2017 (2) TMI 1060 - AT - Central Excise

Valuation - freight - job work - Held that - except conversion charges all the elements including freight stand included in the value of the raw material cost. Therefore, the said price is clearly landed price of the raw material in the hands of respondent. For, this reason also, no further addition is required to be made such as freight in the assessable value of the respondent s product - there is no doubt that even though the freight was paid by M/s TISCO, since invoice does not show freight separately, the freight is deemed to be included in the invoice value. Therefore, the proposal to add the freight amount over and above the invoice value of the raw material is not based on evidence - appeal dismissed - decided against Revenue.

Summary

Issues:
1. Whether the invoices raised by M/s Tata Iron & Steel Co. Ltd. (TISCO) for supply of raw materials to the respondent include the freight element from TISCO to the respondent's factory or should it be added over and above the cost of the raw materials for arriving at the assessable value of the job-work goods manufactured and returned by the respondent to TISCO.

Analysis:
The appeals were filed by the Revenue against Orders-in-Original passed by the Commissioner of Central Excise & Service Tax, Raigad. In appeal No. E/411/06, the Commissioner confirmed a demand of &8377; 21,18,535 out of a total demand of &8377; 31,09,149 attributed to the freight element, leading to an appeal by the Revenue against the reduction of demand. In appeal No. E/2362/06, the Commissioner dropped the entire demand proposed in the show-cause notice, stating that the freight paid by TISCO was included in the value shown in the invoices, hence no demand arose. The Revenue filed an appeal against this decision.

The Revenue argued that since the freight was not shown separately in TISCO's invoices, it should be concluded that the freight paid by TISCO for transportation of goods to the respondent's factory should be included in the assessable value of the respondent's product. On the other hand, the respondent's counsel contended that the Commissioner correctly dropped the demand after confirming that the freight paid by TISCO was included in the invoice value.

The Commissioner's findings in the impugned orders highlighted that until September 1996, TISCO did not include freight charges in their assessable value. From October 1996 onwards, TISCO did not show freight charges separately in their invoices, indicating that they paid duty on the freight charges by including them in the assessable value. The Commissioner accepted the contention that the freight element was included in the assessable value by TISCO, based on the evidence provided.

The Tribunal found that the freight paid by TISCO was included in the value shown in the invoices, and since the invoices did not separately show the freight, it was deemed to be included in the invoice value. The Tribunal observed that all elements, including freight, were included in the value of the raw material cost, and no further addition was necessary. The Commissioner's careful consideration of evidence to establish inclusion of freight in the invoice value was noted, leading to the demand being confirmed only where such evidence was lacking.

In conclusion, the Tribunal held that the Revenue's appeals were not sustainable, and therefore dismissed them.

This judgment clarifies the treatment of freight charges in assessable value determination and emphasizes the importance of evidence in establishing inclusion of freight in invoice values to avoid unnecessary demands.