2017 (10) TMI 1112 - AT - Central Excise

Valuation - freight charges - includibility - Department was of the view that the goods have been sold to the customers at the buyers premises and hence the freight charges collected by the appellant are required to be added to the transaction value for payment of Central Excise duty - place of removal - Held that - it is evident that the goods have been removed from the factory and sent directly to the premises of the buyers. As per the terms of the purchase order the appellant is required to deliver the goods at the premises of the buyer and has to bear all liability upto the delivery point - in the instant case the goods have been sold in terms of section 4(1)(a) except that the excisable goods are to be delivered at the buyers premises. Rule 5 makes it clear that the cost of transportation from the factory gate upto the place of delivery is to be excluded computing the assessable value - freight charges not to be included in the assessable value for the purpose of excise duty. Explanation 2 to Rule 5 will not be applicable in the facts of the present case since the place of removal is factory gate and not the premises of buyer of goods. Appeal allowed - decided in favor of appellant.

Summary

Issues:
Whether freight charges from factory gate to buyer's premises should be included in assessable value for excise duty.

Analysis:
The appeal was against an order-in-Appeal regarding Central Excise duty payment for goods sold to a customer. The dispute was whether freight charges from factory gate to buyer's premises should be added to the transaction value for excise duty calculation. The department argued for inclusion based on the liability clause in the purchase order, while the appellant contended that goods were sold at the factory gate, and freight charges should not be added.

The legal provisions considered were Section 4 of the Central Excise Act and Rule 5 of the Central Excise Valuation Rules. Section 4(1)(a) states that if goods are sold for delivery at the time and place of removal, the transaction value is the assessable value. Rule 5 specifies that for goods sold for delivery at a place other than the place of removal, transportation cost up to the place of delivery should be excluded from the assessable value.

The Tribunal analyzed the case and concluded that the goods were sold at the factory gate, with the appellant bearing liability until delivery at the buyer's premises. Therefore, as per Section 4(1)(a) and Rule 5, the cost of transportation to the buyer's premises should not be included in the assessable value for excise duty calculation. The Tribunal held that the freight charges should not be added to the transaction value for excise duty purposes.

The Tribunal also clarified that Explanation 2 to Rule 5, which deals with the cost of transportation from the factory to the place of removal, was not applicable in this case since the place of removal was deemed to be the factory gate, not the buyer's premises. Consequently, the impugned order was set aside, and the appeal was allowed in favor of the appellant.