2019 (9) TMI 1007 - AT - Central Excise

Valuation - place of removal different from factory gate - inclusion of Freight charges pertaining to transportation of goods to the said stores in the assessable value - period 2012-13 to 2016-17 - HELD THAT - The factory gate or any other place as mentioned in Section 4 of CEA, 1944 from where the manufacturer sells its goods is the place of removal. Any transportation charges if paid for delivery of goods till the place of removal other than factory i.e. warehouse, depot or any other such place from where the excisable goods are actually sold, are to be included in the transaction value for the purposes of assessing the excise duty because till the property in goods is not passed on to the buyer any payment made by him shall be the payment made on behalf of the assessee and as per the definition of transaction value the said payment shall be includible. However, the delivery charges when paid by the buyer after the sale is completed and the property in the purchased goods has already vested in him, since the same is no more the payment by the buyer on behalf of assessee, the same cannot form the part of transaction value for the purposes of assessing excise duty. Since, in the present case the transportation charges have been paid for delivery of goods from the factory gate to a store at site but prior the sale of towers to MPPTP Ltd. which was subject to verification and approval of the buyer s engineer and the payment/consideration was to be passed on thereafter only. The site store, in this place, is the case of removal and the value of transportation charges to the store at site has to be included in the transaction value. The Commissioner (Appeals) has committed an error while ignoring that the goods were not sold at the factory gate but at the ex-factory store at the buyer s site. Thus factory here is not the place of removal but merely the place of clearance of goods. It was also ignored that the prices as agreed to be paid were not only including the charges of insurance risk but all such other charges and were agreed to be paid only after approval/ certification by engineers of buyer (MPPTC) - These facts are sufficient to hold that present is not the case of payment of sale consideration in future but is the case of sale in future subject to approval. Appeal allowed.

Summary

Issues Involved:
1. Whether the freight charges should be included in the transaction value in the given facts and circumstances.

Issue-wise Detailed Analysis:

1. Freight Charges Inclusion in Transaction Value:
The department appealed against the Order-in-Appeal passed by the Commissioner (Appeals), which allowed the assessee's appeal and excluded freight/transportation charges from the transaction value of the final product. The department contended that the ownership of goods remained with the assessee until delivery at the site stores, and therefore, transportation charges should be included in the transaction value as per Section 4(1)(a) of the Central Excise Act, 1944, read with Rule 7 of the Central Excise Valuation (Determination of Price of Goods) Rules, 2000. The department supported its argument with the Supreme Court's decision in Commissioner of Customs, Aurangabad Vs. Roofit Industries Ltd.

Respondent's Argument:
The respondent argued that the Purchase Orders clearly showed separate negotiations and reflections for the basic price and transportation charges. They cited the Supreme Court's decision in Commissioner of Customs, Nagpur Vs. Ispat Industries Ltd., asserting that transportation charges should be excluded from the transaction value.

Tribunal's Analysis:
The Tribunal examined the facts and legal provisions, including Section 4 of the Central Excise Act, 1944, and its amendments over time, along with relevant rules and judicial precedents. The Tribunal noted that the sale of goods was completed only at the assessee's store at the buyer's site, making the store the place of removal. The Tribunal emphasized that the transportation charges were paid by the buyer on behalf of the assessee, thus forming part of the transaction value.

Legal Provisions and Judicial Precedents:
The Tribunal reviewed the evolution of Section 4 of the Central Excise Act, 1944, and its amendments, highlighting the importance of the place and time of removal in determining the transaction value. The Tribunal also referred to the Sale of Goods Act, 1930, to clarify when the property in goods passes to the buyer. It cited various Supreme Court decisions, including Ispat Industries Ltd., Roofit Industries Ltd., and Ultra Tech Cement Ltd., to support its analysis.

Conclusion:
The Tribunal concluded that the transportation charges should be included in the transaction value as the sale was completed at the store at the buyer's site, not at the factory gate. The Tribunal set aside the Commissioner (Appeals) order and restored the original adjudicating authority's order, confirming the demand for the short-paid excise duty, along with interest and penalties.

Final Judgment:
The order-under-challenge was set aside, and the appeal was allowed, with the original adjudicating authority's order dated 31.08.2017 being restored. The judgment was pronounced in the open court on 24.09.2019.