2016 (2) TMI 145 - AT - Central Excise

Tribunal excludes excess freight charges from ex-factory value for excise duty

The Tribunal ruled in favor of the appellants, holding that excess freight charges recovered from buyers should not be added to the ex-factory transaction ... Excess amount towards freight charges recovered from the buyers than the amount actually incurred - demand central excise duty - assessable value subjected to levy - whether freight is not part of the assessable value when the sales are effected at the factory gate? - Held that:- There is no allegation to the effect that the price mentioned in the purchase orders are not true transaction value and certain extra consideration is received towards the sale of such excisable goods. Certain amount is specifically agreed upon by the appellant and the buyer towards freight for transportation of the goods to the buyer’s premises. The variation in actual cost of transportation has no relevance so as to effect the ex factory transaction value. The Hon'ble Supreme Court in the case of Indian Oxygen Ltd. (1988 (7) TMI 58 - SUPREME COURT OF INDIA ) held that if the ex factory is ascertainable, the cost of transportation or transit expenses were not to be considered as they have nothing to do with the manufacture of goods. When the price at factory gate is available, any extra amount collected in transportation charges cannot be considered for addition. In the case of Filament India Vs. CCE, Jaipur reported in (2003 (6) TMI 110 - CESTAT, NEW DELHI ), the Tribunal held that when the sale and delivery take place at the factory gate and freight charges, which are in relation to an independent transaction is mentioned separately in the invoices, the amount of freight has no relevance for valuation purposes. Considering the above discussion, we find that there is no justification for any addition to the ex factory transaction value in the present case. We accordingly set aside the impugned order and allow the appeal with consequential relief, if any. - Decided in favour of assessee Issues:Central excise duty on excess freight charges recovered from buyers.Analysis:The appellants, engaged in manufacturing boilers and heat exchangers, were subjected to central excise levy due to allegedly recovering more freight charges from buyers than actually incurred. The Original Authority confirmed the demands and imposed penalties. Appeals were filed, arguing that freight should not be part of the assessable value when sales are made at the factory gate. The Department contended that any excess amount collected should be added to the assessable value. The appellant argued that Rule 5 does not apply as the goods are sold ex-factory. The Tribunal noted that the purchase orders indicated ex-factory prices, and the place of removal was also ex-factory. The Tribunal emphasized that if the transaction value is true, there is no need to add extra amounts. The Tribunal referred to the Supreme Court's decision in Indian Oxygen Ltd., stating that transportation costs should not affect the ex-factory value. The Tribunal held that in cases where sale and delivery occur at the factory gate, separate freight charges do not impact valuation. Consequently, the Tribunal set aside the impugned order, ruling in favor of the appellant.Conclusion:The Tribunal ruled that there was no justification for adding to the ex-factory transaction value based on excess freight charges. The appeal was allowed, providing consequential relief as necessary.