By TIOL News Service

MUMBAI, JUNE 24, 2016 : THIS is a Revenue appeal.

The respondents are engaged in the manufacture of petroleum products. They were storing excisable goods at Panewadi Terminal, Manmad District . At the time of clearance from the terminal, respondents were collecting Rs.44/- per KL over and above the assessable value declared as Free Delivery Zone (FDZ) charges. The respondents were also collecting charges @0.67/- per KL per Km for delivery of goods beyond the Free Delivery Zone.

It is the Revenue allegation that the amount of Rs.44/- per KL collected by the respondents for sale within Free Delivery Zone was includible in the AV as the said charge was leviable for delivery just outside the factory gate also, where no transportation is involved. Arguing that the said amount is not related to transportation but is an additional consideration, a differential duty demand notice was issued to the assessee.

The CCE dropped the demand notice holding that basic prices of MS/HSD are inclusive of transportation charges; that w.e.f 1.7.2000, the valuation of excisable goods is the transaction value and transportation/freight charges are admissible for deduction provided that these charges are shown separately in the invoices [F. No. 354/81/2000-TRU dated 30.6.2000 refers]; that in case of sale to retail outlet situated at a distance of 5 Km, and the outlet of a dealer at Nandgaon situated at a distance of 35 Km (within FDZ), freight charges are shown uniformly @ Rs.44/- per KL.

Aggrieved with this order, Revenue filed an appeal before the CESTAT in the year 2005.

The appeal was heard recently.

The AR,apart from reiterating the grounds of appeal,produced a photocopy of a Fax dated 29.9.2000 apparently issued by Oil Coordination Committee, wherein revision in Basic Selling Price of petroleum products from 29.9.2000 was communicated by the OCC. It reads –

"At present excise duty on freight in case of MS is being absorbed in the Pool Account effective midnight of 29th /30th September, 2000. Excise duty on freight element included in the price built up of MS should be passed on to consumers. In respect of products where currently 5% duty on assessable value is being absorbed in the Pool Account, the same should be passed on in the settling prices.

OCC vide their Fax Message No. 4005 dated July 29, 2000 have advised that the delivery charges within FDZ for MS and HSD are revised to Rs.44/KL and for ATF to Rs.46.00/KL. Currently the delivery charges within FDZ included in the ‘RPO Charges' for MS isRs.7/KL. For HSDRs… and in ‘AFS charges is Rs.20/KL for ATF. This increase will be charged on for all customers in the selling prices.

It was also advised that the delivery charges outside FDZ for MS, HSD and ATF are revised to Rs.0.67/KL/Km. This increase will be passed on for all customers in the selling prices. However, in case of MS/HSD for the areas covered under the FTX scheme, the same will be borne by the Oil Pool Account."

Inasmuch as it is argued that amount of Rs.44/KL collected in respect of delivery within the FDZ is already included in the price fixed by OCC and, therefore,the amount of Rs.44/KL separately collected by the appellant is an additional consideration.

The respondent submitted that when the buyers arranged their own transport, an amount of Rs.44/KL is not collected, however, if the respondent delivers the goods to the buyers within the specified distance, an amount of Rs.44/KL is collected.

The Bench observed –

“5. … We find that while the learned AR has stated that the charges of Rs. 44/KL are not freight charges, the grounds of appeal clearly recognize that the said charge is freight charge. We find that a large number of decisions of the Tribunal had allowed deduction of such charges collected for delivery of goods within the FDZ. We find that the grounds of appeal raise the issue of quantum of amount collected as freight. We find that the appellant had submitted the data before the Commissioner which shows that the amount of freight collected is less than the actual expenditure. We also find that the Tribunal and superior Courts in number of cases held that any amount of freight which is collected in excess of actual freight is not includible in the assessable value…."

Holding that there is no merit in the appeal filed by the Revenue, the same was dismissed.

(See 2016-TIOL-1520-CESTAT-MUM)