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TMI Blog2019 (9) TMI 1007X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uct cleared during the relevant period. Being aggrieved the department is before this Tribunal. 3. We have heard Shri R.K. Mishra, learned D.R. for the department and Mr. Manish Sahran, learned Advocate for the respondent assessee. 4. It is submitted on behalf of the department that as per Purchase Order, the delivery of final product is on FOR basis and the place of delivery is other than the factory gate. It is also impressed upon that as per the terms and conditions laid down in the Purchase Order, the ownership of goods gets transferred to the buyers at the site stores set up by the assessee though in buyer premises. Thus, in terms of Section 4(1) (a) of the Act, read with Rule 7 of Central Excise Valuation (Determination of Price of Goods) Rules, 2000 the duty, accordingly, has been short paid. The show cause notice was rightly served proposing the liability of the assessee-respondent about payment of the short paid duty of excise along with interest and the penalty which was rightly confirmed by the original adjudicating authority. Justifying the order-in-original, learned D.R. has submitted that the Purchase Orders were duly examined at the investigation s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tire record of the impugned appeals, we observe that the sole question to be adjudicated is here, is : Whether the freight charges shall be included in the transaction value in the given facts and circumstances? The admitted facts of the present case are that the goods herein/the towers in CKD condition were to be delivered at assessee s own site stores at the place of the buyer and it is only at that place that the acceptance of supplies was to be affected that too on the certification by the engineer of the buyer about the consignment of tower parts to have been duly received to the satisfaction of the buyer in the assessee s stores at the site at buyer s place. Admittedly, the buyer/customer has paid the freight charges and even for the transit risk department has included those charges in the transaction value. The original adjudicating authority had confirmed the demand holding the proposal as correct. However, Commissioner (Appeals) has set aside the order based upon the decision of Hon ble Apex Court in the case titled as Ispat Industries Ltd. (Supra) holding that the amount qua transit risk and transportation cannot be included in the transact ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lf of, the assessee, by reason of, or in connection with the sale, whether payable at the time of the sale or at any other time, including, but not limited to, any amount charged for, or to make provision for, advertising or publicity, marketing and selling organization expenses, storage, outward handling, servicing, warranty, commission or any other matter; but does not include the amount of duty of excise, sales tax and other taxes, if any, actually paid or actually payable on such goods.]. Clause (c) in above definition makes it clear that place of removal is either the place of production/manufacture or it is the place where goods are kept after clearance from factory (without payment of duty) but before sale thereof. Clause (d) above makes it clear that the outward handling charges are includable in transaction value if those are paid by the buyer on behalf of assessee-manufacturer i.e. paid at the stage when property in goods was still with assessee 9. Section 4 has, however, undergone several amendments since 1973, hence, the evolution thereof is also necessary to be looked into for the purpose. (i) Section 4, as it stood before 1973 : ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (a), be deemed to be the normal price of such goods in relation to each such class of buyers; ii) Where such goods are sold by the assessee in the course of wholesale trade for delivery at the time and place of removal at a price fixed under any law for the time being in force or at a price, being the maximum, fixed under any such law, then, notwithstanding anything contained in clause (iii) of this proviso, the price or the maximum price, as the case may be, so fixed, shall, in relation to the goods so sold, be deemed to be the normal price thereof; iii) Where the assessee so arranges that the goods are generally not sold by him in the course of wholesale trade except to or through a related person, the normal price of the goods sold by the assessee to or through such related person shall be deemed to be the price at which they are ordinarily sold by the related person in the course of wholesale trade at the time of removal, to dealers (not being related persons) or where such goods are not sold to such dealers, to dealers (being related persons), who sell such goods in retail; b) Where the normal price of such goods is not ascertainable for the r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isable goods are to be sold after their clearance from the factory and, (4)(ba) time of removal , in respect of goods removed from the place of removal referred to in sub-clause (iii) of clause (b), shall be deemed to be the time at which such goods are cleared from the factory; The Hon ble Supreme Court in Ispat case (Supra) in para 17 thereof has held that as a matter of law with effect from the Amendment Act of 28.09.1996, the place of removal only has reference to places from which the manufacturer is to sell goods manufactured by him and can, in no circumstances, have reference to the place of delivery which may, on facts, be the buyer s premises. Thus thought the law of land as established in Ispat case (supra) is that expression, any other place or premises has reference only to a manufacturer s place or premises but, simultaneously it has been held that the place or premises from where the excisable goods are to be sold are the manufacturer s premises. (iv) Finally, an amendment in Section 4 came into effect on 01.07.2000 as already quoted above. 10. These amendment since 1973 to year 2000 makes following things clear: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ether the time of payment of the price or the time of delivery of the goods, or both, is postponed. Section 21 Specific goods to be put into a deliverable state Where there is a contract for the sale of specific goods and the seller is bound to do something to the goods for the purpose of putting them into a deliverable state, the property does not pass until such thing is done and the buyer has notice thereof. Section 22 Specific goods to be put into a deliverable state, when the seller has to do anything thereto in order to ascertain price Where there is a contract for the sale of specific goods in a deliverable state, but the seller is bound to weigh, measure, test or do some other act or thing with reference to the goods for the purpose of ascertaining the price, the property does not pass until such act or thing is done and the buyer has notice thereof. Section 23 Specific of uncertained goods and appropriation (1) Where there is a contract for the sale of unascertained or future goods by description and goods of that description and in a deliverable state are unconditio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... transportation