2014 (6) TMI 819 - AT - Central Excise

Tribunal Upholds Commissioner's Order on Freight Charges Valuation Rule Compliance

COMMISSIONER OF CENTRAL EXCISE, NASHIK Versus GARWARE ENTERPRISES LTD.

The Tribunal upheld the Commissioner (Appeals) order in favor of the respondents, ruling that the separately recovered freight charges fulfilled the ... Valuation of goods - Inclusion of freight charges - Held that:- As per the provisions of Rule 5 of the Valuation Rules, the actual cost of transportation from the place of removal to place of delivery of such excisable goods is excluded from the transaction value provided the cost of transportation is charged to the buyers, in addition to the price of goods and shown separately in the invoices for such excisable goods - freight charges are separately recovered from the customers by issuing debit note, therefore the respondents are fulfilling the conditions imposed under Rule 5 of the Valuation Rules. In these circumstances, we find no infirmity in the impugned order - Decided against Revenue. Issues:Valuation of excisable goods under Rule 5 of the Central Excise Valuation Rules, 2000 based on the inclusion of freight charges in assessable value.Analysis:The case involved an appeal by the Revenue against an order passed by the Commissioner (Appeals) concerning the valuation of excisable goods under Chapter 39 of the Central Excise Tariff. The respondents, engaged in the manufacture of plastic shrinkon sleeves, were clearing goods under invoices and paying duty on the transaction value. The issue arose when the Revenue contended that freight charges should be added to the assessable value of the goods as per Rule 5 of the Valuation Rules. The respondents, on the other hand, argued that they were separately recovering freight charges from customers by issuing debit notes, fulfilling the conditions of Rule 5.The adjudicating authority had initially confirmed the demand and imposed a penalty, leading the respondents to appeal before the Commissioner (Appeals). The Commissioner (Appeals) set aside the adjudication order, prompting the Revenue to file further appeals. The crux of the matter lay in whether the freight charges, when separately recovered and shown in invoices, should be included in the assessable value of the goods. Rule 5 of the Valuation Rules specifically excludes the actual cost of transportation if charged to buyers separately and shown in invoices.Upon careful consideration, the Tribunal found that the respondents were indeed separately recovering freight charges from customers through debit notes, thereby meeting the requirements of Rule 5. Consequently, the Tribunal upheld the impugned order, dismissing the appeals filed by the Revenue. Additionally, the cross objections filed by the respondents were also disposed of on the same grounds. This decision highlights the importance of adhering to valuation rules and properly documenting additional charges like freight to avoid disputes over assessable values of excisable goods.