The Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Ahmedabad Bench ruled that Factory gate being place of removal and cost of transportation collected in addition to price of goods is to be excluded from assessable value.
The appeal has been filed by M/s. Gujarat Polysol Chemicals Pvt Ltd, the appellant against demand of excise duty on the freight charges collected by the appellant while supplying the goods to their customers on FOR basis.
The Original Adjudicating Authority has treated the amount of freight collected from the buyers as an additional consideration and demanded central excise duty on the same. The First Appellate Authority relied on Rule 5 of Central Excise Valuation Rules to hold that the freight charges are includable in the assessable value
The Counsel for the appellant pointed out that they are engaged in manufacture of chemicals and they were supplying their finished goods on payment of central excise duty at the door steps of the buyers. The appellants were recovering freight charges on actual basis from buyers. The appellants were discharging excise duty without including in the assessable value the freight amount collected by them on actual basis.
The Counsel also pointed out that the original adjudicating authority as well as first appellate authority both held that the factory gate is the place of removal in their case and it was argued that having held factory gate as place of removal, it was open to the authorities to include the freight charges in the assessable value of the excisable goods.
A Coram consisting of Ramesh Nair, Judicial Member and Raju, Technical Member observed that “The factory gate is the place of removal and therefore, in our considered view the cost of transportation if collected in addition to the price of the goods and shown separately in the invoice, needs to be excluded from the assessable value.”
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