Whether equalised freight includible in assessable value?

PJ/CASE LAW/2014-15/2527

Case:- COMMISSIONER OF C. EX., ALLAHABAD (U.P.) VERSUS AGARWAL CONDUCTORS

Citation:- 2014 (310) E.L.T. 943 (Tri. - Del.)

Issue:- Whether equalised freight includible in assessable value?

Brief facts:- The respondent are engaged in the manufacture of ACSR weasel and Reaccoon conductors, chargeable to Central Excise duty under Heading 7614.10 of the Tariff. The period of dispute is from 1-7-2000 to 28-2-2003. The respondent has supplied their goods to U.P. Power Corporation Ltd. under various contracts and in terms of the contracts, they were required to deliver the goods on FOR destination basis. They entered into separate contract with U.P. Power Corporation Ltd. for transportation under which they were to charge freight on equalized basis at the rate of per k.m. of the conductors supplied. The point of dispute is as to whether the equalized freight was to be part of the assessable value or not. After issue of show cause notice dated 21-4-2004 the Jurisdictional Deputy Commissioner vide Order-in-Original dated 11-2-2005 confirmed the duty demand of Rs. 41,780/- along with interest and imposed penalty of equal amount on the respondent under Section 11AC. This order of the Deputy Commissioner was set aside by Commissioner (Appeals) vide Order-in-Appeal dated 13-5-2005. Against this order of the Commissioner (Appeals), this appeal has been filed.

Appellant’s contention:- Sh. Yashpal Sharma, learned DR, who assailed the impugned order by reiterating the grounds of appeal and emphasized that since supply was on FOR destination basis, in accordance with Rule 7 of the Central Excise Valuation Rules 2000, the freight charges would be includible in the assessable value, as the point of sale had shifted from the factory gate to the buyer’s premise and that in any case, in accordance with the provisions of Rule 5 of the Central Excise Valuation Rules, 2000, in case of delivery at a place other than the place of removal, deduction of freight from the place of removal to the place of delivery is permissible only on actual basis, not on equalized basis. He, therefore, pleaded that the impugned order is not correct.

Respondent’s contention:- None appeared for the respondent though the notice for hearing has been issued well in time. Therefore in accordance with the provision of Rule 21 of the CESTAT Procedure Rules, so far the respondent are concerned, the matter is being decided to ex parte.

Reasoning of judgment:- The Hon’ble bench have considered the submissions of the learned DR and havegone through the record of this case. During the period of dispute, the definition of “Place of Removal” as given in Section 4(3)(c) of Central Excise Act, 1944, covered only a factory or any other place orpremises of production or manufacture of the excisable goods, or warehouse or any other place or premises wherein excisable goods have been permitted to be deposited without payment of duty. The “depot”, “consignment agent’s premises” or “any other place from where the goods are sold” were included in the definition of the “place of removal” by adding clause (iii) to Section 4(3)(c) w.e.f. 14-5-2003. In view of this, during the period prior to 14-5-2003, the “place of removal” would include only the factory or Bonded Warehouse where the non-duty paid have been allowed to be stored and would not include the “depot” or “consignment agent’s premises” or “customer’s premises” in case of FOR sales. In accordance with the Apex Court’sjudgment in the case of Ispat Industries v. CCE, Mumbai reported in 2006 (202)E.L.T.561 (S.C.)in case of conflict between provision of a Rule framed under the Delegated Legislative Authority, and the provisions of an Act passed by the Parliament, it is the provision of the Act which will prevail. In accordance with thisprinciple, the provisions of Rule 7 of the Central Excise Valuation Rules, 2000, relied upon by the Department, cannot be given an interpretation which is the conflict with the provisions of Section4(3)(c) of the Central Excise Act, 1944, as the same stood during theperiod of dispute. Therefore, during the period of dispute, equalizedfreight would not be includible in the assessable value as the transaction value has to be the price at the place of removal which in this case during the period of dispute was the factory gate. There is, therefore, no infirmity in the impugned order. The Revenue’s appeal is dismissed.

Decision:-Appeal dismissed.

Comment:- The analogy of the case is that freight amount cannot be included in assessable value for the period prior to 14.05.2003 even in case of FOR sales because as per the definition of place of removal at that time, it covered only a factory or any other place orpremises of production or manufacture of the excisable goods, or warehouse or any other place or premises wherein excisable goods have been permitted to be deposited without payment of duty. The defination of place of removal was amended w.e.f. 14.05.2003 and as per new definition, the place of removal included depot, consignment agent’s premises or any other place from where the goods are sold. Hence, freight cannot be included in the assessable value for the period prior to 14/05/2003 because the place of removal could only be factory gate.

Prepared by:- Monika Tak

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PJ/CASE LAW/2014-15/2527

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