2019 (3) TMI 848 - AT - Central Excise

Valuation - place of removal and place of delivery - Short payment of Central Excise Duty - respondent was selling the final product to BSNL on contract basis under purchase orders for delivering the goods at destination, but the Respondent discharged duty liability only on the value of goods at factory gate without including the expenses incurred from factory gate upto the destination - period involved is from April, 2014 to October, 2015. Held that - The Commissioner (Appeals) observed that though the contract was on free on receipt basis, but the amount of freight or the rate of freight was separately mentioned in the contracts and the invoices were issued when the goods left the factory premises. The Commissioner (Appeals) also observed that the amount of freight, sales tax etc. were charged separately and time of removal was also mentioned to be when the goods left the factory premises. The Commissioner (Appeals) also noticed that the sale of goods were effected on ex-factory basis on payment of sales tax by the assessee itself and invoices were prepared at the factory directly in the name of customers at the time the goods left the factory and the freight amount was separately shown in the invoice. The factual position that emerges in the present case is similar to that of the contract before the Supreme Court in Ispat Industries Ltd. 2015 (10) TMI 613 - SUPREME COURT , it has to be held that the place of removal of goods was the factory gate, though the place of delivery may be buyer s premises. This Tribunal in Shardha Ceramics Pvt. Ltd. vs CCE, Jodhpur, 2018 (8) TMI 732 CESTAT New Delhi , after placing reliance upon the decision of the Supreme Court in Ispat Industries Ltd., also observed that the cost of transportation from the place of removal upto the place of delivery of excisable goods is excluded from the computation of excise duty provided it is charged to the buyers and separately shown in the invoices. Appeal dismissed - decided against Revenue.

Summary

Issues Involved:
1. Whether the confirmation of the demand of duty with interest on freight and insurance by the adjudicating authority was justified or not.

Issue-wise Analysis:

1. Confirmation of the Demand of Duty with Interest on Freight and Insurance:

The appeal by the Revenue challenges the order dated 30 May 2018 of the Commissioner (Appeals), which dealt with the confirmation of the demand of duty with interest on freight and insurance by the adjudicating authority.

The Respondent was engaged in the manufacture of Polyethylene Pipes and was selling the final product to BSNL on a contract basis. The Respondent discharged duty liability only on the value of goods at the factory gate without including expenses incurred from the factory gate to the destination, resulting in short payment of Central Excise duty. The Adjudicating Authority confirmed the short-paid Central Excise duty, but the Commissioner (Appeals) set aside this confirmation, provided the Respondent reversed/deposited the Cenvat Credit of Service Tax paid on outward GTA service up to the place of delivery with interest.

The Commissioner (Appeals) relied on the Supreme Court's decision in CCE, Nagpur vs Ispat Industries Ltd., which interpreted Section 4 of the Central Excise & Salt Act, 1944 and Rule 5 of the Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000. The Supreme Court clarified that the 'place of removal' refers to the place from where the manufacturer sells the goods, not the place of delivery, which could be the buyer's premises.

The Commissioner (Appeals) observed that although the contract was on a 'free on receipt' basis, the freight or rate of freight was separately mentioned in the contracts, and invoices were issued when the goods left the factory premises. The amount of freight, sales tax, etc., were charged separately, and the 'time of removal' was noted as when the goods left the factory premises. Therefore, the place of removal was the factory gate, and the place of delivery was the buyer's premises.

The Revenue relied on the Supreme Court's decision in CC & CE, Aurangabad vs Roofit Industries Ltd., where it was held that the sale of goods took place at the buyer's premises based on the terms of the contract, which included transportation, transit risk, and unloading charges. However, the terms and conditions in the present case were different and more akin to those in Ispat Industries Ltd., where the place of removal was the factory gate.

The Tribunal in Shardha Ceramics Pvt. Ltd. vs CCE, Jodhpur, and CCE, Jaipur-I vs Tiirupati Plastomatics Pvt. Ltd. & Ors. also followed the Supreme Court's decision in Ispat Industries Ltd., observing that the cost of transportation from the place of removal to the place of delivery is excluded from the computation of excise duty if charged to the buyers and shown separately in the invoices.

In conclusion, the Tribunal found no infirmity in the order passed by the Commissioner (Appeals) and dismissed the appeal filed by the Revenue. The demand of duty with interest on freight and insurance was not justified as the place of removal was determined to be the factory gate, not the buyer's premises.