On depot freight

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This query is : Resolved

Gautam Kumar (Querist)

09 February 2016 Dear Sir
Our depot has been raised a bill inclusive freight from depot to Customer door He is add freight amount in basic price of Depot Its means our our excise duty has been increase of depot inv due to this problem we pay the extra duty of our Depot sale kindly give us advice how can we show the freight amount on our depot Inv & how can we solve our duty (Excise) through depot sales.
Kindly give us advice on urgent basis.
Regards
Gautam

Suresh Ramaswamy

Suresh Ramaswamy (Expert)

21 February 2016 Valuation of excisable goods is relevant in the context of goods, which are chargeable to ad valorem levies. Valuation under section 4 of the Central Excise Act, 1944 based on transaction value.

For applicability of transaction value in a given case, for assessment purposes, the following requirements should be satisfied:
1. The goods are sold by an assessee for delivery at the time and place of removal. The term ?place of removal? includes factory, warehouse, depot or premises of a consignment agent
2. The assessee and the buyer of the goods is not related
3. The price is the sole consideration for the sale. If any one of the above requirements is not satisfied, then the transaction value shall not be the assessable value and value in such case has to be arrived at under the valuation rules.

In your case apparently all the three conditions are fulfilled and hence transaction value is the assessable value.

It is not clear from your query whether the freight charges recovered are actual freight or the invoicing is done on some equated freight for delivery basis. I am assuming that your depot is recovering the actual transportation charges.

The term place of removal has been redefined to include depot, premises of consignment agent etc. If, therefore, the transaction value is with reference to delivery at the time and place or removal, such transaction value will be the assessable value. In your case the place of removal is your depot.

If the assessee and the buyer are not related persons and the price is also not the sole consideration for sale but only the delivery of goods is made by the assessee at a place other than the factory/warehouse, then the assessable value shall be the transaction value without the addition of the cost of transportation from the factory/warehouse upto the place of delivery. However, exclusion of cost of transportation is allowed only if the assessee has shown them separately in the invoice and the exclusion is permissible only for the actual cost so charged from his buyers. If the assessee has a system of pricing and sale at uniform prices inclusive of equated freight for delivery at factory gate or elsewhere, no deductions for freight element will be permissible.

If the goods are not sold at the factory gate or at the warehouse but they are transferred by the assessee to his depots or consignment agents or any other place for sale, the assessable value in such case for the goods cleared form factory/warehouse shall be the normal transaction value of such goods at the depot, etc. at or about the same time on which the goods as being valued are removed from the factory or warehouse. It may be pertinent to take note of the definition of normal transaction value as given in the valuation rules.

Therefore to reduce the incidence of duty on your depot sales, freight should be shown as a separate item in your tax invoice and the freight charges recovered should be the actual freight paid and not more or less. In that case the assessable value would be the cost at the Depot and no extra duty need be paid on the freight.

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