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TMI Blog2015 (4) TMI 857X X X X Extracts X X X X X X X X Extracts X X X X ..... ds though the place of removal of finished goods was different from the factory gate. The preventive party visited the factory premises of the assessee on 25.03.2000, conducted enquiries and resumed the records for further scrutiny. After scrutiny of various records and documents, it was revealed that the assessee had received work orders from various Government authorities and private contractors and the agreements entered into by the assessee with the above mentioned parties were for designing, manufacturing, providing at site, laying, jointing and testing of PSC pipes of specified sizes. The agreement entered, therefore, entailed upon the assessee, for delivery of the finished goods and not at the factory gate. It was found that no sale took place till the goods reached the test of the projects. 3) A show cause notice dated 02.11.2011 was issued as to why the differential central excise duty amounting to Rs. 43,56,318/- for the period of 01.01.1996 to 30.06.2000 should not be recovered from them under proviso to Section 11A(1) of the Central Excise Act read with Rule 9(1) of the Central Excise Rules, 1994 and why penalty under Section 11AC and interest under Section 11AB should ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion,- (a) * * * (b) 'place of removal' means: (i) * * * (ii) a warehouse or any other place or premises wherein the excisable goods have been permitted to be deposited 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 and from where such goods are removed." 8) A contextual examination of the aforesaid provision, for the purpose of the present case, would bring out the following the pertinent aspects: (i) The duty of excise is chargeable on excisable goods with reference to the value of those goods. (ii) The value of the goods is deemed to be the normal price thereof, that is to say, the price at which such goods are ordinarily sold by the assessee to a buyer in the course of wholesale trade. (iii) The said normal price is to be seen at the time of delivery and place of removal. (iv) 'Place of removal' is specifically defined and for our purposes, it is to be a place or premises from where the excisable goods are to be sold after their clearance from the factory and from where such goods are removed. Thus, place of remo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... il it was delivered to the buyer on the reasoning that otherwise there would be no occasion for the seller namely, the assessee to take risk of any kind of damage to the goods during transportation. To us, the whole reasoning seems to be untenable. The two aspects have been mixed up - one relating to the transaction of sale of the goods and the other arranging for the transit insurance for the buyer and charging the amount expended for the purpose from him separately. In connection with the proposition that insurance can be taken by a third person on behalf of another, reliance has been placed by the assessee on "Chitty on Contracts" Twenty-Eight Edition Vol. 2 Spcial Contracts P.978 Chap. 41 Note 007 under the heading "Insurance of Another's interest". It is indicated that in varied facts and circumstances and subject to the statutory provisions of contract, it is possible to ensure the interest of another. Referring to a decision reported in [1947] K.B. 685 Prudential Staff Union versus Hall, it is observed that a seller in possession of the goods when the property and risks have passed may insure his buyer's interest. Referring to a decision reported in Hepburn versus A. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ses incurred by the assessee upto the date of delivery on account of storage charges, outward handling charges, interest on inventories (stocks carried by the manufacturer after clearance), charges for other services after delivery to the buyer, namely after-sales service and marketing and selling organization expenses incuding advertisement expenses cannot be deducted. It will be noted that advertisement expenses, marketing and selling organization expenses and after sale service promote the marketability of the article and enter into its value in the trade. Where the sale in the course of wholesale trade is effected by the assessee through its sales organisation at a place or places outside the factory gate, the expenses incurred by the assessee upto the date of delivery under the aforesaid heads cannot on the same grounds be deducted. But the assessee will be entitled to a deduction on account of the cost of transportation of the excisable article from the factory gate to the place or places where it is sold. The cost of transportation will include the cost of insurance on the freight for transportation of the goods from the factory gate to the place or places of delivery". 10) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... principle of law, thus, is crystal clear. It is to be seen as to whether as to at what point of time sale is effected namely whether it is on factory gate or at a later point of time i.e. when the delivery of the goods is effected to the buyer at his premises. This aspect is to be seen in the light of provisions of the Sale of Goods Act by applying the same to the facts of each case to determine as to when the ownership in the goods is transferred from the seller to the buyer. The charges which are to be added have put up to the stage of the transfer of that ownership inasmuch as once the ownership in goods stands transferred to the buyer, any expenditure incurred thereafter has to be on buyer's account and cannot be a component which would be included while ascertaining the valuation of the goods manufactured by the buyer. That is the plain meaning which has to be assigned to Section 4 read with Valuation Rules. 13) In the present case, 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 24.06.1996 placed by Kerala Water Authority is on record. On going through the terms and conditions ..... X X X X Extracts X X X X X X X X Extracts X X X X
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