2022 (12) TMI 133 - AT - Central Excise

Valuation - Short payment of Central Excise duty - inclusion of cost of transportation incurred from the factory to the place of removal (destination) for arriving at the assessable value during the relevant period or not - factory gate - place of removal - period August, 2016 to June, 2017 - levy of interest and penalty as well - HELD THAT - Under the similar facts and circumstances, the Apex Court in COMMISSIONER OF CUSTOMS AND CENTRAL EXCISE, NAGPUR VERSUS M/S ISPAT INDUSTRIES LTD. 2015 (10) TMI 613 - SUPREME COURT distinguishing its earlier ruling in the case of COMMISSIONER, CUSTOMS AND CENTRAL EXCISE, AURANGABAD VERSUS M/S ROOFIT INDUSTRIES LTD. 2015 (4) TMI 857 - SUPREME COURT , have held that the place of removal referred to in Section 4 r/w Rule 5 and Rule 7 of Central Excise Valuation Rules, clearly indicates, that the place of removal refers to only the sellers premises (factory gate, warehouse, depo, consignees premises). It is nowhere stated that the buyer s premises can be place of removal. Hon ble Apex Court also observed that in the Roofit case, it did not have occasion to examine the provisions of Section 4, since it was enacted and amended from time to time in the Central Excise Act r/w the Valuation Rules. After examining Section 4 r/w the rules, the Apex Court observed that the cost of transportation from the place of removal up to the place of delivery of excisable goods is excluded from Assessable value for the computation of excise duty - Appeal allowed. Valuation - inclusion of freight and transit insurance in assessable value or not - period from August 2016 to July 2017 - HELD THAT - The cost of freight and transit insurance need not be included in assessable value - appeal allowed. Rejection of Refund claim - determination of assessable value for the purpose of payment of duty - HELD THAT - The issue of inclusion of freight in the assessable value, under the admitted facts and circumstances, has already been held in favour of the appellant-assessee relying on the ruling of the Apex Court in the COMMISSIONER OF CUSTOMS AND CENTRAL EXCISE, NAGPUR VERSUS M/S ISPAT INDUSTRIES LTD. 2015 (10) TMI 613 - SUPREME COURT - demand set aside. Requirement to issue SCN - Section 11AC (1)(d) of CEA - time limitation - HELD THAT - In absence of the condition precedent, that is issue of show cause notice, no proceedings/dispute can be concluded. Also there is no provision for waiver of SCN, under Section 11AC (1) (d).Further, admittedly, no letter of closures was issued by the revenue as requested by the appellant-assessee. Thus, the amount deposited by the appellant-assessee pursuant to audit letter, was in the nature of revenue deposit. Admittedly, the appellant have done the self-assessment at the time of clearance of the goods without including the freight element. In the facts and circumstances, there cannot be any subsequent self assessment. Further, admittedly no revised return was filed - the limitation prescribed under Section 11B is not applicable - the appellant-assessee is entitled to refund of the amount deposited totaling Rs. 4,23,81,640/- alongwith interest as per rules. Appeal allowed - decided in favor of appellant.

Issues Involved:
1. Determination of the "place of removal" for the purpose of calculating the assessable value under Section 4 of the Central Excise Act.
2. Inclusion of freight charges in the assessable value for goods delivered on a Free On Road (FOR) basis.
3. Eligibility for refund of excise duty paid on freight charges.
4. Applicability of the limitation period under Section 11B of the Central Excise Act for refund claims.
5. Conclusion of proceedings under Section 11AC(1)(d) of the Central Excise Act.

Detailed Analysis:

1. Determination of the "place of removal":
The primary issue was whether the "place of removal" for the purpose of calculating the assessable value under Section 4 of the Central Excise Act was the factory gate or the buyer's premises. The appellant argued that the factory gate was the place of removal, while the Revenue contended that it was the buyer's premises due to the FOR basis of delivery. The Tribunal referred to the Supreme Court's ruling in Ispat Industries Ltd., which clarified that the "place of removal" refers to the manufacturer's premises (factory, warehouse, or consignment agent's premises) and not the buyer's premises. This interpretation was reaffirmed by the Tribunal, which concluded that the factory gate was the place of removal.

2. Inclusion of freight charges in the assessable value:
The Revenue argued that freight charges should be included in the assessable value because the goods were delivered to the buyer's premises on an FOR basis, with the risk in transit and ownership remaining with the appellant until delivery. The Tribunal, however, relied on the Supreme Court's ruling in Ispat Industries Ltd., which stated that the cost of transportation from the place of removal to the place of delivery is excluded from the assessable value. The Tribunal held that the freight charges were not includible in the assessable value as the place of removal was the factory gate.

3. Eligibility for refund of excise duty paid on freight charges:
The appellant sought a refund of excise duty paid on freight charges based on the Supreme Court's ruling in Ispat Industries Ltd. The Tribunal found that the amounts paid towards duty, interest, and penalty were in the nature of a revenue deposit since no show cause notice (SCN) was issued, and no proceedings were concluded. The Tribunal held that the appellant was entitled to a refund of the amount deposited, totaling Rs. 4,23,81,640/-, along with interest as per rules.

4. Applicability of the limitation period under Section 11B:
The Revenue argued that the refund claim was hit by the limitation period under Section 11B of the Central Excise Act. The Tribunal, however, found that the amounts paid by the appellant were in the nature of a revenue deposit and not a duty payment. Therefore, the limitation period under Section 11B was not applicable. The Tribunal allowed the refund claim, rejecting the Revenue's contention regarding the limitation period.

5. Conclusion of proceedings under Section 11AC(1)(d):
The Revenue contended that the proceedings were concluded under Section 11AC(1)(d) as the appellant had paid the differential duty, interest, and penalty upon audit intervention. The Tribunal, however, found that no SCN was issued, which is a condition precedent for concluding proceedings under Section 11AC(1)(d). Additionally, no letter of closure was issued by the Revenue. Therefore, the Tribunal held that the amounts paid were in the nature of a revenue deposit, and the proceedings were not concluded under Section 11AC(1)(d).

Conclusion:
The Tribunal allowed the appeals filed by the appellant-assessee, setting aside the impugned orders. The Tribunal dismissed the appeal filed by the Revenue and allowed the cross-objection by the assessee, granting a refund of the amount deposited along with interest as per rules. The Tribunal reaffirmed that the place of removal is the manufacturer's premises and that freight charges are not includible in the assessable value for the purpose of calculating excise duty.

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