STOCK TRANSFER

[SHIVKUMAR SHARMA]

Respected Experts

We have cleared 500 kgs.goods @Rs.200/-(Including Transportation ) Per Kg from Our factory (Mfg.Unit) at Kanpur to our Depot at Panipat on stock Transfer basis after paying Excise duty of ₹ 12500/-(12.5%)& The same goods we have sold from our Depot as under.

250 [email protected]/- per kgs.Plus !2.5% Excise Duty.to customer A

[email protected]/-Per Kgs.Plus 12.5% Excise Duty.to Customer B

Please confirm whether we have to pay Differential duty at our Factory in case of goods supplied to Customer B.fro our Depot.

[Rajagopalan Ranganathan]

Sir,

In case of sale from depot , duty will be payable on the price prevailing at the depot as on date of removal from factory. Price at which such goods are subsequently sold from depot is not relevant for the purpose of determining transaction value since depot is the place of removal. In your case if the price of the goods is ₹ 200 per Kg. at the depot on the date of removal of the same goods from the place of manufacture (factory) then it will be the transaction value of the goods and you have pay duty of excise on that basis. It is not relevant at what price (higher or lower) the goods are sold from the depot.

By way of illustration if an assessee transfers a consignment of paper to his depot from Delhi to Agra on 5.7.2000, and that variety and quality of paper is normally being sold at the Agra depot on 5.7.2000 at transaction value of ₹ 15,000 per tone to unrelated buyers, where price is the sole consideration for sale, the consignment cleared firm the factory at Delhi on 5.7.2000 shall be assessed to duty on the basis of ₹ 15,0000 per tone as the assessable value. If assuming that on 5.7.2000 there were no sales of that variety from Agra depot but the sales were effected on 1.7.2000, then the normal transaction value on 1.7.2000 from the Agra depot to unrelated buyers, where price is the sole consideration shall be the basis of assessment. (Extracted from F.No. 354/81/2000-TRU , Dt. 30/06/2000 issued by Tax Research Unit of CBEC).

[MADAN RAHEJA]

Dear Sir, Brilliant explanation of correct legal position by Sh. Ranganathan. However, audit parties are usually prompt to raise audit objection on such points.

[Ganeshan Kalyani]

Sir, thanks Sri Rajagopalan Sir, your reply enriched my knowledge. Thanks.

[SHIVKUMAR SHARMA]

Shri Rajagopalan Ranganathan Sir,/all Respected Experts

As advise by our Range Supdt.we have to pay Excise duty on ₹ 210/-Per kg.as our sale is at Depot(Place of Removal is Depot) if we sale the goods at our Depot more than the Per KG Rate of our Factory Inoice than we have to Pay Differential duty on or before 5th day of the next month.at our factory.Please provide suitable/related case law or any other legal authority.

[KASTURI SETHI]

Sh.Shiv Kumar Sharma Ji,

The whole scenario has changed.Board's Circular F.No. 354/81/2000-TRU , Dt. 30/06/2000 has lost its sheen. The place of removal is to be determined on the basis of the provisions of Central Excise Act, 1944 read with Sale of Goods Act, 1930. See Board's Circular No. 999/6/2015-CX dated 28.2.15. Also go through the following judgements of Supreme Court:

1. 2015 (319) ELT/221.(SC) =  2015 (4) TMI 857 - SUPREME COURT in the case of Roofit Industries Ltd. decided on 23.4.2015.

2. 2015 (322) ELT. 394 (SC) =  2015 (8) TMI 200 - SUPREME COURT in the case of EMCO Ltd. decided on 31.7.15

3. 2015 (324) ELT.670 (SC) = 2015 (10) TMI 613 - SUPREME COURT in the case of Ispat Industries Ltd. decided on 7.10.15.

Essence in layman's language

If sale tax is paid at factory gate, the place of removal will be factory gate.

If sale tax is paid at depot, the place of removal will be depot.

If sale tax is paid at the buyer's doorstep, the place of removal will be buyer's doorstep.

