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TMI Blog2024 (6) TMI 373X X X X Extracts X X X X X X X X Extracts X X X X ..... is not includible in the assessable value. Reliance placed inthe decisions of this Tribunal in the case of Sayaji Senthness Ltd [ 2024 (5) TMI 194 - CESTAT AHMEDABAD ] where this Tribunal held ' freight and/or insurance is not includable in the assessable value.' From the above decision it can be seen that this Tribunal considered the various judgements which are also referred by the appellant. Tribunal has decided that the freight charges is not includible in the assessable value. The impugned order is set aside - appeal allowed. - HON'BLE MEMBER ( JUDICIAL ) , MR. RAMESH NAIR And HON'BLE MEMBER ( TECHNICAL ) , MR. RAJU Shri Saurabh Dixit , Advocate appeared for the Appellant Shri Rajesh K Agarwal , Superintendent ( AR ) appeared for the Respondent ORDER RAMESH NAIR The issue involved in the present case is that whether the freight charges collected by the appellant from the customers in the course of sale of excisable goods, is includible in the assessable value of goods sold for the purpose of Section 4 of Central Excise Act, 1944, and whether any penalty is impossible on the appellant in the facts and circumstances of the case. 2. Shri Saurabh Dixit, Learned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . On careful considered of the submission made by both the sides and perusal of record, we find the issue to be decided is that whether freight and/or insurance charges shown separately in the invoice is includable in the assessable value of excisable goods. It is observed from the sale invoices of the appellant that the sale is ex-factory as clearly mentioned in the invoice and freight and /or insurance were charged separately. In this fact the freight and /or insurance is not includable in the assessable value as held by this Tribunal in the case of Gujarat Fluorochemicals Ltd (supra) wherein this Tribunal has passed the following orders:- 6. The issue to be decided is whether the freight charges are includible in the assessable value or not. On perusal of the Purchase Order, it is seen that delivery of goods is on EX-WORKS basis and its insurance is covered by the appellant. In the case of Commissioner of Customs Central Excise vs. Ispat Industries Limited (supra), it was noted by the Hon ble Apex Court that the place of removal is to be determined on the facts of each case. The payment of insurance charges or freight charges cannot be criteria for deciding the place of removal. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion, the Commissioner in the impugned order has held that when the freight is collected in invoices for delivery upto the buyer s premises, the buyer s premises become the place of removal . She relies on the decision of Hon ble Apex Court in the case of Roofit Industries Ltd., 2015 (319) ELT 221 (SC) and Circular No. 1065/4/2018 dated 08.06.2018. 4.1 We find that in the case of Ispat Industries (supra), after 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. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ods manufactured by him, and can, in no circumstances, have reference to the place of delivery which may, on facts, be the buyer s premises. 18. By an Amendment Act which came into effect on 1-7-2000, Section 4 was substituted yet again as follows :- Section 4. Valuation of excisable goods for purposes of charging of duty 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 s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... od in question in the present case, namely, 1-7-2000 to 31-3-2003, the depot, premises of a consignment agent or any other place from which excisable goods are to be sold after their 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he actual cost of transportation; and (ii) in case where freight is averaged, the cost 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of the goods and the ownership 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 have been specifically provided that even where price was t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pect 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 acceptance of supplies was to be effected. Price of the goods was inclusive of cost of material, Central excise duty, loading, tra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 upholding the demand of duty is therefore set aside. Since the demand of duty is set aside, the demand of interest as well as penalty cannot be sustained. 6.2 In view of discussion abo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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