2012 (11) TMI 557 - AT - Central Excise

Enhancement of assessable value on the ground that the contract price of transformers manufactured is on F.O.R destination basis therefore the freight is a part of transaction value - Held that - Purchase order clearly shows ex-factory price - customers will pay certain amount towards freight and the respondents were showing the said freight amount in the invoices and also recovered the same from the customers as per the agreement irrespective of actual transportation charges incurred by the respondents - place of removal in the instant case is factory though the place of delivery is the stores of the Electricity Board and, therefore, the cost of transportation from the place of removal to the place of delivery cannot be included in the assessable value of the goods in favor of assessee

Summary

Issues:
1. Inclusion of freight in the assessable value of goods manufactured by the respondents.

Analysis:
The Revenue filed appeals against the Commissioner (Appeals) order to add freight to the assessable value of goods manufactured by the respondents, arguing that the contract price of transformers is on F.O.R destination basis, making freight part of the transaction value. The respondents cited a previous case where the Tribunal dismissed appeals by the Revenue on similar grounds. The main issue was whether freight should be considered part of the transaction value. The Commissioner (Appeals) found that the purchase order clearly indicated an ex-factory price, with customers paying a specific amount for freight, which was shown in invoices and recovered from customers regardless of actual transportation charges. The Tribunal in the previous case also dismissed the appeal by the Revenue, stating that the sale occurred at the factory, not the destination point where goods were delivered.

The Tribunal's decision emphasized that the terms of the contract indicated an ex-works price and separately listed freight charges, clarifying that sales tax paid on an amount inclusive of freight did not signify a sale at the destination. The property of the goods was transferred at the factory gate, even though delivery occurred at various locations of the Electricity Board. The Central Excise Valuation Rules were referenced to explain that the cost of transportation from the place of removal to the delivery point should not be included in the assessable value of goods. The Tribunal concluded that the previous decision's rationale applied to the current appeal due to identical terms and conditions in the contracts. Consequently, the impugned order was upheld, and the appeals were dismissed.