2013 (12) TMI 571 - AT - Central Excise

Tribunal excludes freight costs from assessable value for electricity board supply

The tribunal dismissed the Revenue's appeals, affirming that the cost of freight should not be included in the assessable value for the supply of goods to ... Addition of Cost of Freight in the assessable value – Supply of goods made to electricity board – Held that:- Following CCE v. Accurate Meters Ltd. [2009 (3) TMI 1 - SUPREME COURT] -Transport contract does not appear to be based on distance and rate for payment of freight on actual basis, these payments were not required to be supported by any documentary evidence as per contract - Value of electricity meter was fixed at the factory gate and certain insurance charges were stipulated and freight charged on overall basis but not on actual basis - Separate transport contract not being on actual basis, respondent was to transport the goods at an agreed rate to electricity board - Once there were two contracts distinctly executed and known to both sides, it cannot be said that price of goods sold is to be enhanced taking freight into consideration The peculiar feature of the contract was not considered and the conclusion arrived that the freight shall not form part of the assessable value – Decided against Revenue. Issues:1. Inclusion of cost of freight in the assessable value for supply of goods to electricity board.2. Interpretation of contractual obligations in separate contracts for sale of goods and transportation of goods.Analysis:1. The primary issue in this case revolved around whether the cost of freight incurred by the respondents should be included in the assessable value for the supply of goods to the electricity board. The Revenue contended that all expenditure incurred until the goods reached the buyer's premises should be part of the assessable value. They highlighted a similar situation in a previous case where the inclusion of freight in the assessable value was deemed justified. The respondent argued that in their case, freight was charged separately in the contract for the supply of goods to the electricity board, and each contract had different contractual obligations. They referenced a previous case to support their stance, emphasizing that the supplier was not required to provide a breakdown of expenses for freight and insurance charges as per the contract terms.2. The second issue centered around the interpretation of contractual obligations in the separate contracts entered into by the respondent with the electricity board. It was noted that there were two distinct contracts: one for the sale of goods and the other for the delivery of the goods to the desired location. The selling contract primarily dealt with pricing, quantity, delivery schedule, and other terms, while the transportation contract stipulated a fixed amount irrespective of the delivery destination. The tribunal analyzed the differences between this case and a previous case involving DGS&D contracts, emphasizing that the present transportation contract did not rely on actual distance-based rates for freight payment. The tribunal also highlighted the importance of the law of contract under the Sale of Goods Act and transportation law in determining the obligations of the parties in the contracts.In conclusion, the tribunal dismissed the Revenue's appeals, affirming that the cost of freight should not be included in the assessable value for the supply of goods to the electricity board based on the distinct contractual arrangements and the precedent set by the Apex Court in a relevant case. The tribunal emphasized the importance of analyzing the specific terms of the contracts and applying the relevant legal principles to determine the assessable value in such cases.