Delivery charges for transporting goods from the factory gate to the buyer and the value of scrap already cleared on payment of duty are not includable in the assessable value of goods manufactured on a job work basis.

Final Order Nos. 20245-20247 /2026

PER: P. A. AUGUSTIAN

The issue in the present appeals is whether the delivery charge and value of the un-returned scrap are additional consideration flowing directly to the Appellant and whether they are includable in the assessable value of tin containers/bitumen drums manufactured by the Appellant on job work basis for M/s Bharat Petroleum Corporation Ltd KRL, Cochin. As per the agreement entered by the Appellant with principal manufacturer M/s Bharat Petroleum Corporation, Cochin, they were engaged in manufacture of tin container/bitumen drums on job work basis. As the per contract, BPCL supplies steel coils free of cost and delivers the same directly to Appellant’s premises. Appellant availed CENVAT credit on the steel coil and BPCL is paying fabrication charges and delivery charges at the rate fixed as per the agreement. On verification of records/documents, it is observed that Appellant was not returning scrap of the steel coil generated during the process of manufacture which was supplied by M/s BPCL free of cost but sold by the Appellant from their end on payment of duty. Since Appellant had not included the value of scrap generated and the additional amount of delivery charges received by them from BPCL, proceedings were initiated. Accordingly, four show cause notices were issued as detailed below and the Commissioner (Appeals) vide Order in Appeal COC-EXCUS-000-APP-1156-TO-1158-2019 dated 15.01.2019, confirmed the demands.

Aggrieved by the impugned order 3(three) appeals are filed.

2. When the appeals came up for hearing, the Learned Counsel for the Appellant submits that M/s BPCL-KRL, Cochin provides the value on which the duty has to be paid on the basis of costing carried out by them. The cost of transporting the drums from Appellant’s factory towards BPCL, Cochin is born by M/s BPCL-KRL and paid to the transporter through the appellant. He further submits that the issue relating to delivery charges was taken up by the department way back in 2004 by issuing show cause notice No. 44/2004 CE dated 1.08.2004 and the same was dropped vide Order-in-Original No. 14/2006 again the demand of duty on delivery charges was confirmed in Order-in-Original No.18/2014 dated 23.05.2014 but once again dropped in 2016 vide Order-in-Original No. 18 & 19/2016 dated 29.02.2016 and Department had not reviewed that Order. In the absence of any review of the Department should not have reviewed the order dropping the demand for the subsequent period. The same issue was again disputed by the department on the basis of an Audit objection for the period 2015-16, which was dropped by the Adjudicating Authority vide Order-in-Original No. 01/2017 dated 20.01.2017. Also submits that the entire exercise is revenue neutral as M/s BPCL. Cochin was eligible for input credit on the duty if any paid by the appellant. He further states that the issue is also covered by the judgment of the Hon’ble Supreme Court in the matter of M/s Escorts JCB Ltd Vs Commissioner of Central Excise (2002 (146) E.L.T 31 (SC) and M/s Prabhat Zarda Factory Ltd Vs.