TaxTMI 
TaxTMI 
2016 (12) TMI 1385
X X X X Extracts X X X X
X X X X Extracts X X X X
....manufacturer to his customers/ buyers should be inclusive of freight and transit insurance from the factory gate to such "place of removal". During the investigation, a statement of Shri DK Bhattacharya, Deputy Manager was taken who state that their sale to various electricity boards was on ex-factory basis, that they have not filed declaration containing marketing pattern as required under Rule 173 C (3A) with the Central Excise Department, that the responsibility of goods lies on M/s. Emco till delivery of the said goods to the customer's premises and therefore, freight and transit insurance charges are recovered from the customers, that for covering transit risk they have taken transit insurance policies and whenever there is a loss or damage to the goods M/s. Emco claims the same from the insurance company, that the amount of freight and transit insurance is not included in the assessable value for the purpose of calculating Central Excise Duty, that the possession of goods was transferred only at the premises of the buyers/ customers. 1.1 On the basis of the above, it was alleged that M/s.Emco Ltd. have contravened the provisions of Central Excise Act/ Rules, 1944 inasm....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e incurred before the 'place of removal' then they are to be included while arriving at the transaction value. Again, in the context of the present case, what is to be determined is as to whether the 'place of removal' was the factory gate of the respondent or it was the premises of the purchaser at the time of delivery of these goods. 12. If the goods are cleared at the factory 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 to the buyer and the aforesaid expenditure are thereafter incurred by the buyer. It is this aspect which was gone into by this Court in the case of Escorts JCB Ltd. (supra). That was a case where question of including insurance charges came up for consideration. It was found as a fact that the goods we....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... of another. Referring to a decision reported in (1947) K.B. 685 - Prudential Staff Union v. 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. v. A. Tomlinson (Hauliers) Ltd. - H.L. (E) 1966 451, it has been submitted on behalf of the assessee that a bailee apart from its interest may also insure the interest of the owner of the property. There may be floati.ng insurance policy covering not only the limited interest but the whole interest of the ownership of the customers in the normal course. To substantiate the point further, a reference to Para 5012 at Page 184 of Benjamin's Sale of Goods Fourth Edition has been made which is to the following effect : "Insurance. 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 ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d 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". 13. We have extensively discussed the judgment in Escorts JCB Ltd. because of the reason that the Tribunal has allowed the appeal of the respondent herein with the observations that case of the respondent is covered by this judgment. We would like to point out at this stage that in Commissioner of Excise, Noida v. Accurate Meters Ltd. - (2009) 6 SCC = 2009 (235) E.L.T. 581 (S.C.), the Court took note of few more decisions, including the case of Escorts JCB Ltd., and reiterated the aforesaid principles but at the same time also emphasising that the place of removal depends on the facts of each case. 14. In a recent decision of this Court in Commissioner, Customs and Central Excise, Aurangabad v. M/s. Roofit Industries Ltd - (2015) 5 SCALE 470 = 2015 (319) E.L.T. 221. (S.C.), the position in law was summarized in the following manner: "12. The principle of law,....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... covering the transit risk they had taken out transit insurance policy and whenever there was a loss or damage to goods M/s. Emco claims the same from the insurance company,......the possession of the goods is transferred only at the premises of the buyers/customers". The Commissioner also noted that the aforesaid statement was even confirmed by the General Manager of the assessee. 17. The Tribunal did not bother to look into any of the aforesaid aspects and/or discussed the same. In a cryptic non-reasoned order, the Tribunal allowed the appeal. To be precise, the following order is passed : "Appellants were issued a notice proposing to levy duty in the value of amount of freight and transit insurance recovered by them but the same suppressed from the department as it appears from page 10 of the show cause notice. 2. It was confirmed after hearing both sides, it is found that the issue is well settled in favouring the assessee by the decision in the case of Associated Strips Ltd. [2002 (143) E.L.T. 131 (Tri.)] which has been approved by the Apex Court in the case of Escorts JCB Ltd. v. Collector of Central Excise [2002 (146) E.L.T. 31 (S.C.)]. Being bound by th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Zarda Factory was overruled by the Hon'ble Supreme Court as reported in 2002 (146) ELT 497 (SC) in so far as it relates to inclusion of freight and resources charges for delivery to the customers from the depot relying on the decision of Hon'ble Supreme Court in the case of Escorts JCB Ltd. - 2002 (146) ELT 31 (SC). In the instant case, the Commissioner (Appeals) had also relied on the decision of the Tribunal in the case of Escorts JCB Ltd. - 2000 (118) ELT 650 (T). However, the said decision of the Tribunal was also overruled by the Hon'ble Supreme Court as reported in 2002 (146) ELT 31 (SC). It is seen that the Commissioner had examined the definition of 'sale' and 'purchase' as given under Section 2(h) of the Central Excise Act, 1944 and in that reference he had examined the contracts with MSEB and DSES. The Commissioner has observed in his order as follows: - "54. Further, I have gone through the copies of contract with MSEB and BSES submitted by M/s Emco at the time of personal hearing and I find that in both the contracts a condition has been laid down that the goods will be dispatched with freight pre-paid by road and upto the destination of t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ssion 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," 59. Further, Section 2 (h) of the Central Excise Act, 1944 states that sale means any transfer of the possession of goods by one person to another. 60. On perusal of both the sections mentioned above, it is clear that the transaction value is the price at which goods are sold i.e. when the possession of goods are transferred and this value includes in addition to the amount charged 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 sale, whether payable at the time of sale or at anytime, 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 paid or payable. In the instant case, the sale is taking place at the buyer's premises and the cost of transportation upto the place of sale i.e. place of rem....
