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2015 (4) TMI 857 - SUPREME COURT

2015 (4) TMI 857 - SUPREME COURT - 2015 (319) E.L.T. 221 (SC) - Valuation - non inclusion of freight, insurance and unloading charges - Evasion of central excise duty - place of removal of finished goods was different from the factory gate - Held 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 of the said ord .....

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er 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 place at the factory gate of the assessee but at the place of t .....

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- SUPREME COURT OF INDIA] - Obviously the exact principle laid down in the judgment has not been appreciated by the CESTAT. - Decided in favour of Revenue. - CIVIL APPEAL NO. 5541 OF 2004 - Dated:- 23-4-2015 - A.K. Sikri And Rohinton Fali Nariman JJ. For the Appellant : Mr K.V.Viswanathan,Sr.Adv. Mr. B. Krishna Prasad,Adv. A.K. SIKRI, J. Respondent is the holder of Central Excise Registration for manufacture of RCC and PSC pipes falling under Chapter Heading 6804/6807 for the first schedule to t .....

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t that it was deducting the amount of freight, insurance and unloading charges from the price excisable goods 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 cont .....

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al excise duty amounting to ₹ 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 not be imposed. The assessee replied and was given personal hearing. Learned Adjudicating authority vide its order in original confirmed the demand to extent of ₹ 36,16,318/- on accou .....

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order of the CESTAT, present appeal is preferred by the Revenue under Section 35L(b) of the Act. 6) The respondent has been duly served in the appeal. However, nobody has entered appearance on behalf of the respondent. Matter came up for final arguments on 10.04.2015. On that day, we heard learned counsel for the appellant for some time as the argument remained inconclusive. For remaining arguments, matter was adjourned to 13.04.2015. However, nobody appeared on behalf of the respondent on 10.0 .....

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eads as under: 4. Valuation of excisable goods for purposes of charging of duty of excise.-(1) Where under this Act, the duty of excise is chargeable on any excisable goods with reference to value, such value shall, subject to the other provisions of this section, be deemed to be- (a) 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 for delivery at the time and place of removal, where the buyer .....

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oods 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 .....

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tory gate, then the excise duty has to be charged on the valuation of the goods to be arrived at the factory gate as that would be the place of removal of goods. It would mean that the expenses which are incurred after the removal of goods from the factory gate namely freight, insurance and unloading charges etc. are not to be included in the valuation of the goods for the purposes of excise duty. The reason is that the sale of goods to the buyer is at the factory gate when the property passes t .....

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insurance. The Court found that the terms and conditions of sale clearly stipulated that it was ex-works at the factory gate of the assessee. The payment was to be made before discharge of the goods from the factory premises. In the opinion of the Court, the machinery which was handed over to the career/transporter on receiving the payment was as good as delivery to the buyer in terms of Section 39 of the Sale of Goods Act and, therefore, possession of the sold goods was handed over to the buyer .....

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thorities as well as CEGAT in the following manner: A perusal of the orders passed by the authorities and the CEGAT show that since transit insurance was arranged by the assessee, therefore it was inferred and held that the ownership of the goods was retained by the assessee until 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 reaso .....

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ading 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. Tomlinson (Hauliers) Lt .....

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e. The passing of property is rarely of relevance to insurance. A person can insure goods to their full value against any loss on behalf of anyone who may be entitled to an interest in the goods at the time the loss occurs, provided that it appears from the terms of the policy that it was intended to cover their interest. Also a buyer will have an insurable interest in goods if they are at his risk, whether or not the property has passed to him . From the above passage it is clear that ownership .....

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ar transaction and terms and conditions of sale. A reference has also been made to Colinvauz's Law of Insurance, Sixth Edition by Robert Merkin to indicate that there may be insurance to cover the interest of others that is to say not necessarily the person insuring the interest must be the owner of the property. In one of the cases referred to and reported in 1983 E.L.T. 1896 (S.C.) Union of India and others etc. etc. versus Bombay Tyre International Ltd. etc. etc. the question involved was .....

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ries (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 th .....

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goods from the factory gate to the place or places of delivery . 10) The underlying factor that normal price has to be the price at the time of delivery and at the place of removal, in terms of Section 4, has been succintly brought out and amplified in VIP Industries Ltd. v. Commissioner of Customs and Central Excise, Aurangabad (2003) 5 SCC 507 in the following words: 6. We have heard the parties at length. In our view, Section 4 has to be read as a whole. Under Section 4(1)(a), the normal pric .....

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anufactured or a warehouse or any other place or premises where any excisable goods have been permitted to be deposited without payment of duty. Thus, the price would be the price at that place. By the amendment proviso (i-a) to Section 4(1)(a) has been added. Under Section 4(1)(a)(i-a) where the price of the goods is different for different places of removal, each such price was deemed to be the normal price of such goods in relation to "such place of removal". Thus, if the place of r .....

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ing 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. 11) In Commissioner of Central Excise, Noida v. Accurate Meters Ltd. (2009) 6 SCC 52, the Court took note of few decisions including in the case of Escorts JCB Ltd. and reiterated the aforesaid principles by emphasising that the place of removal depends on the facts of each case. 12) T .....

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ch 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 wi .....

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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 t .....

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