2018 (3) TMI 618 - AT - Central Excise

Valuation - landed cost of raw material and packing materials supplied free of cost by the buyers, which included the cost of transportation, insurance and overheads incurred on such inputs and packing materials - includibility - Section 4 (1)(b) of the CEA, 1944 read with Rule 6 of Central Excise Valuation Rules, 2000 - Held that - in the case where the invoice value does not include the transportation cost and other charges in such case it is to be considered that the prices are inclusive of transportation, insurance and other charges - M/s Indofil Chemicals had given a certificate to the effect that the value of goods consigned by them to the Appellant includes all the incidental charges. No any contrary evidence to the above has been brought on record by the Revenue. The Revenue has not brought any evidence on record either by investigation at the supplier end or from the records of M/s Indofil Chemicals that they have not included the impugned charges in the cost of raw material - the invoice value considered by the Appellants for determining the assessable value of final product is in conformity with the Valuation Rules. Appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Valuation of goods for central excise duty based on job work basis.
2. Consideration of transportation, insurance, and overhead costs in the assessable value.
3. Application of Rule 6 of Central Excise Valuation Rules, 2000.
4. Adjudication of demands and appeals process.
5. Interpretation of Rule 5 of Valuation Rules, 2000.
6. Inclusion of transportation charges in assessable value.
7. Compliance with Section 4 of the Central Excise Act.

Issue 1: Valuation of goods for central excise duty based on job work basis:
The Appellant manufactured goods on job work basis for a company, supplied with inputs and packing materials. The central excise duty was paid based on cost construction valuation. However, a Show Cause Notice alleged under-valuation of goods due to not considering the landed cost of raw material and packing materials supplied free of cost.

Issue 2: Consideration of transportation, insurance, and overhead costs in the assessable value:
The dispute arose regarding the inclusion of transportation, insurance, and overhead costs in the assessable value of goods. The adjudicating authority demanded duty, arguing that these costs were not adequately considered, resulting in under-valuation.

Issue 3: Application of Rule 6 of Central Excise Valuation Rules, 2000:
The demands were confirmed by the adjudicating authority based on Rule 6 of Central Excise Valuation Rules, 2000, which requires the inclusion of transportation, insurance, and overhead costs in the assessable value.

Issue 4: Adjudication of demands and appeals process:
The Appellant appealed to the Commissioner (Appeals) after the demands were confirmed. The case was remanded back to the adjudicating authority for further scrutiny and verification of documents related to the actual costs involved.

Issue 5: Interpretation of Rule 5 of Valuation Rules, 2000:
The Commissioner (Appeals) interpreted Rule 5 of Valuation Rules, 2000, stating that assessable value does not typically include transportation charges between the place of removal and the buyer.

Issue 6: Inclusion of transportation charges in assessable value:
The adjudicating authority loaded the value of freight based on a percentage of the value of goods in the absence of specific evidence, leading to a dispute over the inclusion of transportation charges in the assessable value.

Issue 7: Compliance with Section 4 of the Central Excise Act:
The Tribunal analyzed the compliance with Section 4 of the Central Excise Act and Valuation Rules, concluding that the Appellant's consideration of invoice value for determining the assessable value of the final product was in line with the Valuation Rules.

In conclusion, the Tribunal set aside the impugned orders, holding that the Appellant's valuation methodology was compliant with the Valuation Rules. The appeal was allowed with consequential reliefs, emphasizing the importance of considering all relevant costs in determining the assessable value for central excise duty.