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2023 (5) TMI 890
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....1944, (b) I impose penalty of Rs. 29.44,101 (Rupees Twenty nine lakhs forty four thousand one hundred and one only) on them under Section 11AC of the Central Excise Act, 1944 read with Rule 25 of the Central Excise Rules, 2002. (c) I charge interest at appropriate rate for the relevant period, on short payment of duty, from them under Section 11AB of Central Excise Act." 2.1 Appellant is having manufacturing unit at Kanjurmarg, Mumbai and was procuring order for dispatching transformers directly to the site of the customer through their EPD (Project Division) at Chennai. In terms of this order the goods were directly dispatched to the consignee as the project for which the goods were meant and the customer was shown as EPD division at Chennai. For recovering the freight from the customer during the year 2001-02 and 2002-03 they raised debit notes for Rs.1,84,00,000/- and Rs.630/-. These freight charges were not made part of the assessable value taken for payment of duty. 2.2 A show cause notice dated 21.03.2006 was issued to the appellant asking them to show cause as to why:- "(a) Duty of Rs.29,44,101/- (Twenty-nine Lakhs forty-four thousand one hun....
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....]. 3.3 Learned AR reiterates the findings recorded in the impugned order. 4.1 We have considered the impugned order along with the submissions made in appeal and during the course of arguments. 4.2 For dismissing the appeal filed by the appellant, Commissioner (Appeals) has in her order observed as follows:- "7. There is no dispute that the appellants have recovered freight charges from their EPD (Project Division) by way of debit notes. The department's contention is that EPD (Project Division) in the place of removal and hence the freight charges recovered from the factory to the place of removal is to be included in the transaction value. In terms of Rule 5 of Valuation Rules, 2000, expenses incurred upto the place of removal has to be included in the Assessable Value. Hence expenses upto the place of removal which includes the freight charges form part of the transaction value. The difference in opinion between the department and the appellant lies in the place of removal. It is the contention of the appellants that the sale has taken place at the factory gate and the price is inclusive of the freight charges. Hence, no further amount should be added to the In....
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....ue to the department. Hence, the appellants cannot take the plea that there was no intention to evade payment of duty. This act on the part of the appellants, make the case for invocation of extended period and invokation of Section 11AC of the said Act. Thus it is a clear case of suppression of facts with intention to evade payment of duty. Hence, provisions of Section 11A (1) read with Section 11AC are applicable, Where duty is recoverable under Section 11A of the said Act, interest is recoverable under Section 11AB of the said Act." 4.3 The only issue for our consideration is to determine as to what is place of removal in the present case. We reproduce below the invoices on the sample basis : - 4.4 From the perusal of the invoices, it is quite evident that the goods were directly dispatched by the appellant from their factory to the site of the ultimate customer. 4.5 The above manner of preparation of invoice has been recognized by the Board by way of Circular No. 96/7/1995 dated 13,02.1995, clarifying as follows in respect of the admissibility of Modvat Credit to the consignee: "1. A registered person places an order on a manufacturer for supply and delivery o....
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....a place other than the place of removal, then the value of such excisable good 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. And, according to learned A.R., the transportation charges are not shown separately in the invoice. 5. The only question that needs determination is whether the sale of goods was completed at the factory gate in order to consider the transaction value as per invoices. We find from the purchase order that the freight charges are to the buyer's account. Merely because these are not mentioned separately is no reason to conclude that sale is not complete at the factory gate. The Commissioner in his Order did not reach any conclusion as to the fact of sale at the factory gate. The Commissioner only held that "......Presuming that the sale of goods is complete at the factory gate, then there was no necessity for the assessee to recover any separate charges on account of transp....
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....) 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-distributor of such distributor; or (iv) they are so a....
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....oods are to 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 a....
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....ortation; 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." 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. A....
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.... the buyer. It is not necessary that insurance of the goods and the ownership of the property insured must always go together. It may be depending 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 specif....
