Freight And Handling Charges Shown Separately In The Invoice Is Not Includable In The Assessable Value Of The Excisable Goods: CESTAT

The Ahmedabad bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) has held that freight and handling charges shown separately in the invoice of the appellant are also not includable in the assessable value of the excisable goods.

The two-member bench of Ramesh Nair Member (Judicial) and Raju Member (Technical) has observed that the amount charged as freight and handling charges and separately shown in the invoices cannot be included in the assessable value under Section 4 of the Central Excise Act, 1944.

The appellant/assessee is engaged in the manufacturing of Power Driven Pumps (PD Pumps) and parts falling under chapters 84 and 85 of the Central Excise Tariff Act. It was noticed by the department that appellant had collected freight and handling charges of Rs. 20, 37,289 and Rs. 44, 01,058 from their customers, respectively, at a rate of 0.5% on assessable value, for the periods from 2007-08 to 2010-11 and April 2011 to February 2012, respectively, and had not included the charges in the assessable value of excisable goods cleared on payment of duty.

Therefore, the appellant was issued two show cause notices proposing the recovery of Central Excise Duty on freight and handling charges recovered from their customers as they formed part of the assessable value of excisable goods cleared by them from their factory premises.

In adjudication, the adjudicating authority confirmed the demand for central excise duty under the proviso to Section 11A(1) of the Central Excise Act, 1944. He has also imposed a penalty of the same amount under Section 11AC of the Central Excise Act, 1944.

The appellant contended that the recovery was not for the value of the excisable goods manufactured by the appellant, but for freight and handling, i.e., those activities that were arranged for and handled by the appellant, though they were basically the obligation of the buyers. There was also no evidence on record showing that the recovery was for outward handling charges as contemplated under Section 4 while defining the term "transaction value". Therefore, it was only an inference on the part of the authorities below that the recovery was outward handling charges and hence includible in the value of the goods. Only because the appellant had shown that this recovery was for "freight and handling charges," the authorities below had no jurisdiction to conclude that this recovery was nothing but outward handling charges collected from the customers. The confirmation of the demand for excise duty on the recoveries without any proof, evidence, or basis that the appellant has depressed the real value of the excisable goods and a part of the transaction value was actually recovered in guise of freight and handling charges was unsustainable.

The issue raised was whether the amount shown separately as freight and handling charges in the invoices can be included in the assessable value under Section 4 of the Central Excise Act, 1944, or not.

The Tribunal has held that the cost of transportation from the place of removal up to the place of delivery of such goods is not included in the assessable value under Section 4 of the Central Excise Act, 1944, and is not chargeable to Central Excise duty under Section 3 of the Act.

Case Title: Messrs Mira Industries Versus C.C.E.-Ahmedabad-ii

Case No.: Excise Appeal No.10575 of 2013

Date: 10.04.2023

Counsel For Appellant: Sudhanshu Bissa

Counsel For Respondent: Vijay G. Iyengar

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