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TMI Blog2024 (5) TMI 989X X X X Extracts X X X X X X X X Extracts X X X X ..... g all the appeals of the appellant with consequential relief, if any, as per law. When the sale is on a FOR basis and the outward freight charges are included in the assessable value, the appellant is entitled to claim a refund of the central excise duty paid on the freight. Appeal allowed. - MR. ASHOK JINDAL, MEMBER (JUDICIAL) MR. C L MAHAR, MEMBER (TECHNICAL) Shri Sudhir Malhotra, Advocate for the Appellant Shri Rajiv Gupta, Shri A. K. Saini, ARs for the Respondent ORDER The appellant is in appeals against the impugned orders wherein the refund claim filed under Notification No. 56/2002-CE dated 14.11.2002 has been rejected. 2. The facts of the case are that the appellant is located in the state of Jammu and Kashmir and manufacturing Lead Ingots Lead Oxide. The appellant was availing area based exemption under Notification No. 56/2002-CE dated 14.11.2002. As per the said notification, the appellant is entitled to take cenvat credit on inputs, input service and capital goods, thereafter, whatever duty paid in cash, the appellant is entitled to claim refund thereof. During the course of verification of refund claims, it was found that the appellant has incurred outward freight ch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es, we find that in this case, the sole issue is that whether the duty paid on Outward Transportation Charges when the goods are sold on FOR basis, the appellant is entitled to claim refund thereon under Notification No. 56/2002-CE dated 14.11.2002 or not? The Ld. AR relied on the decision of this Tribunal in the appellant s own case vide final order No. A/60444-60491/2018 dated 06.03.2018. We have gone through the said order, this Tribunal has heavily relied on the decision of Ispat Industries (supra) and against the said order, the appellant has gone in appeal before the Hon ble Apex Court and the Hon ble Apex Court admitted the appeal filed by the appellant and notice has been issued to the Union of India as reported (supra). 8. We further take a note of the fact that it is not disputed that in the present case, the appellant is clearing goods on FOR basis, the premises of the buyer becomes the premises from where goods are being sold after being cleared from the factory of the manufacturer. In case of sale on FOR basis, the transportation expanses get included in the transaction value for the purpose of payment of duty such transportation takes place before actual sale of the g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icating Authority. However, the CESTAT did not take into consideration all these aspects and allowed the appeal of the assessee by merely referring to the judgment in the case of Escorts JCB Ltd. Obviously the exact principle laid down in the judgment has not been appreciated by the CESTAT. 16. As a result, order of the CESTAT is set aside and present appeal is allowed restoring the order passed by the Adjudicating Authority. 10. We further take a note of the fact that in the case of Ispat Industries (supra) the Hon ble Apex Court has observed that in the said case, the prices were Ex-works , therefore, it was observed by the Hon ble Apex Court that the goods were cleared from the factory on payment of appropriate sale tax by the assessee itself thereby indicating that they were sold at factory gate and sales were against letters of credit of bank discounting facilities, sometimes in advance. Invoices were prepared only at factory directly in the name of customer in which name of Insurance company as well as number of transit Insurance Policy were mentioned. All above excise invoices were prepared at the time of goods leaving factory in the name and address of customers of the resp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t rebutted the factual position of the case that the appellant remained owner of the goods till they were delivered to the buyer at their factory gate, in that circumstances, the appellant have rightly paid duty on Outward Transportation Charges which has form part of the assessable value. Therefore, the appellant is entitled to claim refund of duty paid under Notification No. 56/2002-CE dated 14.11.2002 on account of duty paid on Outward Transportation Charges . 12. We further take a note of the fact that it is the case of the revenue that the appellant were not required to pay duty on Outward Transportation charges , in that circumstances also, when the appellant is not liable to pay duty they can claim refund of excess duty paid by them. Therefore, it is a revenue neutrality situation. In that circumstances also the appellant is entitled to claim refund of duty paid on Outward Transportation Charges which was not required to be paid by them. 13. We hold that the appellant is entitled to claim refund of duty paid on Outward Transportation Charges . 14. In these terms, we set-aside the impugned orders and allow the appeals filed by the appellants with consequential relief. (Pronou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... b-section. The place or premises from where excisable goods are to be sold can only be the manufacturer s premises or premises referable to the manufacturer. If we are to accept the contention of the revenue, then these words will have to be substituted by the words have been sold which would then possibly have reference to the buyer s premises. 