Transportation cost separately charged should not forms part of assessable value as per the Central Excise Act

The Customs, Excise & Service Tax Appellate Tribunal has ruled that transportation charges, when invoiced separately, should not be included in the assessable value of goods for the purpose of levying excise duty. The tribunal found that the appellant's factory was the 'place of removal' for the goods, not the buyer's premises, even when the manufacturer provided specialised transport. Therefore, the cost of this transport should not be added to the value on which excise duty is calculated.

The Customs, Excise & Service Tax Appellate Tribunal, New Delhi ("the Tribunal") in the case of M/s. Bathinda Industrial Gases Pvt. Ltd. v. Commissioner of Central Goods and Services Tax [Excise Appeal No. 52053 of 2019]dated November 30, 2022, held that transportation charges collected by way of issuing additional invoice cannot be included in the assessable value of goods for levying excise duty.

Facts

M/s. Bhatinda Industrial Gases Pvt. Ltd. ("the Appellant") was engaged in the business of manufacturing liquid Carbon dioxide (CO2) ("the Goods") due to the highly specialized nature of the Goods the Appellant was transporting through their own specialized tanker to the buyers.

The Appellant was issuing invoices at the time of clearing the goods from the Appellant manufacturing facility, on the basis of purchase orders. Further, the Appellant was raising commercial invoices for transportation charges for transporting the Goods through specialized tankers.

The tax authorities conducted the Audit for the Financial Years 2012-13 to 2016-17 and contended that the Appellant was supplying the goods on freight on road ("F.O.R") destination basis by their own vehicles, meaning thereby, the ownership of the Goods remains with the Appellant till the Goods reach at the premises of the buyer.

Therefore, the Appellant was required to include the transportation cost to the assessable value of goods. Hence, the Authority issued a demand cum Show Cause Notice dated May 03, 2018 ("the SCN") demanding excise duty along with interest and penalty amounting to Rs. 1,13,52,289/-. The SCN was confirmed by the Adjudicating Authority vide Order-in-Original No. 06/2019 dated February 05, 2019 ("the OIO").

Thereafter, the Appellant filed an appeal before the Commissioner (Appeal) ("CIT(A)") who dismissed the appeal vide Order-in-Appeal No. 1244/2018 dated May 29, 2019 ("the OIA").

Aggrieved by the OIA of the CIT(A) the Appellant filed an appeal before the Tribunal.

Issue

Whether the ‘place of removal’ for the goods would be the buyer’s premise in case where the transportation facility was also provided by the Appellant?

Held

The Tribunal held that:

• Rule 5 of the Valuation Rules, 2000, read with Section 4 of the Central Excise Act, 1944 states that the buyer’s premise can never be called as the place of removal of excisable goods.
• Hence, it was clear that the Appellant factory can only be considered as ‘place of removal’ of the goods. Thus, the contention of the Respondent to add transportation cost to the assessable value of the goods because ‘place of removal’ was buyer’s premise was not sustainable.
• Since, in the present case the Petitioner had sold the goods at the factory gate and transported the goods to buyerspremise with own transport vehicle, in such case the value of transportation should not be included to the assessable value of the goods.
• Further observed that, in the Appellant own case the Tribunal vide Final Order No. A/51352/2014 dated March 05, 2014, held that the transportation cost was not to be included in the assessable value of the goods.
• With respect to the Circular stated that, the Circular cannot supersede the Statute, nor it can supersede the finding of the Hon’ble Supreme Court.

The Tribunal allowed the appeal and set aside the impugned Order.