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TMI Blog2017 (7) TMI 1034X X X X Extracts X X X X X X X X Extracts X X X X ..... mpensate the buyer for breakages by issuing credit notes, therefore, such sale ought to be considered not a sale on ex-factory basis but on FOR basis even though the Cost Transportation is not included in the price but shown separately in the invoice. Besides, the condition stipulated in clause (3) General Terms of Sale looses its significance of the delivery of possession at the factory gate, when the Appellant compensated the buyers for loss/breakages during transit to later premises by issuing credit notes. In our opinion, the issue is squarely covered by the decision of the Hon’ble Supreme Court in the case of Surya Roshni Ltd. (2000 (9) TMI 71 - SUPREME COURT OF INDIA]. - Decided against the assessee. Extended period of limitation - Whether the demand issued for the period from 01.02.1999 to 30.9.2004 is barred by limitation as the demand notice was issued on 26.2.2004? - Held that: - Once the facts are within the knowledge of the Department, being always in dispute, hence the allegation that they had suppressed the facts from the knowledge of the Department, cannot be acceptable. On the issue relating to the differential duty on the quantum of discount not passed to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... collected by them at 7% is by no stretch of imagination can be treated as insurance charges. 7.3 Anybody including a manufacturer can act as transporter, as no special permission is required to act as a transporter. In such cases, if freight is collected for transportation at the option of the buyer, and collected from the buyer, such freight is excludable from assessable value. The case laws cited on behalf of the appellants support their case, that such extra money collected towards freight may not be included in the assessable value. The amount collected at fixed percentage towards reimbursement of expenses that may be incurred due to possible; breakage is not an admissible deduction as held by the Hon ble Supreme Court in the case of Surya Roshni cited supra. 7.4 In the present case, the amount, which is collected as insurance charges by the appellant company cannot be treated as insurance charges at all. If, there is a reimbursement for the possible breakage, it should have been claimed as such giving the option to the department to examine their claim. 7.5 The claim that the dealers would have option, appears to be illusory, the amount recovered during ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ors, like sales tax, local levies, competition in particular area etc. He further submits that General Terms of sale between the appellants and the dealers, inter alia, provides that the price of the goods be ex-factory and the dealers are free to arrange their own transportation for delivery of the goods from the factory to their premises. In the event, the dealers opt to get the goods delivered at their premises by the Appellant, the cost of transportation to be paid by the dealers which includes 7% of the price, as transit insurance charges for safe delivery of the manufactured goods, free from breakage in transit. In the event, there was loss due to breakage of sheet glass during transit, then the dealers could claim for such breakage and the amount of loss was to be refunded to dealer, through credit note. It is his contention that the appellants are charging a flat rate of 7% of the invoice value, which was nothing but transit insurance under the head transportation of cost. This charge was nothing but safe transport (breakage free delivery of the sheet glass) till the dealers premises. 4. He has further submitted that such cost of transportation is not included in the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... part of cost of the transportation, hence it cannot form part of the transaction value, in view of the provisions contained in Section 4(2) of C.E.A., 1944. He submits that Section 4(2) of C.E.A., 1944 is a residuary section and applies only to such cases, where the price of the goods at the place of removal, is not known and the value thereof, is determined with reference to the price for delivery at the place other than the place of removal. Under the said Section, the cost of transportation from the place of removal to the place of delivery, will be deductible provided the assessable value, is not known at the factory gate but has to be determined with reference to another place. It is his contention that in the present case since the ex-factory price is available, therefore, there was no necessity for them to claim deduction under Section 4(2) of the Act. 7. Further, he has submitted that the activity of insurance for the goods sold is a post removal of activity and hence, the amount collected by the appellants on which demand is raised forms part of the transportation cost and not sale, therefore, not included in the value. Even if the