Freight Calculation on Invoice

[Mridul Sethi]

Sir, I m working in manufacturing concern, & our one party asks us to show freight charges separately after sales tax calculation, as not to charge sale tax on that freight value, but as per our ERP setting we can calculate excise duty on that (freight+Basic rate) but freight cost does not show at assessable value place only basic rate shows there fore excise duty calculation is correct but assessable value showing is wrong, pls tell me know that it is neccessary to show exact assessable value in front of excise duty & if any notification or rule related to it

[Rajagopalan Ranganathan]

Sir,

It is held in CCE vs. Maharashtra Control Panel [2013 9291)ELT 545 (CESTAT)] = 2011 (6) TMI 549 - CESTAT, MUMBAI that if contract price is ex-works and actual cost of transportation is reimbursed by buyer to the manufacturer, outward freight and insurance are not includible in the assessable value. Therefore you show the basic price in column assessable value and then show the excise duty payable and vat/sales tax payable. After this you show the freight and insurance charges paid by you or payable by the buyer.

[Mridul Sethi]

Sir, we are doing the same thing & we also paying duty on freight but due to technical issue of our ERP system freight cost is not showing at the place of assessable value, say our basic price is ₹ 95 & ₹ 5 is freight cost and at our invoice assessable value is showing ₹ 95 & in assessable value column amount is showing ₹ 12.5 @12.5% on ₹ 100. So, pls come to my point that is Assessable value must be correlated with excise duty percentage or not & is there any rule related to it.

[Rajagopalan Ranganathan]

Sir,

Excise duty is leviable on transaction value. Your transaction value is ₹ 95/- and duty payable should be rs. 11.88 which is the correct one. I feel the programme of your software is written in such a way the duty is calculated on the total value (transaction value + freight). Please take up this mater with your software support team and explain that actual freight need not be included for calculation of duty liability. A discussion with your software support team will help you to solve your problem.

AI Summary

Assessable value: reimbursed freight excluded so excise duty is calculated on the transaction value, not on freight.
Where a contract is ex works and outward freight and insurance are reimbursed by the buyer, those reimbursed charges are not includible in the assessable value for excise; duty must be computed on the transaction value (basic price) while freight and insurance are shown separately on the invoice.