2023 (3) TMI 735 - AT - Central Excise

Exclusion of Freight Charges from Assessable Value Upheld by Tribunal with Relief Granted

The Tribunal held that freight charges separately mentioned in sale invoices of excisable goods should not be included in the assessable value, following ... Valuation of goods - freight charged separately in the sale invoices of excisable goods is includible in the assessable value of such excisable goods or not - goods are to be delivered at buyer’s premises from the factory of the appellant on FOR destination basis - place of removal - HELD THAT:- There is no dispute in the fact that the appellant have cleared the goods from their factory and delivered at the buyer’s premises. In the invoice the freight was charged separately when the sell invoice was issued from the factory at the time of clearances of goods. The factory gate is the place of removal. Merely because the appellant is under obligation to deliver the goods at the buyer’s premises, the place of removal which is a factory gate cannot be extended and buyer’s premises cannot be made as place of removal. This issue has been considered by this Tribunal in the case of SAVITA OIL TECHNOLOGIES LTD. VERSUS C.C.E. & S.T. DAMAN [2022 (7) TMI 138 - CESTAT AHMEDABAD], wherein the reliance was placed on the Hon’ble Supreme Court judgment in the case of COMMISSIONER OF CUSTOMS AND CENTRAL EXCISE, NAGPUR VERSUS M/S ISPAT INDUSTRIES LTD. [2015 (10) TMI 613 - SUPREME COURT]. The tribunal in Savita Oil Technologies held that buyer’s premises cannot, in law, be a “place of removal” under Section 4. In this matrix of facts, the decision of Commissioner holding buyer’s premises as “place of removal” cannot be upheld. Thus, the freight cannot be included in the assessable value in the facts of the present case. Consequently, no demand of duty on freight would sustain - appeal allowed. Issues Involved:1. Whether the freight charged separately in the sale invoices of excisable goods is includible in the assessable value of such excisable goods.2. Whether the demand for the extended period is sustainable.Summary of Judgment:Issue 1: Inclusion of Freight in Assessable ValueThe primary issue in this case was whether the freight charges separately mentioned in the sale invoices should be included in the assessable value of excisable goods. The appellant argued that the place of removal is the factory gate, and thus, freight charges incurred beyond this point should not be included in the assessable value. The respondent contended that the place of removal should be the buyer's premises since the sale is completed upon delivery and acceptance by the buyer.The Tribunal referred to the Supreme Court judgments in the cases of Commissioner of Customs Vs. Ispat Industries Ltd. and Savita Oil Technologies Ltd. which held that the factory gate is the place of removal and freight charges beyond this point are not includable in the assessable value. The Tribunal concluded that the buyer's premises cannot be considered the place of removal under Section 4 of the Central Excise Act. Therefore, the freight charges should not be included in the assessable value, and no duty can be levied on this portion.Issue 2: Demand for Extended PeriodThe appellant also challenged the demand raised for the extended period, arguing that it was based on audit observations and there was no suppression of facts. The Tribunal noted that the issue involved was of interpretation of the value provision and various judgments existed on this matter. Hence, no mala fide intention could be attributed to the appellant. Consequently, the demand for the extended period was not sustainable on the grounds of limitation.Conclusion:The Tribunal set aside the impugned order, holding that the freight charges are not includable in the assessable value of excisable goods. Consequently, no demand of duty on freight would sustain, and the appeal was allowed with consequential relief.