By TIOL News Service

MUMBAI, MAR 31, 2017: WHILE clearing their final products [Ch. 84 & 85] appellants have recovered separately the freight charges through debit notes.

A show-cause notice was issued alleging that the appellants have contravened the provisions of section 4 of the CEA, 1944 r/w the CE Valuation Rules, 2000.

The adjudicating authority confirmed the demand of differential duty on the freight contending that the same is includible in the assessable value. Inasmuch as the sales depot of the appellant is the place of removal and hence transportation from the factory gate upto the depot is not excludable from the assessable value, it was held.

The Commissioner(A) upheld the o-in-o and, therefore, appellant is before the CESTAT.

The appellant submitted that the demand pertains to the period 01/07/2002 to 31/03/2003 and during this period the transportation from the place of removal to the place of delivery was not includable in the assessable value for the reason that the depot/branches was not considered as place of removal.

Reliance is placed on the decisions in -

Emerson Network Power (I) Ltd. – 2015-TIOL-303-CESTAT-MUM

Ispat Industries Ltd. – 2015-TIOL-1775-CESTAT-MUM

Ispat Industries Ltd. – 2015-TIOL-40-SC-CX

Classic Polytubes Pvt. Ltd. – 2016-TIOL-653-CESTAT-ALL

Andhra Pradesh Paper Mills Ltd. – 2014-TIOL-871-CESTAT-BANG

The AR reiterated the findings of the lower authorities.

The Bench extracted the definition of "place of removal" prevailing in section 4(3)(c) of CEA, 1944 and also rule 5 of the Valuation Rules, 2000 and observed –

"…From the combined reading of definition of place of removal and Rule 5 of Central Excise Valuation Rules, 2000, it is clear that in the transaction value in terms of Section 4(1)(a), the transportation from the place of removal upto the place of delivery of such excisable goods is excludable from the transaction value. At the relevant time, the place of removal was only factory gate or warehouse or any other place or premises wherein the excisable goods have been permitted to be deposited without payment of duty from where such goods were removed. As per the said definition the depot or branch of assessee was not place of removal. Therefore, the factory gate is only the place of removal in the present case. If this is so, then transportation charges collected from the customers for transportation of goods from the factory gate upto the place of customer is not includable in the assessable value. Therefore, the findings of both the lower authorities is contrary to clear provisions of law on the inclusion /exclusion of transportation charges as discussed above. The very same issue has been considered by this Tribunal in the case of Andhra Pradesh Paper Mills Ltd. (supra) wherein the Division Bench of this Tribunal has clearly held that for the period from 01/07/2002 to 13/05/2003 there cannot be any demand on incidental charges like freight and insurance charges for clearance of goods from factory gate to depot for the reason that the depot was absent in the definition of place of removal in the Central Excise Act, 1944…"

Holding that the demand is not sustainable, the same was set aside and the appeal was allowed.

(See 2017-TIOL-1069-CESTAT-MUM )