1988 (11) TMI 180 - AT - Central Excise

Issues Involved:
1. Refund claim based on abatement of equalized freight in the assessable value.
2. Interpretation and application of Section 4(2) of the Central Excises and Salt Act, 1944.
3. Validity of the Appellate Collector's order allowing abatement of equalized freight.
4. Relevance of the Supreme Court's judgment in the case of Union of India v. Bombay Tyre International Ltd.

Detailed Analysis:

1. Refund Claim Based on Abatement of Equalized Freight:
The appellants claimed a refund on the grounds that the element of equalized freight was included in the assessable value and should be allowed abatement. The Assistant Collector initially rejected this claim, stating that the sales at the factory gate meant that the price applicable to those sales should also apply to other consumers, per Section 4(1)(a) of the Central Excises and Salt Act, 1944. However, the Collector (Appeals) allowed the appellants' claim, permitting abatement of equalized freight for different areas by different amounts. The Government of India, upon review, tentatively considered this order improper and initiated proceedings to set it aside.

2. Interpretation and Application of Section 4(2) of the Central Excises and Salt Act, 1944:
The learned Departmental Representative argued that the price at which goods were normally sold at the factory gate should form the basis for assessable value, and no abatement should be allowed except for discounts as per Section 4. It was contended that Section 4(2) applies only when there are no sales at the factory gate and sales are made away from it. The Supreme Court's judgment in Union of India v. Bombay Tyre International Ltd. was cited to support this interpretation, emphasizing that averaged freight included in the wholesale cash price should be deducted to arrive at the real wholesale cash price at the factory gate.

3. Validity of the Appellate Collector's Order Allowing Abatement of Equalized Freight:
The Appellate Collector's order allowed the abatement of equalized freight based on the judgment of the Andhra Pradesh High Court and provisions of Section 4(2), considering transportation charges as post-manufacturing costs. The Collector (Appeals) granted relief subject to verification of actual transportation costs incurred by the appellants, as indicated in Chartered Accountant certificates. The Department was directed to ensure that the cost of transportation did not exceed Rs. 1.06 per crate, as initially allowed.

4. Relevance of the Supreme Court's Judgment in the Case of Union of India v. Bombay Tyre International Ltd.:
The respondents argued that the factory gate price included an element of equalized freight, and the sales at the factory gate were minimal and mostly to employees. They contended that the Supreme Court's judgment in Union of India v. Bombay Tyre International Ltd. applied, which allowed abatement of averaged freight included in the sale price. The Tribunal noted that the Supreme Court had clearly stated that averaged freight included in the uniform wholesale cash price should be abated to arrive at the factory gate price for assessment purposes.

Conclusion:
The Tribunal observed that the plea of the Revenue, which argued against the abatement of equalized freight despite sales at the factory gate, was contrary to the Supreme Court's judgment in Union of India v. Bombay Tyre International Ltd. The Supreme Court had held that averaged freight included in the sale price must be abated to determine the factory gate price for excise duty assessment. Consequently, the Tribunal found no merit in the Revenue's arguments and dismissed the appeal, upholding the Collector (Appeals)'s order allowing the abatement of equalized freight.

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