The Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Chandigarh Bench has held that the freight outward is includible in the sale value for assessing excise duty.
The bench of S. S. Garg (Judicial Member) and P. Anjani Kumar (Technical Member) has held that in the context of Section 4(3) (C) when the goods are on FOR destination sales and the freight is paid by the seller and the goods are to be insured by the seller, then the seller cannot claim deduction of freight and insurance from sale price.
The appellant/assessees are engaged in manufacture of staples in strips, falling under Tariff entry 83052000 of the Central Excise Tariff Act, 1985 and are clearing such impugned goods, on payment of appropriate excise duty in terms of Notification dated 06.02.2010. The Notification, issued under Section 5A of the Central Excise Act, 1944provides exemption to specified excisable goods manufactured in a unit setup in the State of Jammu & Kashmir. The exemption is available for a period of 10 years to new units set up after 06.02.1010 or existing units having expanded installed capacity by not less than 25% or new investment leading to new employment.
The procedure of availment of such exemption is also unique as it requires the manufacturer to first utilize the entire CENVAT credit available, while discharging its central excise duty. The remaining payable duty, if any, must be paid in cash through account current or PLA. The excise duty paid through PLA is refundable in cash subject to value addition norms fixed and notified in the Notification. The goods manufactured by the Appellant are covered under S.No. 19 of the Notification, on which value addition is fixed at 36%. The Notification provides that the manufacturer has an option not to avail fixed rates and may apply to the Commissioner of Central Excise for fixation of a special rate, if the actual value addition is at least 115% of the rate specified in Notification.
Since the actual value addition was more than 115% of the rate specified, i.e. 51.79%, the appellants applied to the Commissioner, Central Excise, Jammu for fixing the special rate.
The assessee contended that all the sales made by the appellant are FOR destination sales. The invoice issued by the appellant shown ‘freight as PAID’. Therefore, when the appellant cleared goods to the customer, the freight has already been paid. Furthermore, in the balance sheet ‘outward freight’ is shown under selling and distribution expenses. With regard to transit insurance the appellant has taken a Transit Insurance Policy which clearly showed that the insurance of the goods is to be done by the appellant.
The issue raised was whether the entire excise duty is to be deducted while computing the amount, if value addition is in terms of para 6.5 of the Notification and secondly freight and transit are part of the sale price as appellant’s sales are for destination sales.
The tribunal orders are not sustainable in law therefore, set aside the order by allowing the appeal of the appellant.
Case Details
Case title: M/s Kangaro Industries Ltd V/S Commissioner of CE, Jammu & Kashmir
Citation: Excise Appeal No. 52195 of 2014
Decision date: 27/08/2024
Tribunal: CESTAT Chandigarh
