The Hyderabad Bench of the Customs, Excise and Service Tax Appellate Tribunal ( CESTAT ), observed that cost of transportation from place of removal to the place of delivery of excisable goods is excluded from Assessable value.
The Department scrutinized the accounts of the appellant, The India Cements Ltd, in respect of clearance of cement dispatched on ‘Free on Road (FOR) Basis’ to their customers. Department formed an opinion that to arrive at the assessable value of the goods for calculation duty of excise it is required to determine “place of removal”.
The place of removal in turn is determined based on terms and conditions of contract of sale between the assessee and their customers and the manner of delivery of the goods.
Observing that as per those terms and conditions, the place of delivery was the place of removal that Department alleged that the appellant has short paid central excise duty as it has not included the freight charges in assessable values in contravention of the provisions of Section 4 of the Central Excise Act, 1944 read with Rule 5 and 7 of Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000 and the Rule 4, 6, 8, 11 and 12 of the Central Excise Rules 2002.
A show cause notice was served upon the appellant proposing a demand of Rs. 3 crores for the period from 01.08.2015 to 31.03.2017 along with the proportionate interest and appropriate penalties.
The Apex Court in the case of Ispat Industries held that “Place of removal referred to in Section 4 r/w Rule 5 and Rule 7 of Central Excise Valuation Rules, clearly indicates, that the place of removal refers to only the seller’s premises (factory gate, warehouse, depot, consignees’ premises). The cost of transportation from the place of removal up to the place of delivery of excisable goods is excluded from ‘Assessable value’ for the computation of excise duty.”
The Bench comprising PV Subba Rao, Technical Member and Dr Rachna Gupta, Judicial Member observed that “The value of freight charged by the appellant for delivering the cement to their buyers premises is not to be included while assessing the value for the purpose of payment of central excise duty. Appellant has rightly excluded the same. The differential duty confirmed by the order under challenge is therefore wrong.”
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