2015 (1) TMI 175 - AT - Central Excise

Valuation of goods - Inclusion of freight charges - Revenue contends that the freight discount extended by the appellant to their customers cannot be deducted from the assessable value on an average basis and as such, the same has to be added back to the value for the purpose of duty payment - Held that - original adjudicating authority, in principle, has held that the freight deduction has been confirmed on account of the fact that the freight from the factory gate to the depot also is required to be included and there is no segregation of the same in the Chartered Accountant s certificate. As per the appellant, such freight already stands included in the assessable value and as such, the question of showing it separately does not arise. Inasmuch as, 1.5% deduction was only on rough estimation which stands reconciled by them at the end of the financial year based upon the actual quantum of freight, the matter needs re-consideration. - Matter remanded back - Decided in favour of assessee.

Summary

Issues Involved:
1. Whether the freight discount extended by the appellant to customers can be deducted from the assessable value for duty payment.
2. Proper documentation and Chartered Accountant's certificate requirement for claiming freight deduction.
3. Dispute regarding segregation of freight from factory gate to depot in the Chartered Accountant's certificate.

Analysis:
1. The issue in this case revolves around the deduction of freight discount by the appellant from the assessable value for duty payment. The appellant reduced the cost of freight from the total price of goods when customers insisted on sales directly from the factory or depot. The Revenue contended that the freight discount cannot be deducted on an average basis and must be added back to the value for duty payment, leading to the initiation of proceedings via a show cause notice.

2. The Addl. Commissioner observed that the appellant lacked proper documentation, specifically a Chartered Accountant's certificate, to support the claimed deduction for freight discount. He emphasized the need for clear bifurcation of freight amounts incurred from the factory to the depot and from the depot to the customer's premises. Due to the absence of detailed bills and documentation, the Addl. Commissioner did not permit the deductions in the existing form.

3. The dispute further centered on the segregation of freight elements in the Chartered Accountant's certificate, particularly the lack of clarity regarding the freight from the factory gate to the depot. The Addl. Commissioner confirmed the demands due to the absence of a proper certificate, despite not disputing the freight discount from the depot to the customer's premises. The appellant clarified that they reconciled the situation at the end of the financial year and rectified any duty shortfalls, emphasizing that the 1.5% deduction was an initial rough estimation.

4. In their judgment, the tribunal acknowledged the necessity of including freight from the factory gate to the depot in the assessable value but noted the lack of segregation in the Chartered Accountant's certificate. They recognized the appellant's reconciliation process based on actual freight amounts at the end of the financial year, leading to a reconsideration of the matter. Consequently, the tribunal set aside the previous order and remanded the case for a fresh decision, allowing the appellant to address the issue of limitation in the new proceedings.