2018 (2) TMI 637 - AT - Central Excise

Valuation - includibility - whether the appellant is required to include the outward freight from the factory gate to the customer s premises when remitting the amount at 8% of the total price of the exempted price minus sales tax etc. under Rule 6(3)(b) of Cenvat Credit Rules 2004? - Held that - identical issue has been decided by the Tribunal in the case of Koya & Co. Construction Pvt. Ltd. v. CCE 2007 (2) TMI 86 - CESTAT,BANGALORE , where it was held that charging of 8% on the transportation cost and cost of jointing, laying and commissioning cannot be justified at all in terms of Central Excise law - appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Interpretation of Rule 6(3)(b) of Cenvat Credit Rules, 2004 regarding inclusion of outward freight in the total price.
2. Applicability of previous Tribunal decision in a similar case.
3. Calculation of Central Excise duty on transportation and commissioning costs.

Analysis:
1. The appeal involved the question of whether the appellant, engaged in manufacturing M.S. Pipes, should include outward freight from the factory gate to the customer's premises when remitting the amount at 8% of the total price of the exempted price minus sales tax under Rule 6(3)(b) of Cenvat Credit Rules, 2004. The Tribunal considered the case law of Koya & Co. Construction Pvt. Ltd. v. CCE and held that transportation and commissioning costs should not be included in the total price for calculating Central Excise duty, as these costs are not includible for such purposes. The Tribunal emphasized that the total price excluding sales tax under Rule 6(3)(b) should align with the value as per Section 4 of the Central Excise Act. The Tribunal concluded that charging 8% on transportation and commissioning costs is not justified under Central Excise law.

2. The Tribunal referred to the decision in Koya & Co. Construction Pvt. Ltd. v. CCE, where it was established that the duty paid on inputs is taken as Cenvat credit, and when clearing final products partly with duty payment and partly without due to exemption Notification, 8% of the total price of the final products should be paid under Rule 6(3)(b) of Cenvat Credit Rules, 2002. The Tribunal highlighted that costs like transportation to the site and jointing, laying, and commissioning should not be included in the total price for Rule 6(3)(b) calculations, as these costs are not considered for Central Excise duty purposes.

3. The Tribunal found that the appellant, as a jobworker receiving raw materials free of cost from its principal, was transporting goods to the customer at the principal's instance. The Tribunal noted that the appellant's price for the pipes included transportation costs and jointing, laying, and commissioning costs. However, it reiterated that for Central Excise duty calculation, these costs should not be included in the total price. The Tribunal emphasized the importance of maintaining separate accounts of inputs used in dutiable and exempted final products to ensure accurate calculation under Rule 6(3)(b) of Cenvat Credit Rules, 2002.

In conclusion, the Tribunal allowed the appeal, setting aside the impugned order and ruling in favor of the appellant based on the interpretation of Rule 6(3)(b) of Cenvat Credit Rules, 2004 and the principles established in previous case law regarding the exclusion of transportation and commissioning costs from the total price for Central Excise duty calculation.