2009 (5) TMI 298 - AT - Central Excise

Inclusion of amount collected towards freight and insurance from factory to depots, in assessable value - The invoices raised by the respondents to the depots are for the purpose of transfer - The actual sale in the present case is only from the depots. During the period from 28-9-96 to 30-6-2000, it is admitted that the place of depot is also considered as place of removal and duty was payable based on the sale price at the depots, in respect of clearances made from the factory - That being the case, the exclusion of the freight and insurance element from the factory gate to the depots is not warranted. - However, it is brought to our notice that the definition of place of removal has undergone a change and the depots were not considered as place of removal for the period from 1-7-2000 to 30-6-2003. Therefore, during this period, in our considered opinion, there is no justification to include the amount collected towards freight and insurance. However, during this period, the amount of deduction available should be restricted to the actual amount incurred. To enable the same, we would like remand the matter in appeals relating to this period for quantifying the deduction.

Summary

Issues:
- Interpretation of assessable value including freight and insurance charges
- Consideration of depots as place of removal
- Applicability of penalties
- Change in definition of place of removal

Interpretation of Assessable Value Including Freight and Insurance Charges:
The case involved manufacturers of yarn who mentioned freight and insurance charges on invoices to their depots. The original authority considered the depots as the place of removal and included the 1.3% charges in the assessable value, leading to duty demands and penalties. On appeal, the Commissioner held that the charges were collected on an equalized basis and relied on a Supreme Court decision to exclude the freight charges. The Tribunal analyzed the facts and agreed with the Department's argument that the case was different from the precedent cited, emphasizing that the actual sale occurred at the depots, not the factory. The Tribunal upheld the duty demands and interest for the period when depots were considered a place of removal.

Consideration of Depots as Place of Removal:
The Tribunal clarified that during a specific period, the depots were considered a place of removal, justifying the inclusion of freight and insurance charges in the assessable value. However, when the definition of place of removal changed for a later period, the Tribunal ruled that the charges collected during that time should be restricted to the actual amount incurred. The matter was remanded for quantifying the deduction during the latter period.

Applicability of Penalties:
Regarding penalties, the Tribunal held that no penalty was warranted for the period involving a pure interpretation of legal provisions. Penalties were set aside for the period under consideration.

Change in Definition of Place of Removal:
The Tribunal noted the change in the definition of place of removal for a specific period and directed that the deduction for freight and insurance charges during that time should be based on the actual amount incurred. Appeals were disposed of accordingly, with penalties being upheld for some cases and deductions allowed on an actual basis for others, depending on the period in question.