2004 (7) TMI 150 - AT - Central Excise

Assessment of Central Excise Duty - Interpretation of Rule 5 of Valuation Rules, 2000 - Actual cost of transportation excluded from the transaction value - HELD THAT - According to Rule 5, if the goods are sold for delivery at a place other than the place of removal, then the value of the such excisable goods shall be deemed to be the transaction value excluding the actual cost of transportation from the place of removal up to the place of delivery of such excisable goods, provided the cost of transportation charge to the buyer in addition to the price for the goods and shown separately in the invoice for such excisable goods. We find that in the present case, the cost of transportation was not shown in the invoices separately for the excisable goods. The appellants claimed before the lower authorities that since Valuation Rules, 2000 came into force from 1-7-2000 and they received these late, they could not get their computer software modified immediately but from 1-11-2000 they started showing the freight separately and for the period in dispute, they issued debit notes for the freight amount. Since the law does not require charging of duty on freight, therefore for a lapse of not showing the freight separately, substantial benefit cannot be denied to the appellants specifically when the amount of actual freight was verified by the Superintendent and duty has been paid by the appellants on excess freight collected. Since now the demand relates to actual freight, it will be improper to deny the benefit of deduction of freight to the appellants. Thus, the benefit of excluding the freight from the value shown in invoice is granted and the appeal is allowed.

Summary

Issues involved: Interpretation of Rule 5 of Valuation Rules, 2000 regarding deduction of transportation cost from transaction value for assessment of Central Excise Duty.

In this case, the appellants, manufacturers of Paper and Paper Boards, appealed against a demand for duty on freight charges collected separately through debit notes. The issue revolved around whether the transportation cost, collected separately but not shown in invoices, should be excluded from the transaction value as per Rule 5 of Valuation Rules, 2000. The Commissioner (Appeal) upheld the demand, emphasizing the requirement to show freight charges separately in invoices. The appellants argued for deduction of freight charges based on a Tribunal decision allowing deductions on actual freight even if not shown separately. The Revenue contended that without separate showing in invoices, deduction cannot be allowed. The Tribunal analyzed the case, noting the appellants' claim that they paid duty only on assessable value after issuing credit notes for transportation charges. It observed that the appellants had paid duty on excess transportation charges collected and had started showing freight separately from a certain date. Considering these factors, the Tribunal granted the benefit of excluding freight from the invoice value and allowed the appeal.