TMI Blog2015 (8) TMI 200X X X X Extracts X X X X X X X X Extracts X X X X ..... as 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 at the factory gate. In this manner, the transaction was full and complete and nothing remained to be done after the goods left the factory premises. On these facts, provisions of Section 4 of the Act, which deals with valuation of excisable goods for the purposes of charging of duty of excise was taken note of and analysed, holding that the aforesaid charges could not be included for the purpose of arriving at valuation of excisable goods. Commissioner, Central Excise while deciding that the transportation charges as well as transit insurance charges are to be included for fixing the transaction value. The order reveals that the Commissioner had scanned through the agreements entered into between the assessee and with various customers and other documents on the basis of which the Commissioner concluded that the property in goods was passed on to the customers only at the destination. According to him, there was a specific condition in the contracts that the goods will be dispatched from freight pre-paid by road and up to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s issued on 24.07.2001 proposing to recover a sum of ₹ 1,17,36,766/-on account of short excise duty paid for the period 28.09.1996 to 31.12.2000. In this show cause notice, it was, inter alia, alleged that the transit insurance policies reveal that the assessee had been keeping the custody of the goods with it during the transit. Further, the agreement with various customers nowhere suggested that the transporter was to take the delivery of goods on behalf of the customers. The transit insurance from the assessee's works upto the stores sites where the goods were to be delivered at the buyer's premises under the contract, was on assessee's account. On that basis, the show cause notice contended that the transaction value would include the amount charged on account of transportation and transit insurance as it was covered by the definition of 'transaction value' contained in Section 4(3)(d) of the Act. The assessee refuted the aforesaid averments in the show cause notice with the plea that sale of goods to the customers took place at the factory gate of the assessee which was the 'place of removal' of the goods. Merely because the assessee arranged ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1.12.2000. Section 4 was different prior to 01.07.2000. Section 4 was substituted by new Section 4 with effect from 01.07.2000 by Section 94 of the Finance Act, 2000, whereby the concept of 'transaction value' was introduced. From the same day, the Central Excise (Valuation) Rules, 1975 were also substituted by the Central Excise (Determination of Prices of Excisable Goods) Rules, 2000. Therefore, the period from 28.09.1996 to 30.06.2000 shall be covered by the old provisions and the period of show-cause notice from 01.07.2000 to 31.12.2000 shall be covered by the amended provisions. Section 4, as it stood prior to amendment, reads as under: Section 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 is not a related person and the pri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... harged as price, any amount that the buyer is liable to pay to, or on behalf of, the assessee, by reason of, or in connection with the sale, whether payable at the time of the sale or at any other time, including, but not limited to, any amount charged for, or to make provision for, advertising or publicity, marketing and selling organization expenses, storage, outward handling, servicing, warranty, commission or any other matter; but does not include the amount of duty of excise, sales tax and other taxes, if any, actually paid or actually payable on such goods. 9) It follows from the above that whereas under old Section 4, the basis of value was the normal price at which the goods were ordinarily sold in the course of wholesale trade, under the new provision, the basis of the valuation is the transaction value for each removal. Under the new provision, the duty is chargeable on the excisable goods with reference to their value. Further, such a duty is to be paid on each removal of the goods. Thus, the value is to be calculated at the time of removal of the goods and it has to be on the value of the goods. Further, this value has to be 'transaction value'. Both the exp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ded even if the assessee had arranged for the transit 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 at the factory gate. In this manner, the transaction was full and complete and nothing remained to be done after the goods left the factory premises. On these facts, provisions of Section 4 of the Act, which deals with valuation of excisable goods for the purposes of charging of duty of excise was taken note of and analysed, holding that the aforesaid charges could not be included for the purpose of arriving at valuation of excisable goods. The Court found fault with the orders passed by the authorities as well as CEGAT in the following manner: A perusal of the orders passed by the authorities and the CEGAT show that since transit in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e any relevance in so far insurance of goods sold during transit is concerned. It would therefore not be lawful to draw an inference of retention of ownership in the property sold by the seller merely by reason of the fact that the seller had insured such goods during transit to buyer. It is not necessary that insurance of the goods and the ownership of the property insured must always go together. It may be depending upon various facts and circumstances of a particular 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 regarding deduction of transportation charges along with cost of insurance. It was held as follows: Therefore, the expenses incurred on account of the several factors which have contributed to its value upto the date of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. 15) Having stated the legal position, we now revert to the facts of the present case. 16) The Commissioner, Central Excise while deciding that the transportation charges as well as transit insurance charges are to be included for fixing the transaction value. The order reveals that the Commissioner had scanned through the agreements entered into between the assessee and with various customers and other documents on the basis of which the Commissioner concluded that the property in goods was passed on to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Authority below, may be detailed discussion was not required as the reasons given in detail could be found in the order appealed against, though even in such a case brief reasons are to be given by the Tribunal, in particular, to meet the arguments which are advanced by the appellant while challenging such an order. However, in the instant case, we find that there is a detailed discussion in the order of the Commissioner on the facts of the case. Those facts are not adverted to or dealt with. The decision of the Commissioner is overruled with single observation that the case is covered by the judgment in Escorts JCB Ltd., without discussing as to how it was so covered. This is notwithstanding the fact that the decision as to which is the 'place of removal' depends upon the facts of each case. 19) The consequence of the aforesaid discussion would be to set aside the order of the Tribunal and remit the case to it for fresh consideration after looking into the facts of the present case, namely, the terms and conditions of the sale with the buyer and determination on that basis as to which was the place of removal, that is whether it was the factory gate of the assessee or t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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