2002 (3) TMI 155 - AT - Central Excise

Tribunal Upholds Commissioner's Decision on Assessable Value, Limits Scope of Section 35E Review Orders

COMMISSIONER OF CENTRAL EXCISE, HYDERABAD Versus AP INDUSTRIAL COMPONENTS

The Tribunal dismissed the Revenue's appeals, upholding the Commissioner (Appeals)'s decision. It allowed abatement of transportation costs and confirmed ... Valuation (Central Excise) - Related person - Transportation cost Issues Involved:1. Applicability of Section 4(2) of the Central Excise Act, 1944.2. Definition and determination of 'place of removal.'3. Eligibility for abatement on account of freight and insurance costs.4. Scope of review orders under Section 35E of the Central Excise Act, 1944.Detailed Analysis:1. Applicability of Section 4(2) of the Central Excise Act, 1944:The Commissioner (Appeals) held that Section 4(2) is applicable where the sale price is not known at the place of removal. The Board's Circular No. 251/85/96-CX, dated 14-10-96, clarified that the sale price at the place of removal, such as depots, should include all expenses incurred towards transport, including freight and insurance. However, in cases governed under the 'related person' concept, where the selling price of the related person is the basis for determining the assessable value, abatement of cost of transportation is still admissible if the normal price is not available at the place of removal.2. Definition and determination of 'place of removal':The Revenue contended that the place of removal for sales through related persons is the premises of the related person (M/s. Eureka Forbes Ltd.), not the factory gate. According to Section 4(4)(b) of the Central Excise Act, 1944, the place of removal includes a factory, warehouse, or depot from where excisable goods are sold after clearance from the factory. Since the goods are sold at the premises of the related person, the place of removal should be considered as the premises of M/s. Eureka Forbes Ltd. The Commissioner (Appeals) concluded that the selling price of the related person at their premises to unrelated retail customers is the basis for arriving at the assessable value when the goods are removed from the factory gate.3. Eligibility for abatement on account of freight and insurance costs:The Commissioner (Appeals) allowed the deduction of the cost of transportation from the factory gate to the depot, based on the clarification provided by the Board's Circular dated 14-10-96. The Revenue argued that the assessee is not entitled to abatement on account of freight and insurance from the factory gate to the place of delivery for sales through related persons. The Tribunal upheld the Commissioner (Appeals)'s decision, stating that abatement of transportation costs is admissible in cases governed under the 'related person' concept where the normal price is not available at the place of removal.4. Scope of review orders under Section 35E of the Central Excise Act, 1944:The respondents argued that the review order passed under Section 35E cannot traverse beyond the scope of the show cause notice. The Tribunal agreed with this contention, citing various case laws, including CCE v. Sunita Textiles Ltd., CDC Carbnoline (India) Ltd. v. CCE, CCE, Hyderabad v. Swastik Coaters Pvt. Ltd., and CCE, Bolpur v. Mangal Chand Metal Mtg Co. The Tribunal found that the review order had indeed traversed beyond the scope of the show cause notice and upheld the Commissioner (Appeals)'s decision.Conclusion:The Tribunal dismissed the appeals filed by the Revenue, upholding the Commissioner (Appeals)'s decision to allow abatement of transportation costs and confirming that the selling price of the related person is the basis for determining the assessable value. The stay applications were also disposed of accordingly.