2017 (2) TMI 368 - AT - Central Excise

Excluding transportation charges from assessable value: Tribunal emphasizes place of removal.

The Tribunal ruled that transportation charges paid and recovered by the appellant from customers should not be included in the assessable value for ... Valuation - whether transportation charges paid by the appellant for clearances of their final product and subsequently taken reimbursement from the customers is required to be included in the assessable value or otherwise for the period July 2001 to March 2002? Held that: - the goods sold by the appellant is at factory gate, the transportation is freight, which was paid by the appellant to the transporter and subsequently taken reimbursement from the customers - From the definition of place of removal prevailing at the relevant time, it is observed that in case of factory gate sale, the factory gate is place of removal. Therefore, the transportation beyond the place of removal is not includable in the assessable value in terms of Rule 5 of Central Excise Valuation Rules. Reliance placed in the case of Commissioner of Customs And Central Excise, Nagpur Versus M/s Ispat Industries Ltd. [2015 (10) TMI 613 - SUPREME COURT], where it was held that the transportation charges in case of ex-factory sale is not includible in the assessable value. Appeal allowed - decided in favor of appellant. Issues Involved:Whether transportation charges paid by the appellant for clearances of their final product and subsequently taken reimbursement from the customers are required to be included in the assessable value for the period July 2001 to March 2002.Analysis:The issue in this case revolved around determining whether transportation charges incurred by the appellant, which were later reimbursed by customers, should be included in the assessable value for the relevant period. The appellant argued that as per Section 4 of the Central Excise Act, 1944, the place of removal was solely the factory gate during the relevant period. They contended that since the sale occurred at the factory gate, the transportation charges should not be part of the assessable value. This argument was supported by referencing a previous ruling by the Honorable Supreme Court in the case of Ispat Industries Ltd. (2015) 324 ELT 670 (SC).The Assistant Commissioner representing the Revenue reiterated the findings of the impugned order, opposing the appellant's stance. The Tribunal carefully considered the submissions from both sides and examined the definition of 'place of removal' under Section 4 of the Act prevailing at that time. The definition clarified that in the case of a factory gate sale, the factory gate itself constituted the place of removal. Therefore, any transportation beyond the factory gate was not to be included in the assessable value, as per Rule 5 of the Central Excise Valuation Rules.Relying on the precedent set by the Honorable Supreme Court in the case of Ispat Industries Ltd., the Tribunal concluded that transportation charges paid and recovered by the appellant from customers should not be considered in the assessable value. Consequently, the impugned order was set aside, and the appeal was allowed. The Tribunal's decision aligned with the interpretation that in the scenario of an ex-factory sale, transportation charges are not to be factored into the assessable value, as established by the Supreme Court's ruling.In summary, the Tribunal's judgment clarified the treatment of transportation charges in the assessable value calculation for excisable goods sold at the factory gate during the specified period, emphasizing the significance of the place of removal and the relevant legal provisions and precedents in determining the inclusion of transportation costs in such scenarios.