Whether the freight charged on equalized basis from the place of removal to the place of delivery deductible from the assessable value?

PJ/Case Laws/2012-13/1317

Citation:- 2012-TIOL-1602-CESTAT-DEL

CASE:-Banmore Cable and Conductors Vs C.C.E., Indore

Issue:-Whether the freight charged on equalized basis from the place of removal to the place of delivery deductible from the assessable value?

Brief Facts:-The Appellant is engaged in the manufacture of ACSR/AAA Conductors. He has been charging freight including transit insurance on equalized basis of length of cable sold i.e. at per kilometer rate, irrespective of the distance factor. The invoice issued by the appellant to his customers, mentioned the freight, but on equalized basis. The appellant while paying excise duty on the goods cleared claimed exclusion of the equalized freight from the assessable value and did not pay duty on the freight amount. As per the Revenue, this has been in violation of Rule 5 of the central excise valuation (Determination) of price of Excisable Goods) Rules, 2000 read with section 4(1)(b) as the freight and insurance shown in the invoices is not the actual freight but the equalized freight which is not deductible while determining assessable value of the goods. Accordingly the show cause notice was issued to the appellant which culminated into confirmation of the demand of Rs. 95,253/- along with interest in terms of section 11AB of the Central Excise Act, 1944 and also imposed penalty under Rule 25 of the Central Excise Rules, 2001.The appellant filed appeal against order in original but it was dismissed by the Commissioner (Appeals). Thereafter, appellant filed appeal before Tribunal along with stay application against order in appeal.

Appellant’s contention:- The appellant contended that the freight amount from the place of removal to the place of delivery is to be deductible when it is separately indicated in the invoice and even when it is charged on equalized basis.

Respondent’s contention:-The Respondent reiterates the findings of the Commissioner (Appeals) and emphasized that since during the period of dispute, the Rule 5 of Central Excise Valuation Rules, 2000 provided for exclusion of actual cost of transportation from the place of removal upto the place of delivery and since the invoices do not show the actual freight, but the freight on equalized basis i.e. averaged freight charged at per kilometer rate, its exclusion from the assessable value has been rightly disallowed.

Reasoning of Judgment:- The arguments on both sides have been considered. The point of dispute is as to whether the freight though charged in addition to the price of the goods and shown separately in the invoices, but charged on equalized basis, is excludible from the assessable value. According to the department, only actual freight can be excluded and not the equalized freight. As per the Supreme Court judgment in the case of Union of India vs. Bombay Tyre International Ltd., it has been held that the Rule 5 of the Central Excise Valuation Rules, 2000 specifically provides for the exclusion of the cost of freight from the place of removal to the place of delivery when it is charged from the customer in addition to the price and is mentioned separately in the invoices. The provisions of Rule 5 can be said to be analogous to the provisions of sub section (2) of section 4, as it stood prior to 1.07.2000 and hence the cost of transportation from the place of removal to the place of delivery is to be deducted from the assessable value even if charged on equalised basis. Reliance has also been placed on the decision given in following cases in which it was held that cost of transportation is not to be included when the sale price is inclusive of equalized freight:

· VIP Industries Ltd. vs. C.C.E
· Magestic Auto Ltd. vs. C.C.E.

In view of the above discussion, the impugned order is not sustainable and the same aside. The appeal and the stay application both are allowed.

Decision:- Appeal allowed.

Comment:The analogy drawn from this case is that freight charge from the place of removal to the place of delivery cannot be included in the assessable value even if the said freight is calculated on equalized basis due to specific provision given under Rule 5 of the Central Excise Valuation Rules, 2000.

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PJ/Case Laws/2012-13/1317

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