2011 (2) TMI 1058 - AT - Central Excise

Assessable value - Valuation of excisable goods sold by the assessee - department was of the view that the place of removal was not the factory gate but the premises of the buyer where the delivery took place and accordingly, the cost incurred on account of freight including transit insurance charges from the factory gate to such place of removal was includable in the assessable value - Held that - the terms of sale were ex-works i.e., ex-factory gate. Merely because the assessee has arranged for the transportation of the goods along with transit insurance it does not lead to the conclusion that the place of removal has been shifted from the factory gate to the buyers premises. As decided in Escorts JCB Ltd. (2002 (10) TMI 96 - SUPREME COURT OF INDIA) if as per the terms and conditions of sale, the delivery is taking place at the factory gate and transit risk and insurance are to be borne by the buyers from the time the goods are handed over to the buyer s representative or from the time the goods leave the assessee s premises, the place of removal remains the factory premises, since the transaction of sale, payment of the price and delivery of goods to the carriers occurred at factory premises. The ratio of the above judgement applies squarely to the facts of the case, appeal dismissed

Summary

Issues: Valuation of excisable goods sold by the assessee

Comprehensive Analysis:

1. The issue in this case pertains to the valuation of excisable goods sold by the assessee, M/s.Kaycee Industries Ltd., Mumbai-78, under Chapter 84, 85, 90 & 91 of the Schedule to Central Excise Tariff Act, 1985. The dispute arose as the department contended that the freight and transit insurance charges, recovered by the assessee from customers, should be included in the assessable value under Section 4 of the Central Excise Act, 1944. The department argued that since the assessee maintained ownership of goods until delivery at the buyer's premises, the cost of transportation and insurance up to that point should be considered. A show-cause notice was issued demanding duty payment, which the assessee contested citing legal precedents.

2. The adjudicating authority upheld the duty demand and imposed penalties, which led the assessee to appeal before the Commissioner (Appeals). The Commissioner, in the impugned order, set aside the duty demand, emphasizing that the terms of sale were 'ex-works,' indicating transfer of title at the factory gate. The Commissioner relied on judgments like Escorts JCB Ltd. and Prabhat Zarda to support the decision that ownership of goods and delivery to the carrier at the factory gate constitute delivery to the buyer. Therefore, the place of removal remained the factory premises, and the freight and insurance charges need not be included in the assessable value.

3. Upon careful consideration, the appellate tribunal concurred with the Commissioner's findings. It reiterated that the terms of sale being 'ex-works' implied delivery at the factory gate, as per the terms and conditions between the parties. Referring to the Escorts JCB Ltd. case, the tribunal emphasized that ownership of goods was irrelevant concerning transit insurance. The apex court's ruling established that delivery to the carrier at the factory gate equated to delivery to the buyer, and hence, the freight and insurance charges were not part of the assessable value. Consequently, the tribunal dismissed the appeal, upholding the lower appellate authority's decision.