2005 (8) TMI 246 - AT - Central Excise

Summary

Issues Involved:

1. Determination of assessable value for Central Excise duty.
2. Inclusion of transportation and insurance costs in assessable value.
3. Inclusion of coating charges in assessable value.
4. Determination of place of removal.
5. Applicability of penalties and interest.

Issue-wise Detailed Analysis:

1. Determination of Assessable Value for Central Excise Duty:

The appellant assessee manufactured MS pipes and supplied them either coated or uncoated to various entities. The assessable value of these goods was to be determined under Rule 7 of the Central Excise Valuation (Determination of Prices of Excisable Goods) Rules, 2000. The Commissioner confirmed the demands of duty with interest and imposed penalties based on the inclusion of transportation, insurance, and other expenses in the assessable value. However, the Tribunal found that the transportation and insurance costs should not be included in the assessable value when the sale was deemed to have taken place at the factory gate. This was based on the Tribunal's decision in the case of Associated Strips Ltd. and the Supreme Court's approval in Escorts JCB Ltd.

2. Inclusion of Transportation and Insurance Costs in Assessable Value:

The Commissioner held that transportation and insurance costs up to the customer's work site should be included in the assessable value. However, the Tribunal found that the place of removal was the factory gate, and thus, these costs should not be included. The Tribunal relied on the settled position in the law of Sale of Goods Act, 1939, and the Tribunal's decision in Maruti Udyog, which stated that transit insurance and transport costs could not be added to the assessable value.

3. Inclusion of Coating Charges in Assessable Value:

The Commissioner included the cost of Cement/Epoxy coating in the assessable value following the Supreme Court decision in Siddhartha Tubes Ltd. However, the Tribunal found that the coating was not a process of manufacture and thus, the duty demands on coating charges could not be upheld. The Tribunal referred to C.B.E. & C. F. No. 139/08/2000-CX.4, which stated that value additions outside the factory of clearance on account of certain processes not amounting to manufacture could not be added.

4. Determination of Place of Removal:

The Commissioner determined the place of removal to be the customer's site based on the terms of the contracts, which indicated that the sale was completed only after delivery at the buyer's work site. However, the Tribunal found that the place of removal was the factory gate, as the property in the goods passed to the buyer when the goods were handed over to the transporter. The Tribunal relied on the Tribunal's decision in Associated Strips Ltd., which was approved by the Supreme Court in Escorts JCB Ltd.

5. Applicability of Penalties and Interest:

The Commissioner imposed penalties under Rule 25 and interest under Section 11AB. However, the Tribunal found no reason to uphold the penalties and interest as the valuations arrived at by the Commissioner were not upheld. The Tribunal set aside the orders of penalties, interest, and confiscation under Rule 173Q(2).

Conclusion:

The appeals were allowed, and the orders of the Commissioner were set aside. The Tribunal found that the transportation and insurance costs should not be included in the assessable value, the coating charges could not be added as they did not amount to a process of manufacture, and the place of removal was the factory gate. Consequently, the duty demands, penalties, and interest were not upheld.