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SUPREME COURT OF INDIA
A.K. Sikri, R.F. Nariman, JJ.
COMMISSIONER OF CUSTOMS AND CENTRAL EXCISE, NAGPUR – APPELLANT
VERSUS
M/S. ISPAT INDUSTRIES LTD. – RESPONDENT
CIVIL APPEAL NO. 637 OF 2007
Decided On : 7-10-2015
(b) Central Excise Act, 1944 – Section 4 (as amended in 2000) r/w Rules 5 and 7, Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000 – Concept of “transaction value” replacing concept of “normal value” – Actual price paid or payable on each removal of goods becomes the transaction value – Section 4(2) and sub-section (b)(iii) of 1996 amendment done away with – Therefore from 1.7.2000 to 31.3.2003, any other place from which excisable goods are to be sold after their clearance from the factory are not places of removal – Also, going by definition of transaction value, freight or transportation expenses not included in calculating the excise duty payable (Para 19, 21)
(c) Central Excise Act, 1944 – Section 4 (2003 amendment) – Section 4(3)(b)(iii) (pre 2000) brought back as Section 4(3)(c)(iii) – Rule 5 also substituted reviving the position as obtaining from 28.9.1996 to 1.7.2000 – cost of transportation from the place of removal to the place of delivery is to be excluded. (Para 23)
(d) Central Excise Act, 1944 – Section 4 r/w Rules 5 and 7, Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000 – For the period from 28.9.1996 up to 1.7.2000, the place of removal refers only to manufacturer – Has no reference to buyer – Freight charges cannot be included in transaction value – For the period 1.7.2000 to 31.3.2003 factory premises or the warehouse alone are places of removal, not the buyer’s premises under any circumstances. (Para 25)
(2003) 1 SCC 281; 2002 (146) ELT 497 (S.C.); (1984) 1 SCC 467; (2003) 5 SCC 507 – Relied upon
(1973) 3 SCC 503; (1995) 4 SCC 349 – Referred
Civil Appeal 3418 of 2004 and Civil Appeal 8966 of 2011; (2015) 319 E.L.T. 221 (S.C.) – Distinguished
Facts of the case:
The issue involved in this case is whether, by virtue of a transit insurance policy in the name of the manufacturer, excise duty is liable to be recovered on freight charges incurred for transportation of goods from the factory gate to the buyer’s premises, treating the buyer’s premises as the place of removal.
Intelligence revealed that M/s Ispat were indulging in evasion of central excise duty by a mis-declaration that their factory gate was the place of removal, and not the buyer’s premises, consequent to which freight charges recovered from their buyers was sought to be added in determining the amount of central excise duty payable by them. The period involved in the present appeal is from 28.9.1996 to 31.3.2003. Five show cause notices were issued to the respondents stating that the property in goods manufactured by them remained with Ispat while the goods were in transit as Ispat had taken out an insurance policy to cover the risk of loss or damage to the goods while in transit. Purchase orders as well as agreements with transporters did not suggest that the transporters were taking delivery on behalf of the buyers. It was thus stated that the buyer’s place or the place of delivery should be treated as the place of removal of the goods for the purpose of Section 4 of the Central Excise Act, and this being so, the necessary consequence would be that the freight charges paid by the buyers to Ispat ought to be included in the excise duty payable by Ispat.
The Commissioner held that the property in goods remained with Ispat until payment was made and was not transferred to the buyer at the factory gate.
On appeal by the respondents CESTAT reversed the order of the Commissioner.
Finding of the Court:
Impugned judgment does not warrant interference.
Result: Appeal dismissed.
JUDGMENT
R.F. Nariman, J.
1. The issue involved in the present appeal is whether, by virtue of a transit insurance policy in the name of the manufacturer, excise duty is liable to be recovered on freight charges incurred for transportation of goods from the factory gate to the buyer’s premises, treating the buyer’s premises as the place of removal.
2. M/s Ispat Industries Limited, the respondent herein, is engaged in the manufacture of H.R. sheets/coils, C.R. sheets/coils, and Galvanized/colour coated/sheets, falling under Chapter 72 of the First Schedule to the Central Excise Tariff Act, 1985. Intelligence revealed that M/s Ispat were indulging in evasion of central excise duty by a mis-declaration that their factory gate was the place of removal, and not the buyer’s premises, consequent to which freight charges recovered from their buyers was sought to be added in determining the amount of central excise duty payable by them. The period involved in the present appeal is from 28.9.1996 to 31.3.2003. Five show cause notices were issued to the respondents stating that the property in goods manufactured by them remained with Ispat while the goods were in transit as Ispat had taken out an insurance policy to cover the risk of loss or damage to the goods while in transit. Purchase orders as well as agreements with transporters did not suggest that the transporters were taking delivery on behalf of the buyers. All this was corroborated by a statement made by Shri S.P. Dahiwade, Deputy General Manager, stating that the ownership of the goods in transit remained with Ispat. It was thus stated that the buyer’s place or the place of delivery should be treated as the place of removal of the goods for the purpose of Section 4 of the Central Excise Act, and this being so, the necessary consequence would be that the freight charges paid by the buyers to Ispat ought to be included in the excise duty payable by Ispat.
3. In reply to the five show cause notices, M/s. Ispat stated that all their prices were ex-works, and that the goods were cleared from the factory on payment of central or local sales tax. Most of their sales were against Letters of Credit opened by the customer or through Bank discounting facilities. Invoices were prepared at the factory directly in the name of the customers, and the name of the Insurance Company as well as the number of Transit Insurance Policy were both mentioned. Based on the details mentioned in the invoice, the lorry receipt was prepared by the transporter and was in the buyer’s name. This receipt carried a caution notice as well a notice to the effect that deliveries were to be made to the buyer alone, and to nobody else.
4. M/s. Ispat further stated that these transactions were entered in their sales register and were booked as sales, the stock or inventory of finished goods being reduced by such sales. In the event that there was an insurance claim, recovery was credited to the customer’s ledger account against the recovery due from the customer in respect of the sale of the said goods. Excise invoices were prepared at the time that the goods left the factory in the name and address of the customers, and once the goods were handed over to the transporter, the respondent did not reserve any right of disposal of the goods in any manner. It had no right to divert the goods so handed over to the transporter and meant for a particular customer to anybody else.
5. The learned Commissioner, by his order dated 3.10.2003, held that as the insurance agreement with the transporter was entered into by Ispat who had taken out an Insurance Policy to cover risk to the loss or damage of the goods while in transit, the property in goods remained with Ispat and was not transferred to the buyer at the factory gate. It was also held that in the order acceptance form, it was mentioned that the transport would be by Ispat. Thus, Ispat had assumed responsibility of transportation of the goods up to the door of the customers
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