2013 (7) TMI 102 - CGOVT - Central Excise

Determination of value of export FOB Value or CIF Value in the case of export Applicant submits that Section 4 value arrived at after deducting the freight incurred from Dehradun to Delhi as the corresponding invoices show the terms of delivery as FOB Delhi . As such, the ARE-1 value does not appear to represent the correct value as per Section 4 of the Central Excise Act, 1944 - all the commercial invoices in respect of ARE-1s mentioned in the table indicate the terms of delivery as FOB, New Delhi or FOB Mumbai and there is no term as to payment of freight by the buyer. - Held that - the place of removal is the port of export where sale takes place - place of removal in this case is the port of export i.e. ICD, Delhi since the sale has taken place at the port of export - all expenses incurred upto the place of removal i.e. port of export are part of transaction value - freight expenses incurred beyond the place of removal i.e. port of export will not form part of transaction value - the pleading of department that freight incurred from factory gate to port of export is required to be deducted from FOB value to arrive at transaction value, is not tenable. - Decided in favor of Assessee.

Issues Involved:
1. Determination of transaction value for rebate claims under Section 4 of the Central Excise Act, 1944.
2. Inclusion of freight and insurance charges in the transaction value.
3. Correctness of the rebate sanctioned based on FOB value instead of Section 4 value.
4. Requirement for re-adjudication of the rebate claims.

Detailed Analysis:

1. Determination of Transaction Value for Rebate Claims:
The primary issue is whether the transaction value for rebate claims should be determined based on the FOB value or the Section 4 value of the Central Excise Act, 1944. The department contended that the original authority failed to deduct freight incurred from Dehradun to Delhi or Mumbai, leading to an incorrect transaction value. As per Section 4(1)(a) of the Central Excise Act, 1944, the value of excisable goods should be the transaction value at the place of removal, excluding transportation costs beyond this point. The appellate authority upheld the original orders, which the department challenged, arguing that the correct value should be determined under Section 4.

2. Inclusion of Freight and Insurance Charges:
The department argued that the party included transport charges from Dehradun to ICD/Airport in the transaction value, contrary to Rule 5 of the Central Excise Valuation (Determination of Prices of Excisable Goods) Rules, 2000. According to Rule 5, the transaction value should exclude transportation costs from the place of removal to the place of delivery. The Government noted that the place of removal is within India's geographical limits and cannot be beyond the port of export. Therefore, any freight and insurance costs incurred beyond the port of export should not form part of the transaction value.

3. Correctness of Rebate Sanctioned Based on FOB Value:
The department contended that the rebate sanctioned based on FOB value was incorrect, as it did not reflect the actual transaction value under Section 4. The appellate authority's decision to accept the contracted price, including freight and insurance, as the transaction value was deemed contrary to Section 4 provisions. The Government observed that the place of removal is the port of export, and expenses incurred up to this point are part of the transaction value. The department's argument to deduct freight from the FOB value to determine the transaction value was not tenable.

4. Requirement for Re-adjudication:
The department sought re-examination of the rebate claims to determine the correct value under Section 4 after deducting freight costs. The Government upheld the appellate authority's decision, finding it legal and proper. The Government agreed with the appellate authority that the place of removal is the port of export, and all expenses up to this point are part of the transaction value. The department's plea for re-adjudication was rejected as the appellate authority's reasoning was found to be sound and in accordance with the law.

Conclusion:
The Government upheld the appellate authority's order, rejecting the department's revision applications. It was concluded that the transaction value should be determined based on the place of removal within India's geographical limits, excluding freight and insurance costs incurred beyond the port of export. The rebate claims were correctly sanctioned based on the transaction value at the port of export, and the department's arguments for re-adjudication were not accepted. The impugned Order-in-Appeal was upheld, and the revision applications were dismissed.

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