TMI Blog2003 (5) TMI 163X X X X Extracts X X X X X X X X Extracts X X X X ..... customers, effective from 1-7-2000 as per the circular dated 14-7-2000 issued from the marketing division of the appellants at Gurgaon. This circular inter alia disclosed the rate per unit to be charged from their customers as freight with effect from 1-7-2000 and that such freight collection should be credited to "Equalised Freight Account" code No. 7140. Admittedly, all depots are collecting this extra amount as equalised freight from all customers and they remitted the same to the Head office. It is also on record that this freight has not been declared as part of the transaction value to the department. They have the Net Dealer Price (NDP) bifurcated into the 'product value' and 'freight' and the product value only is declared as transaction value to the department. This system of charging equalized freight from dealers was stated from July 2000 only and prior to that there was no such practice. From this it is apparently evident that after the changes in the Central Excise Law on Valuation with respect to transaction value brought into effect from 1-7-2000 the appellants have resorted to the new practice. It is therefore required to examine in detail the admissibility of excl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Rule 7 would be correctly applicable in the instant case. As per Rule 7 where the price is the sole consideration for the sale, the value shall be the normal transaction value of such goods sold from the depots. The normal transaction value has been defined in Rule 2(b) of Central Excise Valuation Rules, 2000 as - "normal transaction value" means the transaction value at which the greatest quantity of goods are sold". "Transaction value" has been defined in Section 4(3)(d) of the Central Excise Act, 1944 which reads as - "the price actually paid or payable for the goods when sold and includes in addition to the amount charged as price, any amount the buyer is liable to pay to or on behalf of the assessee, by reason of, or in connection with the sale, whether payable at the time of the sale or at any other time, including but not limited to, any amount charged for, or to make provision for advertising or publicity, marketing and selling organization expenses, storage, outward handling, servicing, warranting, commission or any other matter, but does not include the amount of duty of excise, sales tax and other taxes, if any, actually paid or actually payable on such goods." ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the function of sale of goods then such amount cannot be claimed to be not part of transaction value. Since the "uniform freight" charged and collected by the appellants qualifies as "any amount the buyer is liable to pay the assessee", there is no scope to exclude the 'uniform freight' which the buyer is liable to pay in the instant cases. It is not disputed that the uniform freight is being charged and collected by the appellants. It would therefore follow that even as per Rule 7 of Central Excise Valuation Rules, 2000, the normal transaction value applicable in the instant case should be inclusive of the uniform freight shown separately and collected by the depots of the appellants. 12. As regards the case laws on Goodlas Nerolac Paints Ltd. [1993 (65) E.L.T. 186 (Bom.)] and Kesoram Rayon [2001 (43) RLT 339 (CEGAT, Kol.)], it is seen that the same are with respect to the Section 4 in force prior to 1-7-2000. It is pertinent to note that there is drastic deviation after the introduction of the new Section 4 on transaction value, in the scope of inclusion of freight charges in the assessable value. As per the provisions of Section 4 and as interpreted by the case laws referred ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t Cost : "18. If the assessee and the buyer are not related persons and the price is also the sole consideration for sale but only the delivery of goods is made by the assessee at a place other than the factory/warehouse, then the assessable value shall be the "transaction value" without the addition of the cost of transportation from the factory/warehouse upto the place of delivery. However, exclusion of cost of transportation is allowed only if the assessee has shown them separately in the invoice and the exclusion is permissible only for the actual cost so charged from his buyers. If the assessee has a system of pricing and sale at uniform prices inclusive of equated freight for delivery at factory gate or elsewhere, no deductions for freight element will be permissible. 19. If the goods are not sold at the factory gate or at the warehouse but they are transferred by the assessee to his depots or consignment agents or any other place for sale, the assessable value in such case for the goods cleared from factory/warehouse shall be the normal transaction value of such goods at the depot, etc. at or about the same time on which the goods as being valued are removed from the fac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e enriched its value and given to the article is marketability in the trade. Therefore, the expenses incurred on account of the several factors which have contributed to its value upto the date of sale, which apparently would be the date of delivery, are liable to be included. Consequently, where the sale is effected at the factory gate, expenses incurred by the assessee upto the date of delivery on account of storage charges, outward handling charges, interest on inventories (stocks carried by the manufacturer after clearance), charges for other services after delivery to the buyer, namely after-sales service and marketing and selling organisation expenses including advertisement expenses cannot be deducted. It will be noted that advertisement expenses, marketing and selling organisation expenses and after-sales service promote the marketability of the article and enter into its value in the trade. Where the sale in the course of wholesale trade is effected by the assessee through its sales organisation at a place or places outside the factory gate, the expenses incurred by the assessee upto the date of delivery under the aforesaid heads cannot, on the same grounds, be deducted. B ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the freight transported from the place of removal to the selling points allowed in Bombay Tyre International are concerned, then were allowed evidently because they form an adjunct of the transportation charges and are incidental thereto. We are also of the opinion that the holding in Bombay Tyre International that deductions other than those specifically mentioned in Section 4 can yet be conceived of may not be available to the assessee herein in view of the express enunciation of law in the very decision on the issue now in question. We may add here that where the freight is averaged and the average freight is included in the wholesale cash price so that the wholesale cash price at any place or places outside the factory gate is the same as the wholesale cash price has to be deducted in order to arrive at the real wholesale cash price at the factory gate and no excise duty can be charged on such averaged freight, as clarified in Bombay Tyre International. (emphasis supplied) Thus, averaged freight or Transport charges were not considered by Apex Court to constitute a component of value for the purposes of levy of Central Excise Duty on ad valorem rated goods. They were to b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... but are amounts recovered, after sale of tyres in this case. It is now well-settled by the Apex Court in the case of Prabhat Zarda Factory Ltd. v. CCE reported in 2002 (146) E.L.T. 497 (S.C.), wherein it was held that when sales are made from the depot, the freight and insurance charges up to depot should be included. However, freight and insurance charges for delivery to the customers from the depot ought to be deducted, and were not includible in the assessable value. In the case of Escorts JCB Ltd. v. CCE [2002 (146) E.L.T. 31 (S.C.)], while dealing with the question of valuation of goods, and in particular freight and insurance during transit, the Apex Court held that where the assessee had handed over the goods to the buyer's representative, and after elaborately examining the issue in the light of law relating to sale of goods and law of insurance held that the lower authorities in that case had erred in their findings that ownership of the goods in the property continued to remain in the manufacturer till the goods were delivered to the buyers and that such a conclusions was held to be unsustainable. In this view of the matter, when in this case, the issue is only of additio ..... X X X X Extracts X X X X X X X X Extracts X X X X
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