Excise duty on excess transportation charges

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Querist : Anonymous

Querist : Anonymous (Querist)

09 October 2013 Dear Sir

I have raised a Invoice to Customer adding Freight Amount of Rs. 75000.00 bu have paid the Transporter Rs. 50000.00 can i liable to pay the Excise on balance amount of Rs. 25000.00 (Freight is Charged from Palace or Removal to Customer Place) Please explain

RAMESH KUMAR VERMA

RAMESH KUMAR VERMA (Expert)
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09 October 2013 Under Section 4 of the Central Excise Act, 1944, the Central Excise duty has to be paid on the transaction value of the goods. Transaction value means the price actually paid or payable for the goods, at the time and place of removal. Thus when any amount is paid for transportation or insurance or interest for credit or for any other services, these are payments not for the goods but for the services provided by the manufacturer and hence these charges are not to be included in the assessable value under section 4 of the Act. Even when the amount paid is in excess to the cost incurred by the manufacturer supplier, the excess amount is profit earned by the manufacturer in course of providing these services. These profits are not in connection with the sale of goods but in connection with the services provided and hence this profit earned in not includible in the assessable value of the goods.

In Indian Oxygen Ltd. V/s Collector of Central Excise [1988 (36) ELT 723 (SC)] the Hon’ble Supreme Court held that duty of Excise is a tax on manufacturer, and not a tax on the profits made by a dealer on transportation and hence these profits earned are not includible in the assessable value. In Baroda Electric Meters Ltd. V/s Collector of Central Excise [1997 (94) ELT 13 (SC)], the Supreme Court affirmed this judgment and held that excess freight amount collected by the manufacturer is not includible in the assessable value of the goods.

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Querist : Anonymous

Querist : Anonymous (Querist)

09 October 2013 Respected Sir

Thanks for your reply

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RAMESH KUMAR VERMA

RAMESH KUMAR VERMA (Expert)
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09 October 2013 WELCOME MEMBER.