The Customs, Excise & Service Tax Appellate Tribunal, Ahmedabad Bench, has recently, in an appeal filed before it, held that the amount charged as freight & handling charges, being separately shown in the invoices, are not assessable under Section 4 of Central Excise Act.
The aforesaid observation was made by the Ahmedabad CESTAT, when an appeal was filed before it by the appellant Messrs Mira Industries, who were engaged in the manufacturing of Power-Driven Pumps (PD Pumps) and parts thereof, falling under chapter 84 and 85 of Central Excise Tariff Act.
The brief facts of the case were that, it was noticed by the department that the appellant had collected freight and handling charges of Rs. 20,37,289/- and Rs. 44,01,058/- respectively at 0.5%, on assessable value, from their customers for the period from 2007-08 to 2010-11 and April 2011 to February 2012 respectively and had not included the above said charges in the assessable value of excisable goods cleared on payment of duty.
Therefore, the appellant was issued two show cause notices dated 30.03.2012 and 22.03.2012, proposing the recovery of Central Excise Duty on freight and handling charges recovered from their customers, as they were forming part of assessable value of excisable goods cleared by them from their factory premises.
In adjudication, the adjudicating authority confirmed the demand of Central Excise duty under the proviso to Section 11A (1) of the Central Excise Act, 1944, and also imposed penalty of the same amount under Section 11AC of the Central Excise Act, 1944.
Being aggrieved by the orders-in-original, the appellant filed appeals before the Commissioner (Appeals), who by the impugned order-in appeal No. 15 to 16/2013 (Ahd-II) CE/AK/Commr(A)/Ahd, dated 31.01.2013, rejected the appeals and upheld the orders-in-original, thus leaving the appellant to prefer the instant appeal before the Ahmedabad CESTAT.
With Shri Sudhanshu Bissa, the Counsel appearing for the appellant, having submitted that it is a settled legal position that freight, insurance, handling etc. are activities and elements not forming part of the assessable value of the excisable goods, he placed his reliance on a number of judicial precedents in his support.
On the other hand, Shri Vijay G. Iyengar, the Assistant Commissioner (AR), appearing on behalf of the Revenue, reiterated the findings in the impugned order.
Hearing the opposing contentions of both sides, and thereby perusing the materials available on record, the CESTAT observed:
“We have carefully considered the submission made by both sides and perused the records. The issue required to be decided in this matter is that whether the amount shown separately as freight and handling charges in the invoices can be included in the assessable value under Section 4 of the Central Excise Act, 1944 or not. We find that Revenue’s case has no merits as during the disputed period duty liability has been discharged by the appellant on the basis of transaction value. We have seen the specimen invoice copy produced by the learned Counsel and note that duty paying documents were indicating separately the value for the freight and handling charges. It is the case of the department that price of the goods so recovered should include elements of freight and handling charges which cannot be considered as transportation/handling cost but it is additional consideration. In this regard this Bench is of the view that during transportation of goods from the factory gate to the destination there can be certain charges incurred for handling of finished goods which the appellant has recovered only as cost of freight and handling.”
“There is no evidence on record to show by the department that said charges are nothing but arrangement for reducing the assessable value of goods. In the absence of any such evidence it has to be held that the entire element of freight and handling charges shown separately in the invoices is nothing else but freight and handling charges. It is now a settled law as per the relied upon judgments cited by the Learned Counsel that any amount collected separately as freight in the invoices cannot be included in the assessable”, the coram of Shri Ramesh Nair, the Judicial Member and Shri Raju, the Technical Member added.
Thus, the CESTAT held:
“In the above judgments it is held that amount charged as freight & handling charges and separately shown in the invoices cannot be included in the assessable value under Section 4 of the Central Excise Act, 1944. Therefore, being the same facts and issue involved in the present case also, the freight and handling charges shown separately in the invoice of the appellant is also not includable in the assessable value of the excisable goods, consequently, duty demand on the said elements is not sustainable. Accordingly, the impugned order is set aside. The appeal filed by the appellant is allowed.”
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