2017 (7) TMI 556 - AT - Central Excise

Court Upheld Transportation Charges Demand, Remanded Pricing Issue for Fresh Adjudication

M/s Shakti Tubes Limited. Versus CCE, Patna

The court upheld the demand for transportation/freight charges from 14.05.2003 to 2006-2007, including interest and equivalent penalty. However, the ... Valuation - transportation cost - differential pricing - commission paid to the commission agents - includibility - Revenue felt that premises are place of removal and transportation cost from the factory gate to place of removal should be included in the assessable value - Held that: - the period involved in the show cause notice is from 2002-2003, 2003-2004, 2004-2005, 2005-2006 and 2006-2007. Admittedly, the definition of place of removal in Section 4(3)(c) (iii) was amended w.e.f. 14.05.2003 to insert the depot/consignment agents in the statute. As per Section 4(3)(c)(iii), in case of sale from depot/place of consignment agents, time of removal shall be deemed to be the time at which the goods are cleared from the factory. In other words, in case of sale from depot/place of consignment agents, duty is payable on the price prevailing at the depot as on the date of removal from the factory - in terms of the explanation 2 to Rule 5, the cost of transportation from the factory to the place of removal where factory is not the place of removal (like in the present case where depot is place of removal after 14.05.2003) is to be included in the assessable value - the transportation/freight charges in show cause notice for the period 14.05.2003 to 31.03.2004, 2004-2005, 2005-2006 and 2006-2007 are liable to be included in the assessable value. However, for the period prior to 14.05.2003 when the definition of place of removal in Section 4 of Central Excise Act, 1944 did not include depot as place of removal, the place of removal will be factory gate and for this period, the transportation/freight charges would not be includible in the assessable value. Valuation - differential pricing - Held that: - the Ld. Commissioner (Appeals) has not given any findings. The Ld. Commissioner (Appeals) is therefore required to examine the issue afresh after giving fair opportunity to the appellants to make their submissions - matter on remand. Commission paid to commission agents - extended period of limitation - The appellants have argued that since the issue of depot sale was in the knowledge of the Department, the show cause notice is barred by limitation - Held that: - there is sufficient ingredient available on the part of the Respondent for deliberate withholding the information in suppression of facts with malafide intention to evade Central Excise Duty. Therefore, I find nother wrong in invocation of extended period of limitation in view of deliberate suppression & misstatement of facts with intention to evade Central Excise duty - finding of deliberate suppression is sustained - demand upheld. Appeal allowed in part and part matter on remand. Issues Involved:1. Inclusion of transportation/freight cost from the factory gate to the depot.2. Inclusion on account of differential pricing.3. Inclusion of commission to the commission agents.Detailed Analysis:Issue No. (i): Inclusion of transportation/freight cost from the factory gate to the depotThe primary dispute revolves around whether transportation and other charges up to the depot or place of consignment agents should be included in the assessable value when goods are sold from these locations. The period under consideration is from 2002-2003 to 2006-2007. The definition of 'place of removal' in Section 4(3)(c)(iii) was amended on 14.05.2003 to include depot/consignment agents, making the time of removal the time at which goods are cleared from the factory. Rule 5 of the Central Excise Valuation Rules, 2000, effective from 01.03.2003, clarifies that the cost of transportation from the factory to the place of removal should be included in the assessable value. This principle was reinforced by the Tribunal in cases like Century Laminating Co. Ltd. Vs. CCE, Meerut-II and Dhillon Kool Drinks And Beverages Ltd. Vs. CCE, Jalandhar. Consequently, for the period from 14.05.2003 onwards, transportation/freight charges must be included in the assessable value. However, for the period prior to 14.05.2003, when the factory gate was the place of removal, these charges are not includible.Issue No. (ii): Inclusion on account of differential pricingThe Ld. Commissioner (Appeals) did not provide findings on the issue of differential pricing. Therefore, this matter requires re-examination. The case is remanded back to the Ld. Commissioner (Appeals) for fresh adjudication, ensuring that the appellants are given a fair opportunity to present their submissions.Issue No. (iii): Inclusion of commission to the commission agentsThe appellants argued that the commission was already included in the value of the goods, and thus, it should not be included again. This contention was not disputed by the Revenue. Consequently, the demand for commission cannot be sustained, as previously held by the Tribunal in the appellants' case, Shakti Tubes Ltd. Versus CCE, Patna.Limitation and SuppressionThe appellants contended that the show cause notice was barred by limitation, arguing that the issue was within the Department's knowledge due to previous show cause notices. However, the Tribunal found that the previous notices pertained to a period before the new valuation provisions were introduced in July 2000. The Ld. Commissioner (Appeals) correctly invoked the extended period of limitation, citing deliberate suppression and misstatement of facts by the appellants. The Tribunal upheld this finding, noting the appellants' non-cooperation and partial disclosure of information, which indicated an intent to evade duty.Final Order1. The demand for transportation/freight charges for the period from 14.05.2003 to 2006-2007 is upheld, along with interest and equivalent penalty. The demand for the period prior to 14.05.2003 is not sustained. The matter is remanded to the Ld. Commissioner (Appeals) for re-quantification of the duty demand, interest, and penalty.2. The issue of differential pricing is remanded back for fresh adjudication.3. The demand, interest, and penalty on account of commission agents are not sustained.ConclusionThe appeal is disposed of in accordance with the above directions, with the order pronounced in the Court on 04.07.2017.