2009 (4) TMI 384 - AT - Central Excise

CESTAT Bangalore rules in favor of appellants, excluding excess freight charges from duty liability.

The CESTAT Bangalore allowed the appeal, ruling in favor of the appellants, who contested the inclusion of excess freight charges in the assessable value ... Excess freight - assessable value - inclusion of additional consideration in transaction value - profit element on freight not constituting part of transaction value - Baroda Meters principle - excise duty on transportation charges - interest under Section 11AB - penalty under Section 11ACExcess freight - assessable value - inclusion of additional consideration in transaction value - Baroda Meters principle - Whether excise duty is leviable on excess freight collected by the assessee by treating it as part of the assessable value/transaction value of goods. - HELD THAT: - The Tribunal held that where freight collected is in excess of the actual freight, the excess portion represents a profit made on transportation and does not form part of the assessable value of the goods. Applying the legal principle in Baroda Meters, the excess freight cannot be included as additional consideration for the transaction value and therefore is not exigible to excise duty. The Tribunal accepted the appellants' reliance on precedent and comparable decisions and rejected the Commissioner's contrary finding that payment of service tax on transportation or the Commissioner's view that sales were not ex-factory could convert the excess freight into assessable value. Consequently the demand of duty on excess freight was held unsustainable.Demand of excise duty on excess freight disallowed; duty on excess freight not demandable.Interest under Section 11AB - penalty under Section 11AC - Whether interest and penalty can be sustained in respect of the disallowed demand of excise duty on excess freight. - HELD THAT: - Having held that the excise demand on excess freight is unsustainable, the Tribunal concluded that consequential measures-interest under Section 11AB and penalty under Section 11AC-cannot be levied. Interest and penalty flow from a valid demand; absent a valid duty liability on the excess freight, the imposition of interest and penalty lacks foundation. The Tribunal therefore set aside the interest and penalty confirmed by the Commissioner.Interest and penalty confirmed by the Commissioner in respect of the excess freight demand quashed.Final Conclusion: Appeal allowed; impugned demand of excise duty on excess freight, and the consequential interest and penalty, set aside, with consequential relief if any to follow. The appellate tribunal CESTAT, Bangalore, consisting of Members T.K. Jayaraman and M.V. Ravindran, heard an appeal against an order passed by the Commissioner of Customs & Central Excise, Hyderabad-III Commissionerate. The appellants were accused of not discharging duty liability for specific periods due to excess freight charges collected. The Commissioner confirmed the demand for excise duty and interest, and imposed penalties. The appellants contested the order, arguing that the excess freight should not be included in assessable value of goods, citing the Baroda Meters case and other relevant case laws. The tribunal, after careful consideration, ruled in favor of the appellants, stating that excess freight profits should not be subject to duty. The appeal was allowed, and interest and penalties were not imposed. The decision was delivered on April 17, 2009.