2024 (4) TMI 325 - AT - Central Excise

Valuation - inclusion of freight/insurance charges for delivery at buyer's place in the transaction value - HELD THAT - It is found that freight/insurance have been charged separately and received separately. It is also noticed that the buyers of the goods Indian Oil Corporation Ltd. and Hindustan Petroleum Corp. Ltd. have issued purchase order specifying the price for the goods separately and also specifying the transportation cost for the supply of goods. Accordingly, appellant have supplied the goods and raised invoices for the price of goods and the transportation. Thus, it amounts to showing the cost of transport separately in the invoices. On perusal of copies of the purchase contract placed by the Indian Oil Corporation Ltd and Hindustan Petroleum Corp. Ltd. and invoices issued by the Appellant. From the invoices, it is seen that the freight/insurance shown in the invoices is in addition to basic price of the goods. It is clear from the terms of the purchase contract that basic price and other components have to be indicated separately. Therefore, there is no dispute that basic price and the freight/insurance components are clearly indicated separately in the invoices and therefore criterion i.e. cost of transportation should be in addition to the basic price of the goods stand fulfilled. There are no valid reason for disallowing the deduction for the freight/insurance paid inasmuch as the sales are FOR destination. It is also found that a coordinate Bench of CESTAT in the case of STERLITE OPTICAL TECHNOLOGIES LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE CUSTOMS AURANGABAD 2015 (9) TMI 1023 - CESTAT MUMBAI has taken a view in identical facts that freight/insurance will be allowable as a deduction from the composite price. Thus, the contention of the Department to include the freight/insurance amount in the assessable value does not meet the test of law and hence not legally sustainable. Hence, there are no merit in order passed by the appellate authority. Thus, freight/insurance amount is not includable in the assessable value of the goods for charging excise duty. The impugned order is set aside - appeal allowed.

Summary

Issues involved:
The judgment involves the inclusion of freight/insurance charges in the transaction value for excise duty assessment.

Details of the judgment:
1. Background: The appellant entered into a contract with IOCL, HPCL for delivery of goods to different locations. The department contended that freight/insurance charges collected by the appellant should be included in the transaction value for excise duty assessment. Two show cause notices were issued, and the demand was confirmed by the Original Adjudicating Authority.

2. Appellant's Argument: The appellant argued that the price of excisable goods did not include freight charges, which were separately mentioned in the purchase order and invoices. The appellant cited various judgments to support their position. They also claimed that there was no evidence to show that the charges were meant to depress the assessable value. Additionally, they argued that the demand for an extended period was time-barred due to frequent audits by the department.

3. Revenue's Response: The revenue supported the findings of the impugned order.

4. Judgment: The Tribunal considered whether freight/insurance charges separately mentioned in the sale invoices should be included in the assessable value of excisable goods. The Tribunal noted that the goods were sold for delivery at a place other than the place of removal (factory gate), as specified in the purchase orders. The relevant Valuation Rule 5 was analyzed, which stated that the cost of transportation should be shown separately in the invoices when goods are sold for delivery at a place other than the place of removal. The Tribunal found that the basic price and freight/insurance components were clearly indicated separately in the invoices, fulfilling the criteria for deduction of transportation costs. Citing legal provisions and precedents, the Tribunal concluded that the freight/insurance charges should not be included in the assessable value for excise duty assessment. The impugned order was set aside, and the appeal was allowed.

(Separate Judgment not mentioned)