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TMI Blog2023 (3) TMI 735X X X X Extracts X X X X X X X X Extracts X X X X ..... ER OF CUSTOMS AND CENTRAL EXCISE, NAGPUR VERSUS M/S ISPAT INDUSTRIES LTD. [ 2015 (10) TMI 613 - SUPREME COURT] . The tribunal in Savita Oil Technologies held that buyer s premises cannot, in law, be a place of removal under Section 4. In this matrix of facts, the decision of Commissioner holding buyer s premises as place of removal cannot be upheld. Thus, the freight cannot be included in the assessable value in the facts of the present case. Consequently, no demand of duty on freight would sustain - appeal allowed. - EXCISE Appeal No. 10016 of 2018-DB WITH EXCISE Appeal No. 10854 of 2019-DB - FINAL ORDER NO. A/10460-10461/2023 - Dated:- 16-3-2023 - MR. RAMESH NAIR, MEMBER (JUDICIAL) AND MR. RAJU, MEMBER (TECHNICAL) Shri Kumar Parekh, CA for the Appellant Shri G. Kirupanandan, Assistant Commissioner (AR), for the Respondent ORDER The issue involved in the present case is that whether the freight charged separately in the sale invoices of excisable goods is includible in the assessable value of such excisable goods and duty on the said freight is chargeable or otherwise. 2. Shri Kumar Parekh, Learned Chartered Accountant appearing on behalf of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s also considered, therefore the judgments of Ispat Industries shall prevail. He further submits that the identical issue has been considered by this Tribunal in the case of Savita oil Technologies Ltd. vide order No. A/10755/2022 dated 30.06.2022, whereby it was held that the buyer s premises, cannot in law, be a place of removal under Section 4 and consequently no duty can be levied on portion of freight. He also submits that the demand was raised for extended period which was not invokable. In fact of the present case, it was made out on the basis on audit observation from the audits of the records. Therefore, there is no suppression of fact on the part of the appellant. The issue involved is of interpretation of value of the provision and there are various judgments on this issue. The issue is that whether freight is includable in the assessable value or otherwise. Therefore, no mala fide intention can be attributed to the appellant, hence the demand of the extended period is not sustainable on limitation also. He placed reliance on the following judgments: Commissioner of Customs Central Excise, Aurangabad Vs. M/s. Roofit Industries Ltd.-2015 (319) ELT 02221 (S. C) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ter taking note of the decision of the Hon ble Apex Court in the case of Roofit Industries (supra) and the case of Emco Ltd. 2015 (322) ELT 394 (SC), the Hon be Apex Court came to the following conclusion: 5 This view of the law was reiterated in Government of India v. Madras Rubber Factory Ltd., (1995) 4 SCC 349 = 1995 (77) E.L.T. 433 (S.C.). Interestingly, in paragraph 39 of the judgment, cost of transportation from the factory gate to the place of removal not forming part of excise duty was conceded by the revenue. 6 Section 4 as substituted by the 1973 Amendment Act suffered a further amendment in 1996. The amendments carried out were to have effect from 28-9-1996, which is also the starting point on facts in the present case. Three important changes were made to Section 4. First a new sub-section (ia) was added to Section 4(1) which reads as follows :- (ia) Where the price at which such goods are ordinarily sold by the assessee is different for different places of removal, each such price shall, subject to the existence of other circumstances specified in clause (a), be deemed to be the normal price of such goods in relation to each such place of removal; ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y of excise . - (1) Where under this Act, the duty of excise is chargeable on any excisable goods with reference to their value, then, on each removal of the goods, such value shall - (a) In a case where the goods are sold by the assessee, for delivery at the time and place of the removal, the assessee and the buyer of the goods are not related and the price is the sole consideration for the sale, by the transaction value; (b) In any other case, including the case where the goods are not sold, be the value determined in such manner as may be prescribed. (2) The provisions of this section shall not apply in respect of any excisable goods for which a tariff value has been fixed under sub-section (2) of section 3. (3) For the purpose of this section, - (a) assessee means the person who is liable to pay the duty of excise under this Act and includes his agent; (b) Person shall be deemed to be related if - (i) they are inter-connected undertakings; (ii) they are relatives; (iii) amongst them the buyer is a relative and a distributor of the assessee, or a sub-distributor of such distributor; or (iv) they are so associated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... clearance from the factory are no longer places of removal. Also, the definition of transaction value makes it clear that freight or transportation expenses are not included in calculating the excise duty payable. 20 . It is necessary also to refer to Rules 5 and 7 of the Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000 which came into force on the same date as the amendment to Section 4, i.e., 1-7-2000. These Rules read as under :- Rule 5. Where any excisable goods are sold in the circumstances specified in clause (a) of sub-section (1) of section 4 of the Act except the circumstances in which the excisable goods are sold for delivery at a place other than the place of removal, then the value of such excisable goods shall be deemed to be the transaction value, excluding the actual cost of transportation from the place of removal upto the place of delivery of such excisable goods provided the cost of transportation is charged to the buyer in addition to the price for the goods and shown separately in the invoice for such excisable goods. Rule 7. Where the excisable goods are not sold by the assessee at the time an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of transportation calculated in accordance with generally accepted principles of costing. Explanation 2. - For removal of doubts, it is clarified that the cost of transportation from the factory to the place of removal, where the factory is not the place of removal, shall not be excluded for the purposes of determining the value of the excisable goods. 