Custom, Excise & Service Tax Tribunal
Cc&Ce, Raipur vs M/S Jaiswal Steels Enterprises Pvt. Ltd on 2 June, 2016
CUSTOMS EXCISE & SERVICE TAX APPELLATE TRIBUNAL, West Block No.2, R. K. Puram, New Delhi. Date of hearing: 03.05.2016 Date of decision: 02.06.2016 For Approval and Signature: Honble Ms. Archana Wadhwa, Member (Judicial) Honble Mr. V. Padmanabhan, Member (Technical) 1 Whether Press Reporter may be allowed to see the Order for publication as per Rule 26 of the CESTAT (Procedure) Rules, 1982? No 2 Whether it should be released under Rule 26 of CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not? No 3 Whether their Lordships wish to see the fair copy of the Order? Seen 4 Whether Order is to be circulated to the Departmental authorities? Yes Excise Appeal No. 1135 of 2007-Ex (DB) (Arising out of the Order in Appeal No.134/RPR-II/2006 dated 29.12.2006 passed by the Commissioner (Appeals-I) Customs and Central Excise, Raipur). CC&CE, Raipur Appellant Vs. M/s Jaiswal Steels Enterprises Pvt. Ltd. Respondent
Appearance:
Sh. R. K. Mishra, AR for the appellant- Revenue.
Shri Arun Pathak, Advocate for the respondent-assessee.
Coram: Honble Ms. Archana Wadhwa, Member (Judicial) Honble Mr. V. Padmanabhan, Member (Technical) Final Order No. 51930 / 2016 Per: V. Padmanabhan:
Brief facts of the case are that the respondent are engaged in the manufacture of excisable goods falling under chapter headings 73.07 and 86.07 of the Central Excise Tariff for supply to various Circles of Department of Telecommunications (DoT) and its successor Bharat Sanchar Nigam Limited (BSNL). The DoT/ BSNL finalised purchase orders for various goods on the basis of bids supplied by the respondent and others. The terms of the purchase orders were such that the price fixed were FOR destination, composite price inclusive of excise duty, sates tax, price and freight. The respondents were found to have paid the excise duty on the basic value without including the component of freight indicated in the composite price. However, the element of freight was indicated separately in the invoices issued for the goods. The controversy arose with the Revenue seeking to disallow the deduction for freight on the ground that the freight indicated was equalised freight and hence not actual transportation charges. The consequential differential duty was demanded by the original adjudicating authority vide order dated 31.08.2006. Since this demand was held to be unsustainable by the Commissioner (Appeals) vide order dated 29.12.2006, the Revenue is in appeal.
2. The main argument putforth by the respondent was that, since the delivery is FOR destination, a deduction for transportation charges will have to be allowed under Section 4(1)(b) of the Central Excise Act read with Rule 5 of the Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000.
3. Heard the ld. DR as well as the ld. Advocate on behalf of the respondent.
4. Since the delivery in this case is FOR destination, the case will fall under Section 4(1)(b) and not under Section 4(1)(a). The relevant rule 5 of the Valuation Rules is reproduced below:
Rule 5. Where any excisable goods are sold in the circumstances specified in clause (a) of sub-section (1) of section 4 of the Act except the circumstances in which the excisable goods are sold for delivery at a place other than the place of removal, then the value of such excisable goods shall be deemed to be the transaction value, excluding the cost of transportation from the place of removal upto the place of delivery of such excisable goods. Explanation 1.- Cost of transportation includes-
(i) the actual cost of transportation ; and
(ii) in case where freight is averaged, the cost of transportation calculated in accordance with generally accepted principles of costing.
Explanation 2. For removal of doubts, it is clarified that the cost of transportation from the factory to the place of removal, where the factory is not the place of removal, shall not be excluded for the purposes of determining the value of the excisable goods.
From the above rule it can be seen that when goods are sold for delivery at a place other than place of removal, transaction value of excisable goods shall not include actual cost of transportation from the place of removal up to the place of delivery of such excisable goods. As per the rule reproduced above, in order to allow the deduction of the cost of transportation following criterion should be fulfilled :
(a) The goods should be sold for delivery at a place other than place of removal.
(b) Cost of freight should be in addition to the price for the goods.
(c) Cost of transportation should shown separately in the invoices.
5. As regards the first criterion, the place of removal is factory gate, however the goods were delivered at customer place. Therefore goods were sold for delivery not at the place of removal (i.e. factory gate) but at other place i.e. customer door step. We have perused a copy of the bid as well as the purchase order placed by the DoT and some sample invoices issued by the respondent.
From the sample invoices it is seen that the freight shown in the invoices is in addition to basic price of the goods. It is clear from the terms of the bid documents also that basic price and other components have to be indicated separately. Therefore, there is no dispute that basic price and the freight components are clearly indicated separately in the invoices and therefore criterion i.e. cost of transportation should be in addition to the basic price of the goods stand fulfilled.
6. In the light of these facts and legal provisions, we find no valid reason for disallowing the deduction for the freight paid inasmuch as the goods are FOR destination. We also find that a coordinate Bench of CESTAT in the case of Sterlite Optical Technologies Ltd. vs. CCE &C, Aurangabad 2015 (329) ELT 341(Tri. Mumbai) has taken a view in identical facts that freight will be allowable as a deduction from the composite price. Hence we find no reason to defer from the order passed by the first appellate authority. Hence, the appeal filed by the Revenue is dismissed.
(Pronounced on 02.06.2016).
(Archana Wadhwa) Member (Judicial) (V. Padmanabhan) Member (Technical) Pant