2016 (6) TMI 1261 - AT - Central Excise

Dispute over transportation costs in Central Excise duty calculation clarified by appellate authority

Bharat Petroleum Corporation Ltd. Versus Commissioner of Central Excise, Indore

The case involved a dispute over the inclusion of transportation costs in the assessable value for Central Excise duty calculation. The Original ... Valuation - goods sold from warehouse - includibility - cost of transportation - Held that: - In terms of the Valuation Rules, it is clear that an assessee will be entitled to deduction of the cost of transportation from the premises of the depot till the premises of the ultimate customers - The appellant has asserted that the lower authority has mistakenly added the above cost considering it as the freight incurred from the warehouse to the depot. To confirm the facts, the relevant submission on record will need to be verified - appeal allowed by way of remand. Issues:1. Inclusion of transportation cost in the assessable value for Central Excise duty calculation.Detailed Analysis:The appellant, a manufacturer of petroleum products falling under Chapter 27 of the Central Excise Tariff Act, had a dispute regarding the inclusion of transportation cost in the assessable value. The goods were manufactured in Mumbai, stock transferred, and warehoused. Central Excise duty was paid at the time of stock transfer to the depot, from where actual sales to buyers occurred. The transaction value for duty payment was determined under Rule 7 of the Central Excise Valuation Rules, 2000, at the depot price. Rule 5 of the Valuation Rules specified the exclusion of transportation cost from the depot to the destination of the buyer, but transportation expenses up to the depot had to be included in the assessable value.The Original Adjudicating Authority confirmed a duty demand of approximately Rs. 3.15 crores for including freight charges for transportation from the warehouse to the depot. The appellant challenged this order, arguing that transportation charges to depots were already included in the assessable value on which duty had been paid. They contended that only transportation costs from the depot to customers' locations were eligible for deduction under Rule 5. The appellant claimed that the Revenue mistakenly added transportation costs from the depot to customers' premises, thinking it was from the warehouse to the depot.During the hearing, it was noted that the lower authority had mistakenly added transportation costs from the depot to customers' premises, assuming it was from the warehouse to the depot. To verify the facts, the matter was remanded to the Original Adjudicating Authority for reconsideration based on the appellant's plea. The remand was allowed, with a directive to complete the process within three months from the date of the order.In conclusion, the judgment revolved around the correct interpretation of the Central Excise Valuation Rules regarding the inclusion and exclusion of transportation costs in the assessable value for duty calculation. The decision to remand the matter highlighted the importance of accurate assessment and adherence to the valuation rules in determining the duty payable by the appellant.