Kashyap Sweetners Limited Vs Commissioner of Central Excise & ST (CESTAT Ahmedabad)
Introduction: In a precedent-setting decision by the CESTAT Ahmedabad, it was ruled that excess freight charges collected from customers do not have to be included in the transaction value for calculating excise duty. This article aims to explore and dissect the specifics and the implications of this ruling in the case of Kashyap Sweeteners Limited Vs Commissioner of Central Excise & ST.
Analysis: In this landmark case, the primary question posed was whether the surplus amount gathered from customers, exceeding the actual freight, should be added to the assessable value for charging excise duty. The appellant’s representative contended that the freight, in its entirety, should not be included in the transaction value from removal to delivery. Furthermore, any excess freight collected is considered profit on transportation, separate from the transaction value of the goods.
This point was further solidified by past rulings such as those in the cases of M/S Ispat Industries Limited, GP Petroleums Limited, and many others. As a part of his argument, the appellant’s representative also highlighted cases where the freight paid was higher than the freight charged from the customers, suggesting that the net difference should be considered for any potential demand.
Ultimately, the CESTAT, after careful consideration of submissions from both sides, concluded that any excess paid in freight as compared to the actual should not be included in the transaction value for calculating excise duty. This decision upholds the precedent set by the Supreme Court in the case of Baroda Electric Meters and others.
Conclusion: The CESTAT’s ruling has potentially significant implications for the treatment of freight charges in excise duty calculations. The verdict affirms the principle that excise duty is a tax on manufacture, not on profits made from transportation. By excluding excess freight from the transaction value, the CESTAT has drawn a clear line between the value of goods and profits made from ancillary activities like transportation. This ruling may bring clarity and relief to industries where freight charges form a significant part of their operational expenses.
FULL TEXT OF THE ORDER OF ITAT AHMEDABAD
The issue involved in the present case is that whether the excess amount collected from the customers over and above the actual freight is liable to be added in the assessable value/ transaction value for the purpose of charging excise duty or otherwise.
2. Shri Mehul Jiwani, learned Chartered Accountant appearing on behalf of the appellant submits that firstly, the freight as a whole in not includable in the transaction value from the place of removal to place of delivery. In support, he placed reliance on the following judgments:-
(a) M/S Ispat Industries Limited 2015 (324) E.L.T. 670 (S.C.)
(b) GP Petroleums Limited 2019 (5) TMI 1018 CESTAT Ahmedabad
(c) Emco Limited – 2016 (12) TMI 1385 – CESTAT Mumbai
(d) Miraj Pipes & Fittings Pvt. Ltd. 2019 (7) TMI 1792 CESTAT New Delhi
(e) Order No. A/10755/2022 Dated 30/06/2022 Passed By CESTAT Ahmedabad in case of Savita Oil Technologies Limited
2.1 without prejudice he further submits that even if freight is includable in the transaction value for the purpose of charging duty, excess freight collected over and above the actual freight paid to the transporter is nothing but on account of profit on transportation and the same is not part of the transaction value of the goods, therefore the same is not includable in the assessable value. He placed reliance on the following judgments:-
(a) Baroda Electric Meters – 1997 (94) E.LT 13 (SC)
(b) Mercedes Benz India Pvt. Limited – 2010 (260) E.L.T. 149 (TRI. Mumbai)
(c) Jost’s Engineering Co. Limited. 2017 (8) TMI 213 CESTAT MUMBAI
(d) Balkrishna Paper Mills Limited. – 2018 (5) TMI 300 CESTAT Mumbai
(e) M/S. Marpol Pvt Limited – 2017 (2) TMI 247 CESTAT Mumbai
(f) Transformers and Rectifiers (India) Limited – 2021 (8) TMI 759 CESTAT
(g) Indo Amines Limited – 2018 (11) TMI 489 CESTAT Mumbai
(h) Indian Oil Corporation Limited – 2013 (291) ELT 449 (Tri. Ahmd.)
(i) Indian Sugar & General Engg. Corpn. – 2016 (333) E.L.T. 109 (Tri. Del.)
(j) PRS Rolling Mills Pvt. Limited – 2012 (281) E.L.T. 560 (Tri-Del)
2.2 He further submits that this issue has been decided in the appellant’s own case for the other unit, in their favour and the said order has not been reviewed by the department and thus attained finality. Thus, department cannot be permitted to take contrary stand in the subsequent cases. In this support, he placed reliance on the following cases:-
(a) Surcoat Paints (P) Limited – 2008 (232) ELT. 4 (S.C.)
(b) Suntrack Electronics (P) Limited – 2003 (156) E.L.T. 163 (S.C.)
(c) Jayaswals Neco Limited – 2006 (195) E.LT. 142 (S.C.)
(d) Birla Corporation Limited – 2005 (186) E.L.T. 266 (S.C.)
2.3 Without prejudice he further submits that there is not only cases of excess recovery of freight but there are cases where the appellant have paid excess freight and collected from the customer the lesser amount of freight as compared to the actual. He submitted a chart which is reproduced below:-
