2024 (9) TMI 1168 - AT - Central Excise

Taxability - freight charged separately in the sale invoices of excisable goods - whether freight constitute part of the transaction value of the excisable goods when shown separately in the invoice for the purpose of computation of excise duty in terms of provisions of Section 4 of the Central Excise Act, 1944 read with Central Excise Valuation Rules, 2000? - HELD THAT - From the sample purchase order, the order acknowledgement and corresponding sales invoice it can be seen that the freight was charged separately over and above the sale price of the goods and it is also undisputed that the bill clearly shows that the goods were sold directly to the customers without taking to depot or any other place from where the goods are sold, therefore, in this fact it is ex-factory sale and the freight charges is not includible in the assessable value. This issue has been considered time and again. In the case of Ispat Industries Limited 2015 (10) TMI 613 - SUPREME COURT the Hon ble Supreme Court observed ' Further, for the period 1.7.2000 to 31.3.2003 there will be no extended place of removal, the factory premises or the warehouse (in the circumstances mentioned in the Section), alone being places of removal. Under no circumstances can the buyer's premises, therefore, be the place of removal for the purpose of Section 4 on the facts of the present case.' In view of the decision of Apex Court judgment in Ispat Industries Limited it is settled that in case of factory gate sale even though sale is on FOR basis the freight charges shown/ collected separately in the invoice shall not be included in the transaction value of excisable goods. Thus, demand on the said freight charges is not sustainable. The impugned order is set aside - Appeal allowed.

Issues Involved:
1. Whether Central Excise duty is required to be paid on the freight charged separately in the sale invoices of excisable goods.
2. Whether 'freight' constitutes part of the transaction value of the excisable goods when shown separately in the invoice for the purpose of computation of excise duty under Section 4 of the Central Excise Act, 1944, read with Central Excise Valuation Rules, 2000.

Issue-wise Detailed Analysis:

1. Central Excise Duty on Separately Charged Freight:
The primary issue in this case revolves around whether Central Excise duty should be levied on freight charges that are shown separately in the sale invoices of excisable goods. The appellant argued that the sale is on an FOR (Free on Rail) basis but is essentially an ex-factory sale. Therefore, based on various judgments, the freight shown separately in the invoice should not be included in the assessable value. The appellant cited several precedents, including CCE v. Ispat Industries Ltd., Jindal Tubular (India) Ltd. v. CCE, Eimco Elecon India Ltd. v. CCE, Mira Industries v. CCE, Panama Petrochem Ltd. v. CCE, and others, to support their claim.

2. Freight as Part of Transaction Value:
The tribunal examined whether the freight charges should be included in the transaction value for the purpose of Section 4 of the Central Excise Act, 1944, read with the Central Excise Valuation Rules, 2000. The tribunal emphasized that each transaction's facts must be examined to determine this. A sample purchase order and corresponding invoice were reviewed, showing that the freight was charged separately over and above the sale price of the goods. It was undisputed that the goods were sold directly to customers without being taken to a depot or any other place from where the goods are sold, indicating an ex-factory sale. Therefore, the freight charges were not includible in the assessable value.

The tribunal referred to the Supreme Court judgment in Ispat Industries Limited, which clarified that the actual cost of transportation from the place of removal up to the place of delivery of excisable goods is excluded from the computation of excise duty, provided it is charged to the buyer in addition to the price of goods and shown separately in the invoices. The tribunal also cited other relevant judgments, including Escorts JCB Ltd. v. CCE and VIP Industries Ltd. v. Commissioner of Customs & Central Excise, which supported the exclusion of freight charges from the assessable value when shown separately.

Judgment Analysis:
The tribunal concluded that the freight charges shown separately in the invoices should not be included in the assessable value of the excisable goods. This conclusion was based on the following points:
- The freight charges were shown separately in the invoices.
- The sale was an ex-factory sale, and the goods were delivered directly to the customers.
- The legal provisions and precedents supported the exclusion of freight charges from the assessable value when shown separately.

The tribunal also referenced the case of Eimco Elecon India Ltd., where it was held that freight charges shown separately in the invoices are not includible in the assessable value. The tribunal reiterated that for the deduction of transportation costs to be allowed, the goods should be sold for delivery at a place other than the place of removal, the cost of freight should be in addition to the price for the goods, and the cost of transportation should be shown separately in the invoices.

In light of these facts and legal provisions, the tribunal found no valid reason for disallowing the deduction for the freight paid, as the sales were FOR destination. The tribunal also noted that a coordinate Bench of CESTAT in the case of Sterlite Optical Technologies Ltd. v. CCE & C, Aurangabad had taken a similar view.

Conclusion:
The tribunal set aside the impugned order and allowed the appeal with consequential relief, emphasizing that the freight charges shown separately in the invoices should not be included in the assessable value of the excisable goods. The judgment was pronounced in the open court on 18.09.2024.

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