TaxTMI 
TaxTMI 
2024 (1) TMI 883
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....revealed that the goods were sold by appellant for delivery at buyer's premises which is a place different from the place of removal i.e. the factory gate. The department was of the view that the freight charges are liable to be included in the transaction value for payment of central excise duty. Show cause notices for different period were issued proposing to recover the short paid differential duty along with interest and for imposing penalties. After due process of law, the original authority confirmed the demand, interest and imposed penalties. Aggrieved, the appellant is now before the Tribunal. 3. The learned Counsel Shri Dhaval K. Shah appeared and argued for the appellant. It is submitted that the goods are sold at the factory gate and that therefore, the freight charges need not be included in the assessable value. As per the agreement with the customer/ buyer, there is a mutual understanding that the goods are to be delivered at the buyer's premises. Though the transit freight is chargeable to the buyers, the appellant has collected the freight charges separately by excise invoices. Learned Counsel adverted to the Purchase Order and submitted that the price agreed is 'E....
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....e same is to be included in the assessable value. The decision in the case of Principal Commissioner, Raipur vs. M/s. Unique Structures and Towers Limited - 2020-TIOL-43-CESTAT-DEL was relied upon. It is prayed that the appeal may be dismissed. 5. Heard both the sides. 6. The issue to be decided is whether the freight charges are includible in the assessable value or not. On perusal of the Purchase Order, it is seen that delivery of goods is on 'EX-WORKS' basis and its insurance is covered by the appellant. In the case of Commissioner of Customs & Central Excise vs. Ispat Industries Limited (supra), it was noted by the Hon'ble Apex Court that the place of removal is to be determined on the facts of each case. The payment of insurance charges or freight charges cannot be criteria for deciding the place of removal. The documents show that there is mutual agreement between the parties on 'EX-WORKS' price. The contention of the department that because the insurance charges are borne by the appellant upto the buyers premises from factory gate, the transfer of property in the goods has not been passed on to buyer at the factory gate, cannot be accepted. The Circular issued by the Board....
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.... that in the case of Ispat Industries (supra), after taking note of the decision of the Hon'ble Apex Court in the case of Roofit Industries (supra) and the case of Emco Ltd. 2015 (322) ELT 394 (SC), the Hon'be Apex Court came to the following conclusion: 5 This view of the law was reiterated in Government of India v. Madras Rubber Factory Ltd., (1995) 4 SCC 349 = 1995 (77) E.L.T. 433 (S.C.). Interestingly, in paragraph 39 of the judgment, cost of transportation from the factory gate to the place of removal not forming part of excise duty was conceded by the revenue. 6 Section 4 as substituted by the 1973 Amendment Act suffered a further amendment in 1996. The amendments carried out were to have effect from 28-9-1996, which is also the starting point on facts in the present case. Three important changes were made to Section 4. First a new sub-section (ia) was added to Section 4(1) which reads as follows :- "(ia) Where the price at which such goods are ordinarily sold by the assessee is different for different places of removal, each such price shall, subject to the existence of other circumstances specified in clause (a), be deemed to be the normal price of such goods in rel....
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.... duty of excise. - (1) 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 associated that they have interest, direc....
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....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 are not sold by the assessee at the time and place of removal but are transferred to a depot, premises of a consignment age....
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....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. As a matter of law therefore, the Commissioner's order and Revenue's argument based on that order that freight charges must be included as the sale in the present facts took place at the buyer's premis....
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....ms 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 specifically stated, following the said judgment, that insurance of goods during transit cannot possibly be the sole consideration to decide ownership or the point of sale of goods. 28. Similarly in VIP Industries Ltd. v. Commissioner ....
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....er 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 the judgments of this Court. If that had been the intention it would have been specifically provided that even where price was the same/uniform all over the country, the cost of transportation was to be added. Thus in cases where the price remains u....
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....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 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 ass....
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....ation, 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. 6.1 It is seen that the above decision of Hon'ble Apex Court covers all the aspects of this issue, holds that the buyer's premises cannot, in law, be a "place of removal" under Section 4. In this matrix of facts, the decision of Commissioner holding buyer's premises as "place of removal" cannot be upheld. The impugned order upholding the demand of duty is therefore set aside. Since the demand of duty is set aside, the demand of interest as well as penalty cannot be sustained. 6.2 In view of discussion above, the appeal is allowed." From the above decision of t....