TaxTMI 
TaxTMI 
2024 (9) TMI 1166
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.... FOR sale the freight charges is not includible in the assessable value of the excisable goods. He placed reliance on the following judgments:- 1. EIMCO Elecon India Ltd v. C.C.E. & C. Anand 2024 (4) TMI 62 - CESTAT AHMEDABAD 2. Panama Petrochem Ltd. v. C.C.E, Daman 2024 (4) TMI 325 - CESTAT AHMEDABAD 3. Sayaji Senthness Ltd. v. C.C.E., Ahmedabad 2024 (5) TMI 194 - CESTAT AHMEDABAD 4. Gujarat Fluorochemicals Limited v. C.C.E., Vadodara 2024 (1) TMI 883 - CESTAT AHMEDABAD 5. Messrs Mira Industries v. CCE 2023 (4) TMI 655-CESTAT AHMEDABAD 6. CCE v. Ispat Industries Ltd. 2015 (324) ELT 670 (S.C.) 7. Escorts JCB Ltd. v. CCE 2002 (146) ELT 31 (S.C.) 8. CCE, Mumbai III v. EMCO Ltd. 2015 (322) ELT 394 (S.C.) 9. CCE v. Accurate Meters Ltd. 2009 (235) ELT 581 (S.C.) 10. Baroda Electric Meters Ltd. v. CCE 1997 (94) ELT 13 (S.C.) 11. Sterlite Optical Technologies Ltd. v. CCE Aurangabad 2015 (329) ELT 341 (Tri. - Mumbai) 12. Cadila Pharmaceuticals Ltd v. CCE 2017 (349) ELT 694 (Guj.) 13. CCE v. ZYG Pharma Pvt. Ltd 2017 (358) ELT 101 (M.P.) 14. Apex Electricals Pvt. Ltd v. UOI 1992 (61) ELT 413 (Guj.) 15. Anand Nishikawa Co. Ltd. v. CCE 2005 (188) ELT 149 (S.C.) ....
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....ace, at the nearest place where such market exists, or (b) where such price is not ascertainable, the price at which an article of the like kind and quality is sold or is capable of being sold by the manufacturer or producer, or his agent, at the time of the removal of the article chargeable with duty from such factory or other premises for delivery at the place of manufacture or production, or if such article is not sold or is not capable of being sold at such place, at any other place nearest thereto. Explanation. - In determining the price of any article under this section, no abatement or deduction shall be allowed except in respect of trade discount and the amount of duty payable at the time of the removal of the article chargeable with duty from the factory or other "premises aforesaid." 11. It will be seen that the value of an article chargeable with excise duty is deemed to be the wholesale cash price for which an article of the like kind and quality is sold or capable of being sold at the premises of manufacture or production. In A.K. Roy v. Voltas Ltd., (1973) 3 SCC 503 = 1977 (1) E.L.T. (J177) (S.C.), this Court had occasion to deal with the said provision and in p....
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....ing related persons) or where such goods are not sold to such dealers, to dealers (being related persons), who sell such goods in retail; (b) Where the normal price of such goods is not ascertainable for the reason, that such goods are not sold or for any other reason, the nearest ascertainable equivalent thereof determined in such manner as may be prescribed. (2) Where, in relation to any excisable goods the price thereof for delivery at the place of removal is not known and the value thereof is determined with reference to the price for delivery at a place other than the place of removal, the cost of transportation from the place of removal to the place of delivery shall be excluded from such price. (3) The provisions of this section shall not apply in respect of any excisable goods for which a tariff value has been fixed under sub-section (2) of section 3. (4) For the purposes 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) "place of removal" means - (i) a factory or any other place or premises of production or manufacture of the excisable goods; or (ii) a warehouse or any other....
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....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." [at para 50] 14. This view of the law was reiterated in Government of India v. Madras Rubber Factory Ltd., (1995) 4 SCC 349 = 1995 (77) E.L.T. 433 (S.C.). Interestingly, in paragraph 39 of the judgment, cost of transportation from the factory gate to the place of removal not forming part of excise duty was conceded by the revenue. 15. Section 4 as substituted by the 1973 Amendment Act suffered a further amendment in 1996. The amendments carried out were to have effect from 28-9-1996, which is also the starting point on facts in the present case. Three important changes were made to Section 4. First a new sub-section (ia) was added to Section 4(1) which reads as follows :- "(ia) Where the price at which such goods are ordinarily sold by the assessee is different for different places of removal, each such price shall, subject to the existence....
