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2024 (5) TMI 989
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....cash, the appellant is entitled to claim refund thereof. During the course of verification of refund claims, it was found that the appellant has incurred outward freight charges from their factory to the place of delivery and the same was included in the assessable value and the duty was paid. The appellant claim refund of duty paid thereon. The case of the revenue is that as the appellant was clearing goods from their factory gate, therefore, they are not required to pay duty on the transportation charges. Consequently, they are not entitled to claim refund of duty paid on outward freight charges. In these set of facts, the refund claims filed by the appellant were rejected. Against those orders, the appellant is before us. 3. The Ld. Counsel for the appellant submits that it is not disputed the fact that the appellant is selling their goods on FOR basis to their buyers and as per the terms between the buyers, the appellant is required to deliver the goods at the buyer's place. Therefore, they are rightly paid duty on 'Outward Transportation Charges' and claim refund. He submits that their case is squarely covered by the decision of the Hon'ble Apex court in the case of C....
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....after being cleared from the factory of the manufacturer. In case of sale on FOR basis, the transportation expanses get included in the transaction value for the purpose of payment of duty such transportation takes place before actual sale of the goods. Since the transportation charges incurred before the possession of goods is transferred to the buyer, the same will from part of transaction value. Further, since the sales are effected on FOR destination basis the amount of freight is not deductible from the transaction value. 9. We further take a note of the fact that in the case of Roofit Industries Ltd. (supra), the facts of the case are as under:- "2. It is the case of the Revenue that on the basis of general intelligence collected, respondent/assessee was indulging in evasion of Central Excise duty by not computing the assessable value of finished goods properly to the extent that it was deducting the amount of freight, insurance and unloading charges from the price of excisable goods though the place of removal of finished goods was different from the factory gate. The preventive party visited the factory premises of the assessee on 25-3-2000, conducted enqu....
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....metimes in advance. Invoices were prepared only at factory directly in the name of customer in which name of Insurance company as well as number of transit Insurance Policy were mentioned. All above excise invoices were prepared at the time of goods leaving factory in the name and address of customers of the respondents. When the goods were handed over to the transporter, the respondents had no right to deposal of goods nor did it reserve such rights inasmuch as title had already passed to its customers. On these facts, the Hon'ble Apex Court distinguished the case of Roofit Industries Ltd. (supra), and hold that in the said case, factory gate of the assessee was the place of removal of excisable goods, but, in the case in hand, it is an admitted fact that the invoice has been raised by the appellant in the name of buyer and the same is on FOR basis. A sample invoice is extracted herein below:- In the said invoices, no separate transportation charges have been mentioned. Moreover, these transportation charges have from part of the assessable value of the goods sold by the appellant on FOR basis. Moreover, the CBEC has also issued Circular vide Circular No. 1065/4/2018-CX d....
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....ppellant is entitled to claim refund of duty paid on 'Outward Transportation Charges' which was not required to be paid by them. 13. We hold that the appellant is entitled to claim refund of duty paid on 'Outward Transportation Charges'. 14. In these terms, we set-aside the impugned orders and allow the appeals filed by the appellants with consequential relief. (Pronounced on______________) (Ashok Jindal) Member (Judicial) (C. L. Mahar) Member (Technical) C.L. MAHAR :- 15. The main point involved in the case is valuation of excisable goods manufactured and cleared by the appellant /assessee from the state of J&K to other places and claiming refund of the central excise duty paid in cash under notification 56/2002-CE dated 14/11/2002. The appellants have paid outward freight and included the same in the assessable value. The appellants were selling their goods at transaction value and their place of removal is factory gate. Outward freight paid for movement of goods sold beyond place of removal does not form part of assessable value in terms of section 4 of Act read with Rule 5 of valuation (De....
