2016 (8) TMI 443 - AT - Central Excise

Includibility - Freight element or cost of transportation - incurred after the point of removal of goods from the factory gate - two separate contracts, one is for sale and another is for transportation, packing, forwarding and insurance purposes - Held that - in view of the decision of Tribunal in the case of CCEx., Allahabad Vs. Chandra Metals Pvt. Ltd. 2014 (5) TMI 678 - CESTAT NEW DELHI , and in view of the decision of Supreme Court in the case of Commr. of Customs & Central Excise, Nagpur Vs. M/s Ispat Industries Ltd 2015 (10) TMI 613 - SUPREME COURT , the actual cost of transportation from the place of removal, upto the buyer s place is to be excluded for valuation of goods for the purposes of computation of Excise duty, provided it is charged separately to the buyer in addition to the price of goods. Therefore, when there are separate contract for sale of the goods and for transportation etc., it is held that the said transportation charges can not be included in the assessable value of the goods for the purposes of computation of Central Excise duty. - Decided against the revenue

Summary

Issues involved:
Whether the freight element incurred after the point of removal of goods from the factory gate should be included in the value of the goods for the purposes of duty of Central Excise.

Analysis:
The appeal was filed by the Revenue against the order allowing deductions for freight element incurred after the point of removal of goods from the factory gate. The Revenue argued that transportation cost is part of the value of the goods and should be included for Central Excise duty purposes. They contended that even if freight charges are recovered on an equalized/average basis through separate invoices, they must be included in the value of the goods. On the other hand, the Respondent argued that when the sale is completed at the factory gate and there is a separate contract for transportation, the freight charges should not be included in the value of the goods for Central Excise duty purposes. The Respondent cited relevant case laws to support their argument.

The Tribunal carefully considered the submissions from both sides and reviewed the facts on record. The Commissioner (Appeals) noted that in the present case, the sale was completed at the factory gate itself, and there were separate terms and conditions for transportation between the parties. It was emphasized that the transportation, packing, forwarding, and insurance activities were covered under a separate contract and were not part of the value of the goods. Referring to previous decisions, it was highlighted that the cost of transportation from the place of removal to the place of delivery should not be included in the assessable value of the goods, even if calculated on an average basis. The Supreme Court's decision further supported the exclusion of actual transportation costs from the computation of excise duty if charged separately to the buyer. Therefore, the Tribunal held that when there are separate contracts for the sale of goods and transportation, the transportation charges should not be included in the assessable value of the goods for Central Excise duty purposes, leading to the dismissal of the appeal.