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.... price is the price at the "time of delivery" and "at the place of removal". Before the amendment, the place of removal was only the factory or any other place or premises where the excisable goods 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 th....
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.... to at what point of time sale is effected, namely, whether it is on factory gate or at a later point of time, i.e., when the delivery of the goods is effected to the buyer at his premises. This aspect is to be seen in the light of the provisions 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 delivere....
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....t will be seen that this is a decision distinguishing the Escorts JCB's case on facts. It was found that goods were to be delivered only at the place of the buyer and the price of the goods was inclusive of transportation charges. As transit damage on the assessee's account would imply 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 "exworks", 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 so....
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....as to whether the freight charges recovered by the appellant manufacturer from the purchasers of manufactured product / liquid CO2 for transporting the said product in its own specialized tankers to the buyers premises have to be included in the transaction /assessable value or not. 6. The relevant provision for the purpose is section 4 of Central Excise Act, 1944 and Rule 5 of Central Excise Valuation Rules, 2000. Section 4(1) reads as follows: ..... 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 ag....
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....sold in the wholesale trade at a place outside the factory gate, the value should be determined as the price at which the excisable article is sold in the wholesale trade at such place, after deducting 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 remova....
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.... retain with the manufacturer. Accordingly we hold that the cost of transportation in the given circumstances is the one which has expressly been excluded in terms of Rule 5 of Valuation Rules." 4.10 In view of the above decisions, we do not find any merits in the impugned order. 5.1 The impugned order is set aside and the appeal allowed. ( Order pronounced in the open court ) ============= Document 1Swer Systems Group Business Unis of Crompton Greaves Ltd. Permanent Income Tax No.: AAACC.3840 KBMY/SP/Rg/53 Central Excise Series No. 65 A Form Invoice INVOICE CUM CHALLAN Invoice for removal of Excisable Goods from a Factory or ware house on Payment of Duty Under Rules 11 of C. Ex (No.2) 2001 ECC No. AAACC38400M 011. Regd. No. MF. 2904080042 Name of Excisable Commodity: Transformers & Spares Chapter Sub Heading No. 8504.00 PLA NO: NES (68)471 No. & Date of Notification under which any concessions rates of duty are claimed. TRANSFORMER DIVISION Factory: Kanjur Marg, (East), Mumbai 400 042. GG Regd. Off.: 1, Dr. V. B. Gandhi Marg, Mumbai 400 001. URIGINAL FOR BUYER Crompton Greaves Authorize Signatory Пактарам COMMISSIONARA....
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....cate No. 400018/3-123 Effective 1.4.96 ret asistration artificate 1-10 Effective 1.4.96 Total Duty Payable in words: 13. FITT EIGHT LAKE PORT THO0SAND GALT Date of Removal 27/04/2002 THIRTY Certified that the particulars given below are true & correct. The amount indicated represents the price actually charged & that there is no flow of additional consideration directly or indirectly from the CERTIFIED that the particulars given above are correct CROMPTON GREAVES MITED TRANSFORMER VISION ewer Systems Group mpter, Greaved Permanent Income Tax No.: AAACC.3840 K BMY/SP/Rg/53 Central Excise Series No. 65 A Form Invoice INVOICE CUM CHALLAN Invoice for removal of Excisable Goods from a Factory or ware house on Payment of Duty under Pucas 11 of C. Ex (NO2)2001 ECC No. AAACC3840HOM 011. Regd. No. MF. 2904080042 Name of Excisable Commodity: Transformers & Spares, Chapter Sub Heading No. 8504.00 PLA NO: NES (68471 No. & Date of Notification under which any concessionia rates of duty are claimed. TRANSFORMER DIVISION GG FOR BUYES Crompton Greaves Factory: Kanjur Marg. (East), Mumbai 400 042. Regd. Off.: 1, Dr. V. B. Gandhi Marg, Mumbai 400 001. EXCISE RANGE ....