Whether freight includible in assessable value if separately recovered by debit notes?

PJ/Case law/2014-15/2201

Case:- COMMISSIONER OF CENTRAL EXCISE, NASHIK VERSUS GARWARE ENTERPRISES LTD.

Citation:-2014(301) E.L.T.349 (Tri.-MUMBAI)

Brief Facts:-The Revenue filed these appeals against the common impugned order passed by the Commissioner (Appeals). The brief facts of the case are that the respondents are engaged in the manufacture of plastic shrinkon sleeves and plastic shrinkon RP sleeves falling under Chapter 39 of the Central Excise Tariff. The respondents are clearing the goods under the invoices and paying duty on the transaction value. The respondents are recovering the freight charges by issuing debit notes to their customers. A show cause notice was issued to the respondents in view of provisions of Rule 5 of the Central Excise Valuation (Determination of Price of Excisable Goods) Rule, 2000, demanding duty by adding the freight charges to the assessable value of the goods. The adjudicating authority confirmed the demand and imposed the penalty. The respondents filed appeal before the Commissioner (Appeals) and the Commissioner (Appeals) set aside the adjudication order. Hence, the present appeal is filed by the revenue department.

Appellant Contentions:-The revenue filed these appeals on the ground that as the respondents are not mentioning the freight charges separately in the invoice under which the goods were cleared, therefore, as per the provisions of Rule 5 of the Valuation Rules, the amount recovered as freight is to be added to the assessable value of the goods.

Respondent Contentions:-The contention of the respondents is that the they are clearing the goods at the factory gate and paying appropriate duty on the transaction of the goods to their customer’s place and that amount was separately recovered hence the impugned order is rightly passed.

Reasoning of Judgment:- We find that as per the provisions of Rules 5 of the Valuation Rules, the actual cost of transportation from the place of removal to place of delivery of such excisable goods is excluded from the transaction value provided the cost of transaction is charged to the buyers, in addition to the price of goods and shown separately in the invoices for such excisable goods.
In the present case, the freight charges are separately recovered from the customers by issuing debit notes, therefore the respondents are fulfilling the conditions imposed under Rule 5 of the Valuation Rules. In these circumstances, we find no infirmity in the impugned order. The appeals are dismissed. The cross objections filed by the respondents are also disposed of on the same grounds.

Decision:-Appeal dismissed.

Comment:-The gist of this case is that as per Rule 5 of Valuation Rules, actual cost of transportation from the place of removal to place of delivery is excluded from the transaction value provided the freight recovered is separately indicated in the invoice. As in the present case, freight charges were recovered separately on actual basis by issuing debit notes, the freight charges were not includible in the assessable value of the excisable goods.

Prepared by:- Hushen Ganodwala

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PJ/Case law/2014-15/2201

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