17. It will thus be seen that, in law, it is clear that for the period from 28/09/1996 up to 01/07/2000, 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 argument based on that order that freight charges must be included as the sale in the present facts took place at the buyer s premises is incorrect. Further, for the period 01/07/2000 to 31/03/2003 there will be no extended place of removal, the factory premises or the warehouse (in the circumstances mentioned in the Section), alone being places of removal. Under no circumstances can the buyer s premis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to send his goods. As a matter of law therefore, the Commissioner s order and Revenue s argument based on that order that freight charges must be included as the sale in the present facts took place at the buyer s premises is incorrect. Further, for the period 01/07/2000 to 31/03/2003 there will be no extended place of removal, the factory premises or the warehouse (in the circumstances mentioned in the Section), alone being places of removal. Under no circumstances can the buyer s premises, therefore, be the place of removal for the purpose of Section 4 on the facts of the present case. 22. It will be seen that this is a decision distinguishing the Escorts JCB s case on facts. 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 recei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , warehouse or any other premises or depot or premises of a consignment agent from where the excisable goods are sold after the clearance from the factory. We note in the present case the appellant/assessee is claiming that the goods were sold on FOR basis and as such the place of removal is the delivery point to the buyer. The freight element incurred by the appellant/assessee should form part of the assessable value in such FOR sale. In this connection, we note that the Learned AR relied on the decision of Hon ble Supreme Court in CCE, Nagpur v. Ispat Industries Ltd. - 2015 (324) E.L.T. 670 (S.C.). In the said decision the Apex Court held under no circumstances can the buyer s premises, therefore, be the place of removal for the purpose of Section 4 on the facts of the present case . The Apex Court also distinguished their earlier decision in Rooffit Industries - 2015 (319) E.L.T. 221 (S.C.). The Apex Court observed as below :- 16. It will thus be 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. Sub-clause (b)(iii) is very important and ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... difference of opinion with the Member (Judicial), the file may be put up to the Hon ble President for referring the matter to third member for majority decision. (Order pronounced on 28/02/2020.) (C.L. Mahar) Member (Technical) As there is a difference in the opinion of the Member (Judicial) and Member (Technical), the following points of difference emerge which need to be referred to the third Member for a decision :- (i) Whether in the facts of the present matter where the sale of the goods have taken place at the buyer s premises at the factory gate whether it is correct to include the amount of the freight in the assessable value of goods ; (ii) Whether the appellant is entitled for refund of the central excise duty paid by him on the element of freight and other expenditures made beyond the point of clearance i.e. factory gate. 2. In view of above, it is requested that Hon ble President may nominate a third Member for majority decision in this case. ( Ashok Jindal) Member (Judicial) (C.L. Mahar) Member (Technical) Hon ble President DATE OF HEARING: 15.02.2024 APPEARANCE: Present for the Appellant: Sh. Rajat Mittal, Advocate Present for the Respondent: Sh. Aneesh Dewan Sh. Yash ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the case of Commissioner of Customs Central Excise, Aurangabad vs. M/s Roofit Industries Ltd 2015 (319) ELT 221 (SC), wherein the facts were identical as in the present case. 28.2 He has further submitted that the decision of the Hon ble Apex Court in the case of Commissioner of Customs Central Excise, Nagpur vs. M/s Ispat Industries Ltd 2015 (319) ELT 221 (SC) is not applicable to the facts of the present case. He has further submitted that after the decision of the Hon ble Apex Court in the case of M/s Ispat Industries Ltd (supra) and M/s Roofit Industries Ltd (supra), the Department clarified the position vide Circular No. 1065/4/2018-CX dated 08.06.2018 and distinguished between the facts in the cases of M/s Ispat Industries Ltd (supra), M/s Roofit Industries Ltd (supra) and CCE Mumbai-III vs. M/s Emco Ltd 2015 (322) ELT 394 (SC). The relevant extract of the Circular has been reproduced as follows: Exception: (i) The principle referred in para 3 above would apply to all situations except where the contract for sale is FOR contract in the circumstances identical to the judgments in the case of CCE, Mumbai-III vs. Emco Ltd [2015 (322) ELT 394 (SC)] and CCE vs. M/s Roofit Indu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r considering the judgment of Hon ble Supreme Court in the case of M/s Ispat Industries (supra). The learned AR has further submitted that in the present case all their prices were ex-works and the goods were sold at the factory gate. He has further submitted that in the appellant s own case reported in 2019 (366) ELT 837 (Tribunal), the Tribunal has held that if the clearance of the goods is at the factory