TMI Blog2023 (5) TMI 890X X X X Extracts X X X X X X X X Extracts X X X X ..... rther the invoice also shows that the insurance against it has been paid by the customer for transportation of the goods and has been borne by the customer and not by the appellant. Freight also is shown to have been paid separately over and above the invoice value - No evidence has been produced by the Revenue at any time of proceedings to show that the goods were cleared by the appellant from their factory to EPD Chennai and thereafter from Chennai to the project site. In absence of any such evidence showing transportation of the goods to the premises of EPD Division, the entire premise on which the case is based has to fail on factual basis. In the case of COMMNR. OF CENTRAL EXCISE, NAGPUR VERSUS M/S. ISPAT INDUSTRIES LTD. [ 2015 (4) TMI 73 - SUPREME COURT] after considering Rule 5 and Rule 7 of Central Excise Rules, 2002, Hon ble Supreme Court has held that Tribunal has correctly arrived at a categorical finding that the respondent is not responsible to pay the cost of transport from the place of removal to the place of delivery i.e. from the factory gate to the depot separately. In terms of Rule 5 of the Central Excise Valuation (Determination of price of Excisable Goods) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dispatched to the consignee as the project for which the goods were meant and the customer was shown as EPD division at Chennai. For recovering the freight from the customer during the year 2001-02 and 2002-03 they raised debit notes for Rs.1,84,00,000/- and Rs.630/-. These freight charges were not made part of the assessable value taken for payment of duty. 2.2 A show cause notice dated 21.03.2006 was issued to the appellant asking them to show cause as to why:- (a) Duty of Rs.29,44,101/- (Twenty-nine Lakhs forty-four thousand one hundred and one only) due, but not paid, on the goods, should not be demanded and recovered from them under proviso to Section 11 A(1) of Central Excise Act, 1944. (b) Penalty should not be imposed on them under Section 11AC of the Central Excise Act, 1944 read with Rule 25 of the Central Excise Rules, 2002. (c) Interest should not be charged on short payment of duty which also should not be recovered from them under Section 11AB of Central Excise Act, 1944. 2.3 The show cause notice was adjudicated by the Additional Commissioner as per the order referred to in para 1 above and appeal against the same has been dismissed by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion Rules, 2000, expenses incurred upto the place of removal has to be included in the Assessable Value. Hence expenses upto the place of removal which includes the freight charges form part of the transaction value. The difference in opinion between the department and the appellant lies in the place of removal. It is the contention of the appellants that the sale has taken place at the factory gate and the price is inclusive of the freight charges. Hence, no further amount should be added to the Invoice Value for payment of duty. The department's contention is that since the place of removal is EPD (Project Division) all expenses including the freight charges incurred upto the place of removal forms part of transaction value and are liable to duty. In this regard, the appellants submitted few sample invoices along with the appeal. I have perused Invoices No.808 dt.31.12.2001 and 1097 dt. 8.3.2002. These invoices show details like clearance to their EPD (Project Division) as their customer and contain remark IDT TO- EPD NO SALE TAX. The implication NO SALES TAX means that no sale involved and the goods in question were inter. departmental transfer. Thus it is evident that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ple basis : - 4.4 From the perusal of the invoices, it is quite evident that the goods were directly dispatched by the appellant from their factory to the site of the ultimate customer. 4.5 The above manner of preparation of invoice has been recognized by the Board by way of Circular No. 96/7/1995 dated 13,02.1995, clarifying as follows in respect of the admissibility of Modvat Credit to the consignee: 1. A registered person places an order on a manufacturer for supply and delivery of goods directly to a consumer and the goods are accordingly transported from the manufacturer s premises to the user s premises without being brought to the registered person s premises. In such a situation manufacturer will issue an invoice under Rule 52A. This invoice under Rule 52A will contain, in addition to the prescribed details including the consignee s name and address, mentioned therein, the registered person s name and address, on account of whose instructions the goods have been despatched. The consignee in this case will be the end user. In such a situation the registered person s invoice is not required for availment of Modvat credit. The duplicate copy of the manufac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the purchase order that the freight charges are to the buyer's account. Merely because these are not mentioned separately is no reason to conclude that sale is not complete at the factory gate. The Commissioner in his Order did not reach any conclusion as to the fact of sale at the factory gate. The Commissioner only held that Presuming that the sale of goods is complete at the factory gate, then there was no necessity for the assessee to recover any separate charges on account of transportation and insurance cost. By recovering the amount separately from their buyers it is conclusively proved that the sale is not complete at the factory gate . The only reasoning given by the Commissioner is