23 . It is clear, therefore, that on and after 14-5-2003, the position as it obtained from 28-9-1996 to 1-7-2000 has now been reinstated. Rule 5 as substituted in 2003 also confirms the position that the cost of transportation from the place of removal to the place of delivery is to be excluded, save and except in a case where the factory is not the place of removal. 24 . It will thus be seen that, in law, it is clear that for the period from 28-9-1996 up to 1-7-2000, the place of removal has reference only to places from which goods are to be sold by the manufacturer, and has no reference to the place of delivery which may be either the buyer s premises or such other premises as the buyer may direct the manufacturer to send his goods. As a matter of law therefore, the Commissioner s order and Revenue s arg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the property insured must always go together. It may be depending upon various facts and circumstances of a particular transaction and terms and conditions of sale. A reference has also been made to Colinvauz s Law of Insurance, 6th Edn. by Robert Merkin to indicate that there may be insurance to cover the interest of others, that is to say, not necessarily the person insuring the interest must be the owner of the property. [at para 10] 26 . This Court then went on to follow Bombay Tyre International s case and ultimately held :- In view of the discussion held above, in our view the Commissioner of Central Excise and CEGAT erred in drawing an inference that the ownership in the property continued to be retained by the assessee till it was delivered to the buyer for the reason that the assessee had arranged for the transport and the transit insurance. Such a conclusion is not sustainable. [at para 12] 27 . We are inclined to the opinion that the Tribunal was correct in relying upon this judgment on the facts in the present case and on the Circular dated 3-3-2003, which specifically stated, following the said judgment, that insurance of goods during tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Before the amendment, the place of removal was only the factory or any other place or premises where the excisable goods were produced or manufactured or a warehouse or any other place or premises where any excisable goods have been permitted to be deposited without payment of duty. Thus, the price would be the price at that place. By the amendment proviso (ia) to Section 4(1)(a) has been added. Under Section 4(1)(a)(ia) where the price of the goods is different for different places of removal, each such price was deemed to be the normal price of such goods in relation to such place of removal . Thus, if the place of removal was the factory, then the price would be the normal price at the factory. If the place of removal was some other place like a depot or the premises of a consignment agent and the price was different then that different price would be the price. It is because the newly added proviso (i-a) to Section 4(1)(a) was now providing for different prices at different places of removal that the definition of the term place of removal had to be enlarged. Thus the amendment was not negativing the judgments of this Court. If that had been the intention it would ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or at a later point of time, i.e., when the delivery of the goods is effected to the buyer at his premises. This aspect is to be seen in the light of the provisions of the Sale of Goods Act by applying the same to the facts of each case to determine as to when the ownership in the goods is transferred from the seller to the buyer. The charges which are to be added have put up to the stage of the transfer of that ownership inasmuch as once the ownership in goods stands transferred to the buyer, any expenditure incurred thereafter has to be on buyer s account and cannot be a component which would be included while ascertaining the valuation of the goods manufactured by the buyer. That is the plain meaning which has to be assigned to Section 4 read with the Valuation Rules. In the present case, we find that most of the orders placed with the respondent assessee were by the various government authorities. One such order, i.e., order dated 24-6-1996 placed by Kerala Water Authority is on record. On going through the terms and conditions of the said order, it becomes clear that the goods were to be delivered at the place of the buyer and it is only at that place where the acceptanc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... It was found that goods were to be delivered only at the place of the buyer and the price of the goods was inclusive of transportation charges. As transit damage on the assessee s account would imply that till the goods reached their destination, ownership in the goods remained with the supplier, namely, the assessee, freight charges would have to be added as a component of excise duty. Further, as per the terms of the payment clause contained in the procurement order, payment was only to be made after receipt of goods at the premises of the buyer. On facts, therefore, it was held that the sale of goods did not take place at the factory gate of the assessee. Also, this Court s attention was not drawn to Section 4 as originally enacted and as amended to demonstrate that the buyer s premises cannot, in law, be a place of removal under the said Section. 6.1 It is seen that the above decision of Hon ble Apex Court covers all the aspects of this issue, holds that the buyer s premises cannot, in law, be a place of removal under Section 4. In this matrix of facts, the decision of Commissioner holding buyer s premises as place of removal cannot be upheld. The impugned order uph ..... X X X X Extracts X X X X X X X X Extracts X X X X
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