2016 (12) TMI 1518 - AT - Central Excise

Valuation - manufacture of Air Conditioners/Refrigeration equipment and supplying the same on self basis at site and undertaking the job of erection and installation of such Air Conditioners/Refrigeration - whether the freight charges to be included in the assessable value? - most appropriate method in the case is Rule 8 - Held that - On a plain reading of Rule 8 it is clear that the value should be 115% of the cost of manufacture of the product. The provision does not provide to add any elements over and above the 115% of the cost manufacture. Therefore addition of freight charges in the value of 115% is without authority of law - freight charges is not includible in value adopted by the respondent - appeal dismissed - decided against Revenue.

Summary

Issues:
1. Inclusion of freight charges in the assessable value of goods cleared on self basis.
2. Applicability of Central Excise Valuation Rules, 2000.
3. Interpretation of Rule 8 for valuation of goods.
4. Dispute regarding the addition of elements to the cost of manufacture.
5. Consideration of CBEC Circular No. 692/8/2003-CX for valuation.

Analysis:
The case involved a dispute over the inclusion of freight charges in the assessable value of goods cleared on self basis by M/s. Blue Star Limited. The Revenue contended that all elements incurred from the factory to the site, including freight charges, should be included in the assessable value. The respondent argued that the goods were not sold at the factory gate but supplied on a self basis at the site, justifying the valuation under Rule 8 of Central Excise Valuation Rules, 2000.

The Tribunal analyzed the facts and found that the goods were cleared on a self basis to the customer's site as part of a turnkey project for supply, erection, installation, and commissioning. Since the sale price was not separately available, valuation under Section 4(1)(b) read with Central Excise Valuation Rules, 2000 was deemed appropriate. Rule 8, which prescribes the cost construction method at 115% of the cost of manufacturing, was found to be applicable in this case.

The Tribunal emphasized that Rule 8 did not authorize the addition of elements beyond 115% of the cost of manufacture. The Ld. Commissioner (Appeals) supported this position, citing CBEC Circular No. 692/8/2003-CX, which emphasized valuation for captive consumption in accordance with CAS-4. As the respondent had valued the goods correctly as per CAS-4, the impugned order of undervaluation and duty short payment was set aside.

Ultimately, the Tribunal upheld the impugned order, ruling that the freight charges should not be included in the value adopted by the respondent. Consequently, the Revenue's appeals were dismissed, and the decision was pronounced in court on 20/12/2016.