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.... yet again as follows :- "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 their value, then, on each removal of the goods, such value shall - (a) In a case where the goods are sold by the assessee, for delivery at the time and place of the removal, the assessee and the buyer of the goods are not related and the price is the sole consideration for the sale, by the transaction value; (b) In any other case, including the case where the goods are not sold, be the value determined in such manner as may be prescribed. (2) The provisions of this section shall not apply in respect of any excisable goods for which a tariff value has been fixed under sub-section (2) of section 3. (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-distributo....
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.... be sold after their clearance from the factory are no longer places of removal. Also, the definition of "transaction value" makes it clear that freight or transportation expenses are not included in calculating the excise duty payable. 20. It is necessary also to refer to Rules 5 and 7 of the Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000 which came into force on the same date as the amendment to Section 4, i.e., 1-7-2000. These Rules read as under :- "Rule 5. Where any excisable goods are sold in the circumstances specified in clause (a) of sub-section (1) of section 4 of the Act except the circumstances in which the excisable goods are sold for delivery at a place other than the place of removal, then the value 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 pl....
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....rdance with generally accepted principles of costing. Explanation 2. - For removal of doubts, it is clarified that the cost of transportation from the factory to the place of removal, where the factory is not the place of removal, shall not be excluded for the purposes of determining the value of the excisable goods." 23. It is clear, therefore, that on and after 14-5-2003, the position as it obtained from 28-9-1996 to 1-7-2000 has now been reinstated. Rule 5 as substituted in 2003 also confirms the position that the cost of transportation from the place of removal to the place of delivery is to be excluded, save and except in a case where the factory is not the place of removal. 24. It will 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 in....
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.... 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, 6th Edn. 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." [at para 10] 26. This Court then went on to follow Bombay Tyre International's case and ultimately held :- "In view of the discussion held above, in our view the Commissioner of Central Excise and CEGAT erred in drawing an inference that the ownership in the property continued to be retained by the assessee till it was 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 o....
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....oods were produced or manufactured 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 (ia) to Section 4(1)(a) has been added. Under Section 4(1)(a)(ia) 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 removal was the factory, then the price would be the normal price at the factory. If the place of removal was some other place like a depot or the premises of a 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 wa....
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....ions 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 the Valuation Rules. 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 24-6-1996 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 cha....
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....mply that till the goods reached their destination, ownership in the goods remained with the supplier, namely, the assessee, freight charges would have to be added as a component of excise duty. Further, as per the terms of the payment clause contained in the procurement order, payment was only to be made after receipt of goods at the premises of the buyer. On facts, therefore, it was held that the sale of goods did not take place at the factory gate of the assessee. Also, this Court's attention was not drawn to Section 4 as originally enacted and as amended to demonstrate that the buyer's premises cannot, in law, be "a place of removal" under the said Section. 33. As has been seen in the present case all prices were "ex-works", 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 ....
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.... the excisable goods are sold for delivery at a place other than the place of removal, then the value of such excisable goods shall be deemed to be the transaction value, excluding the cost of transportation from the place of removal upto the place of delivery of such excisable goods. Explanation 1. - "Cost of transportation" includes - (i) the actual cost of transportation; and (ii) in case where freight is averaged, the cost of transportation calculated in accordance with generally accepted principles of costing. Explanation 2. - For removal of doubts, it is clarified that the cost of transportation from the factory to the place of removal, where the factory is not the place of removal, shall not be excluded for the purposes of determining the value of the excisable goods". From the above rule it can be seen that when goods are sold for delivery at a place other than place of removal, transaction value of excisable goods shall not include actual cost of transportation from the place of removal up to the place of delivery of such excisable goods. As per the rule reproduced above, in order to allow the deduction of the cost of transportation following criterion should be ....
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.... and perused the material available on record. The issue involved in the present case is that whether the freight/insurance charged separately in the sale invoices of excisable goods is includible in the assessable value of such excisable goods. 4.1 Having considered the rival contention we find that freight/insurance have been charged separately and received separately. We also take notice that the buyers of the goods Indian Oil Corporation Ltd. and Hindustan Petroleum Corp. Ltd. have issued purchase order specifying the price for the goods separately and also specifying the transportation cost for the supply of goods. Accordingly, appellant have supplied the goods and raised invoices for the price of goods and the transportation. Thus, it amounts to showing the cost of transport separately in the invoices. 4.2 The relevant Rule 5 of the Valuation Rules is reproduced below:- "Rule 5. Where any excisable goods are sold in the circumstances specified in clause (a) of sub-section (1) of section 4 of the Act except the circumstances in which the excisable goods are sold for delivery at a place other than the place of removal, then the value of such excisable goods shall be deeme....