Service Tax or Central Excise Duty on Freight Charges

[Krishna Murthy]

A manufacturing unit raises central excise invoice with basic price and central excise on the basic price. Freight is also included in the invoice but the same is not included for calculation of central excise duty. The unit has paid service tax on such freight charges levied. Now, the department says since the place of removal is buyers place, freight charges are to be included in assessable value for central excise purpose.

What is the position of law. Is payment of service tax as done by the unit is correct or the unit should have paid central excise on freight charges also, since the place of removal is buyers place or central excise duty and service tax both are applicable in this case.

AI Summary

Assessable value inclusion of freight: contractual risk allocation determines whether freight and insurance form exciseable value.
The core issue is whether separately invoiced freight and insurance form part of the excise assessable value when delivery is at the buyer's location. Resolution depends on contractual allocation of risk and shipment terms: if the manufacturer retains risk and freight/insurance are charged as part of the invoice value, those components can be included in the assessable value; conversely, authorities indicate that delivery to the buyer's premises alone does not necessarily establish the buyer's place as the place of removal for excise valuation.