that there was no necessity to recover freight charges separately on account of transportation. We do not agree with this reasoning because, effectively, the payment for purchase in this case has been split into invoice value (for goods) and debit notes for charging transportation costs. Merely because the transport has been arranged by appellant on buyers request and recovered from buyer through debit notes cannot be a ground for denying substantial benefit under the law laid down in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3) For the purpose of this section, - (a) assessee means the person who is liable to pay the duty of excise under this Act and includes his agent; (b) Person shall be deemed to be related if - (i) they are inter-connected undertakings; (ii) they are relatives; (iii) amongst them the buyer is a relative and a distributor of the assessee, or a sub-distributor of such distributor; or (iv) they are so associated that they have interest, directly or indirectly in the business of each other. Explanation. - In this clause - (i) inter-connected undertakings shall have the meaning assigned to it in clause (g) of section 2 of the Monopolies and Restrictive Trade Practices Act, 1969 (64 of 1969); and (ii) relative shall have the meaning assigned to it in clause (41) of section 2 of the Companies Act, 1956 (1 of 1956); (c) place of removal means - (i) a factory or any other place or premises of production or manufacture of the excisable goods; (ii) a warehouse or any other place or premises wherein the excisable goods have been permitted to be deposited without payment of duty, from where such goods are removed; ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alue of such excisable goods shall be deemed to be the transaction value, excluding the actual cost of transportation from the place of removal upto the place of delivery of such excisable goods provided the cost of transportation is charged to the buyer in addition to the price for the goods and shown separately in the invoice for such excisable goods. Rule 7. Where the excisable goods are not sold by the assessee at the time and place of removal but are transferred to a depot, premises of a consignment agent or any other place or premises (hereinafter referred to as such other place ) from where the excisable goods are to be sold after their clearance from the place of removal and where the assessee and the buyer of the said goods are not related and the price is the sole consideration for the sale, the value shall be the normal transaction value of such goods sold from such other place at or about the same time and, where such goods are not sold at or about the same time, at the time nearest to the time of removal of goods under assessment. 21. The actual cost of transportation from the place of removal up to the place of delivery of excisable goods is exclud ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll thus be seen that, in law, it is clear that for the period from 28-9-1996 up to 1-7-2000, the place of removal has reference only to places from which goods are to be sold by the manufacturer, and has no reference to the place of delivery which may be either the buyer s premises or such other premises as the buyer may direct the manufacturer to send his goods. As a matter of law therefore, the Commissioner s order and Revenue s argument based on that order that freight charges must be included as the sale in the present facts took place at the buyer s premises is incorrect. Further, for the period 1-7-2000 to 31-3-2003 there will be no extended place of removal, the factory premises or the warehouse (in the circumstances mentioned in the Section), alone being places of removal. Under no circumstances can the buyer s premises, therefore, be the place of removal for the purpose of Section 4 on the facts of the present case. 25. It now remains to deal with some of the judgments cited at the Bar. Escorts JCB Ltd. v. CCE, (2003) 1 SCC 281 = 2002 (146) E.L.T. 31 (S.C.), was strongly relied upon by Shri Bagaria and sought to be distinguished by Shri Panda. The facts of Escorts JC ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... delivered to the buyer for the reason that the assessee had arranged for the transport and the transit insurance. Such a conclusion is not sustainable. [at para 12] 27. We are inclined to the opinion that the Tribunal was correct in relying upon this judgment on the facts in the present case and on the Circular dated 3-3-2003, which specifically stated, following the said judgment, that insurance of goods during transit cannot possibly be the sole consideration to decide ownership or the point of sale of goods. 28. Similarly in VIP Industries Ltd. v. Commissioner of Customs Central Excise, (2003) 5 SCC 507 = 2003 (155) E.L.T. 8 (S.C.), this Court was faced with the following question :- The question for consideration in both these appeals is whether in cases where a manufacturer includes equalised freight in the price of the goods and sells the goods all over the country at a uniform price, the Department is entitled to compute value by including the cost of transportation from the factory to the depot. This question was decided by this Court in the case of Union of India v. Bombay Tyre International Ltd. [(1984) 1 SCC 467 : 1984 SCC (Tax) 17 : 1983 (14) E.L. