of Freight Cost:
The Commissioner (Appeals) also held that the freight cost recovered by the Respondent for the onward movement of goods from the factory gate to the Railway Station is not includable in the assessable value. The Tribunal supported this conclusion, noting that charges for transporting goods beyond the factory gate cannot be included in the assessable value. The Tribunal emphasized that these charges were collected for services provided beyond the factory gate and were not part of the price of the goods.

3. Legality of the Earlier Finalization of Provisional Assessment:
The Tribunal found that the finalization of the provisional assessment confirming the demand of Rs. 3,01,72,409/- was legally unsustainable. The Commissioner (Appeals) had detailed that the lower authority erred in demanding the production of invoices/purchase orders for secondary packing after a significant time lapse, which was impractical for the appellant. The Tribunal upheld that the cost of secondary packing and forwarding charges should be excluded from the assessable value for the period 01.04.1980 to 30.06.2000, and thus, the demand and interest charged were set aside.

Conclusion:
The Tribunal dismissed the Appeals filed by the Revenue, affirming the Commissioner (Appeals)'s detailed findings and conclusions that secondary packing charges and freight costs are not includable in the assessable value, and the earlier finalization of provisional assessment was legally unsustainable.