Panama Petrochem Ltd. Vs Commissioner of C.E. & S.T.-Daman (CESTAT Ahmedabad)
The case of Panama Petrochem Ltd. vs. Commissioner of C.E. & S.T.-Daman, adjudicated by CESTAT Ahmedabad, delves into the contentious issue of whether freight and insurance charges should be included in the assessable value of goods for charging excise duty.
The crux of the matter lies in the inclusion of freight and insurance charges in the transaction value of goods. The appellant contended that these charges, collected separately and over and above the price of goods, should not be part of the assessable value. The appellant argued that as per contractual agreements with buyers like IOCL and HPCL, the transportation costs were distinct and separate from the price of the goods.
The appellant’s counsel cited various precedents and legal provisions to bolster their argument. They emphasized that the invoices clearly delineated the basic price of goods and the transportation costs, fulfilling the criterion laid down by Rule 5 of the Valuation Rules. Moreover, the appellant asserted that there was no evidence to suggest that these charges were aimed at depressing the assessable value.
On the other hand, the revenue, represented by the Superintendent (AR), reiterated the findings of the impugned order, contending that the freight and insurance charges should indeed be included in the assessable value.
After careful consideration of both parties’ submissions and perusal of the relevant material, CESTAT Ahmedabad made several key observations. Firstly, it noted that the goods were sold for delivery at a place other than the place of removal (i.e., the factory gate), meeting one of the criteria for the deduction of transportation costs. Secondly, it affirmed that the invoices clearly separated the basic price of goods from the transportation charges, as mandated by Rule 5.
Additionally, CESTAT Ahmedabad referenced a similar case precedent to support its decision. It highlighted that a coordinate Bench of CESTAT had previously ruled in favor of allowing freight and insurance charges as deductions from the composite price.
In light of the legal provisions, factual analysis, and precedents cited, CESTAT Ahmedabad concluded that the freight and insurance charges should not be included in the assessable value of the goods for charging excise duty. The impugned order was set aside, and the appeal was allowed with consequential relief, if any, as per law.
FULL TEXT OF THE CESTAT AHMEDABAD ORDER
The present appeal has been filed to assail the Order-in-Original No. DMN-EXCUS-000-COM-0005-0006-15-16 dated 30.12.2015 vide which the learned Commissioner has confirmed the duty demand by including the freight/insurance charges for delivery at buyer’s place in the transaction value.
1.1 Brief facts of the case are that the appellant entered in contract with IOCL, HPCL. As per the contract the appellant is responsible for delivery of goods to the destination of different location as mentioned in contract. The case of the department is that the freight/insurance charges collected by the appellant in addition to the price of the goods is includible in the transaction value and excise duty is chargeable on such freight/ insurance charges. Accordingly, two show cause notices were issued to the appellant and subsequently demand was confirmed by the Original Adjudicating Authority vide Order-in-Original dated 30.12.2015. Being aggrieved by the impugned Order, appellant is before this Tribunal.
2. Shri Nimish K Oza, Learned Counsel appearing on behalf of the appellant submits that the excisable goods were removed from the factory gate of the appellant. The price of the excisable goods are firm and fixed in which freight charges are not included. The Purchase order specifically provided for charges pertains to freight over and above the price of excisable goods. The freight charges shown separately in the invoices cannot be added in the assessable value. He placed reliance on the following judgments:-
