2016 (12) TMI 144 - AT - Central Excise

Valuation - the assessee was separating the elements of manufacture cost and transportation cost for calculating Excise duty and duty element was calculated on only for manufacture cost which appeared to be not correct - Held that - it becomes evident that, only after the goods are inspected and passed by Railways can the goods be in fact dispatched out of appellant s factory. Once such inspection is completed only the last date of delivery is specified. Again, once such inspection is completed at appellants factory, there is no further inspection at the time of delivery, only condition being that IPSs should be received in good and acceptable condition at consignees end, after which balance 90% of the payment/reimbursement will be effected. Thus the road transport to consignee s stores is merely for the sake of convenience and a standard requirement in the Railway Tender/contract, and in any case the transportation charges are reimbursed by Railways to the appellant. In such a situation it is fallacious to hold that the place of removal has been shifted from factory gate to place of delivery. The place of removal is the factory gate of the appellant, and cost of transport charges and transit insurance cannot be included in the assessable value - appeal allowed - decided in favor of appellant.

Summary

Issues:
Determination of assessable value for excise duty calculation based on inclusion of transportation charges in the cost of goods supplied.

Analysis:
The case involved the appellants engaged in the manufacture and clearance of battery chargers and allied products. The Department alleged non-inclusion of transportation charges in the assessable value, leading to show cause notices and subsequent confirmation of duty, interest, and penalty by the adjudicating authority and Commissioner(Appeals). The main submissions by the appellant's counsel included arguments regarding the terms of purchase orders, ownership transfer, and reimbursement of freight charges by the customer. The appellant relied on various case laws to support their contentions.

The Department, represented by the Assistant Commissioner, reiterated the correctness of the impugned order and cited the judgment in the case of Roofit Industries Ltd. to support the inclusion of transportation charges in the value of goods delivered at the buyer's premises. The Tribunal analyzed the sample letter of advance acceptance and observed that the costs of transportation were reimbursed by the Railways to the appellant, indicating a different scenario from the Roofit case where the price of goods was inclusive of transportation.

The Tribunal further highlighted the importance of inspection by the Railways at the appellant's factory before dispatch, emphasizing that the place of removal was the factory gate and not the buyer's premises. Referring to the judgment in Commissioner Vs. India Carbon Ltd., the Tribunal concluded that the transportation charges reimbursed by the buyer should not be included in the assessable value of the goods supplied. The Tribunal also cited additional judgments supporting the exclusion of transit insurance from the assessable value.

In light of the above analysis, the Tribunal held that the place of removal was the factory gate of the appellant, and the cost of transport charges and transit insurance should not be included in the assessable value. Consequently, the impugned orders were set aside, and the appeals were allowed with consequential reliefs, if any, as per law.