2026 (2) TMI 4 - AT - Central Excise

Inclusion of freight and loading charges in excise assessable value; Tribunal rejects Section 11D demand and allows appeal

Invoices during the exemption period did not record or collect any amount as excise duty; therefore constructive collection under Section 11D does not ... Recovery of amounts collected as representing excise duty - Inclusion of freight, loading and unloading charges in assessable value - Place of removal / ex-factory versus FOR/site delivery - Small Scale Industry (SSI) value-based exemption under Notification No.8/2003-CE - Appellate Tribunal (CESTAT) adjudication on interpretation of Section 11D - HELD THAT:- In the present case, the invoices which are issued to the customers during the exemption period, nowhere in the invoices any amount is shown and collected from the customers as excise duty calculated on the value of the goods sold even though the appellant has been availing value-based exemption under Notification No.8/2003-CE dated 01.03.2003 up to an aggregate value of clearances of specific goods of Rs.150 lakhs in a financial year. If any amount is not shown in the clearance document as representing duty, Section 11D is not attracted. This principle has been laid down by the Tribunal in a series of cases including Everest Industries Ltd. Vs. CCE, Coimbatore [2019 (6) TMI 735 - CESTAT CHENNAI] The confirmation of demand u/s 11D cannot sustained. We find merit in the contention of the learned advocate for the appellant inasmuch as except in the cases of NAPC and BPCL, no other evidence has been placed on record by the Revenue to justify the clearances are on FOR basis. On the other hand, the sample invoices enclosed along with the appeal paper book reveals that the clearances are on ex-factory basis and transportation costs are shown separately which are paid on behalf of the customers and recovered separately. Also, we find merit in the contention of the Learned Advocate on the issue of limitation. Hence, confirmation of demand on this count also cannot be sustained. Further, it is submitted that major portion of the clearances were ex-factory basis and levy of duty on freight charges is a question of interpretation of law, hence invoking extended period is bad in law. On the appropriation of the amount, we find that the appellant though discharged duty against periodical clearances within the stipulated time; however, there was delay in filing periodical returns with the Department. Attributing the reason, the learned advocate for the appellant has submitted that the delay was caused at the end of the Chartered Accountant who was entrusted with the job of filing the Excise returns; however, they have filed the returns subsequently complete in all aspects. From the records, we find that the amount paid by the appellant for the respective period has been appropriated. Considering the fact that the appellant is an SSI unit, for delay in filing the return deserves to be condoned. In the result, the impugned order is set aside and the appeals are allowed. Issues: (i) Whether amount of Rs.66,83,256/- is recoverable under Section 11D of the Central Excise Act, 1944; (ii) Whether freight and loading/unloading charges are includable in the assessable value and differential duty of Rs.28,75,181/- is recoverable.Issue (i): Whether Section 11D/11D(1A) applies so as to require deposit of amounts alleged to have been collected as excise duty during the SSI exemption period.Analysis: Section 11D/11D(1A) requires that an amount must have been collected in any manner as representing excise duty to be payable to the Government. Where invoices do not show any amount specifically as excise duty and only show an all-inclusive price during the exemption period, Section 11D is not attracted. Prior decisions and statutory amendment history distinguish between collection shown as duty and mere retention of consolidated prices while enjoying exemption; non-passage of benefit (profiteering) does not, by itself, create liability under Section 11D.Conclusion: Section 11D does not apply and the demand of Rs.66,83,256/- cannot be sustained.Issue (ii): Whether transportation, freight and loading/unloading charges are part of the assessable value for the purpose of excise duty for the supplies in question.Analysis: Inclusion of freight and allied charges in assessable value depends on place of removal and contractual terms. For clearances that are genuinely ex-factory with transport arranged by or paid for on behalf of the buyer and shown separately, transportation costs are excludable from assessable value under the valuation provisions. Revenue did not place evidence to show that clearances (except specified contracts) were on FOR basis; sample invoices supported ex-factory treatment. Invocation of extended limitation for a question of valuation/interpretation without clear suppression is not sustainable.Conclusion: Freight and loading/unloading charges are not includable in the assessable value for the majority of clearances; the differential duty demand of Rs.28,75,181/- cannot be sustained.Final Conclusion: The impugned demand and penalties are set aside and the appeals are allowed.Ratio Decidendi: Section 11D/11D(1A) is attracted only where an amount is specifically collected or shown as representing excise duty; an all-inclusive price during an exemption period without a distinct amount shown as duty does not create liability under Section 11D, and assessable value excludes transportation charges where place of removal is ex-factory and transport costs are separately recovered.