2022 (12) TMI 48 - AT - Central Excise

Valuation of manufactured material liquid Carobon dioxide (CO 2 ) - inclusion of freight charges for delivery at buyer s place in the transaction value - freight charges recovered by the appellant manufacturer from the purchasers of manufactured product / liquid CO 2 for transporting the said product in its own specialized tankers to the buyers premises - Scope of place of removal - HELD THAT - From the definition of place of removal also it is seen that where the price at which goods are ordinarily sold by the assessee is different for different places of removal, then each such price shall be deemed to be the normal value thereof. Subclause (b)(iii) is very important and makes it clear that a depot, the premises of a consignment agent, or any other place or premises from where the excisable goods are to be sold after their clearance from the factory are all places of removal. What is important to note is that each of these premises is referable only to the manufacturer and not to the buyer of excisable goods. Hon ble Apex Court in the case of UNION OF INDIA ORS. ETC., ETC. VERSUS BOMBAY TYRE INTERNATIONAL LTD. ETC., ETC. 1983 (10) TMI 51 - SUPREME COURT held that cost of transportation from place of removal to the place of delivery is statutorily excluded. The harmonious reading of three of above provisions (Section 4 of Central Excise Act, Rule 5 of Valuation Rules and definition of place of removal under section 4 of Central Excise Act, 1944) makes it clear that buyer s premises can never be, by any law, can be called as the place of removal of excisable goods. The place of removal can never be equated with the place of delivery. Place of removal alone is relevant for the purpose of section 4 i.e. for the purpose of calculating the transaction value as it was held by Hon ble Apex Court in the case of ESCORTS JCB LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE, DELHI-II 2002 (10) TMI 96 - SUPREME COURT . Undisputed fact remains is that appellants are mentioning the freight charges as separately in the invoices issued by them to the purchasers, there is nothing in the invoices or any other documents which shows that sales are on FOR destination basis, though the authorities below have given the finding that sales were on FOR destination basis but no evidence in this regard has been discussed - the cost of transportation in the given circumstances is the one which has expressly been excluded in terms of Rule 5 of Valuation Rules. The freight charges are not includible in the assessable value of liquid CO 2 those being separately charged in the invoices and the gas was sold at the time of clearance from the factory of the appellant. The authorities below are held to have wrongly confirmed the duty demand against the appellant on the basis of inclusion of freight charges in assessable value. Appeal allowed.

Summary

Issues Involved:
1. Inclusion of freight charges in the transaction value.
2. Determination of the "place of removal."
3. Applicability of Section 4 of the Central Excise Act, 1944, and Rule 5 of the Central Excise Valuation Rules, 2000.
4. Relevance of CBEC Circular No. 988/12/2014-CE dated 20.10.2014.
5. Interpretation of relevant case laws and precedents.

Issue-wise Detailed Analysis:

1. Inclusion of Freight Charges in the Transaction Value:
The appellant was engaged in manufacturing liquid CO2 and availed Cenvat Credit on inputs, capital goods, and input services. During an audit, it was observed that the appellant collected "Freight Charges" from buyers but did not include these charges in the transaction value. The department alleged that the appellant's ownership of the goods continued until delivery, thus freight charges should be included in the assessable value. The Original Adjudicating Authority confirmed this demand, which was upheld by the Commissioner (Appeals). The appellant contended that transportation costs were separately indicated in invoices, and thus should not be included in the assessable value as per Rule 5 of the Central Excise Valuation Rules, 2000.

2. Determination of the "Place of Removal":
The core issue was whether the buyer's premises could be considered the "place of removal." The appellant argued that the transportation was provided due to the specialized nature of the product and their ownership of specialized tankers, not because the sale was on a 'FOR destination basis.' The Tribunal noted that the "place of removal" should be determined based on the facts of each case, and in this case, the sales were not on a 'FOR destination basis.'

3. Applicability of Section 4 of the Central Excise Act, 1944, and Rule 5 of the Central Excise Valuation Rules, 2000:
Section 4(1) of the Central Excise Act, 1944, and Rule 5 of the Central Excise Valuation Rules, 2000, were crucial in determining the transaction value. Rule 5 explicitly states that transportation costs from the "place of removal" to the place of delivery should be excluded from the assessable value if indicated separately in the invoice. The Tribunal emphasized that the "place of removal" refers to the manufacturer's premises and not the buyer's premises.

4. Relevance of CBEC Circular No. 988/12/2014-CE dated 20.10.2014:
The Adjudicating Authority relied on this circular, which clarifies that the "place of removal" should be determined based on the point of sale. However, the Tribunal observed that circulars cannot supersede statutory provisions or judicial precedents. The Tribunal found that the circular was inconsistent and could not override the statutory provisions and judicial interpretations.

5. Interpretation of Relevant Case Laws and Precedents:
The Tribunal referred to several judicial precedents, including:
- Union of India vs Bombay Tyre International Ltd.: Cost of transportation from the "place of removal" to the place of delivery is excluded from the assessable value.
- Escorts JCB Ltd. vs CCE, Delhi: Ownership of goods during transit does not solely determine the point of sale.
- CCE & Customs vs Roofit Industries Ltd.: The place of sale should be determined based on the transfer of ownership.
- CC & CE, Nagpur vs Ispat Industries Ltd.: The "place of removal" must be the manufacturer's premises, not the buyer's premises.
- CCE & ST vs Ultra Tech Cement Ltd.: Reaffirmed that the "place of removal" is the manufacturer's premises.

The Tribunal concluded that the freight charges were not includible in the assessable value as they were separately indicated in the invoices and the sales took place at the factory gate. The authorities below erred in including the freight charges in the assessable value, and thus, the impugned order was set aside, and the appeal was allowed.

Conclusion:
The Tribunal held that the freight charges were not includible in the assessable value of liquid CO2, as they were separately charged and the sales occurred at the factory gate. The authorities below incorrectly confirmed the duty demand based on the inclusion of freight charges. The appeal was allowed, setting aside the impugned order.