Other factors are also very important.

Accordingly the issue of freight and insurance whether to be included into assessable value, will be decided.Cenvat Credit is also linked. So many issues are involved. The facts of each and every case are different. So go through all these judgements of the Apex Court and take the decision accordingly.

[Rajagopalan Ranganathan]

Sir,

With due respects to the views expressed by Shri Kasturi Sethi Sir on 3.8.2016 in my view the Supreme Court judgments cited are dealing with the question of 'place of removal' and inclusion or non-inclusion of freight and transit insurance in assessable value/transaction value. However the issue involved in Id 110732 initiated by Shivkumar Sharma is about what is the transaction value to be adopted when excisable goods are sold at the depot at lesser price/higher price after removal from the factory. In my view the clarification given by TRU in F.No. 354/81/2000-TRU , Dt. 30/06/2000 is still relevant. I invite views of other experts in this regard.

[Ganeshan Kalyani]

Sir, Sri Rajagopalan Sir, with due respect, in my view the place of removal as appreciated by Sri Kasturi Sir has an importance in this query. This is because the excise duty is payable on removal of goods. If the place of removal is factory then value of goods at factory shall be considered. And if the place of removal is the depot than the value of goods at the time of removal of goods from depot need to be considered. Thus the place of removal place a significant role here.

This is my view. I welcome Sri Kasturi Sir's view in this regard. Thanks.

[KASTURI SETHI]

Sh.Ganeshan Kalyani Ji,

The element of 'SALE' is not present in the clearance from a factory on stock-transfer basis. So where sale takes place that is 'the place of removal' in view of Board's circular dated 28.2.15 and latest judgements of the Apex Court.

However, in support of your views, an other judgement of the Supreme Court is given below :-

Valuation (Central Excise) - Free gifts to buyers - Sole consideration for sale

The Supreme Court Bench comprising Hon’ble Mr. Justice S.H. Kapadia and Hon’ble Mr. Justice B. Sudershan Reddy on 16-7-2008 dismissed the Review Petition (C) No. 2125 of 2004 in Civil Appeal No. 4964 of 2000 filed by Sony India Ltd. against the Apex Court order and judgment dated 5-5-2004 in Civil Appeal No. 4964 of 2000 as reported in 2004 (167) E.L.T. 385 (S.C.) (Sony India Ltd. v. Commissioner). While dismissing the review petition, the Supreme Court passed the following under :-

“In our view the review petition is misconceived and is accordingly dismissed.”

The Supreme Court in its impugned order and judgment while affirming the Tribunal decision impugned before it and reported in 2000 (120) E.L.T. 644 (Tribunal) had held that sale price charged from buyers, as affixed at depot, does not cease to be sole consideration for such sale not withstanding free gifts offered by assessee. The Court further held that offer of gifts was only incidental benefit and not part of consideration to be paid in regard to TV sets as such.

The Apex Court further held that stock transfer of goods from factory to depots was not sale of goods as actual sale of goods took place from depots, hence Maximum Retail Price fixed at depots was to be considered the price for sale of goods notwithstanding free gifts offered to buyers.

[Sony India Ltd. v. Commissioner - 2008 (229) E.L.T. A127 (S.C.)]

 

[YAGAY andSUN]

Since you had paid differential C.E. Duty on 250 * 210, then, on sale of 250*190, you can seek refund from C.E. Department. It is now settled legal position. However, no assessee files an application for seeking refund in such scenario as mentioned by you in your point number 1.

[Ganeshan Kalyani]

Vivid replies, Thanks experts. Enriching.

AI Summary

Place of removal determines assessable value; depot pricing can govern excise liability and trigger differential duty obligations. Whether excise duty on goods sent from factory to depot on stock transfer is assessed on factory or depot pricing depends on the place of removal and the prevailing transaction value at that place; TRU guidance supports using depot price where the depot is the place of removal, but later Board guidance and Supreme Court authority alter the place of removal and value analysis, affecting inclusion of freight, Cenvat credit, differential duty obligations and refund possibilities.