2016 (12) TMI 1385 - AT - Central Excise

Tribunal excludes freight & insurance charges from assessable value, clarifies place of removal rules

EMCO Ltd., Versus Commissioner of Central Excise, Mumbai-IV (Vice-Versa)

EMCO Ltd., Versus Commissioner of Central Excise, Mumbai-IV (Vice-Versa) - TMI Issues Involved:1. Inclusion of freight and insurance charges in the assessable value for the purpose of excise duty.2. Determination of the 'place of removal' under Section 4 of the Central Excise Act.3. Compliance with Central Excise Rules regarding declaration and payment of duty.Issue-wise Detailed Analysis:1. Inclusion of Freight and Insurance Charges in Assessable Value:The primary issue in this case was whether the freight and insurance charges incurred by the appellant, M/s. Emco Ltd., should be included in the assessable value for the purpose of calculating Central Excise Duty. The appellant argued that the sale took place at the factory gate, and thus, these charges should not be included. The Commissioner, however, concluded that the property in goods was passed to the customers only at the destination, and thus, these charges should be included in the assessable value. This conclusion was based on the terms of the contracts which stipulated that the goods were to be dispatched with freight pre-paid and insured by the appellant up to the customer's destination. The Tribunal initially set aside the demand, but the Supreme Court remanded the matter back to the Tribunal for fresh consideration.2. Determination of the 'Place of Removal':The 'place of removal' was a crucial factor in determining whether the freight and insurance charges should be included in the assessable value. According to Section 4 (3) (c) of the Central Excise Act, the place of removal is the place from where the excisable goods are to be sold after their clearance from the factory. The Supreme Court, in its remand order, emphasized that if the place of removal is the factory gate, then the charges incurred after the removal from the factory gate should not be included in the assessable value. Conversely, if the place of removal is the buyer's premises, then these charges should be included. The Tribunal was directed to examine the terms and conditions of the sale to determine the place of removal.3. Compliance with Central Excise Rules:The appellant was also alleged to have contravened various provisions of the Central Excise Rules, such as failing to file declarations regarding the place of removal (Rule 173C), removing goods without determining the proper rate of duty (Rule 173F), and not debiting the appropriate amount of duty through PLA or Cenvat account (Rule 173G). These allegations were based on the assertion that the appellant did not include freight and insurance charges in the assessable value, thereby evading duty.Tribunal's Findings and Conclusion:The Tribunal, upon re-examination, found that the definition of 'place of removal' was amended effective from 1/7/2000, which excluded any place other than the factory or warehouse as the place of removal. For the period after 1/7/2000, the Tribunal concluded that only the factory premises could be considered the place of removal. Therefore, the appeals for the period after 1/7/2000 were allowed, and the freight and insurance charges were not to be included in the assessable value.For the period prior to 1/7/2000, the Tribunal examined the contracts and concluded that the goods were delivered to the buyers at their premises, and the seller bore the risk of transit. This indicated that the place of removal could be the buyer's premises, and thus, the charges could be included in the assessable value. However, subsequent to the remand and the decision in the case of Ispat Industries Ltd., the Tribunal noted that the buyer's premises could not be considered the place of removal under the Central Excise Act. Thus, the Tribunal allowed the appeal of M/s. Emco Ltd. and dismissed the Revenue's appeal, concluding that the buyer's premises could not be the place of removal, and the freight and insurance charges should not be included in the assessable value.Final Pronouncement:The Tribunal pronounced its decision on 14/6/2016, allowing the appeal of M/s. Emco Ltd. and dismissing the Revenue's appeal.