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... consignment agent and the price was different then that different price would be the price. It is because the newly added proviso (i-a) to Section 4(1)(a) was now providing for different prices at different places of removal that the definition of the term place of removal had to be enlarged. Thus the amendment was not negativing the judgments of this Court. If that had been the intention it would have been specifically provided that even where price was the same/uniform all over the country, the cost of transportation was to be added. Thus in cases where the price remains uniform or constant all over the country, it does not follow that value for the purpose of excise changes merely because the definition of the term place of removal is extended. The normal price remains the price at the time of delivery and at the place of removal. In cases of equalised freight it remains the same as per the judgments of this Court set out hereinabove. In our view, the amendments have made no difference to the earlier position as settled by this Court. In this view of the matter, we are unable to uphold the judgments of the Tribunal. They are accordingly set aside. The appeals ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... we find that most of the orders placed with the respondent assessee were by the various government authorities. One such order, i.e., order dated 24-6-1996 placed by Kerala Water Authority is on record. On going through the terms and conditions of the said order, it becomes clear that the goods were to be delivered at the place of the buyer and it is only at that place where the acceptance of supplies was to be effected. Price of the goods was inclusive of cost of material, Central excise duty, loading, transportation, transit risk and unloading charges, etc. Even transit damage/breakage on the assessee account which would clearly imply that till the goods reach the destination, ownership in the goods remain with the supplier, namely, the assessee. As per the terms of payment clause contained in the procurement order, 100% payment for the supplies was to be made by the purchaser after the receipt and verification of material. Thus, there was no money given earlier by the buyer to the assessee and the consideration was to pass on only after the receipt of the goods which was at the premises of the buyer. From the aforesaid, it would be manifest that the sale of goods did not take ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , be a place of removal under the said Section. 33. As has been seen in the present case all prices were exworks , like the facts in Escorts JCB s case. Goods were cleared from the factory on payment of the appropriate sales tax by the assessee itself, thereby indicating that it had sold the goods manufactured by it at the factory gate. Sales were made against Letters of Credit and bank discounting facilities, sometimes in advance. Invoices were prepared only at the factory directly in the name of the customer in which the name of the Insurance Company as well as the number of the transit Insurance Policy were mentioned. Above all, excise invoices were prepared at the time of the goods leaving the factory in the name and address of the customers of the respondent. When the goods were handed over to the transporter, the respondent had no right to the disposal of the goods nor did it reserve such rights inasmuch as title had already passed to its customer. On facts, therefore, it is clear that Roofit s judgment is wholly distinguishable. Similarly in Commissioner Central Excise, Mumbai-III v. M/s. EMCO Ltd., this Court re-stated its decision in the Roofit Industries case bu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... - (i) a factory or any other place or premises of production or manufacture of the excisable goods; (ii) a warehouse or any other place or premises wherein the excisable goods have been permitted to be stored without payment of duty; (iii) a depot, premises of a consignment agent or any other place or premises from where the excisable goods are to be sold after their clearance from the factory; from where such goods are removed. From this definition, it is clear that in case of a factory gate sale from a non-duty paid warehouse, or from a duty paid depot (from where the excisable goods are sold, after their clearance from the factory), the determination of the place of removal does not pose much problem. However, there may be situations where the manufacturer /consignor may claim that the sale has taken place at the destination point because of following terms of the sale contract/agreement (i) the ownership of goods and the property in the goods remained with the seller of the goods till the delivery of the goods in acceptable condition to the purchaser at his door step; (ii) the seller bore the risk of loss of or damage to the goods during transit to the destination; and (iii ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... freight for transportation of the goods from the factory gate to the place or places of delivery. 10. To our opinion the harmonious reading of three of above provisions (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. Place of removal alone is relevant for the purpose of section 4 i.e. for the purpose of calculating the transaction value as it was held by Hon ble Apex Court in the case of Escorts JCB Ltd. vs CCE, Delhi reported as [2002 (146) ELT 31 (SC)]. In the Escorts case the price charged from the buyer was ex-work and was exclusive of freight insurance. The Hon ble Apex Court observed that since the transit insurance was arranged by the assessee, the Tribunal inferred with the ownership of the goods so retained by the assessee only. It was delivered to the buyers on the reasoning that otherwise there would be no occasion for seller namely the assessee to take the risk of any kind of damage ..... X X X X Extracts X X X X X X X X Extracts X X X X
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