By TIOL News Service

NEW DELHI, MAY 19, 2014: DEPARTMENT is in appeal against the order of Commissioner (Appeals) dropping the demand relating to the issue whether equalized freight separately charged to be included in the assessable value in case of sale on FOR destination basis for the period from July, 2000 to February, 2003. Revenue did not accept Commissioner (Appeals)'s order and have came in appeal before the tribunal.

The appellants manufactured various varieties of copper wires classifiable under chapter 74 of the first schedule to the Central Excise Tariff Act, 1985. It was alleged by the Revenue that the appellants had entered into contracts with their respective buyers for delivery of goods at the agreed prices on FOR destination basis, but the freight charges were not shown in the respective invoices. The appellants raised separate bills/ invoices showing freight therein. However, it was alleged that this freight being part of the transaction value was not allowed to be deducted from the assessable value in terms of section 4 of the Central Excise Act, 1944 read with Rule 5 of Central Excise Valuation (Determination of Price of Excisable goods) Rules.

After hearing both sides, the CESTAT held:

The Counsel of the party has mainly relied upon the judgement of the Tribunal in the case of CCE, Nagpur vs. Ramakrishna Electricals Pvt. Ltd.- 2011 (272) ELT 149 (Tri.-Mum) wherein it has been held that:

"Supply of transformer to State Electricity Boards, freight charges, inclusion of - Contract clearly indicates ex-works price, freight charges on equalized basis mentioned separately - Merely because Sales tax paid on amount inclusive of freight charges, it cannot be concluded that sale taken place at destination - Clauses relating to testing etc., indicating that property transferred at factory gate itself - It has been decided by Supreme Court in the case of Accurate Meters Ltd. - 2009-TIOL-31-SC-CX-LB and also the Tribunal in the case of Majestic Auto Ltd. -2003-TIOL-23-CESTAT-DEL that freight charges cannot be included in the assessable value - No infirmity in impugned order."

The Tribunal in the case of Majestic Auto v. CCE - 2003-TIOL-23-CESTAT-DEL, had held that the equalised cost of freight shown separately in the invoices cannot be included in the assessable value even after 1-7-2000 when the place of removal remains the factory-gate.

In view of above cited judgement of the Tribunal, it clearly comes out that cost of transportation from the place of removal to the place of delivery cannot be included in the assessable value even though cost of transportation has been calculated on average basis and not on actual basis.

(See 2014-TIOL-797-CESTAT-DEL)