X X X X Extracts X X X X
X X X X Extracts X X X X
....sub-clause (i) of the said definition would apply. He argued that so clause (ii) and (iii) are not applicable to the present situation as the goods are not cleared from warehouse or any other premises of the appellants from where the goods are sold after their clearances from the factory, He relied on the following decisions to assert to buyers premises cannot be place of removal and the place of removal has to be the premises of the manufacturer: (i) Aditya Birla Insulators Ltd vs. CCE [2008 (226) ELT 377 (Tri.-Kolkata)] (ii) CCE vs. Gauwahti Carbon Ltd [2009 (243) ELT 307 (hi. Kolkata)] (if) CCE vs. Mukat Pipes Ltd. [2013 (298) ELT 268 (Tri.- Del.)] (iv) Bajaj Auto Ltd. vs. Commr. of Cus. & C.Ex, Aurangabad [2003 (153) ELT 557 (TH.- Mumbai)] 2.3 He further argued that the appellants have sold the goods from the factory gate. He argued that the title to the goods passed to buyers at its factory gate when the goods are issued for delivery post the inspection by the buyer or his authorised agency and on receipt of dispatch instructions from buyer post inspection. He argued that since the products are made as per the specifications of the buyer, the delivery is offered....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e buyer at the factory gate itself. He argued that the invoices raised on the name of the buyers, the appellant has received payment through proper banking channels. He further argued that lorry receipts show buyer as the consignee. He argued that as per Section 39 of the Sales of Goods Act, where in pursuance of a contract of sale, the seller is authorised or required to send the goods to the buyer, delivery of the goods to a carrier, whether named by the buyer or not, for the purpose of transmission to the buyer, or delivery of the goods to a wharfinger for safe custody is prima facie deemed to be a delivery of the goods to the buyer. He further argued that in view of the provisions of Section 23 and Section 39 of the Sale of Goods Act, 1930 the goods are delivered or deemed to be delivered to the buyer and property and possession of the goods passes on to the buyer when the goods are handed over to transporter. He further argued that in any event insurance and freight charges were agreed separately independent of the ex-works price of the goods. He argued that it is not well settled law that where the insurance and freight charges are agreed and shown separately and in the event....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rdinary course of trade or business for cash or deferred payment or other valuable consideration. Accordingly, he argued that the place where the possession of goods is transferred by the manufacturer to their customer/buyer. He further argued that the transaction value means the price actually paid or payable for the goods when sold and includes in addition to the amount charged 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 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 organisation expended, 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. 4. We have gone through the rival contentions. We find that the issue that needs to be decided is if the 'sale' has taken place at factory gate of at the premises of buyers and consequently if the value of freight and transit insurance from factory gat....
