2016 (10) TMI 38 - AT - Central Excise

Area based exemption - refund of duty paid - inclusion of freight from the factory gate to the place of delivery for payment of duty - contracts for goods are FOR destination - appellant is selling the goods at the factory gate but showing the sale as FOR destination and pay more duty, by including freight from the factory gate to the place of delivery, to get more refund under Notification No.32/99-CE - Held that - the freight is included in the agreed upon prices but actual freight incurred is also known to the appellant and the buyer. That is why some of the buyers have a specific clause in purchase order that adjustment on account of freight charged and actually incurred has to be allowed by the appellant. If sale is FOR destination based then where is the requirement for such an adjustments/compensation. In certain cases insurance of goods is borne by the buyers. It has also not been brought on record by the appellant as to where sales tax is paid. The onus is on the appellant to establish the point of sale with documentary evidences to stake claim for exemption and refund under Notification No.32/99-CE. Inspite of the specific directions from the bench appellant has not been able to bring on record that ownership of the goods, till their delivery at the doorsteps of the buyers, lies with them and that insurance of goods in transit is borne by the appellant. Hence, the appellant is not able to establish that the sales/clearances effected by them are on FOR destination basis. - Decided against the appellant

Issues Involved:
1. Whether the appellant was eligible to include freight charges from the factory gate to the place of delivery in the assessable value.
2. Determination of the point of sale: factory gate or customer's premises.
3. Compliance with Notification No. 32/99-CE for area-based exemption and refund.
4. Responsibility for transit insurance and its impact on assessable value.
5. Applicability of relevant case laws and CBEC Circular.

Detailed Analysis:

1. Eligibility to Include Freight Charges in Assessable Value:
The core issue was whether the appellant could include freight charges from the factory gate to the place of delivery in the assessable value. The First Appellate Authority upheld the Order-in-Original, which determined that the cost of transportation from the place of removal to the place of delivery should be excluded for value determination under Rule 5 of the Central Excise Valuation Rules, 2000. The appellant did not exclude these charges, resulting in excess duty payment and refund under Notification No. 32/1999.

2. Determination of the Point of Sale:
The appellant argued that the sales were on an "FOR destination" basis, implying the point of sale was the customer's premises, and thus, the place of removal was the place of delivery. However, the Revenue contended that the sales occurred at the factory gate, supported by the fact that sales tax was paid at the factory gate and insurance was on account of the buyer. The Tribunal noted that the appellant failed to provide sufficient documentary evidence to prove that ownership and transit insurance were borne by them until delivery to the customer.

3. Compliance with Notification No. 32/99-CE:
The appellant claimed area-based exemption under Notification No. 32/99-CE. However, the Tribunal emphasized that the appellant did not satisfactorily demonstrate that the sales were on an "FOR destination" basis, which was crucial for claiming the exemption and refund. The Tribunal pointed out that the appellant had not shown that the ownership of goods remained with them until delivery to the customer, nor had they provided evidence of paying sales tax at the point of delivery.

4. Responsibility for Transit Insurance:
The Tribunal examined whether the appellant bore the transit insurance, which would indicate that the sale occurred at the customer's premises. The appellant failed to provide evidence of bearing transit insurance, and in some cases, the purchase orders indicated that insurance was on the buyer's account. This lack of evidence undermined the appellant's claim that the sales were on an "FOR destination" basis.

5. Applicability of Relevant Case Laws and CBEC Circular:
The appellant relied on various case laws and CBEC Circular No. 6/59/2000-CX.1 to support their argument that transportation charges should be included in the assessable value. However, the Tribunal found these case laws inapplicable to the factual matrix of the case, as there was no dispute in those cases that sales were "FOR destination." The Tribunal also referenced the case of Associated Strips Ltd., which held that the sale took place at the factory gate if the property in goods passed to the buyer at that point.

Conclusion:
The Tribunal concluded that the appellant failed to establish that the sales were on an "FOR destination" basis. The evidence suggested that sales occurred at the factory gate, and the appellant did not bear transit insurance or provide sufficient proof of paying sales tax at the point of delivery. Consequently, the appeal was dismissed, and the inclusion of freight charges in the assessable value was deemed incorrect. The operative portion of the order was pronounced in the open court.

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