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2024 (8) TMI 711 - AT - Central ExciseValuation - Inclusion of freight charges collected from customers in the transaction value for central excise duty - place of removal - circular no.1065/4/2018-CX dated 08.06.2018 - penalty u/s Section 11AC of the Central Excise Act. Valuation - HELD THAT - The issue considered in the impugned order was whether the freight charges paid for transport of goods from the premises of the appellant to their customers premises on FOR basis shall be included in the assessable value of goods for the purpose of charging central excise duty. That similar issue was considered by the Apex Court in COMMISSIONER, CUSTOMS AND CENTRAL EXCISE, AURANGABAD VERSUS M/S ROOFIT INDUSTRIES LTD. 2015 (4) TMI 857 - SUPREME COURT and in COMMISSIONER CENTRAL EXCISE, MUMBAI-III VERSUS M/S. EMCO LTD. 2015 (8) TMI 200 - SUPREME COURT and the principles laid down in Roofit Industries Ltd. were 'As per the 'terms of payment' clause contained in the procurement order, 100% payment for the supplies was to be made by the purchaser after the receipt and verification of material. Thus, there was no money given earlier by the buyer to the assessee and the consideration was to pass on only after the receipt of the goods which was at the premises of the buyer. From the aforesaid, it would be manifest that the sale of goods did not take place at the factory gate of the assessee but at the place of the buyer on the delivery of the goods in question.' It is not disputed that the appellant had collected the amount towards freight from the customers but have not included the same in the transaction value and hence, no central excise duty was paid on the said amount. The ownership of the goods was to be transferred at the buyers premises, where the sale actually took place and, therefore, the place of removal for the purpose of valuation under Section 4 was the buyers premises - The facts clearly show that the point of sale was where the ownership of goods was transferred to the buyers or customers, and, therefore, all the expenses incurred and collected by the appellant till the buyers premises shall be part of the assessable value under Section 4 of the Act. The next submission of the learned counsel for the appellant is that authorities erred in relying on the rescinded Circular No.988/12/2014-CX dated 20.10.2014 and Circular No.97/8/2007-CX dated 23.08.2007 - HELD THAT - The opening paragraph of the later Circular dated 8 June 2018, clearly refers that it has been issued on the implementation of the circulars in view of the various judgements pronounced by the Supreme Court and rescinding the earlier Circular - Relying on the observations of the Apex Court in COMMISSIONER OF CUSTOMS AND CENTRAL EXCISE, NAGPUR VERSUS M/S ISPAT INDUSTRIES LTD. 2015 (10) TMI 613 - SUPREME COURT , the Circular stated that the place of removal is required to be determined with reference to point of sale with the condition that place of removal (premises) is to be referred with reference to the premises of the manufacturer, however, at the same time, an exception is provided in paragraph-4 that though para-3 would apply in all situations, except where contract for sale is FOR contract in the circumstances. In the present case, it is an admitted position that the contract was on FOR basis and, therefore, no reliance could be placed on the principles provided in paragraph-3 - Lastly, para-6 of the Circular is relevant as it provides for the facts and circumstances of each case to be verified. In view thereof, the contention of the appellant has no substance and needs to be rejected. Thus, the freight charges of outward transportation of excisable goods have been rightly included in the assessable value of goods for the purpose of discharging the central excise duty by the impugned order and hence the same needs to be affirmed. The demand towards excise duty having been affirmed, the levy of statutory interest under Section 11AA of the Act is automatic and hence the same is rightly imposed. Penalty under Section 11 AC of the Act - HELD THAT - The non-payment of central excise duty was noticed by the Departmental Audit Team during the course of audit, which clearly shows that the appellant suppressed the facts with intent to evade the payment of central excise duty by suppressing the value of excisable goods in their ER-I monthly returns. Though the law was settled by the Apex Court in COMMISSIONER OF CENTRAL EXCISE SERVICE TAX VERSUS ULTRA TECH CEMENT LTD. 2018 (2) TMI 117 - SUPREME COURT , yet the appellant resorted to unlawful deduction of freight from the assessable value. Thus, they are liable to pay penalty under Section 11 AC of the Act which the Commissioner (Appeals) has reduced to 25%. Accordingly, the same is upheld. Appeal dismissed.
Issues Involved:
1. Inclusion of freight charges in the transaction value for central excise duty. 2. Determination of the 'place of removal' for the purpose of valuation. 3. Applicability of rescinded circulars. 4. Entitlement to CENVAT credit on Goods Transport Agency (GTA) services. 5. Imposition of penalty under Section 11AC of the Central Excise Act. Detailed Analysis: 1. Inclusion of Freight Charges in the Transaction Value for Central Excise Duty: The primary issue was whether the freight charges paid for transporting goods from the appellant's premises to the customer's premises on a FOR (Free on Rail/Road) basis should be included in the assessable value of goods for the purpose of charging central excise duty. The Tribunal noted that the sale took place at the buyer's premises, making it the 'place of removal.' Consequently, all expenses incurred and collected by the appellant until the buyer's premises should be part of the assessable value under Section 4 of the Central Excise Act. 2. Determination of the 'Place of Removal' for the Purpose of Valuation: The Tribunal referred to multiple Supreme Court judgments, including CCE vs. Roofit Industries Ltd. and CCE, Mumbai-III vs. Emco Ltd., which established that the 'place of removal' is where the ownership and risk transfer to the buyer. In this case, the ownership and risk remained with the appellant until the goods were delivered to and accepted by the buyer. Therefore, the buyer's premises were deemed the 'place of removal' for valuation purposes. 3. Applicability of Rescinded Circulars: The appellant argued that the impugned order was based on rescinded circulars dated 20.10.2014 and 23.08.2007. The Tribunal clarified that only specific clauses of the 2007 circular were rescinded and not the entire circular. The Tribunal also noted that the 2018 circular provided exceptions for FOR contracts, which applied to this case, making the reliance on the rescinded circulars irrelevant. 4. Entitlement to CENVAT Credit on Goods Transport Agency (GTA) Services: The Tribunal referred to the Supreme Court's decision in CCE & ST vs. Ultra Tech Cement, which held that CENVAT credit on GTA services used for transporting goods from the 'place of removal' to the buyer's premises was not admissible after the 2008 amendment. The amendment changed the definition of 'input service' to include services only 'up to' the place of removal, not beyond. Therefore, the appellant was not entitled to claim CENVAT credit for the outward transportation of goods. 5. Imposition of Penalty under Section 11AC of the Central Excise Act: The Tribunal upheld the imposition of a penalty under Section 11AC, noting that the appellant had suppressed facts with the intent to evade payment of central excise duty. The non-payment was discovered during a departmental audit, indicating deliberate suppression of the value of excisable goods. The penalty was reduced to 25% by the Commissioner (Appeals) and was affirmed by the Tribunal. Conclusion: The Tribunal dismissed the appeal, affirming the inclusion of freight charges in the assessable value for central excise duty, the determination of the buyer's premises as the 'place of removal,' and the imposition of penalty under Section 11AC. The Tribunal relied on Supreme Court judgments and clarified the applicability of circulars, ultimately ruling against the appellant.
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