2004 (7) TMI 397 - AT - Central Excise

Appellate tribunal overturns duty demand for excluding customer forwarding charges from assessable value. Manufacturer's actual costs matter.

The appellate tribunal ruled in favor of the appellants, setting aside duty demand notices for failure to include forwarding charges in the assessable ... Valuation - Forwarding charges Issues:1. Failure to include forwarding charges in the assessable value of goods.2. Dismissal of appeals by CCE (A) due to lack of proof of forwarding charges borne by customers.3. Legality of duty demand notices and penalties imposed.Issue 1: Failure to include forwarding charges in the assessable value of goodsThe appellants, manufacturers of excisable goods, invoiced customers based on contracts, including charges for forwarding services to transporters chosen by customers. However, those who collected goods at the factory gate were not charged for forwarding services. Duty demand notices were issued for not including forwarding charges in the assessable value of goods cleared. The lower authority held that only actual forwarding charges incurred by the manufacturer should be excluded, requiring substantial proof. The appellants failed to provide documentary evidence of actual charges, leading to the inclusion of forwarding charges in the assessable value. The appellate tribunal disagreed, citing the Supreme Court's ruling that transport costs up to the customer's destination cannot be considered for valuation. Consequently, demands for duty were set aside.Issue 2: Dismissal of appeals due to lack of proof of forwarding charges borne by customersThe CCE (A) dismissed the appeals as the appellants did not provide evidence that forwarding charges were borne by customers. The appellants argued that charges invoiced as forwarding charges ex-factory gate were recovered, regardless of actual costs. The tribunal held that the actual costs being different from the recovered amount was immaterial, as per the Supreme Court's decision. Since no nexus was established between material costs and forwarding charges, the duty demands were not upheld, and the appeals were allowed.Issue 3: Legality of duty demand notices and penalties imposedGiven the findings that no duty demand was justified, the penalties imposed were also set aside. The tribunal concluded that since the duty demands were not upheld, the penalties could not be sustained. Therefore, both the duty demands and penalties were overturned, resulting in the appeal being allowed.