appellants earn some profit, on such ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... - whereas the actual discount passed on by them to their buyer was much more ₹ 23,23,77,024/-. Hence, the total discount passed on was more than the deduction claimed by them. Accordingly, the demand on this count is bad in law. Ld. Senior Advocate has further submitted that the differential duty demanded in the show cause notice dated 26.2.2004 invoking extended period of limitation is unsustainable as the collection of 7% of the price towards transit insurance from the dealers has always been with the knowledge of the Department and proceedings were in fact initiated way back in 1995. Also, even after amendment of Section 4 of CEA, 1944, the appellant through letter 31.7.2000 informed the Department on the method of computing the transaction value. Letters were submitted with the Department from time to time furnishing information on expenses towards transit insurance and the amount collected towards this element supported by Chartered Accountant certificate. In support, he has referred to the judgment of the Hon ble Supreme Court in the case of Pushpam Pharmaceuticals Co Vs. C.C.E. - 1995 (78) ELT 401 (SC); P B Pharmaceuticals Ltd. Vs. C.C.E. - 2000 (153) ELT 14 (SC); ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f freight incurred was ₹ 18,730/- and hence difference in freight amount is ₹ 19,088/- towards compensation of breakage during transit. Hence the same is includible in the assessable value. Further, the ld. A.R. for the Revenue has submitted that dismissal of the Revenue's appeal by the Hon ble Supreme Court against the Tribunal's order dated 1.12.2009 has no precedentiary value as the Civil Appeal was dismissed at the preliminary stage itself in view of principle of law laid down by the Supreme Court in the case of C.C.E., Ahmedabad Vs. Ramesh Food Products - 2004 (174) ELT 310 (SC ) and in the case of Sun Export Corporation Vs. C.C., Bombay - 1997 (93) ELT 641 (SC). Hence, the judgment of this Tribunal dated 01.12.2009 does not have precedentiary value and should not be followed. Besides, in the said judgment this Tribunal has not laid down a different principle than the earlier judgment. Further, the ld. A.R. for the Revenue has submitted that collection of these charges from their customers have not been disclosed to the Department and hence, invoking the extended period of limitation raised in the show cause notice dated 26.2.2004 in relation to Appe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the basis of facts are applicable to the present case also. We are not disagreeing with the principles of the law as pronounced by the Tribunal in case of the appellant for the earlier period. 16. From the above observation it is clear that as the Department could not able to show that the facts involved in the earlier case also same in the subsequent case, therefore, without disagreeing with the principle of law laid down in the earlier judgment, the appeal was allowed. Needless to emphasize, in the order dated 01.12.2009, the Tribunal concurred with the principles of law laid down on the includibility of said charges in the value of the glass sheets. The appellants argued before the Hon ble Supreme Court in their appeal against the order dated 10.7.2007 that the Tribunal has not examined all the facts i.e agreement, invoices etc. before arriving at the conclusion on the issue, resulting into remand of the case by the Hon ble Supreme Court to consider the facts keeping all issues open. Therefore, in our opinion, the argument of the Appellant that the issue is settled by the judgment dt.01.12.2009 and hence to be followed, is devoid of merit in view of the above finding of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , he will have to pay insurance charges, which are presently charged at 7% of the total invoice value inclusive of the cost of sheet glass, special packing charges, laffa charges, excise duty and truck freight to destination. (b) The price of the goods inclusive of the above cost of Transportation amount, comprising of special packing, truck freight, transit insurance etc., will also become due simultaneously along with the price of the goods once they leave the factory gate. (3) It will always be understood that the property in the goods shall be deemed to be vested in the buyer the moment the goods leave the factory gate. The transporter will always be deemed to be as taking the delivery of goods as the agent of the buyer. 