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....turer 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 premises is incorrect. Further, for the period 01/07/2000 to 31/03/2003 there will be no extended place of removal, the factory premises or the warehouse (in the circumstances mentioned in the Section), alone being places of removal. Under no circumstances can the buyer's premises, therefore, be the place of removal for the purpose of Section 4 on the facts of the present case. Further, the Hon'ble Supreme court has categorically observed in the Judgment that: 18. It is clear, therefore, that as a matter of law with effect from the Amendment Act of 28/09/1996, the place of removal only has reference to places from which the manufacturer is to sell goods manufactured by him, and can, in no circumstances, have reference to the place of delivery which may, on facts, be the buyer's premises. 19. A cursory reading of the substituted provision makes it clear that the concept of "normal value" has given way to the concept of "transaction value". ....
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....tinguishing 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. 23. As has been seen in the present case all prices were "ex-works", 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 sold the goods manufactured by it at the fa....
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..... In the said decision the Apex Court held "under no circumstances can the buyer's premises, therefore, be the place of removal for the purpose of Section 4 on the facts of the present case". The Apex Court also distinguished their earlier decision in Rooffit Industries - 2015 (319) E.L.T. 221 (S.C.). The Apex Court observed as below :- "16. It will thus be seen that where the price at which goods are ordinarily sold by the assessee is different for different places of removal, then each such price shall be deemed to be the normal value thereof. Sub-clause (b)(iii) is very important and makes it clear that a depot, the 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 are all places of removal. What is important to note is that each of these premises is referable only to the manufacturer and not to the buyer of excisable goods. The depot, or the premises of a consignment agent of the manufacturer are obviously places which are referable only to the manufacturer. Even the expression "any other place or premises" refers only to a manufacturer's place or premises because such pl....
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....the buyer's premises at the factory gate whether it is correct to include the amount of the freight in the assessable value of goods ; (ii) Whether the appellant is entitled for refund of the central excise duty paid by him on the element of freight and other expenditures made beyond the point of clearance i.e. factory gate. 2. In view of above, it is requested that Hon'ble President may nominate a third Member for majority decision in this case. (Ashok Jindal) Member (Judicial) (C.L. Mahar) Member (Technical) Hon'ble President DATE OF HEARING: 15.02.2024 APPEARANCE: Present for the Appellant: Sh. Rajat Mittal, Advocate Present for the Respondent: Sh. Aneesh Dewan & Sh. Yashpal Singh, Authorized Representatives PER : S.S. GARG 25. The difference on the following issues recorded in two separate orders passed by two Members of the original Division Bench, has been placed before me to give my opinion as a Third Member: (i) Whether in the facts of the present matter where the sale of the goods have taken place at the buyer's premises at the factory gate whether ....
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....Industries Ltd - 2015 (319) ELT 221 (SC) is not applicable to the facts of the present case. He has further submitted that after the decision of the Hon'ble Apex Court in the case of M/s Ispat Industries Ltd (supra) and M/s Roofit Industries Ltd (supra), the Department clarified the position vide Circular No. 1065/4/2018-CX dated 08.06.2018 and distinguished between the facts in the cases of M/s Ispat Industries Ltd (supra), M/s Roofit Industries Ltd (supra) and CCE Mumbai-III vs. M/s Emco Ltd - 2015 (322) ELT 394 (SC). The relevant extract of the Circular has been reproduced as follows: "Exception: (i) The principle referred in para 3 above would apply to all situations except where the contract for sale is FOR contract in the circumstances identical to the judgments in the case of CCE, Mumbai-III vs. Emco Ltd [2015 (322) ELT 394 (SC)] and CCE vs. M/s Roofit Industries Ltd [2015 (319) ELT 221 (SC)]. To summarise, in the case of FOR destination sale such as M/s Emco Ltd and M/s Roofit Industries where the ownership, risk in transit, remained with the seller till goods are accepted by the buyer on delivery and till such time of delivery, seller alone remained the o....
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....ted that in the appellant's own case reported in 2019 (366) ELT 837 (Tribunal), the Tribunal has held that if the clearance of the goods is at the factory gate, the outward freight is not includable in the assessable value for the payment of central excise duty. 30. I have considered the submissions of both the parties and perused the material on record and also perused the views expressed by both the Members. I find that in the present case it is not in dispute that the sale is FOR and the freight element is included in the assessable value. Now the question arises whether in the facts and circumstances, the appellant are entitled to get the refund of central excise duty paid by them on the element of freight or not? This question has been considered recently by the Larger Bench of the Tribunal in the case of M/s The Ramco Cements Limited vs. CCE, Puducherry and vide Interim Order No. 40020/2023 dated 21.12.2023, the Larger Bench of the Tribunal after considering all the judgments of the Hon'ble High Courts as well as of the Hon'ble Supreme Court on this issue, has held in para 31 onwards as under: "31. The Karnataka High Court in Bharat Fritz Werner considered t....