X X X X Extracts X X X X
X X X X Extracts X X X X
....their premises. The transit insurance and the risk of transit is taken by the seller, replacement of goods lost, broken or transit is would be the responsibility of the seller. Essentially the possession of goods have to be transferred to buyer by the seller, at the premises identified by the buyer. The insurance taken by the seller in respect of transit risk, is not an insurance taken on behalf of the buyer but on his own behalf. The seller is responsible for delivering the goods safe and sound at the premises identified by the buyer at his own risk. 4.2 To examine the issue we have to first examine the meaning of the term sale in the context of Central Excise Law. The Section 2 and sub-section (h) of the Central Excise Act contains the definition of various words/expressions used in the Act. It reads as under:- SECTION 2. Definitions. - In this Act, unless there is anything repugnant in the subject or context, - -- (h) "sale" and "purchase", with their grammatical variations and cognate expressions, mean any transfer of the possession of goods by one person to another in the ordinary course of trade or business for cash or deferred payment or other valuable conside....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ct provides that words and expression used and not defined in the said Act but defined in Indian Telegraph Act, 1885 or the Indian Wireless Telegraphy Act, 1933 shall have the meanings respectively assigned to them in those Acts. Thus, meaning of only such words which are not defined under TRAI Act but defined under those Acts could be taken into consideration. It is furthermore well known that the definition of a term in one statute cannot be used as a guide for construction of a same term in another statute particularly in a case where statutes have been enacted for different purposes." Similarly in the case of SHRED BAIDYANATH AYURVED BHAWAN LTD (2009 (237) E.L.T. 225 (S.C.)) Hon Supreme Court has observed as under: 41. True it is that Section 3(a) of the Drugs and Cosmetics Act, 1940 defines 'Ayurvedic, Sidha or Unani Drug' but that definition is not necessary to be imported in New Tariff Act. The definition of one statute having different object, purpose and scheme cannot be applied mechanically to another statute. As stated above, the object of Excise Act is to raise revenue for which various products are differently classified in New Tariff Act. In view of a....
X X X X Extracts X X X X
X X X X Extracts X X X X
....buyer to the assessee in connection with the sale (i.e. transfer of the possession of goods b one person to another in the ordinary course of trade or business for cash or deferred payment or other valuable consideration) of such goods, and such price-cum-duty, excluding sales tax and other taxes, if any, actually paid, shall be deemed to include the duty payable on such goods. The concept of transfer of ownership based definition of 'sale' is alien to the Central Excise Act. Section 4(1) of the Central Excise Act creates liability on each 'removal of goods' and not on 'transfer of property in goods', 4.5 The other sections of the Central Excise Act are also harmonized with this definition of 'sale' linked with the physical possession of goods. Section 4 (3) (c) defines the place of removal and Section 4(3) (cc) defines the time of removal as follows: Section 4(3)(c) in the Central Excise Act, 1944 (c) "place of removal" means - (i) a factory or any other place or premises of production or manufacture of the excisable goods; (ii) a warehouse or any other place on premises wherein the excisable goods have been permitted t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ransfer of the property in the goods is to take place at a future time or subject to some condition thereafter to be fulfilled, the contract is called agreement to sell. (4) An agreement to sell becomes a sale when the time elapses or the conditions are fulfilled subject to which the property in the goods is to be transferred. 19. Property passes when intended to pass. - (1) Where there is a contract for the sale of specific or ascertained goods the property in them is transferred to the buyer at such time as the parties to the contract intend it to be transferred. (2) For the purpose of ascertaining the intention of the parties regard shall be had to the terms of the contract, the conduct of the parties and the circumstances of the case. (3) Unless a different intention appears, the rules contained in Sections 20 to 24 are rules for ascertaining the intention of the parties as to the time at which the property in the goods is to pass to the buyer. 23. Sale of unascertained goods and appropriation.- (1) Where there is a contract for the sale of unascertained or future goods by description and goods of that description and in a deli....
X X X X Extracts X X X X
X X X X Extracts X X X X
....o has manufactured it. The question of transfer of property does not arise at all. In these circumstances it is doubtful if reliance can be placed on the definition and provisions of Sale of Goods Act 1930 to interpret the provisions of the Central excise Act. Reliance can be placed on these definitions and provisions of Sale of Goods Act 1930 only if 'there is anything repugnant in the subject or context' requiring such reliance. Reliance on section 39 of the sale of goods act could lead to an anomaly. In the instant case there is no contract with the transporter on behalf of the buyer as envisaged in section 39 of Sale of Goods act. Thus provisions of Section 39 of the Sale of Goods Act 1930 cannot be invoked. In fact the transit loss if any is to be borne by the seller as demonstrated in the paragraph below. 6 The terms of one such contract of the appellant with the BSES are as follows: Freight and Insurance: The charges towards Freight and Insurance will be Rs. 3,00,000/- for Transformer & its accessories and Spares. The goods will be despatched with Freight prepaid by road. You shall arrange for the insurance of all goods and items to be supplied under this....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e 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 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 or material. Thus, there was no money given earlier by the buyer to the assessee and the consideration was to pass-on 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 a....