By TIOL News Service

MUMBAI, OCT 16, 2013: THE appellants are manufacturers of Iron and Steel products [Ch. 72 &73]. During the scrutiny of the records of the appellant-assessee, it was observed that the appellant was clearing goods to various customers on FOR basis and the freight charges were shown to be included in the value of the goods and excise duty liability discharged on the same. However, in some cases, it was found that freight charges have been collected separately in the invoices even though the goods had to be delivered at the buyer's premises and Central Excise duty on the same was not being paid. Accordingly, a SCN dated 01/03/2012 was issued demanding Central Excise duty of Rs.8,02,17,457/- on the duty short paid on freight charges for the period February, 2007 to December, 2011.

The CCE, Raigad confirmed the demand with an equivalent amount of penalty and interest.

Before the CESTAT with a Stay application, the appellant submitted that at the customer's request, the appellant has to supply the goods and deliver it at the customer's premises. For delivery of the goods at the customer's premises, the buyers pay the appellant transportation rates at pre-fixed rates. In these cases, ex-factory prices of the goods are shown in the invoices on which excise duty liability is discharged and the freight is shown separately at the rates agreed upon between the appellant and the buyers and on these freight charges, no excise duty is discharged; that VAT liability is discharged on the value inclusive of freight; that the ‘place of removal' in these cases is the factory gate and, therefore, on the cost of transportation from the factory to the buyer's premises, excise duty is not liable to be demanded. It is also claimed that the availment of CENVAT credit on GTA services is shown in the monthly ER-1 returns submitted by the appellant to the department and hence extended period is not invokable.

The Revenue representative while reiterating the findings of the adjudicating authority prayed that the appellant be put to terms.

The Bench after extracting the provisions of section 4 of the CEA, 1944 inter alia observed -

+ All the expenses incurred which is charged as part of the price is included in the transaction value. It is on this price excise duty liability is required to be discharged. It is an admitted position that where the appellant delivers the goods at their customers' premises on their own, they are discharging excise duty liability on a value inclusive of cost of transportation up to the customers' premises and on that value VAT liability has also been discharged.

+ However, in identical transactions, where the customer requests for delivery at the customer's premises on payment of transportation charges at a pre-agreed rate, the appellant wants to discharge excise duty liability only on the ex-factory price even though sales tax liability is discharged on a value inclusive of transportation.

+ If goods are delivered at the customers' premises, whether at appellant's own volition or at the request of the customer, that should not make any difference in the assessable value of the goods because the goods are sold for delivery at the customers' premises and as per Section 4, the price is the sale value of the goods for delivery at the time and place of removal.

+ As per the definition of ‘place of removal' when the goods are sold at the customers' premises for delivery, it is the customers' premises which is the ‘place of removal'. Therefore, we do not find any merit in the argument of the appellant that where the goods are delivered at the customers' premises at a pre-agreed rate of transportation, the cost of transportation should be excluded from the sale price to arrive at the assessable value.

Noting that the case laws relied upon by the appellant were delivered in the context of old section 4 of the CEA, 1944, the Bench held that they were not relevant to the case on hand.

The plea of time-bar taken by the appellant was held to be prima facie inadmissible by observing that the declaration made in the ER-1 return is only with respect to availment of CENVAT credit on the GTA services paid by the appellant and this had nothing to do with the valuation of excisable goods.

In fine, while recording that the appellant had not pleaded any financial hardship, the Bench observed that the appellant had not made out a prima facie case in their favour, and hence directed the appellant to make a pre-deposit of Rs.4 Crores and report compliance.

We will soon be back with more on this case…

(See 2013-TIOL-1526-CESTAT-MUM)