2004 (96) ECC 593 (Tri)

CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL

South Zonal Bench -- Bangalore

Dr. S.L. Peeran, Member (J) and Shri T.K. Jayaraman, Member (T)

Solaris Chemtech Ltd.

Versus

Commissioner of Central Excise, Mangalore

Appeal No. E/1213/02

[Arising out of Order-in-Appeal No. 580/2002-CE, dated 30.9.2002 passed by the Commissioner of Central Excise (Appeals), Bangalore]

Final Order No. 1491/2004, dated 20.9.2004, Certified on 27.9.2004

Assessable value

Cost of transportation charges -- Sale of goods by the appellants was only on ex-factory basis. It is only at the request of the buyers that the appellants arranged transportation and collected the transportation charges. When the price is ex-factory, the valuation will be under Section 4(1)(a) and there is no need to go to Section 4(1) (b). Therefore, Valuation Rules also will not be applicable, when ex-factory price is available. Under these circumstances, it is not necessary to show the cost of transportation in the invoice. In any case, it is not the case of the department that the appellants had collected amounts on account of transportation in excess of the actuals. By law, the cost of transportation is not includible in the assessable value

[Para 5]

PRESENT :

Shri K. Parameshwaran, Adv. for the appellant.

Shri L. Narasimha Murthy, SDR for the respondent.

Case Cited :

West Coast Paper Mills Ltd., v. CCE Bangalore 2004 (116) ECR 66 (Tri. Bang)...... [Para 4]

Per : T.K. Jayaraman

M/s Solaris Chemtech Limited (hereinafter referred to as appellants) are engaged in the manufacture of Caustic Soda Lie, Caustic Soda Fakes, Orthophosphoric Acid, Hydrochloric Acid, DCP etc., falling under various chapters of the Central Excise Tariff Act, 1985.

The brief facts of the case are as follows:

2. As per the terms of delivery for the various products manufactured and sold by the appellants, the sale is on ex-factory basis. However, at the request of the buyer, the appellants were arranging transportation on their behalf separately. For the period form 1.7.02 to 15.2.2001, the appellants had arranged transportation at buyer's request and charged separately, the cost of transportation amounting to Rs. 3,08,17,338 under commercial invoices raised on the buyer. As the cost of transportation charged in the commercial invoice had not been included in the invoices issued under Rule 52 of the erstwhile Central Excise Act, 1944. The department issued a show cause notice to the appellants for inclusion of the cost of transportation in the assessable value and duty was demanded. The adjudicating authority held that as the goods are not sold by assessee for delivery at their factory gate, the value has to be determined in terms of Section 41(d) of the Central Excise Act read with provisions of the Central Excise Valuation Rules in terms of which the cost of transportation would be excluded only if the same is shown separately in the invoice of the excisable goods. The adjudicating authority confirmed demand of duty of Rs. 49,30,774 on inclusion of transportation charges in the assessable value and also imposed penalty of Rs. 5 lakhs under Rule 173 Q of the erstwhile Central Excise Rules, 1944. Even though the appellant appealed to the Commissioner (Appeals), they were not successful. The Commissioner (Appeals) in his Order-in-Appeal 580/02 dated 30.9.02 upheld the Order-in-Original but reduced the penalty of Rs. 2 lakhs. The appellants have strongly challenged the Order-in-Appeal.

3. Shri K. Parameshwaran, Advocate appeared for the appellants and Shri L. Narasimha Murthy, SDR appeared for the Revenue.

4. The appellants stated that the adjudicating authority had erroneously assumed that in terms of the contract between the appellants and the buyer, the delivery of the goods is to be made at the premises of the customers and are not sold for delivery at the factory gate and therefore invoked Rule 57 Valuation Rules. It was pointed out that the Commissioner (Appeals), had not appreciated the submission made by the appellants before him. Department did not have any material or evidence to come to the conclusion that the goods are not sold at the factory gate. Moreover, the freight collected by the appellants is the actuals. In their letter dated 25.9.01, the appellants had stated the factual position that all sales are made by the appellants only on ex-factory basis and transportation has been arranged only at the request of the buyer and further the cost of transportation has been charged and recovered from the buyer at the actuals. During the hearing it was pointed out that the issue is covered by the Tribunal's decision in the case of West Coast Paper Mills Ltd. v. CCE Bangalore 2004 (116) ECR 66 (Tri. Bang). The departmental representative reiterated the stand taken by the department in the Order-in-Original and Order-in-Appeal.

5. We have heard and examined the rival contentions. From the facts of the case, it is very clear that the sale of goods by the appellants was only on ex-factory basis. It is only at the request of the buyers that the appellants arranged transportation and collected the transportation charges. When the price is ex-factory, the valuation will be under Section 4(1)(a) and there is no need to go to Section 4(1) (b). Therefore, Valuation Rules also will not be applicable, when ex-factory price is available. Under these circumstances, it is not necessary to show the cost of transportation in the invoice. In any case, it is not the case of the department that the appellants had collected amounts on account of transportation in excess of the actuals. By law, the cost of transportation is not includible in the assessable value as held in the decision of this Tribunal quoted (supra). There is no justification for imposing any penalty. Thus, there is no merit in the Order-in-Appeal and the same is liable to be set aside. Therefore we allow the appeal with consequential relief.

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