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TMI Blog2024 (9) TMI 1166X X X X Extracts X X X X X X X X Extracts X X X X ..... spondent had no right to the disposal of the goods nor did it reserve such rights inasmuch as title had already passed to its customer.' The freight charges shown separately in the invoice for which there is a contract between the assessee and the buyers of the goods the said freight charges shall not include in the assessable value of the excisable goods. Thus, in the present fact of the case, the freight charges collected by the appellant separately in the invoice in respect of transportation of excisable goods is not includible in the assessable value. Therefore, consequential demand of duty, penalty and interest will not sustain. Accordingly, the impugned order is set aside - appeal allowed. - HON'BLE MEMBER ( JUDICIAL ) , MR. RAMESH NAIR And HON'BLE MEMBER ( TECHNICAL ) , MR. RAJU Shri Ishan Bhatt , Advocate appeared for the Appellant Shri Rajesh R Kurup , Superintendent ( AR ) , appeared for the Respondent ORDER RAMESH NAIR The issue involved in the present case is that, 1) Whether freight charges in case of ex-factory sale as well as FOR sale is includible in the assessable value of excisable goods, when in agreements with the buyer, there is specific clause fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e for purpose of charging excise duty. We find that on this issue much water has flown and in the various judgments of the Tribunal as well as the Hon ble Supreme Court, it was consistently decided that the freight charges shown separately in the invoice which is other than the price of the goods shall not include in assessable value of the excisable goods irrespective whether the sale is ex-factory or FOR sale. Some of the judgments are reproduced below:- 4.1 In the case of Ispat Industries Ltd the Hon ble Supreme Court even after considering the judgments relied upon by the Learned AR in the case of Roofit Industries Ltd EMCO Ltd. (supra) delivered the following judgment:- 9. As this case involves the correct interpretation of Section 4 as it stood at the relevant time, it is necessary to recapitulate the history of the said provision insofar as it relates to freight charges being part of excise duty. 10. Section 4, as it stood before the 1973 amendment made to the Central Excises and Salt Act, provided as follows :- Section 4. Where under this Act, any article is chargeable with duty at a rate dependent on the value of the article, such value shall be deemed to be - (a) the whol ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ay, the price at which such goods are ordinarily sold by the assessee to a buyer in the course of wholesale trade for delivery at the time and place of removal, where the buyer is not a related person and the price is the sole consideration for the sale : Provided that - (i) Where, in accordance with the normal practice of the wholesale trade in such goods, such goods are sold by the assessee at different prices to different classes of buyers (not being related persons) each such price shall, subject to the existence of the other circumstances specified in clause (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 so ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are ultimately removed. Interestingly, in Section 4(2), which is introduced for the first time, where in relation to excisable goods the price thereof for delivery at the place of removal is not known, and the value is determined with reference to the price for delivery at a place other than the place of removal, the cost of transportation from the place of removal to the place of delivery is statutorily excluded. As the law stood thus, this Court in Union of India v. Bombay Tyre International Ltd., (1984) 1 SCC 467 = 1983 (14) E.L.T. 1896 (S.C.), after extracting the substituted Section 4 by the Amendment Act of 1973, held :- Where the excisable article or an article of the like kind and quality is not sold in wholesale trade at the place of removal, that is, at the factory gate, but is sold in the wholesale trade at a place outside the factory gate, the value should be determined as the price at which the excisable article is sold in the wholesale trade at such place, after deducting therefrom the cost of transportation of the excisable article from the factory gate to such place. The claim to other deductions will be dealt with later. [at para 27] The Court further went on to sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es it clear that a depot, the premises of a consignment agent, or any other place or premises from where the excisable goods are to be sold after their clearance from the factory are all places of removal. What is important to note is that each of these premises is referable only to the manufacturer and not to the buyer of excisable goods. The depot, or the premises of a consignment agent of the manufacturer are obviously places which are referable only to the manufacturer. Even the expression any other place or premises refers only to a manufacturer s place or premises because such place or premises is stated to be where excisable goods are to be sold . These are the key words of the sub-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 is clear, therefore, that as a matter of law with effect from the Amendment Act of 28-9-1996, the place of removal only has reference to places from ..... 