gate, the outward freight is not includable in the assessable value for the payment of central excise duty. 30. I have considered the submissions of both the parties and perused the material on record and also perused the views expressed by both the Members. I find that in the present case it is not in dispute that the sale is FOR and the freight element is included in the assessable value. Now the question arises whether in the facts and circumstances, the appellant are entitled to get the refund of central excise duty paid by them on the element of freight or not? This question has been considered recently by the Larger Bench of the Tribunal in the case of M/s The Ramco Cements Limited vs. CCE, Puducherry and vide Interim Order No. 40020/2023 dated 21.12.2023, the Larger Bench ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... finition, Place of Removal. In Para 5 of the Circular, the Ministry has referred to the judgment in the case of CCE ST v. Ultra Tech Cement Ltd. [Civil Appeal No. 11261 of 2016, dated 1-2-2018] [2018 (9) G.S.T.L. 337 (S.C.)) and stated that, in that case, the Apex Court has held that Cenvat credit on GTA Service from the place of removal to the buyer's premises is not admissible. 18. In the instant cases, the place of removal is buyer's premises Therefore, the authority in the case of Madras Cements Ltd., is applicable to the facts of this case and these appeals merit consideration. Hence, the following ORDER (a) The questions of law framed by this Court in CEAS No. 56/2019 and 71/2019 are answered in favour of the assessee holding that the Tribunal's view is unsustainable in law, (b) CEA No. 56/2019 is allowed and impugned order vide Final Order Nos. 21960-21962/2018, dated 31-12-2018 passed in Appeal Nos. E/21756/2017-SM, E/21757/2017-SM and E/21758/2017-SM are set aside, and (c) CEA No. 71/2019 is allowed and impugned order vide Final Order No. 20224/2019, dated 27-2- 2019 passed in Appeal No. E/20302/2018-SM is set aside 32. The interpretation of the judgment of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the instant case, freight charges form part of assessable value, the ownership of goods remains with seller till delivery at customer s doorstep, seller bears risk of loss or damage to the goods during transit to the destination, and property in the goods is not transferred till delivery. So outward transportation qualifies as input service and is eligible for CENVAT Credit. 28) The sale being of gases manufactured by the appellant, due to the peculiar nature, sale happens at the buyer s premises and admittedly such sale is on F.O.R basis. 29) In M/s Roofit Industries (Supra), the Supreme Court held: 13. The principle of law, thus, is crystal clear. It is to be seen as to whether as to at what point of time sale is effected, namely, whether it is on factory gate 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the case. (3) Unless a different intention appears, the rules contained in Sections 20 to 24 are rules for ascertaining the intention of the parties as to the time at which the property in the goods is to pass to the buyer. 30) This was reiterated in Emco case (supra). 31) The CBIC, in it s circular dt. 8.6.2018 has considered these two decisions and also the decision in Ultra Tech cement (supra) and had specifically held (as set out in para 23 supra) that in the case of FOR destination sale where the ownership, risk in transit, remained with the seller till goods are accepted by buyer on delivery and till such time of delivery, seller alone remained the owner of goods retaining right of disposal, benefit has been extended by the Apex Court on the basis of facts of the cases. 32) This circular binds the respondents though it had been issued by the CBIC on 8.6.2018 after the decision was rendered in the instant case by the CESTAT on 27.2.2018. 33) In Ranadey Micronutrients etc. vs. Collector of Central Excise, the Supreme Court held that in view of Section 37B of the Central Excise Salt Act, 1944, instructions issued by the Board in order to ensure uniform practice of assessment of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Himachal Pradesh in the case of M/s Inox Air Products Pvt Ltd (supra) as well as by the Larger Bench of the Tribunal in the case of M/s The Ramco Cements Limited (surpa), therefore, by following the ratios of the above cited decisions, I am of the considered opinion that the view taken by the Member (Judicial) is correct in law and hence, I hold that when the sale is FOR and the outward freight charges are included in the assessable value then, the appellant are entitled to claim the refund of the central excise duty paid by them on the element of freight. 33. Now the matter be placed before the Regular Division Bench for majority order. (S. S. GARG) MEMBER (JUDICIAL) MAJORITY ORDER 34. Considering the facts and circumstances of the case and after following the ratios of the law laid down by the Larger Bench of the Tribunal in the case of M/s The Ramco Cements Limited (supra) and the decision of Hon ble High Court of Himachal Pradesh in the case of M/s Inox Air Products Pvt Ltd (supra), we are of the considered view that the impugned orders denying the refund of the excise duty paid by the appellant on transportation of the goods up to the buyer s premises are not sustainable in l ..... X X X X Extracts X X X X X X X X Extracts X X X X
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