2014 (3) TMI 792 - AT - Central Excise

Valuation of goods - manufacture of glass sheets - Inclusion of sound delivery charges - Held that - We have examined the invoices issued in some of the cases, where no sound delivery charges stand raised and received by the appellants. As such the contract price being available at the factory gate and the sound delivery charges being optional in nature, we find no reasons to add the same in the assessable value of the goods - assessee has undertaken transport and insurance of the goods after their sale from the factory or depot, such charges cannot be included in the assessable value of the goods. We also find that the transit breakage is covered under the sound delivery charges and the same were in nature of insurance to breakage of the goods - sound delivery charges recovered by the appellants were not to be added to the assessable value, the bifurcation of the same into freight, insurance and transit breakage, by the Commissioner (Appeals) was not justified - Decided in favour of assessee.

Summary

Issues: Assessment of sound delivery charges in the assessable value of final products under Central Excise Tariff Act, 1985.

Analysis:
1. The appellants, engaged in the manufacture of glass sheets, entered into contracts with government departments under DGS&D at contract rates for delivery of goods at the factory gate. They also charged sound delivery charges from clients, which included freight, insurance/transit risk, and open delivery expenses. Customers had the option to transport the goods themselves if more economical. Revenue contended that these charges should be included in the assessable value of the final products.

2. A show cause notice was issued for demand confirmation, culminating in a duty demand, interest, and penalties. The adjudicating authority relied on Tribunal decisions in the case of Escort (JCB) Ltd. and Prabhat Zarda Factory Ltd. The appellants appealed to the Commissioner (Appeals), highlighting that the Tribunal decisions had been reversed by the Supreme Court in the cases of Escorts (JCB) Ltd. and Prabhat Zarda Factory Ltd. The Commissioner relied on subsequent Supreme Court decisions in other cases, holding that duty is not chargeable on freight and insurance charges but on transit breaking loss/damage charges collected by the appellants.

3. The appellants contended that an identical issue was addressed by the Tribunal in the case of Gujarat Borosil Ltd., where the Supreme Court ruled that transit insurance charges were not includible in the assessable value. They argued that the issue had been settled up to the Supreme Court level and should be followed. The appellants emphasized that sound delivery charges were optional as per the agreement terms, and invoices without such charges were issued and received. They argued that since goods were available at the factory gate and the charges were optional, they should not be added to the assessable value.

4. Referring to the Tribunal's decision in the case of Triveni Glass Ltd., it was noted that charges for transport and insurance after the sale from the factory or depot should not be included in the assessable value of goods. The Tribunal observed that transit breakage, covered under sound delivery charges, was akin to insurance for breakage of goods. The Tribunal held that the sound delivery charges recovered by the appellants should not be added to the assessable value, and the bifurcation of charges by the Commissioner (Appeals) was not justified.

5. Consequently, the Tribunal set aside the impugned order and allowed the appeal filed by the assessee. The Revenue's appeal regarding freight and insurance charges was required to be rejected in light of the Tribunal's findings. Both appeals were disposed of accordingly.