The New Delhi Bench of the Customs, Excise and Service Tax Appellate Tribunal ( CESTAT ), held that Freight charges not includable in assessable value of liquid carbon dioxide (CO2) being separately charged in invoices and sale was at time of clearance from the factory.
The appellant, Bathinda Industrial Gases Pvt Ltd is engaged in the manufacture of liquid Carobon dioxide and is also availing the Cenvat Credit facility on inputs, capital goods and input services under the provisions of Cenvat Credit Rules, 2004. During the audit of records of the appellant for the financial year 2012-13 to 2016- 17 and audit of freight income ledger for the month of March 2015, it was noticed that the appellant had collected “Freight Charges” from the buyers but has not included the same in transaction value.
From the perusal of the purchase order, the department observed that the appellant is supplying material (liquid CO2) on ‘FOR destination basis’ to the destination through their own vehicles. It was also observed that the transportation cost was highly inflated to reduce the assessable value of manufactured product. Department formed an opinion that the ownership of the goods continued with the appellant till the goods reach the destination.
The appellant is thus alleged to have excluded the freight charges with the sole intention to undervalue its manufactured product. Accordingly, Central Excise duty was proposed to be recovered, as being short paid from the appellant along with interest and penalty. The proposal was initially confirmed by the Adjudicating Authority and has been dismissed by Commissioner (Appeals). Being still aggrieved by the Order, the appellant is before the Tribunal.
The issue involved herein is of the valuation and as to whether the freight charges recovered by the appellant manufacturer from the purchasers of manufactured product / liquid CO2 for transporting the said product in its own specialized tankers to the buyers premises have to be included in the transaction /assessable value or not.
A Coram comprising P V Subba Rao, Technical Member and Dr Rachna Gupta, Judicial Member held that “The freight charges are not includible in the assessable value of liquidCO2 those being separately charged in the invoices and the gas was sold at the time of clearance from the factory of the appellant. The authorities below are held to have wrongly confirmed the duty demand against the appellant on the basis of inclusion of freight charges in assessable value.”
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