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PJ/Case Law/2016-17/3443

Whether transportation charges collected be admissible as deduction in form of freight charges?
Case:- COMMISSIONER OF C. EX., NAGPUR-II Versus SOLAR EXPLOSIVES LTD.
Citation:- 2017 (345) E.L.T. 136 (Tri. - Mumbai)
Issue:-Whether transportation charges collected be admissible as deduction in form of freight charges?
Brief facts:-The issue involved in this case was regarding the demand of differential duty from the respondent on the amount of freight charged by them for transportation of explosives to various coal fields. The contention of Revenue was that the duty liability arises on transportation charges so collected by the respondent for outward journey and return journey. Thus, the deduction on account of transportation charges collected by the respondent was not admissible to them as the freight charges. The adjudicating authority confirmed the demand raised with interest and also imposed penalty. On an appeal, the first appellate authority by impugned order had set aside the order-in-original and allowed the appeal filed by the respondent.
Appellant’s contention:- Learned DR assailed the order and submitted that the duty liability arose on the transportation of the explosives from the factory premises to the coal fields and it had been collected by issuing commercial invoices. He relied upon the Board’s Circular No. 643/34/2002-CX., dated 1-7-2002 wherein Board had clarified that outward and inward journey was liable to be taxed. It was his submission that the respondent had supplied the explosives to the coal fields based upon the contract which was entered into after tendering for the supply of explosives. As per the terms of the contract, the explosives were to be supplied at the coal field as required hence the cost of transportation charged separately by the respondent was liable to be included in the value of the goods for discharge of Central Excise duty.
Respondent’s contention:-Learned Counsel appearing on behalf of the respondent submitted that the Hon’ble Supreme Court in the case of Commissioner of Central Excise v. Ispat Industries Ltd. - 2015 (324) E.L.T. 670 (S.C.) had held that the freight charges could not be included in the assessable value on the ground that the sale took place at the buyer’s place. He also submitted that on factual matrix the invoices raised clearly indicate that the freight charges for which the deduction was allowed as per Rule 5 of Central Excise Valuation Rules, 2000.
Reasoning of judgment:-The Tribunal found that Revenue’s case had no merits inasmuch as the period involved in the case in hand was from July, 2000 to June, 2004. During the period, duty liability had to be discharged on the basis of transaction value and the transaction between the respondent and coal field for supply of explosives was as per the value contracted by both the parties. The contract also emphasised the transportation of explosives to the coal field which was done so by the respondent using their own specialized vehicle. They had seen the specimen invoice copy produced by the learned Counsel and noted that duty paying documents were indicating separately the value for the transportation. The first appellate authority in the impugned order in unnumbered paragraph, in internal Page No. 9 of the order specifically recorded that the adjudicating authority had verified the invoices and collected the freight charges indicating on the invoices itself. If that be so, they found that the provisions of Rule 5 of Central Excise Valuation Rules, 2000, were directly applicable in the case in hand, wherein it was provided that the transport cost need not be included in the assessable value if it was billed on the invoice and collected. It was not the case of the Revenue that the respondent had billed for more transportation charges than actually paid by them. In the absence of contrary evidence indicating that the respondent collected excess freight, they held that the provisions of Rule 5 of Central Excise Valuation Rules had been complied with and the excess of transportation charges need not to be included in the assessable value for discharge of additional excess duty.
Decision:-Appeal rejected.
Comment:-The analogy drawn from the case is that Rule 5 of Central Excise Valuation Rules, 2000, will directly be applicable and transport cost need not be included in the assessable valuein the cases where:
·         Transportation charges are separately shown in the invoice and collected.
·         The person has not billed for more transportation charges than actually paid by them.
·         No extra transportation charges is collected than actually incurred.
Prepared by:-Praniti Lalwani
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