No Excise Duty on Outward Freight from Leamak to ITC when included in Assessable Value: CESTAT [Read Order]

Excise Duty - Outward Freight - Leamak - ITC - CESTAT - Excise Duty on Outward Freight - Outward Freight from Leamak- taxscan

The Ahmedabad Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), ruled that there is no excise duty on outward freight from Leamak Healthcare P Ltd to ITC Ltd when included in assessable value.

M/s. Leamak Healthcare P Ltd (LHL) is engaged in the manufacture of confectionary items on behalf of M/s. ITC Ltd. on job work basis. As per the agreement entered between LHL and ITC, the packing material has been supplied by ITC and the goods manufactured by the LHL were handed over to ITC at factory gate.

The LHL was paying Central excise duty on the value arrived at on the basis of raw material cost plus packing material cost plus conversion cost. Prior to June, 2005 the LHL was discharging duty on MRP basis under Section 4A of the Central Excise Act, 1944.

The Commissioner in the remand proceeding again confirmed the demand of central excise duty amounting to Rs.2 crores along with interest under Section 11AB of the Central Excise Act, 1944, penalty under Section 11AC of the Central Excise Act read with Rule 25(1) of Central Excise Rules, 2002 was also imposed on LHL and a penalty of Rs.60 lakhs was imposed on ITC under Rule 26(1) of Central Excise Rules, 2002. Aggrieved by the said order, the LHL and ITC are in appeal before the Tribunal.

The Bench comprising Ramesh Nair, Judicial Member and Raju, Technical Member observed that “No excise duty needs to be paid on the outward freight from Leamak to ITC, Marketing spends by ITC and fixed costs of ITC relating to activities of ITC other than provision of moulds at concessional cost.”

“Finally, the impugned order is set aside in so far as it seeks to include outward freight from Leamak to ITC godown and marketing spends for charging excise duty. The impugned order is also set aside in so far as it seeks to include the fixed cost of ITC in total to the assessable value” the Tribunal noted.

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