2016 (8) TMI 483 - AT - Central Excise

Demand - differential duty on freight - freight amount not shown separately in the invoice but indicated in the commercial invoices and collected the same from customers - not included in the assessable value - Held that - merely because in excise invoice, the amount of freight not shown, the excise duty cannot be charged on the freight amount. As per Rule 5 of Central Excise Valuation Rules, 2000 the purpose for showing freight amount is to ascertain the amount of freight. Here though the appellant has not shown freight amount in the excise invoice but it is admittedly shown in the commercial invoice. On the basis of commercial invoice the freight amount can be identified. It is not the case of the Revenue that the amount of freight shown in the commercial invoice is not correct or it is not on account of freight therefore only for not showing the freight in the excise invoice, excise duty cannot be charged thereon. The adjudicating authority, in the adjudication order has accepted that the sale is at factory gate therefore place of removal is the factory gate and as per Rule 5 of Central Excise Valuation Rules, 2000 freight amount is not chargeable to excise duty. Moreover during the period in question i.e. 1.7.2000 to 31.3.2003, the definition of place of removal was restricted to the factory gate or the depot. The premises of the buyer could not have been the place of removal. The costs incurred beyond the place of removal could not be included in the assessable value. Thus cost of transportation beyond the factory gate or the depot could not possibly form part of assessable value. Freight was incurred beyond the factory gate and therefore could not be part of assessable value. - Decided in favour of appellant

Summary

Issues:
- Whether excise duty can be charged on the amount of freight indicated in commercial invoices but not included in the assessable value.
- Whether the failure to show the amount of transportation separately in the excise invoice justifies charging excise duty on the freight amount.
- Determination of the place of removal and its impact on the assessable value for excise duty calculation.

Analysis:
1. The appeal challenged an Order-in-Appeal upholding an Order-in-Original that confirmed the demand for excise duty on freight charges collected by the appellant but not included in the assessable value. The appellant, engaged in manufacturing excisable goods, faced a show cause notice proposing excise duty on freight amounts indicated in commercial invoices. The adjudicating authority confirmed the duty, citing non-inclusion of freight in the excise invoice, contravening Central Excise Valuation Rules. The Commissioner(Appeals) upheld this decision, leading to the appeal.

2. The appellant contended that since sales occurred at the factory gate, the duty should not apply to freight charges. They argued that the freight amount, though not in the excise invoice, was clearly shown in commercial invoices for identification purposes, complying with Rule 5 of Central Excise Valuation Rules. Citing Supreme Court judgments, the appellant supported their position.

3. The Revenue, however, argued that sales took place at the customer's premises, justifying inclusion of transportation charges in the assessable value. They relied on specific judgments to support their stance.

4. The Tribunal analyzed the submissions and ruled in favor of the appellant. They held that not showing freight in the excise invoice did not warrant charging duty on it. The Tribunal emphasized that the purpose of indicating freight was for identification, and the commercial invoice sufficed for this. They highlighted that the sale indeed occurred at the factory gate, as accepted by the adjudicating authority, making the freight amount non-chargeable. Additionally, the definition of place of removal during the relevant period limited it to the factory gate or depot, excluding the buyer's premises. Therefore, transportation costs beyond the factory gate could not be part of the assessable value, leading to the appeal's allowance.

5. Ultimately, the impugned order was set aside, and the appeal was allowed by the Tribunal, emphasizing the correct interpretation of the relevant rules and the place of removal for excise duty calculation.