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. 19. A cursory reading of the substituted provision makes it clear that the concept of normal value has given way to the concept of transaction value . Thus, no longer is there a normative price for purposes of valuation of excisable goods. The actual price that is paid or payable on each removal of goods becomes the transaction value. Interestingly, it will be noticed that under Section 4(3)(c), the place of removal is defined as it had been defined in the substituted Section 4 (by the 1973 Amendment) before its further amendment in 1996. What is conspicuous by its absence in the present Section is Section 4(2) and sub-section (b)(iii) in the previous Section 4 (after its amendment in 1996). It ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of removal, Rule 7 deals with the normal transaction value of goods transferred to a depot or other premises which is said to be at or about the same time or the time nearest to the time of removal of goods under assessment. 22. To complete the picture, by an Amendment Act with effect from 14-5- 2003, Section 4 was again amended so as to re-include sub-clause (iii) of old Section 4(3)(b) (pre 2000) as Section 4(3)(c)(iii). This amendment reads as follows :- (3)(c)(iii) a depot, premises of a consignment agent or any other place or premises from where the excisable goods are to be sold after their clearance from the factory; Also, Rule 5 of the Central Excise Rules was substituted, with effect from 1-3- 2003, to read as follows : 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 cost of transportation from the place of removal upto the place of delivery of such excisable goods. Explanati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... price was ex- works and exclusive of freight insurance, etc. After setting out Section 4 post its amendment in 1996, this Court held :- A perusal of the orders passed by the authorities and CEGAT shows that since transit insurance was arranged by the assessee, therefore it was inferred and held that the ownership of the goods was retained by the assessee until it was delivered to the buyer on the reasoning that otherwise there would be no occasion for the seller, namely, the assessee to take risk of any kind of damage to the goods during transportation. To us, the whole reasoning seems to be untenable. The two aspects have been mixed up - one relating to the transaction of sale of the goods and the other arranging for the transit insurance for the buyer and charging the amount expended for the purpose from him separately. [at para 8] From the above passage it is clear that ownership in the property may not have any relevance insofar as insurance of goods sold during transit is concerned. It would therefore not be lawful to draw an inference of retention of ownership in the property sold by the seller merely by reason of the fact that the seller had insured such goods during transi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the cost of transport from factory to the depot, even in case where the manufacturer sold the goods at a uniform price all over the country by including the element of equalised freight. The Tribunal has upheld the view of the Department on the reasoning that by this amendment the definition of the term place of removal has been extended to include the depot. The Tribunal has also held that Section 4(2) which excluded the cost of transportation from the place of removal to the place of delivery was not amended when the definition of the term place of removal was extended. According to the Tribunal the result was that only the transport charges from the place of removal to the place of delivery were to be excluded from the value. We have heard the parties at length. In our view, Section 4 has to be read as a whole. Under Section 4(1)(a), the normal price is the price at which goods are ordinarily sold by the assessee to a buyer in the course of wholesale trade for delivery at the time and place of removal, where the buyer is not a related person and price is the sole consideration for sale. Therefore, the normal price is the price at the time of delivery and at the place of removal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Central Excise, Delhi-II [2002 (146) E.L.T. 31 (S.C.)]. The only difference which has been pointed out is that in the Escorts case (supra) the sale was at the factory gate whereas in these cases, the sale is from the depot. Learned counsel for the appellants admit that the freight and insurance charges up to the depot would be includible in the assessable value for the purposes of excise. However, the sale being at the depot, the freight and insurance for delivery to the customers from the depot would not be so includible as per the said judgment. This judgment, therefore, also holds that even in a depot sale, freight and insurance for delivery to customers from the depot to their premises cannot possibly be included, and followed the Escorts JCB case supra. 