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3 E/3428, 4102/2012 2.1 During the course of Audit, it was noticed that the appellant was not including the amount of excess freight collected from the dealers in the assessable value though this amount was collected from the buyers in connection with the sale of the motorcycles. The department alleged that the excess freight is collected from the dealers on the assessable value of goods. It was alleged that the excess freight collected from the dealers is one of the considerations for sale of excisable goods, thus should form part of assessable value under Rule 5 and 6 of Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000.

2.3 In this background, two show cause notices dated 07.10.2011 and 08.05.2012 were issued to the appellant proposing demand of duty alongwith interest and penalty.

2.4 After following due process, the Adjudicating Authority vide the impugned orders dated 31.07.2012 and 17.09.2012 confirmed the demand proposed in the show cause notices.

2.5 Aggrieved by the said order, the appellant is before us.

3. Ld. Counsel appearing for the appellant submits that the impugned order is not sustainable in law as the same has been passed without properly appreciating the facts and the law and the binding judicial precedents on identical issues. She further submits that freight is recovered from the dealers on the basis of estimation of freight element based on per kilometer basis for each transporter on a standard 44 motorcycle capacity vehicle. However, the freight recovery from the dealers may either be over, or excess recovered depending on whether the capacity of transporting vehicle is less or 4 E/3428, 4102/2012 more than 44 motorcycles. She further submits that as per Section 4(1)(a) of the Excise Act, assessable value of the excisable goods shall be the 'transaction value' where the goods are sold by the assessee for delivery at the time and place of the removal, and price is the sole consideration for the sale. She further submits that the price collected for the sale of excisable goods as separately mentioned on the invoices is the 'sole consideration' and the amount of excess freight collected has no nexus with the manufacturing activity undertaken by the appellant and hence the same is not leviable to Excise duty. She further submits that the allegation of the department that the appellant has realized the additional consideration for the excisable goods in the guise of excess freight, thus includible in the assessable value is not sustainable as there is no evidence which has been put- forth by the department to prove this allegation. She also submits that it is a settled law that in the absence of contrary evidence, the price of the goods cleared is correct and legal and no adverse inference can be drawn. For this submission, she relied upon the following decisions:-

5.3 We also find that the amount of excess freight recovered over and above the total cost of transportation is for totally independent activity and hence no connection with the manufacture or the sale of vehicles and therefore, there is no connection of the excess freight recovered with the transaction value of the vehicle sold by the appellant as the sale was on ex-factory basis.

5.4 Further, we find that the case laws relied upon by the Ld. DR are not relating to the excess freight recovered by the appellant, and therefore, the ratio of those decisions are not applicable and are distinguishable from the case laws relied upon by the appellant in support of their submissions. The objection of the Ld. DR that the case laws relied upon by the appellant relates to the period prior to 1.7.2000 is not correct.

5.5 Here, we may refer to the decision in the case of Mercedes Benz India Pvt. Ltd. cited (supra) wherein the issue of duty liability on excess freight recovered from the customers has been settled by the Tribunal and the Tribunal has held as under:-

10 E/3428, 4102/2012

"6. We have perused the agreement between the assessee and one of the dealers and we find that the sale of goods took place at factory gate and the dealer was liable to take delivery of the goods at factory gate. In other words, the dealer was liable to incur the cost of transportation from the factory gate to his own premises. It is also on record that the cost of transportation was initially incurred by the assessee and subsequently recovered from the buyer. What was actually paid by the assessee to the transporter will, of course, be the actual cost of transportation and the same was liable to be excluded from the assessable value even as per Rule 5 relied on by the Revenue. The question which now arises for consideration is whether the amount collected by the assessee from the dealer in excess of the actual cost of transportation should be held to be includable in the assessable value of the goods by virtue of Rule 5. The rule only provides that actual cost of transportation has to be excluded from the assessable value where the goods are sold in the circumstances specified under Section 4(1)(a) of the Act. In the present case, the place of delivery is the factory gate and, even according to the Revenue, the cost of transportation from the factory gate to the buyers' premises is liable to be excluded from the assessable value of the goods. The rule does not provide for inclusion of any excess freight in the assessable value in the circumstances specified under Section 4(1)(a) of the Act. We do not think that the proposal to include the excess freight in the assessable value is corollary to exclusion of the actual cost of transportation from the assessable value. It has been argued that the excess freight collected by the appellant from their dealers is an additional consideration flowing directly or indirectly from the latter to the former and hence should be included in the assessable value of the goods under Rule 6. The term "additional consideration" appears to be referable to the additional amount referred to in the definition of "transaction value" given under Section 4(3)(d) of the Act. This definition indicates that, in addition to the amount charged as price of the excisable goods, any amount that the buyer is liable to pay to, or on behalf of, the assessee, by reason of, or in connection with, the sale, whether payable at the time of the sale or at any other time would also be includable in transaction value. We find that the excess freight collected by the appellant from their dealers was not an amount which the dealers were liable to pay to, or on behalf of the assessee, be reason of, or in connection with, the sale inasmuch as the relevant agreement of sale did not provide for such payment, the transportation of the 11 E/3428, 4102/2012 goods having been undertaken under a separate agreement between the assessee and the transporter concerned. The buyer was not a party of this agreement. If any excess amount was collected by the assessee from a dealer towards freight, it cannot be considered to be an amount collected by the assessee by a reason of, or in connection with, the sale of the goods. It would be an amount collected by the assessee in connection with the transportation of the goods. The nexus is not between the amount and the sale of the goods but between the amount and the transportation. This aspect was noted by their lordships in the case of Baroda Electric Meters (supra) and it was held that any excess amount collected by the assessee from their customers would be a profit made on transportation and hence such amount would not be includable in the assessable value of the goods since the duty of excise was a tax on manufacture and not on any profit made on transportation. The character of the excess amount collected by the assessee from their dealers stands determined vide Baroda Electric Meters (supra) and therefore, in our considered view, the Revenue is precluded in the present case from contending that such amount represents additional consideration flowing directly or indirectly from buyer to the seller. We are also of the view that the decision of the Hon'ble Supreme Court with regard to the nature of the excess freight would not have been different, had their lordships considered the case for any period after 1-7-2000. The reason is that the crucial question is one of fact rather than of law. The question of fact as to the nature of the excess freight stands determined for all times by the Apex Court and accordingly, we hold that the excess freight collected from the dealers was only a profit on transportation and not an "additional consideration" within the meaning of this expression used in Rule 6, nor an "additional amount" within the meaning of the definition of "transaction value" under Section 4(3)(d) of the Act. In this view of the matter, we further hold that the distinction drawn by the learned Consultant for the Revenue between "normal value" and "transaction value"