2017 (8) TMI 585 - AT - Central Excise

Valuation - includibility - freight charges - loading charges - stock transfer - whether the transportation charges from the factory to depot/consignment agent premises and the cost of unloading charges at the depot are to be included in the assessable value? - Rule 7 of Central Excise Valuation Rules 2000 - Held that - The new section 4 (Transaction Value) was introduced with effect from 01.07.2000 which defined the place of removal as factory gate alone. Later with effect from 14.05.2003 the definition of place of removal was restored to include depot as well as consignment agent premises. That for the period 01.07.2000 to 14.05.2003 as per law the place of removal is only factory gate and when goods are sold at place other than factory gate Rule 5 of Central Excise Rules 2000 would apply. This Rule provides for deduction of freight and other charges from assessable value - from 01.07.2000 excise duty is to be paid on transaction value and therefore valuation under Section 4(1)(a) and depot not being place of removal is to be adopted and transportation charges need not be included. Reliance placed in the case of Indian Oil Corporation 2015 (3) TMI 1158 - CESTAT MUMBAI where it was held that the transportation charges/unloading charges are includable in the assessable value. Extended period of limitation - Held that - it is abundantly clear that there was much confusion regarding the issue whether transportation charges are to be included or not. The same was set right by the amendment brought to the definition of place of removal with effect from 14.05.2003 - the appellants cannot be said to be guilty of suppression of facts with intent to evade payment of duty - appellants succeed on the issue of limitation. The demand beyond the normal period is set aside on the ground of being time-barred - appeal allowed - decided partly in favor of appellant.

Issues Involved:
1. Inclusion of transportation charges from factory to depot/consignment agent premises in assessable value.
2. Inclusion of unloading charges at the depot in assessable value.
3. Application of Rule 5 vs. Rule 7 of the Central Excise Valuation Rules, 2000.
4. Interpretation of "place of removal" during the disputed period.
5. Applicability of the extended period for demand due to alleged suppression of facts.

Issue-wise Detailed Analysis:

1. Inclusion of Transportation Charges:
The core issue was whether transportation charges from the factory to depot/consignment agent premises should be included in the assessable value. The appellants argued that under Rule 5 of the Central Excise Valuation Rules, 2000, the cost of transportation should be excluded from the assessable value, as the place of removal during the disputed period (07/2000 to 02/2003) was only the factory gate. The department, however, contended that Rule 7 should apply, which does not allow for the exclusion of transportation charges. The Tribunal ultimately concluded that, based on the interpretation of Rule 7 and the definition of "place of removal" during the disputed period, transportation charges must be included in the assessable value.

2. Inclusion of Unloading Charges:
The Tribunal also examined whether unloading charges at the depot should be included in the assessable value. Similar to the transportation charges, the department sought to include these charges by applying Rule 7. The Tribunal, following the reasoning applied to transportation charges, held that unloading charges are also includable in the assessable value.

3. Application of Rule 5 vs. Rule 7:
The appellants argued that Rule 5 should apply, which allows for the exclusion of transportation charges when goods are sold for delivery at a place other than the place of removal. The department, supported by Board Circular No.354/81/2000, argued for the application of Rule 7, which does not provide for such exclusion. The Tribunal sided with the department, referencing the case of Indian Oil Corporation Vs Commissioner of Central Excise, Raigad, and concluded that Rule 7 was applicable, thus including transportation charges in the assessable value.

4. Interpretation of "Place of Removal":
The definition of "place of removal" was critical in this case. Prior to 01.07.2000, and after 14.05.2003, the definition included depots and consignment agent premises. However, during the disputed period, the definition was limited to the factory gate. The Tribunal noted that during the disputed period, the place of removal was only the factory gate, which influenced the interpretation and application of valuation rules. Despite this, the Tribunal concluded that Rule 7 applied, necessitating the inclusion of transportation charges in the assessable value.

5. Applicability of the Extended Period for Demand:
The appellants argued against the invocation of the extended period for demand, claiming no suppression of facts. The Tribunal found merit in this argument, noting that there was significant confusion regarding the inclusion of transportation charges, and the appellants had disclosed relevant information in their declarations. The Tribunal concluded that the extended period could not be justified, and thus, demands beyond the normal period were set aside as time-barred.

Conclusion:
The Tribunal held that transportation and unloading charges are includable in the assessable value under Rule 7 of the Central Excise Valuation Rules, 2000. However, the demand for differential duty beyond the normal period was set aside on the grounds of being time-barred due to the absence of suppression of facts. The appeal was allowed with consequential reliefs.

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