2014 (4) TMI 604 - AT - Central Excise

Valuation of goods - Inclusion of cost of transportation - Place of removal - whether the cost of transportation of the goods from the factory gate to the depots would be includible in the assessable value of the goods - Held that - In terms of Section 4 (1), where under this Act, the excise duty is chargeable on any excisable goods with reference to their value, then, on each removal of the goods such value shall be, in a case where the goods are sold by the assessee for delivery at the time and place of removal, and the assessee and buyers of the goods are not related and price is the sale consideration for sale, be the transaction value. In any other case, where the goods are not sold at the time and place of removal, the value shall be determined in terms of provisions of Central Excise Valuation Rules, 2000. Thus, in terms of Section 4 (1), the assessable value of the goods is the transaction value at the time and place of removal. The place of removal during the period of dispute, as mentioned above, covered only the factory or any other place or premises of production or manufacture of the excisable goods or a warehouse or any place wherein the excisable goods have been permitted to be deposited without payment of duty and, as such, the place of removal did not include depot, premises of consignment agents or any other place or premises from where the goods after their clearance from the factory are to be sold. In view of this, when the goods during the period of dispute were sold after their clearance from the factory from depots, notwithstanding the provisions of Rule 7 of the Central Excise Valuation rules, the assessable value would be the transaction value at the time and place of removal and hence the same would not include the cost of transportation from the factory to Depots - Following decision of Ispat Industries vs. Union of India 2006 (9) TMI 181 - SUPREME COURT OF INDIA - Decided against Revenue.

Summary

Issues:
Interpretation of Rule 7 of Central Excise Valuation Rules, 2000 regarding inclusion of transportation cost in assessable value.

Analysis:
The case involved a dispute regarding the assessable value of goods cleared on stock transfer basis from the factory to depots for sale. The Department contended that the cost of transportation from the factory to the depots should be included in the assessable value as per Rule 7 of the Central Excise Valuation Rules, 2000. The Commissioner (Appeals) allowed the appeal, stating that the definition of 'place of removal' during the relevant period did not cover depots or premises of consignment agents. The key question was whether the price of goods sold from depots should include transportation costs.

During the period in question, Rule 7 of the Central Excise Valuation Rules, 2000 specified that when goods are transferred to depots or other premises for sale after clearance from the factory, the assessable value should be based on the normal transaction value at the depots. The rule did not explicitly mention including transportation costs in the assessable value. The definition of 'place of removal' under the Central Excise Rules, 1994, during the dispute period, only covered factories, warehouses, or places where goods were stored without duty payment.

The Tribunal analyzed Section 4(1) of the Central Excise Act, which determines the assessable value based on the transaction value at the time and place of removal. As the 'place of removal' did not include depots during the relevant period, the assessable value was to be based on the transaction value at the factory gate. The Tribunal cited established legal principles that in case of conflict between rules and statutory provisions, the latter prevails. Therefore, the Tribunal upheld the Commissioner's decision, ruling that transportation costs should not be included in the assessable value. Consequently, the Revenue's appeals were dismissed, and the Cross Objections were disposed of.