2011 (10) TMI 378 - AT - Central Excise

Demand - In reply to the show cause notice, the respondents said that the amount stated in the Show Cause Notice to be unexplained amount was towards gunnitting and epoxy coating of MS pipes to be done at project sites - Revenue has not made out any case that at the time of removal from the factory, the clearance is not against sale - Unless it is proved that if the risk of any damage to the pipes stored at project site till the processes were carried out, was to the respondents account, it cannot be held that the place of sale was the project site - Decided in favor of the assessee

Summary

Issues:
Interpretation of 'place of removal' under Central Excise Act for excisable goods; Assessable value determination for excise duty calculation based on contract pricing; Application of case law precedent in determining the place of sale; Consideration of activities like epoxy coating and gunnitting in assessable value calculation.

Issue 1: Interpretation of 'place of removal' under Central Excise Act
The case involved a dispute regarding the interpretation of 'place of removal' under section 4(3)(c) of the Central Excise Act. The Revenue argued that the project site where goods were delivered should be considered as the place of removal. However, the Tribunal analyzed the definition of 'place of removal' which includes a factory, warehouse, or premises from where goods are sold after clearance from the factory. The Tribunal concluded that the project site did not fit within this definition, as it did not align with the nature of a depot or consignment premises.

Issue 2: Assessable value determination for excise duty calculation
The dispute also revolved around the determination of assessable value for excise duty calculation. The Revenue contended that the respondents were not billing goods at the agreed price with the buyer, resulting in a lower invoiced amount for excise duty calculation. The Revenue claimed that freight charges should be included in the assessable value. However, the respondents argued that the sale occurred at the factory gate, and activities like epoxy coating and gunnitting, done outside the factory, should not be considered in the assessable value calculation.

Issue 3: Application of case law precedent in determining the place of sale
The parties disagreed on the application of case law precedent in determining the place of sale. The Revenue cited a case involving the place of removal when goods were delivered to buyers' premises for finishing. In contrast, the respondents argued that the sale took place at the buyers' premises after finishing processes, such as epoxy coating and gunnitting, were completed. The Tribunal analyzed the facts of the present case and found that the Revenue failed to establish how it differed from the precedent case, leading to the rejection of the Revenue's appeal.

Issue 4: Consideration of activities like epoxy coating and gunnitting in assessable value calculation
A crucial aspect of the case was whether activities like epoxy coating and gunnitting, conducted outside the factory, should be included in the assessable value calculation. The respondents contended that these activities did not amount to manufacturing and should not be part of the assessable value. They relied on relevant legal precedents and circulars to support their argument. The Tribunal considered these arguments and concluded that such activities outside the factory did not determine the place of sale, which remained at the factory gate unless the risk of damage during subsequent processes was borne by the respondents.

In conclusion, the Tribunal rejected the Revenue's appeal, emphasizing that the sale occurred at the factory gate, and the activities conducted at the project site did not alter the place of sale. The Tribunal upheld the respondents' position regarding the assessable value calculation and the interpretation of 'place of removal' under the Central Excise Act.