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Circular No. 287/3/97-CX
dated 14/1/97
F.No. 6/55/96-CX.1
Government of India
Ministry of Finance
Department of Revenue,
New Delhi
Subject : Determination of
Assessable value - Equalisation of freight in cases of multi product, multi
factory companies
Sub-Section (2) of Section 4 of the Central Excise Act, 1944 provides for
exclusion of the cost of transportation from the place of removal to the
place of delivery, from the value of excisable goods, where the price thereof
for delivery at the place of removal is not known and the value is determined
with reference to the price for delivery at a place other than the place
of removal.
2. The
Supreme Court in the case of Union of India Vs. Bombay Tyre International
Ltd. (1983 ELT 1896), referring to the entitlement of the assessee to a
deduction on account of the cost of transportation of the excisable article
from the factory gate to the place or the places where it is sold, observed
as under:-
"Where freight is averaged and the averaged 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 at the
factory gate, the averaged freight included in such 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 it. "(Para 50).
3. Now a question
has arisen how the deduction on account of freight has to be allowed in
respect of multi-product, multi-factory companies where it may not be possible
to work out separately product-wise and factory-wise freight charges to
be deducted. Similar question was considered by the CEGAT in the
case of M/s Indian-Explosive Ltd. Vs. CCE [1989 (40) ELT 190(t) and it
was held as follows:-
Deductions
on account of freight and transit insurance should be allowed pro-rata
on average basis after veritying the claims of the appellants made on the
basis of 6 categories of products; for this purpose, the total cost of
transportation of the two factories for a year or a quarter, as convenient
could be taken together, the pro-rata cost for exempted, non-excisable
and specific rated products transported deducted therefrom and the balance
amount allocated to individual and valorem rated products on weight basis,
sale-unit basis.
4. The matter
has been further examined and it is felt that in multi-products and multi-location
factories if equalised freight cannot be worked product wise, the principle
laid down by the CEGAT in above said decision may be followed to work out
equalised freight/averaged freight for the purposes of Section 4(2) of
Central Excise Act, 1944.
5. For
removal of any doubt, it is further clarified that the deduction of equalised
freight/averged freight from the price prevalent at other place of removal
as defined under clause (ii) to section 4(4)(b) would not arise on and
after 28.9.96. The clarification given against the fourth point of
doubt in Board's F.No. 6/31/96-CX.1 (circular No. 251/85/96-CX) dated 14.10.96
may be referred to.
Sd/-
(S.C.Bhatia)
Under Secretary (CX.1)