Factory-gate valuation under Cenvat Credit Rules excludes transportation and site execution charges from the eight per cent computation.

Under Rule 6(3)(b) of the Cenvat Credit Rules, 2002, only the price charged by the manufacturer at factory clearance could be taken for computing the eight per cent amount; transportation and site execution charges such as laying, jointing, testing and commissioning were not part of that value. A composite contract did not change the character of those post-clearance elements, because they were outside the factory-gate sale price. Following the earlier Tribunal view, the demand for the duty-related amount and interest was held unsustainable.

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Issues: Whether, for computation of the amount payable under Rule 6(3)(b) of the Cenvat Credit Rules, 2002, the value attributable to transportation, laying, jointing, testing and commissioning could be included in the sale price of exempted goods cleared from the factory.

Analysis: The goods were supplied under a composite contract covering the pipe price as well as transportation and post-clearance activities such as laying, jointing, testing and commissioning. The rule required payment of an amount equal to eight per cent of the total price, excluding sales tax and other taxes, charged by the manufacturer for sale of the goods at the time of clearance from the factory. The elements relating to transportation and execution at site were held not to form part of the factory-gate price. The earlier Tribunal decision relied upon by the lower appellate authority was followed, and the issue was treated as already settled in favour of the assessee.

Conclusion: The value of transportation, laying, jointing, testing and commissioning was not includible for calculating the eight per cent amount under Rule 6(3)(b), and the demand of duty-related amount and interest was unsustainable.

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