2008 (1) TMI 78 - AT - Central Excise

Air-conditioners - sales from their depots & to customers on door delivery basis insurance cover granted by assessee for safe transportation to premises of customer- clarification of the Board make it clear that the terms of insurance should not be taken as the criteria for determining the ownership of the goods sold - Therefore the decision of the Commissioner enhancing the assessable value and confirming the demand of duty and imposition of penalties is not sustainable

Summary

Issues:
- Interpretation of sale of goods at factory gate
- Transfer of possession of goods
- Valuation of goods for duty calculation
- Bar on demand due to limitation
- Application of penalty under section 11AC

Interpretation of sale of goods at factory gate:
The appellant claimed to have sold goods at the factory gate to customers, supported by invoices prepared accordingly. However, the Department contended that possession was not transferred at the factory gate, citing agreements with transporters and insurance policies. The appellant argued that while they arranged transport and insurance, the sale occurred at the factory gate, with transport risk covered until delivery. The involvement of branches was said to be limited to after-sales service. Purchase orders indicated lower prices than depot sales, exempting them from sales tax.

Transfer of possession of goods:
The Department alleged that goods were only supplied through branches and depots based on purchase orders, but this claim was unsubstantiated. The distinction between possession and ownership was emphasized. Once a sale was made at the factory gate per purchase orders, the responsibility for transport and delivery to a different location did not affect the sale's validity.

Valuation of goods for duty calculation:
The Commissioner had enhanced the assessable value, demanded duty, and imposed penalties. The appellant argued that the valuation was done under rule 173C based on invoice values, which included all charges in the composite price without separate recovery for freight or insurance. The appellant also contended that declarations and invoices were regularly submitted to the Department, with no suppression of material facts.

Bar on demand due to limitation:
The appellant claimed that the demand was time-barred due to no mis-declaration and regular submission of declarations and invoices to the Department. They argued that the extended period of limitation did not apply, thus penalty under section 11AC was not warranted.

Application of penalty under section 11AC:
The appellant asserted that penalty under section 11AC was not applicable due to the absence of mis-declaration and the voluntary payment of differential duty for sales from depots/branches at higher prices than declared. They referenced a Supreme Court judgment and a Board circular to support their position.

In conclusion, the Tribunal allowed the appeals, finding the Commissioner's decision unsustainable. The Tribunal held that the terms of insurance should not determine ownership of goods sold, supporting the appellant's claim of sales at the factory gate. The judgment highlighted the distinction between possession and ownership, ultimately ruling in favor of the appellant and granting consequential relief.