Order date – 30 November 2022

Facts –

• The Appellant, Bathinda Industrial Gases Pvt. Ltd, is engaged in the manufacture of liquid Carbon dioxide (CO2) and is also availing the Cenvat Credit facility on inputs, capital goods and input services under the provisions of Cenvat Credit Rules, 2004.
• During the audit of records of the appellant for the financial year 2012-13 to 2016-17 it was noticed that the appellant had collected "Freight Charges" from the buyers but has not included the same in transaction value. From the perusal of the purchase order, the department observed that the appellant is supplying material (liquid CO2) on ‘FOR destination basis’ to the destination through their own vehicles.
• Accordingly a show cause notice was issued alleging that the appellant have excluded the freight charges with the sole intention to undervalue its manufactured product.

Issue –

• Whether the freight charges recovered by the appellant manufacturer from the purchasers of manufactured product / liquid CO2 for transporting the said product in its own specialized tankers to the buyers premises have to be included in the transaction /assessable value or not?

Order –

• The Tribunal observed that Section 4 of Central Excise Act, Rule 5 of Valuation Rules and definition of place of removal under section 4 of Central Excise Act, 1944 makes it clear that buyer’s premises can never be, by any law, can be called as the place of removal of excisable goods. The place of removal can never be equated with the place of delivery. 
• The Tribunal relied on the decision of the Hon’ble Apex Court in the case of CC & CE, Nagpur vs Ispat Industries Ltd. wherein it was held that ‘place of removal’ is required to be determined with reference to ‘point of sale’ with the condition that ‘place of removal’ is to be referred with reference to the premises of the manufacturer.
• Further, there is no evidence in the present case that liquid CO2 was to be sold at the buyer’s place. The invoices were issued on the basis of purchase orders at the premises of appellant-manufacturer itself. Accordingly, Tribunal hold that the cost of transportation in the given circumstances is the one which has expressly been excluded in terms of Rule 5 of Valuation Rules.
• Hence, the freight charges are not includible in the assessable value of liquid CO2 those being separately charged in the invoices and the gas was sold at the time of clearance from the factory of the appellant. The authorities below are held to have wrongly confirmed the duty demand against the appellant on the basis of inclusion of freight charges in assessable value.
• The appeal is allowed.