Custom, Excise & Service Tax Tribunal
M/S.Indian Sugar & General Engg.Corpn vs Cce, Panchkula on 11 September, 2015
IN THE CUSPTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL, NEW DELHI, PRINCIPAL BENCH NEW DELHI
Date of Hearing/ Decision11.09.2015
Excise Appeal No.E/3202/2006-EX(DB)
[Arising out of Order-in-Appeal No.162-166/NS/PCK/2006 dated 26.06.2006 passed by the Commissioner of Central Excise (Appeals), Gurgaon)
M/s.Indian Sugar & General Engg.Corpn. Appellants
Vs.
CCE, Panchkula Respondent
Appearance:
Rep. by Shri B. L. Narsimhan, Advocate for the appellant. Rep. by Shri Satyavir Singh, DR for the respondent. For approval and signature:
Honble Shri Ashok Jindal, Member (Judicial) Honble Shri B. Ravichandran, Member (Technical) 1 Whether Press Reporters may be allowed to see the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982? 2 Whether it should be released under Rule 27 of the CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not? 3 Whether Their Lordships wish to see the fair copy of the Order?
4 Whether Order is to be circulated to the Departmental authorities?
Coram: Honble Shri Ashok Jindal, Member (Judicial) Honble Shri B. Ravichandran, Member (Technical) Final Order No. 53049/2015 dated:11.09.2015 Per B. Ravichandran:
The appellants are engaged in the manufacture of boilers, heat exchangers, etc. subjected to central excise levy. The Proceedings were initiated against the appellants to demand central excise duty on the ground that they have recovered more amounts towards freight charges from the buyers than the amount actually incurred by them. Such excess amount is sought to be added in the assessable value subjected to levy. The Original Authority passed order dated 30.11.2005 covering the period July, 1999 to March, 2005 and confirmed the demands. He imposed equal amount of penalty on the appellants.
2. Aggrieved by the said order, appeals were filed and the ld. Commissioner (Appeals) upheld the said original order. Aggrieved by the impugned order, the appellant is before us.
3. The main ground of appeal is that freight is not part of the assessable value when the sales are effected at the factory gate. The cost of transportation of the goods from the factory gate to the buyer is excludible from the assessable value. When the place of removal for excise valuation proposed is determined to be factory gate, any amount collected towards freight for delivery of the goods to the buyer has no relevance for valuation. The Departments contention is that the appellant collected certain amount in excess of actual freight and such amount should be added to the assessable value as additional consideration is not legally tenable. They have relied on the decision of this Tribunal in the case of Filament India Vs. CCE, Jaipur reported in 2003 (160) ELT 314 (Tribunal-Delhi). The amendment in Section 4 has no relevance as far as this issue is concerned. The appellant pleaded that the provisions of Rule 5 has no application as the same will come into play only when circumstances specified in Clause (a) of sub-section 4(1) are not specified. This rule will apply only when the goods are sold for delivery at a place other than the place of removal. In their case, the goods are sold ex-factory.
4. During the oral submissions, ld. Counsel for the appellant pointed out the terms of purchase order to emphasize that the sale is ex factory and they undertake the transport to the buyer for which freight amount is shown separately. As an illustration, he quoted the purchase order dated 3.12.2002 of M/s. Larson & Toubro Ltd. In the said purchase order, the basic price of hydrozen reactors shall be Rs.6.25 crores including Rs.5 lakhs for transportation of all the reactors upto Panipat Projects site.
7. Ld.Counsel intimated that as per purchase order it is clear that the place of removal is ex works of the appellant and as such, the amount of freight shown in the purchase order cannot be considered for valuation purposes. He relied on the Honble Supreme Courts decision in the case of Indian Oxygen Ltd. reported in 1988 (36) ELT 723 (SC).
8. Ld. AR opposed the appeal on the ground that the place of delivery being at the buyers end only. In case the transportation is undertaken by the appellant, only actual freight can be excluded. He reiterated that in terms of Rule 5 of Central Excise Valuation Rules, 2000 amount which is not attributable to the freight is to be added in the assessable value.
9. Heard both the sides and examined the appeal records.
10. The question for decision is liability of the appellant for central excise duty in respect of the amount received from the buyers towards freight which is in excess of actual freight incurred by them. The first point for determination is whether assessment of value in the present case is to be at the factory gate or not. The Original/Appellate Authority held that place of removal and delivery is not factory gate. The goods have actually been delivered at a place other than the place of removal. As the transportation of the goods to the buyers premises is inbuilt in the purchase order and ex works price alone cannot be considered for valuation, the additional amount received by the appellant in excess of the actual cost of transportation was to be considered as extra consideration to form part of the assessable value. We find that neither the Original Authority nor the first Appellate Authority have recorded clear findings to the effect that there is no transaction value available as per Section 4 (1)(a) of the Act. In the impugned order, the only observation is that the goods are sold at the time of place of removal but not for delivery at the time and place of removal. We are not able to appreciate the distinction made here. The admitted fact is that the purchase orders indicated the agreed price ex factory and the central excise duty is paid on such ex factory transaction value. The appellant undertake the transportation of the goods on pre-agreed cost which is also indicated in the purchase order. There are instances when the actual cost of transportation is either higher or lower than the cost of freight mentioned in the purchase order. When the ex factory sale value is available, the place of removal being determined as ex factory, the question of adding anything over and above the said ex factory price can arise only if the transaction value is not true to the provisions of Section 4 (1)(a) and is tainted. There is no finding by the lower authorities to this effect. The only ground on which certain additions on the ex factory price was sought to be made is that the freight elements shown in the purchase order is not the actual freight amount. So, the excess, if any over and above the actual cost of transportation was sought to be added to the value. It is very clear that Rule 5 of the Valuation Rules will come into ply only when the provisions of Section 4 (1)(a) are not fulfilled. In the present case the goods are sold by the assessee and the purchase order clearly indicates the transaction value ex factory and the place of removal is ex factory. The appellant undertaking the transport duties will not make the place of removal other than ex factory. We find that the purchase orders indicated the price which fulfills the conditions of transaction value ex factory. In these circumstances, recourse to the provisions of Valuation Rules is not warranted. There is no allegation to the effect that the price mentioned in the purchase orders are not true transaction value and certain extra consideration is received towards the sale of such excisable goods. Certain amount is specifically agreed upon by the appellant and the buyer towards freight for transportation of the goods to the buyers premises. The variation in actual cost of transportation has no relevance so as to effect the ex factory transaction value. The Honble Supreme Court in the case of Indian Oxygen Ltd. (supra) held that if the ex factory is ascertainable, the cost of transportation or transit expenses were not to be considered as they have nothing to do with the manufacture of goods. When the price at factory gate is available, any extra amount collected in transportation charges cannot be considered for addition. In the case of Filament India Vs. CCE, Jaipur reported in 2003 (160) ELT 314 (Tribunal-Delhi), the Tribunal held that when the sale and delivery take place at the factory gate and freight charges, which are in relation to an independent transaction is mentioned separately in the invoices, the amount of freight has no relevance for valuation purposes.
11. Considering the above discussion, we find that there is no justification for any addition to the ex factory transaction value in the present case. We accordingly set aside the impugned order and allow the appeal with consequential relief, if any.
[operative part of the order already pronounced in the open court] ( Ashok Jindal ) Member (Judicial) ( B. Ravichandran) Member (Technical) Ckp.
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