thereto shall not be included in the transaction value for accessing the Excise duty. 14. Similarly, the definition of transaction value itself as got inserted after the amendment of the year 2000 makes it abundantly clear that if the freight is paid prior the sale of goods the outward charges for delivering the same are to be included in the assessable value. However, if freight is paid after the sale of goods, the same shall stand excluded. This definition clarifies that till the sale is not complete, any payment made by the buyer is the payment made on behalf of the manufacturer and that and the same will form the part of transaction value and excise duty shall be assessed accordingly. We also observe that what is important for transaction value is amount at the time goods are sold. Keeping in view the same and the successive amendment in Section 4 as discussed about, we are of the opinion that triggering event for the purpose of ascertaining the transaction value/normal price/whole sale cash price is the sale of goods. Resultantly, the manufacturer s place can be a place of mere clearance but place of removal since has a nexus with ascertaining ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er in addition to the price of goods and is shown separately in the invoice for such excisable goods. The word in addition to is used in reference to the Act of sale of goods. Thus it stands reiterated that when the sale of excisable goods is concluded and any amount in addition is charged towards transportation, since it is not the amount paid by the buyer on behalf of assessee, the same shall be excluded from the transaction value. Rule 7 clarifies the situation where excisable goods are not sold i.e it talks about of the clearance of goods from the place of production to a captive place as that of depot or warehouse. Since, during this stage the buyer is not in picture nor the sale is, the question of inclusion or exclusion of the transportation charges from the place of production to the place of captivity has no meaning. It further reiterates that the place of production or captivity will become the place of removal only and only when sale takes place at that particular place. This situation stands corroborated from Section 4(ia) as inserted in 1996 w.e.f. 28.09.1996 i.e. different places of removal may have a different price and the value relevant for assessing excise duty ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... towers is: (i) Inclusive of packing freight charges; (ii) Includes all costs relating to fabrication, galvanization and delivery at Stores (to be set up by the assessee-respondent). (iii) Includes works relating to fabrication, galvanizing, delivery ex-contractors stores. (iv) Appellant had to arrange, secure maintain insurance as necessary for all such amounts to protect interest of the supplier and interest of the purchaser, against all the risk. (v) The costs on account of insurance liability covered under the contract will be on contractor s account and the same is deemed to be included in the contract price. (vi) The payment would be made on certification by the engineer that the consignment of Tower parts has been duly received in the assessee s stores at the site. These facts clarify two things peculiar to the present case i.e. 1. In view of Section 22 24 of Sale of Goods Act and also in view of above interpretation arrived by us about the meaning of place of removal transaction value, the sale of the tower gets completed only at the assessee s store at buyers site. Thus, the property in the i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eld that as a matter of law w.e.f Amendment Act of 28.09.1996, the place of removal only has a reference only to places from which manufacturer is to sell goods manufactured by him and can in no circumstance has the reference to the place of delivery which may, on facts, be the buyer s premises. Relying upon the case of Bombay Tyre International Ltd. [1984(1)SCC 467 SC], it was held that the cost of transportation will include the cost of insurance on the freight for transportations of goods from the factory gate to the place or places of delivery. These findings to our opinion were only in reference to the context of the fact that once the goods have been sold at the factory gate with an agreement to have the payment after 30 days of the delivery, the amount of insurance risk as borne by the transporter is the part of the transportation charges. Hon ble Apex Court after observing that the delivery of the goods in this case since was post sale, the value paid for transportation, including the value for insurance cannot be the part of transaction value. (2) Commissioner of Customs, Aurangabad Vs. Roofit 2015 (319(E.L.T 221(SC) : In this case the assessee had r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the delivery of goods in question by virtue of Section 19 of Sale of Goods Act, 1930 (as reproduced above). The appeal was accordingly allowed. (3) Commissioner of Central Excise and S.T Vs. Ultra Tech Cement Ltd. [2018(19) GSTL 337(SC)] : The assessee in this case was involved in packing and clearing/forwarding of cement. He was observed to avail cenvat credit of service tax paid on outward transportation of goods through a transport agency from their premises to the customer premises. Department, forming an opinion that the transport agency service used by the assessee for transportation of their product from their premises to customer premises cannot be considered to have been used directly or indirectly in relation to clearance of goods from the factory that is the place of removal in terms of Rule 2(1) of Cenvat Credit Rules, 2004, served a show cause notice alleging that assessee cannot avail the cenvat credit on the transportation charges not being the input service. The original adjudicating authority confirmed the demand holding that once the final products are cleared from factory premises, extending credit beyond the point of clearance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... service on the outward freight from the place of removal to the customer premises was eligible input service or not. There seems no difference of opinion about the place of removal to mean a place where the property in goods stands transferred to the buyer. . 21. In view of entire above discussion, we are of the firm opinion that factory gate or any other place as mentioned in Section 4 of CEA, 1944 (as quoted above) 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... goods from the seller to the buyer and it is the factory gate or the warehouse or the depot of manufacturer which would be the place of removal. Since it is here that the goods are handed over to the transporter for the purpose of transmission to the buyer. It is in this backdrop that the eligibility to CENVAT credit on related input services has been decided by the Supreme Court in Ultra Tech (Supra) case. 22. We hold that 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 as mentioned above 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. We, accordingly, set aside the said order and restore the order-in-original dated 31.08 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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