18. It is argued that the appellants sell the goods on ex-works basis and the buyers under Clause (1) require to take delivery of the goods at their own risk; under Clause (2) of the Agreement, in the event the buyers desire the Appellant to bear the risk of breakage or non-delivery of the goods for whatsoever reason maybe, then the buyers would be required to pay the cost of transportation. Under sub-Clause (a), it is mentioned that the cost of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Needless to mention, when the stipulation is a simple arrangement of transportation of the goods from the factory premises to the place of buyer, on behalf of the buyer, without bearing the risk of damages beyond that was provided by the insurance company by way of compensating for the loss/ breakage to the buyers during the transit, the sale could be described as ex-factory basis. But, in the present case, the appellants on receiving extra amount @7% of the total value undertook to deliver the goods breakage free, and compensate the buyer for breakages by issuing credit notes, therefore, such sale ought to be considered not a sale on ex-factory basis but on FOR basis even though the 'Cost Transportation' is not included in the price but shown separately in the invoice. Besides, the condition stipulated in clause (3) General Terms of Sale looses its significance of the delivery of possession at the factory gate, when the Appellant compensated the buyers for loss/breakages during transit to later premises by issuing credit notes. 22. We find that the entire issue has been mis-understood and mis-interpreted by the appellant being not considered in the proper perspective, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... premium to an insurance company. The payment made by the respondent to its customers for breakages and losses cannot tantamount to insurance. Nor can, by any means, such compensation be treated as a part of the cost of transportation; it is a clear case of making up to the customer by means of a credit note the monies that it has lost on account of breakages or losses in transit. 24. The Hon ble Supreme Court has clearly laid down the principle as to what should include in the cost of transportation . It is observed that what is includible in the cost of transportation as transit insurance is the premium paid to an insurance company for the possible loss and not the payment made to the customers for breakages and losses which cannot tantamount to insurance. In the present case the amount is collected from the buyers to compensate the loss due to breakages, in addition to the premium paid to the insurance companies, hence, ought to form part of the value. 25. The ld. Senior Advocate made an attempt to distinguish the aforesaid judgment from the present case stating that in the said case there was claim for deduction of said insurance charges from the price, whereas in the pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssable value, when the goods are delivered at the buyer's premises. In that context, the Hon ble Supreme Court held that since price is ex-factory, the expenditure incurred, towards freight and transit insurance, cannot form part of the assessable value. Similar facts also in the case of Accurate meter's case and the Tribunal in Triveni Glass case(supra). 28. It is also argued on behalf of the appellant that the excess amount collected as transit insurance cannot be added to the assessable value, in view of the principle of law laid down by the Hon ble Supreme Court in the case of CCE Vs. Indian oxygen Ltd - 1988 (36) ELT 730(SC), Baroda Electric Meters Ltd Vs. CCE - 1997 (94) ELT 13 (SC) , where under it is held that the excess amount of freight collected be considered as a profit and hence not chargeable to duty. In the present case, it is not the excess amount of insurance charges collected and retained by the appellant but the amount has been collected as compensation for breakages during the course of transit by way of issuing credit notes. Therefore the said judgements are not applicable to the facts of the present case. 29. The next issue that needs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... harmaceuticals (P) Ltd. Vs. CCE - 2003 (153) ELT 14(SC). In view of above, demand in the show cause notice dated 26.2.2004 be restricted to the normal period of limitation. 31. On the issue relating to the differential duty on the quantum of discount not passed to the customers, the ld. Advocate for the appellants claimed that during the said period, though they have claimed a total discount of ₹ 21,60,72,896/- but in fact they have passed more discount to their buyers amounting to ₹ 23,23,77,024/-hence, duty demanded on this count is unsustainable in law. Considering the categorical submission of the ld. Advocate for the appellant, it is necessary to verify these facts, hence, the matter is remanded to the adjudicating authority for determination of the said issue. 32. On the issue of imposition of penalty we are of the opinion that since the issue relates to interpretation of valuation provision and duty has been confirmed for the normal period, in our view, imposition of penalty equal to the duty under Section 11AC of CEA, 1944 is unwarranted and unjustified. In the result, the demands confirmed with interest in the both the Impugned Orders relating to recove ..... X X X X Extracts X X X X X X X X Extracts X X X X
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