31. With this we come to two recent judgments of this Court. In CCE Customs v. Roofit Industries Ltd., 2015 (319) E.L.T. 221 (S.C.), this Court, after distinguishing the Escorts JCB s case, stated :- 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... there is a contract for the sale of specific or ascertained goods the property in them is transferred to the buyer at such time as the parties to the contract intend it to be transferred. (2) For the purpose of ascertaining the intention of the parties regard shall be had to the terms of the contract, the conduct of the parties and the circumstances of 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. These are clear finding of facts on the aforesaid lines recorded by the Adjudicating Authority. However, CESTAT did not take into consideration all these aspects and allowed the appeal of the assessee by merely referring to the judgment in Escorts JCB Ltd. [(2003) 1 SCC 281 : (2002) 146 E.L.T. 31] Obviously the exact principle laid down in the judgment has not been appreciated by CESTAT. [at paras 12-15] 32. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cal issue has also been considered by this Tribunal in the case of EIMCO Elecon India Ltd (supra) wherein, the following judgment was passed:- 4. We have considered the rival submissions and perused the material available on record. 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. 4.1 Having considered the rival contention we find that freight have been charged separately and received separately. We also take notice that the buyers of the goods-Western Coalfields Ltd., Nagpur and M/s Bharart Coking Coal Ltd. (A Subsidiary of Coal India Ltd.) have issued purchase order specifying the price for the goods separately and also specifying the transportation cost for the supply of goods. Accordingly, appellant have supplied the goods and raised invoices for the price of goods and the transportation. Thus, it amounts to showing the cost of transport separately in the invoices. 4.2 The relevant Rule 5 of the Valuation Rules is reproduced below:- Rule 5. Where any excisable goods are sold in the circumstances specified in clause (a) of sub-section (1) of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... these facts and legal provisions, we find no valid reason for disallowing the deduction for the freight paid inasmuch as the sales are FOR destination. We also find that a coordinate Bench of CESTAT in the case of Sterlite Optical Technologies Ltd. v. CCE C, Aurangabad - 2015 (329) E.L.T. 341 (Tri.-Mumbai) has taken a view in identical facts that freight will be allowable as a deduction from the composite price. Thus, the contention of the Department to include the freight amount in the assessable value does not meet the test of law and hence not legally sustainable. Hence, we find no merit in order passed by the appellate authority. 4.5 We also find that in view of the various judgments cited by the Ld. Advocates, freight amount is not includable in the assessable value of the goods for charging excise duty. Since we have decided the matter on merits of the case, we are not going to the issue of limitation raised by Ld. Advocate. 5. Accordingly, the impugned order is set aside and the appeal is allowed with consequential relief, if any, as per law. 4.3 This Tribunal further in the case of Panama Petrochem Ltd.(supra) dealing the same issue observed as under:- 4. We have considered ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... addition to the price for the goods. (c) Cost of transportation should be shown separately in the invoices. 4.3 As regards the first criterion, the place of removal is factory gate, however the goods were delivered at customer place. Therefore goods were sold for delivery not at the place of removal (i.e. factory gate) but at other place i.e. customer door step. We have perused copies of the purchase contract placed by the Indian Oil Corporation Ltd and Hindustan Petroleum Corp. Ltd. and invoices issued by the Appellant. From the invoices, it is seen that the freight/insurance shown in the invoices is in addition to basic price of the goods. It is clear from the terms of the purchase contract that basic price and other components have to be indicated separately. Therefore, there is no dispute that basic price and the freight/insurance components are clearly indicated separately in the invoices and therefore criterion i.e. cost of transportation should be in addition to the basic price of the goods stand fulfilled. 4.4 In the light of these facts and legal provisions, we find no valid reason for disallowing the deduction for the freight/insurance paid inasmuch as the sales are FOR d ..... X X X X Extracts X X X X X X X X Extracts X X X X
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