Whether the transportation cost incurred for Goods sold form factory to customer is to be included in assessable value?

PJ/Case Law/2018-2019/3481

Case:JOST’S ENGINEERING CO. LTD.Versus COMMISSIONER OF C. EX., MUMBAI-II
Citation: 2017 (7) G.S.T.L. 344 (Tri. – Mumbai)
Issue:Whether the transportation cost incurred for Goods sold form factory to customer is to be included in assessable value?
Brief facts:The brief facts of the case are that the appellants cleared their excisable goods from factory gate but did not show freight, transportation charges separately in excise invoice. They had collected freight and transportation charges either through commercial bills or debit notes.
Appellant’s contention:Shri RoshilNachani, ld. Counsel appearing on behalf of the appellants submits that the issue whether the transportation charges is includible in the assessable value in a case where the goods were sold from the factory has been settled by the Hon’ble Supreme Court in the case of Ispat Industries Ltd.2015 (324) E.L.T. 670(S.C.) at least for the period from 1-7-2000 to 31-3-2003. The present case involved the period from July, 2000 to March, 2003. He also placed reliance on the Tribunal decision in the case of KappacPharma Ltd. 2017-TIOL-305-CESTAT-MUM.
Respondent’s Contention and Reasoning of Judgement:Shri M.R. Melvin, ld. Supdt. (AR) appearing on behalf of the revenue reiterates the finding of the impugned order.
After carefully considering the submission made by both sides and perusing the records, the bench find from the impugned order that the Commissioner (Appeals) has held that transportation charges collected by the appellants is required to be included in the assessable value by giving the following finding :-
“I have gone through the case records and written submission filed by the respondents and find that lower authority has failed to appreciate the facts that respondents had collected freight and transportation charges through commercial invoices issued by them and no duty was paid on the amounts so collected. Rule 5 of Central Excise Valuation (Determination of Price of excisable goods) Rules, 2000 is very clear and it is mandatory on the part of assessee to show the cost of transportation separately in the invoice for the goods cleared to exclude the actual cost of transportation from the assessable value. In this case, since the assessee recovered the freight and transportation cost through debit notes and not by showing separately in the invoices, they violated the Rule 5 of the Central Excise Valuation (Determination of Price of excisable goods) Rules, 2000 and they are not eligible for excluding the freight and transportation cost from the assessable value.”
From the above finding, it can be seen that the ld. Commissioner did not dispute in principle that whether in the case the goods were sold from the factory in terms of Rule 5. The transportation charges are excludible from the assessable value. However, he has confirmed the duty on the transportation charges only on the ground that the appellants have not shown the transportation charges separately in the invoice accordingly, they have violated Rule 5 of the Central Excise Valuation Rules 2000 accordingly, they are not eligible for excluding the freight and transporters cost from the assessable value. They find that in principle as decided by the Supreme Court in the case of IspatInds. (supra) when the goods are sold from the factory the transportation cost is not to be included in the assessable value, therefore the transportation cost per se in the given transaction is not includible in the assessable value. As regards the ld. Commissioner (Appeals) finding that it is not excludible due to the reason that the transportation cost was not shown separately in the invoice is only a procedural lapse. Whether the transportation cost shown separately in the invoice or charged separately by way of commercial invoice or debit note, the nature of the transportation cost is not under dispute. Therefore in our considered view, merely because the transportation cost is not shown separately in the invoice cannot be the reason for denying the exclusion of the same from the assessable value. The Authority therefore set aside the impugned order and allow the appeal.
Decision:The application allowed.
Comment:The gist of the case is that the assessee had sold goods from factory to the customer as well as transported the same. The transportation cost was not shown in the invoice. The assessee had collected freight and transportation charges either through commercial bills or debit notes. The decision has been given in favor of assessee by giving reference of Ispat Industries Ltd.2015 (324) E.L.T. 670(S.C.).
Prepared By:HimanshuBhimani

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PJ/Case Law/2018-2019/3481

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