HPL CHEMICALS LTD. Vs. COMMISSIONER OF CENTRAL EXCISE

JUDGEMENT

(1.) M /s. HPL Chemicals Ltd. (appellant) manufactures Hydrazine. While selling the Hydrazine, in addition to the price, the appellant charges transit insurance @ 0.4% of the value of the goods from all buyers. Central Excise investigation showed that the actual cost of insurance, by way of insurance premium, worked out to only 0.242%. Accordingly, proceedings were initiated to treat the differential amount between the amount collected and the premium paid as additional value of the goods and to recover central excise duty on the same. The authorities below confirmed the duty demand so raised. Thus, the short question that arises for consideration in these appeals is whether that action is correct.

(2.) IT is the appellant's contention that it is well settled that differential amounts arising on account of collection of freight, insurance premium, etc., at a standard rate is not required to be treated as forming part of the value of the goods and duty collected. According to the appellant, the law remains settled by the decision of the Apex Court in the case of Baroda Electric Meters Ltd. v. C.C.E. - 1997 (94) E.L.T. 13 (S.C.). The Revenue authorities have relied upon a statement of the appellant's General Manager Shri S.S. Chowla to the effect that the excess amount collected went towards insurance of raw materials, manufactured goods in stock, etc. The appellants have produced insurance policy for the relevant period and have submitted that this statement was not factually correct at all inasmuch as the insurance policy taken by the appellant covered only transport of Hydrazine from the appellant's premises to the premises of the buyers. It is further submitted that there was no insurance for manufactured goods in stock and that raw materials purchased by the appellant came under transit insurance taken by the sellers of those raw materials.

(3.) WE have perused the records and have heard the learned Advocate for the appellant and SDK for the Revenue. The only material in support of the Revenue's case is the statement of Shri S.S. Chowla. The evidence produced by the appellant disproves the statement that differential amount went towards insurance of finished stocks, raw material, etc. In the case of Baroda Electric Meters Ltd., the Apex Court held that the differential amount between equalised freight charged from buyers at uniform rate and amount actually paid is not required to be treated as part of the value of the goods and subjected to duty. What is true of equalised freight is true of equalised insurance also. The appellants are therefore, right in their submission that the impugned orders are contrary to settled law.