Profit Made On Transportation Charges Need Not Be Included In The Assessable Value, No Excise Duty Payable: CESTAT

The Chennai Bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) has held that profit made on transportation charges need not be included in the assessable value and the excise duty is not leviable.

The bench of Sulekha Beevi C.S. (Judicial Member) and M. Ajit Kumar (Technical Member) has observed that excise duty is not a tax on profits but only on the actual value of the finished goods.

The appellants/assessees are in the manufacturing of concrete sleepers and are also availing of the CENVAT Credit facility for duty paid on inputs. On verification of records, it was found that the appellant had collected outward freight charges from their customers and paid lesser freight to the transporters. They had included only the lesser freight in the assessable value while discharging the excise duty on finished products.

The Department was of the view that the appellant has to pay excise duty on the amount of freight charges collected from the customers and not on the lesser freight paid to the transporters. Though the appellant had collected inspection charges from the customers under commercial invoices, they did not discharge Central Excise Duty on the charges for the period from January 2010 to January 2011.

The Show Cause Notice was issued, proposing to demand the duty of excise on freight collected and also the duty on inspection charges, along with interest and penalties.

After due process of law, the original authority confirmed the demand along with interest and imposed a penalty.

The appellant had filed an appeal before the Commissioner (Appeals), who set aside the demand on inspection charges. However, the Commissioner (appeals) confirmed the demand in respect of freight charges.

The appellant contended that it actually paid less freight to the transporters than what was shown in the invoices. Only the amount that has been paid as charges to the transporters needs to be included in the assessable value. Thus, the appellant has correctly discharged the excise duty on freight charges.

The issue raised was whether the appellant has to include the surplus freight charges that have been collected from the customers in the assessable value for discharging the Central Excise Duty. The freight charges that have been paid to the transporters have been included in the assessable value for discharging excise duty. Yet another issue raised was whether the amount that has been collected as surplus and is a profit in the hands of the appellant is required to be added to the assessable value.

The tribunal noted that the appellant has actually paid less freight to the transporters than what has been shown in the invoices. Only the amount that has been paid as charges to the transporters needs to be included in the assessable value. Thus, the appellant has correctly discharged the excise duty on freight charges.

Case Title: M/s. Concrete Products and Construction Co. Versus Commissioner of GST & Central Excise

Case No.: Excise Appeal No.41577 of 2013

Date: 01.06.2023

Counsel For Appellant: P.C. Anand

Counsel For Respondent: S. Bala Kumar

Click Here To Read The Order