Is theamount recovered from customers as transportation and insurance charges in excess of what actually was incurred liable to the incidence of duty ?

PJ/CASE LAW/2014-15/2505

Case:- M/S Indo Rama Synthetics (I) Ltd Vs Commissioner Of Central Excise, Nagpur

Citation:- 2015-TIOL-69-CESTAT-MUM

Brief facts:-the brief facts of the case are that the appellant are manufacturer of polyester yarn. The said goods were being sold at uniform price from time to time. In addition to such price, the appellant has also recovered freight, insurance and textile committee fees on the said goods. On examination, it was found that the total amount of freight recovered by them was more than the freight incurred by them. Similarly, the total amount towards insurance charges recovered by them from the customers was more than the amount paid by them as the premium to the insurance companies. Accordingly, a demand of rs. 17,66,394/was confirmed on the appellant. Out of the said amount rs. 88,534/was pertaining to the excess transportation charges collected and rs. 16,77,860/was pertaining to the excess insurance charges collected.

Appellant’s contention:-the learned counsel for the appellant argued that the hon'ble supreme court in the case of baroda electric meters vs. Commissioner of central excise 1997 (94) elt 13 (sc) = 2002-tiol-96-sccx has held that differential amount not includible in the assessable value since the duty of excise is on manufacture and not on profit made by the dealer on transportation. The learned counsel for the appellant also quoted number of decisions by this tribunal in support of his contention. The learned ar on the other hand argued that case is squarely covered by the decision of this tribunal in the case of tripty drinks (p) ltd. Vs. Commissioner of central excise, bhubaneswari 2002 (147) elt 586 (trikol) and the said decision of the tribunal has been upheld by the hon'ble supreme court. We have considered the rival submissions. The hon'ble supreme court in the case of baroda electric meters (supra) has observed as under:"

The tribunal accepted the position that equalised freight was charged by the appellant from everyone, but proceeded to say that even though freight cannot be a part of the assessable value that wherever freight actually paid was less than the amount collected by way of freight and transportation charges the difference was appropriated by the appellant and, therefore, the same would be a part of the assessable value. In our opinion, the tribunal proceeded on an incorrect premise. It was clearly held in indian oxygen ltd. V. Collector of central excise, 2002-tiol-88-sccx, that the duty of excise is a tax on the manufacturer and not a tax on the profits made by a dealer on transportation. In view of that decision, the view taken by the tribunal cannot be sustained.

Reasoning of judgment:-The H’ble CESTAT have gone through the judgment in the case of Tripty drinks (p) ltd., and held that the facts of the said case are entirely different. There the appellant was manufacturing aerated water. The aerated water was being supplied to the customer at the factory gate, but appellant was collecting certain amounts in the name of transportation charges, even though no transportation was being undertaken by Tripty drinks (p) ltd., and the transportation company was being run by close relations of the directors of the Tripty drinks (p) ltd. It is in those circumstances that the tribunal has taken view that the so called transportation charges are includible in the assessable value. In our view the decision of the hon'ble supreme court in the case of baroda electric meters (supra) is squarely applicable to the facts of the present case.

Decision:-the appeal is allowed.

Comment:-the crux of the case is that when excess amount is recovered from customers as transportation charges and insurance charges, which amounts to profit is not liable for duty.

Submitted by:- somya jain

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PJ/CASE LAW/2014-15/2505

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