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2023 (2) TMI 98 - AT - Central ExciseDemand of differential duty - place of removal - inclusion of freight charges in the assessable value for payment of central excise duty - It was observed by the Department that the sale of cement to few of the customers was on FOR basis that too in terms of an agreement/ the purchase order - HELD THAT - Learned DR has laid emphasis upon clause 3 of the definition of place of removal as was relevant for the period in question because said clause includes the place from where the goods are to be sold in the definition of place of removal , the buyer s place becomes the place of removal where sale gets concluded at buyer s place. The said submission is not acceptable in the light of decision of Hon ble Apex Court in COMMISSIONER OF CUSTOMS AND CENTRAL EXCISE, NAGPUR VERSUS M/S ISPAT INDUSTRIES LTD. 2015 (10) TMI 613 - SUPREME COURT only wherein the Hon ble Apex Court has held that the words used in the provision are goods are to be sold . The contention of the Revenue would be correct if and only if the words in the provision would have been goods have been sold . Resultantly, the place of removal refers only to the place from where goods are to be sold by the manufacturer and thus it has no reference to the place of delivery which may be either the buyers premises or the premises as the buyer may direct the manufacturer to send his goods. The earlier decision in the case of ESCORTS JCB LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE, DELHI-II 2002 (10) TMI 96 - SUPREME COURT was held to have similar facts as were there in the case of Ispat Industries Ltd. The Hon ble Court also observed that in the case of COMMISSIONER, CUSTOMS AND CENTRAL EXCISE, AURANGABAD VERSUS M/S ROOFIT INDUSTRIES LTD. 2015 (4) TMI 857 - SUPREME COURT the Hon ble Supreme Court had distinguished Escort s JCB s case. But based on the facts of that case (Roofit s), it was held that the sale of goods in terms of Section 19 of sale of goods Act did not take place at the factory gate of assessee. The Court also observed that the Court s attention was not drawn to Section 4 of Excise Act as originally enacted and as amended to demonstrate that the buyer s premises cannot, in law, be a place of removal under the said section. The value of freight charged by the appellant for delivering the cement to their buyers premises is not to be included while assessing the value for the purpose of payment of central excise duty - Appeal allowed.
Issues Involved:
1. Inclusion of freight charges in the assessable value for payment of central excise duty. 2. Determination of the "place of removal" under Section 4 of the Central Excise Act. Issue-Wise Detailed Analysis: 1. Inclusion of Freight Charges in the Assessable Value: The appeal challenges the Order-in-Appeal No. 024-2022-23 dated 17.06.2022, which upheld the demand for differential duty based on the inclusion of freight charges in the assessable value for central excise duty. The appellants, manufacturers of cements and clinkers, paid excise duty excluding the freight charges incurred for delivering goods to some consumers' premises. The Department observed that the sale of cement to certain customers was on an F.O.R. (Free on Rail/Road) basis, as per agreements or purchase orders, concluding that the buyer's premises were the place of removal. Consequently, a show cause notice dated 01.05.2018 was issued, proposing an additional demand of Rs. 42,44,685/- for the non-inclusion of freight charges in the assessable value for the period from April 2016 to June 2017. This demand was initially confirmed by the Original Authority and subsequently upheld in the order under challenge. 2. Determination of the "Place of Removal": The core issue is whether excise duty should be paid on freight charges incurred for transporting goods from the factory gate to the buyer's premises, treating the buyer's premises as the place of removal. The appellant's counsel argued that their case is covered by the Tribunal's decision in My Home Industries Pvt. Ltd. vs. Commissioner of Central Tax, Visakhapatnam, and the Supreme Court's decision in CC and CCE Nagpur vs. Ispat Industries [2015 (324) ELT 670 (SC)]. The Department's representative relied on the Supreme Court's decision in CCE Aurangabad vs. Roofit Industries Ltd. [2015 (319) ELT 221 (SC)]. The Tribunal observed that the issue is identical to that in Ispat Industries Ltd., where the Supreme Court examined Section 4 of the Central Excise Act. The Court held that the cost of transportation from the factory gate to the place of delivery should be excluded from the assessable value, emphasizing that the "place of removal" refers to the manufacturer's premises and not the buyer's premises. The amendment to Section 4 in 1996 and the introduction of "transaction value" in 2000 further clarified that freight or transportation expenses should not be included in calculating excise duty. The Tribunal noted that Rule 5 and Rule 7 of the Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000, as amended in 2003, confirmed that transportation costs from the place of removal to the place of delivery are to be excluded from the assessable value. The Department's reliance on the definition of "place of removal" was rejected, as the Supreme Court in Ispat Industries Ltd. clarified that the buyer's premises cannot be considered the place of removal. The Tribunal also referred to its previous decision in My Home Industries Pvt. Ltd. vs. Commissioner of Central Tax, Visakhapatnam, which relied on the Supreme Court's ruling in Ispat Industries Ltd. and held that the place of removal is the manufacturer's premises, not the buyer's. The Tribunal reiterated that the cost of transportation from the place of removal to the place of delivery should be excluded from the assessable value. In conclusion, the Tribunal held that the value of freight charges for delivering cement to the buyer's premises should not be included in the assessable value for central excise duty. The differential duty confirmed by the order under challenge was deemed incorrect, and the appeal was allowed, setting aside the impugned order. (Order pronounced in the open court on 01.02.2023)
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