TaxTMI 
TaxTMI 
2022 (12) TMI 48
X X X X Extracts X X X X
X X X X Extracts X X X X
....3 to 2016- 17 and audit of freight income ledger for the month of March 2015, it was noticed that the appellant had collected "Freight Charges" from the buyers but has not included the same in transaction value. From the perusal of the purchase order, the department observed that the appellant is supplying material (liquid CO2) on 'FOR destination basis' to the destination through their own vehicles. It was also observed that the transportation cost was highly inflated to reduce the assessable value of manufactured product. Department formed an opinion that the ownership of the goods continued with the appellant till the goods reach the destination. The appellant is thus alleged to have excluded the freight charges with the sole intention to undervalue its manufactured product. Accordingly, vide show cause notice No. 06/2018-7358 dated 03.05.2018, Central Excise duty Rs.1,13,52,289/- was proposed to be recovered, as being short paid from the appellant along with interest and penalty. The said proposal was initially confirmed by the Original Adjudicating Authority vide Order-in-Original No. 06/2019 dated 05.02.2019. The appeal thereof has been dismissed by Commissioner (Appeals) vid....
X X X X Extracts X X X X
X X X X Extracts X X X X
....at Industries Ltd. reported as [2015 (324) ELT 670 (SC)]. 4. To rebut the submissions, the Adjudicating Authority has relied upon the CBEC Circular No. 988/12/2014 -CE dated 20.10.2014 wherein it has been clarified that the 'place of removal' needs to be ascertained in terms of provisions of Central Excise Act, 1944 read with the provisions of Sale of Goods Act, 1930. It also clarified that it is the place where sales have taken place or where the property of any goods has passed on from seller to buyer which is relevant consideration to determine the 'place of removal'. Learned Departmental representative has impressed upon that in the present case there is sufficient evidence discussed by the adjudicating authority about sale to have concluded at the buyer's place and as such, the buyer's place was the place of removal. Transportation charges up to such place have rightly been included in the assessable value of the liquid CO2 manufactured by the appellant. The appeal is accordingly, prayed to be dismissed. 5. Having heard the rival contentions, we observe as follows: The issue involved herein is of the valuation and as to whether the freight charges recovered by the app....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 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." 7. A bare perusal of Rule 5 of Valuation Rules clarifies that the cost of transportation from the 'place of removal' up to the place of delivery of the excisable goods has to be excluded. In this connection, the phrase "place of removal" needs determination, however taking into account the facts of this individual case. The phrase "place of removal" is defined under section 4 of the Central Excise Act, 1944 as: "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 or premises wherein the excisable goods have been permitted to be stored without payment of duty; (iii) a depot, premises of a consignment agent or any other place or premises from where the excisable goods are to be sold after their clearance from the factory; from where such goods are removed." From this definition, it is clear that in case of a factory gate sale....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ng therefrom the cost of transportation of the excisable article from the factory gate to such place. The claim to other deductions will be dealt with later." The Court further went on to say : "Where the sale in the course of wholesale trade is effected by the assessee through its sales organization at a place or places outside the factory gate, the expenses incurred by the assessee upto the place of delivery under the aforesaid heads cannot, on the same grounds, be deducted. But 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." 10. To our opinion the harmonious reading of three of above provisions (Section 4 of Central Excise Act, Rule 5 of Valuation Rules and definition of place of removal under section 4 of Central Excise Act, 1944) makes it clear that buyer's premises can never be, by any law, can be called as the place of removal of excisable goods. The place of remova....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 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 of material. Thus, there was no money given earlier by the buyer to the assessee and the consideration was to pass on only after 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 at the factory gate of the assessee but at the place of the buyer on the delivery of the goods in question." 12. These findings have been modified by Hon'ble Apex Court ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ve any right of disposal of the goods in any manner. It had no right to divert the goods so handed over to the transporter and meant for a particular customer not to anybody else. 12.2 The Hon'ble Supreme Court in this case considered the amendments made after 1973 in relevant section 4 and observed that there were three important changes made in the Section 4. "Place of removal" has been defined for the first time to mean not only the premises of production or manufacture of excisable goods but also a warehouse or any other place or premises wherein such goods have been permitted to be deposited without payment of duty and from where such goods are ultimately removed. Section 4(2), which was introduced for the first time, where in relation to excisable goods the price thereof for delivery at the place of removal is not known, and the value 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 was statutorily excluded. It was further observed by the Hon'ble Supreme Court that Section 4 as substituted by the 1973 Amendment Act suffered a further amend....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 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. Position remains same post 2003 as well. Further, the Hon'ble Supreme Court held that 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 number of the transit Insurance Policy were mentioned. Above all, excise invoices were prepared at the time of the goods leaving the factory in the name and address of the customers of the respondent. When the goods were handed over to the transporter, the respondent had no right to the disposal of the goods nor did it reserve such rights inasmuch as title had already passed to its customer. 12.5 As far as Roofit (supra) decision is concerned, the Hon'ble Court observed that "This Court's attention was not drawn to section 4 as o....