Excise duty not to be paid on transportation charges which are borne by buyers

CA Bimal Jain

Facts:

The Paper Products Ltd. (the Appellant) was engaged in the manufacture of paper products, mainly packaging products. The transportation has been arranged by the Appellant on buyers’ request and recovered from buyer through debit notes as it was separately mentioned in the purchase order that the freight and insurance are to the account of the buyer. However, the Department alleged that because delivery is not made at the factory gate, valuation is to be done as per the provisions of Section 4(1)(b) of the Excise Act read with Rule 5 of the Excise Valuation Rules (i.e. delivery at a place other than the place of removal). Thus, recovery of the transportation and insurance charges, which were not shown separately in the invoice is leviable to Excise duty in terms of Rule 5 of the Excise Valuation Rules.

Held:

The Hon’ble CESTAT, Mumbai relied upon the following cases:

• Commissioner of Central Excise, Nashik Vs. Garware Enterprises Ltd. [2014 (301) ELT 349 (Tri. – Mumbai)];
• Commissioner of Central Excise, Nashik Vs. General Metallisers Ltd. [2014 (300) ELT 534 (Tri.-Mumbai)];
• Commissioner of Central Excise, Nashik Techno Force (I) Pvt. Ltd. [2014 (310) ELT 951 (Tri. – Mumbai). = 2014-TIOL-1943-CESTAT-MUM];
• Goodyear India Ltd. Vs. Commissioner of Central Excise Delhi-IV [2014 (301) ELT 410 (Tri.-Del)].

and held that when freight charges are to the buyer’s account, merely because these are not mentioned separately is no reason to conclude that sale is not complete at the factory gate. Further, transport charges recovered from buyer through debit notes cannot be a ground for denying substantial benefit under the law laid down in Section 4 of the Excise Act. Therefore, as per the provisions laid down, duty is not required to be paid on the transportation charges which are borne by the buyers.

(Author can be reached at Email: bimaljain@hotmail.com)

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