The Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Hyderabad Bench observed that freight charged for delivering cement to buyers’ premises not to be included in assessing value for payment of central excise duty.
The present appeal has been filed to assail the order vide which the demand of differential duty confirmed on the basis of inclusion of freight charges in the assessable value for payment of central excise duty has been upheld against the appellant, Sri Chakra Cement Ltd.
The appellants are the manufacturers of cements and clinkers. They were also availing the facility of CENVAT Credit scheme for the purpose of payment of central excise duty on their finished goods during the period from April 2016 to June 2017.
The Department observed that appellant had paid excise duty on the value, exclusive of freight which was incurred by the appellant for delivery of goods at the premises of some of their consumers. It was observed by the Department that the sale of cement to few of the customers was on FOR basis that too in terms of an agreement/ the purchase order.
From the conditions therein, department concluded that it was the buyer’s place which was the place of removal. Hence, alleging that the appellant had short paid the excise duty, the show cause notice was issued to the appellant proposing additional demand of Rs.42 lakhs on account of non-inclusion of freight in the assessable value during the aforementioned relevant period.
The said demand was confirmed initially by the Original Authority The appeal thereto has been dismissed vide the order under challenge.
The Apex Court in the case of Ispat Industriesobserved that the view taken by the Revenue that freight charges must be included, as the sale in the present facts took place at the buyer’s premises, is incorrect. Further, there cannot be extended place of removal, and the factory premises or the warehouse (as mentioned in the Section), alone being places of removal.
The Bench comprising observed that “Following the said ‘ratio decidendi’, we hold that the value of freight charged by the appellant for delivering the cement to their buyers’ premises is not to be included while assessing the value for the purpose of payment of central excise duty. Appellant has rightly excluded the same. The differential duty confirmed by the order under challenge is therefore wrong.”
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