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..... 11261 of 2016, dated 1-2-2018] [2018 (9) G.S.T.L. 337 (S.C.)) and stated that, in that case, the Apex Court has held that Cenvat credit on GTA Service from the place of removal to the buyer's premises is not admissible. 18. In the instant cases, the place of removal is buyer's premises Therefore, the authority in the case of Madras Cements Ltd., is applicable to the facts of this case and these appeals merit consideration. Hence, the following ORDER (a) The questions of law framed by this Court in CEAS No. 56/2019 and 71/2019 are answered in favour of the assessee holding that the Tribunal's view is unsustainable in law, (b) CEA No. 56/2019 is allowed and impugned order vide Final Order Nos. 21960-21962/2018, dated 31-12-2018 passed in Appeal Nos. E/21756/2017-SM, E/21757/2017-SM and E/21758/2017-SM are set aside, and (c) CEA No. 71/2019 is allowed and impugned order vide Final Order No. 20224/2019, dated 27-2- 2019 passed in Appeal No. E/20302/2018-SM is set aside" 32. The interpretation of the judgment of the Supreme Court by the High Courts as above throws light on the controversy. The Rajasthan High Court in Mangalam Cements sim....
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...., the ownership of goods remains with seller till delivery at customer's doorstep, seller bears risk of loss or damage to the goods during transit to the destination, and property in the goods is not transferred till delivery. So outward transportation qualifies as 'input service' and is eligible for CENVAT Credit. 28) The sale being of gases manufactured by the appellant, due to the peculiar nature, sale happens at the buyer's premises and admittedly such sale is on F.O.R basis. 29) In M/s Roofit Industries (Supra), the Supreme Court held: "13. The principle of law, thus, is crystal clear. It is to be seen as to whether as 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 go....
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....f 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." 30) This was reiterated in Emco case (supra). 31) The CBIC, in it's circular dt. 8.6.2018 has considered these two decisions and also the decision in Ultra Tech cement (supra) and had specifically held (as set out in para 23 supra) that in the case of FOR destination sale where the ownership, risk in transit, remained with the seller till goods are accepted by buyer on delivery and till such time of delivery, seller alone remained the owner of goods retaining right of disposal, benefit has been extended by the Apex Court on the basis of facts of the cases. 32) This circular binds the respondents though it had been issued by the CBIC on 8.6.2018 after the decision was rendered in the instant case by the CESTAT on 27.2.2018. 33) In Ranadey Micronutrients etc. vs. Collector of Central Excise, the Supreme Court held that in view of Section 37B of the Central Excise & Salt Act, 1944, instructions issued by the Board in ....
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.... aside." 32. Since the issue is no more res interga and has been settled by the jurisdictional High Court of Himachal Pradesh in the case of M/s Inox Air Products Pvt Ltd (supra) as well as by the Larger Bench of the Tribunal in the case of M/s The Ramco Cements Limited (surpa), therefore, by following the ratios of the above cited decisions, I am of the considered opinion that the view taken by the Member (Judicial) is correct in law and hence, I hold that when the sale is FOR and the outward freight charges are included in the assessable value then, the appellant are entitled to claim the refund of the central excise duty paid by them on the element of freight. 33. Now the matter be placed before the Regular Division Bench for majority order. (S. S. GARG) MEMBER (JUDICIAL) MAJORITY ORDER 34. Considering the facts and circumstances of the case and after following the ratios of the law laid down by the Larger Bench of the Tribunal in the case of M/s The Ramco Cements Limited (supra) and the decision of Hon'ble High Court of Himachal Pradesh in the case of M/s Inox Air Products Pvt Ltd (supra), we are of the consi....