2011 (3) TMI 1181 - AT - Central Excise

Tribunal excludes transportation costs from assessable value in sales transactions

The Tribunal rejected the department's appeal, holding that transportation and insurance charges incurred by the assessee for supplying goods up to the ... Assessable value - Ex-works/ex-factory - Inclusion of freight and insurance in assessable value - Place of removal - Application of Escorts JCB ratioAssessable value - Ex-works/ex-factory - Inclusion of freight and insurance in assessable value - Place of removal - Application of Escorts JCB ratio - Whether freight and transit insurance paid by the assessee for carriage of goods up to the buyer's premises are includable in the assessable value where the terms of sale are ex-works/ex-factory. - HELD THAT: - The Tribunal examined the contract documents - the tender dated 10/05/1996 and fax No. 70/97/018 dated 07/07/1997 - which expressly stated the price as ex-works/ex-factory and that prices were exclusive of freight and insurance. On these terms the point of removal remained the factory gate despite the assessee arranging transport and insurance to the buyer's premises. Applying the ratio of the Hon'ble Supreme Court in Escorts JCB Ltd. (as accepted in subsequent authorities relied upon by the parties and the Tribunal), mere carriage and insurance by the seller to the buyer's premises does not convert the place of removal into the buyer's premises nor justify inclusion of freight and insurance in the assessable value. The Tribunal also noted consistent earlier decisions, including its own order, holding that where the contract is ex-works the assessable value cannot be increased by freight and insurance charges. [Paras 6, 7]Freight and transit insurance charges incurred by the assessee up to the buyer's premises are not includable in the assessable value where the terms of sale are ex-works/ex-factory; appeal rejected.Final Conclusion: On the admitted documentary terms of sale being ex-works/ex-factory, and applying the Escorts JCB ratio, the Tribunal dismissed the department's appeal and held that freight and insurance charges paid to deliver goods to the buyer's premises cannot be included in the assessable value. Issues:Interpretation of assessable value in relation to transportation and insurance charges incurred by the assessee for supply of goods up to the buyer's premises.Analysis:The appeal was directed against the Order-in-Appeal passed by the Commissioner of Central Excise (Appeals), Mumbai - III, where it was held that the cost of transportation and transit insurance incurred by the assessee for supply of goods up to the premises of the buyer is not includable in the assessable value of the goods. The department contended that the cost of transportation and insurance charges up to the point of sale should be included in the assessable value, as the transfer of goods takes place at the buyer's place. The department relied on a fax/post confirmation copy and argued that the sale is effected only at the buyer's premises. The advocate for the respondent, however, argued that the demand of duty on the value inclusive of transportation and freight charges was based on figures in the party's ledger and not on documentary evidence proving the buyer's premises as the place of removal. The advocate cited relevant judgments to support their case.Upon careful consideration of submissions and perusal of documentary evidence, the Tribunal found that the terms and conditions of sale were ex-works or ex-factory, indicating that the place of removal was not the buyer's premises. The Tribunal emphasized that transporting goods and insuring them up to the buyer's premises does not establish the buyer's premises as the place of removal. Relying on the judgment of the Hon'ble apex court in a similar case, the Tribunal concluded that the freight and insurance charges need not be included in the assessable value. Referring to a previous judgment in the assessee's own case, the Tribunal reiterated that as per the Board's circular and the apex court's decision, the assessable value cannot be burdened with freight and insurance charges. Consequently, the appeal filed by the department was rejected based on the above legal principles.In conclusion, the Tribunal's decision was based on the interpretation of the assessable value concerning transportation and insurance charges incurred by the assessee for supplying goods up to the buyer's premises. The judgment highlighted the significance of the terms of sale, the place of removal, and relevant legal precedents in determining the assessable value in such cases.