2013 (9) TMI 492 - AT - Central Excise

Duty Demand of Differential Value - inclusion of transit insurance charge - Suppression of Information - Consideration for sale - The appellant suppressed the information that he had recovered from the buyers as transmit insurance charge against transit insurance premium - Whether the price charged by the appellant from the buyer at the time of delivery at factory gate was the sole consideration for sale - The Department was of the view that the appellant should have included the amount of transit insurance charge recovered in excess of the actual insurance charge premium paid in the transaction value of the goods cleared in terms of Rule 6 of Central Excise Valuation Rules - Held that - The price charged at the time of removal was not the sole consideration for transaction of sale - the adjudicating authority and the Commissioner (Appeals) were right in including the difference of transit insurance charged and the amount received by the appellant against transit insurance charge in sale price to work out transaction value for the purpose of excise duty. Relying upon Baroda Electric Meters Ltd. v. Collector of Central Excise 1997 (7) TMI 126 - SUPREME COURT OF INDIA - Transaction on the face of it was highly unnatural and was against the norms of the trade practice - The only inference which can be drawn from such an abnormal transaction was that the price paid at the time of delivery was not the sole consideration for sale and the appellant with the aid of buyers had evaded excise duty by issuing invoices/bills showing lower transaction value and getting compensated by indirectly receiving the price in the guise of transit insurance charges - The adjudicating authority as well as appellate authority were right in including the difference of the transit insurance charged actually paid by the appellant and the amount received by the appellant against transit insurance charges in the transaction value for the purpose of assessing excise duty, as such the order cannot be faulted - Decided against assessee.

Summary

Issues:
Valuation of excisable goods for excise duty - Inclusion of transit insurance charge in transaction value.

Analysis:
The appellant, engaged in manufacturing cotton yarn and fabric, cleared goods on factory gate basis, paying excise duty as per invoice prices. However, appellant did not disclose recovering Rs. 22,02,603 from buyers as transit insurance charge, exceeding the actual premium paid. The Department contended the excess charge should be included in transaction value per Rule 6 of Central Excise Valuation Rules, issuing a show cause notice for duty of Rs. 1,98,184.

The appellant argued that the ownership did not transfer at the factory gate, so the transit insurance charge should not affect transaction value per Sales of Goods Act, Section 39. The Assistant Commissioner confirmed a duty demand of Rs. 1,10,725, which the Commissioner (Appeals) upheld with reduced penalty.

The appellant appealed, claiming the authorities erred in including the excess transit insurance charge in the transaction value for excise duty calculation. They cited judgments like Baroda Electric Meters Ltd. v. Collector of Central Excise and other Tribunal cases to support their argument.

The Department argued the abnormal transaction aimed to evade duty, urging dismissal of the appeal. The Tribunal analyzed the relevant legal provisions, including Section 4(1) of the Central Excise Act, which determines transaction value based on price at the time and place of removal, provided the buyer and seller are unrelated.

The Tribunal found the appellant charged significantly more for transit insurance than the actual premium paid, indicating an attempt to lower the transaction value and evade duty. Citing Baroda Electric Meters Ltd. judgment, the Tribunal emphasized excise duty is on the manufacturer, not dealer profits from services like transportation or insurance. The Tribunal concluded the excess transit insurance charge should be included in the transaction value for excise duty calculation, upholding the lower authorities' decision and dismissing the appeal.