Custom, Excise & Service Tax Tribunal
Bhushan Steel Ltd vs Commissioner Of Central Excise, Raigad on 15 January, 2014
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL WEST ZONAL BENCH AT MUMBAI COURT NO. Appeal No. E/87565/2013-Mum. (Arising out of Order-in-Original No. 67/MAK(67)COMMR/RGD/12-13 dated 26/03/2013 passed by the Commissioner of Central Excise, Raigad ) For approval and signature: Honble Mr. S.S. Kang, Vice President Honble Mr. P.K.Jain, Member (Technical) ============================================================
1. Whether Press Reporters may be allowed to see :
the Order for publication as per Rule 27 of the
CESTAT (Procedure) Rules, 1982?
2. Whether it should be released under Rule 27 of the :
CESTAT (Procedure) Rules, 1982 for publication
in any authoritative report or not?
3. Whether Their Lordships wish to see the fair copy :
of the Order?
4. Whether Order is to be circulated to the Departmental :
authorities?
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Bhushan Steel Ltd.
:
Appellant
VS
Commissioner of Central Excise, Raigad
:
Respondent
Appearance
Shri M.H. Patil, Advocate for Appellant
Shri Shobha Ram, Commissioner (A.R) for respondent
CORAM:
Mr. S.S. Kang, Vice President
Mr. P.K. Jain, Member (Technical)
Date of hearing : 15/01/2014
Date of decision :
ORDER NO.
Per : P.K. Jain
Brief facts of the case are that the appellant during the period February 2007 to December 2011 sold its manufactured goods in the following manner.:-
(a) At the factory gate, where the customer took delivery of the goods;
(b) At the customers premises, where excise duty was discharged on the price of the goods and the freight payable for carriage of the goods from the factory to the customers premises; and
(c) Where the goods are said to be sold to the customer at its factory gate but agreed to be delivered at the customers premises at pre-agreed freight. This freight is separately shown in the invoices issued to the customer. In this case the appellant had paid excise duty only on the price of the goods and not included therein the freight paid which was reimbursed by the customer.
2. The dispute in this appeal is with regard to clearances of goods covered by (c) above. According to the Revenue, the amount of freight shown separately in the invoice will form part of the price of the goods to arrive at the assessable value under Section 4 of the Central Excise Act, 1944 while the appellants contend that freight cannot be added to the price of the goods to arrive at the assessable value of the goods. According to Revenue, goods are not sold at the factory gate but at customers premises and hence transaction value would include the freight element also.
3. Section 4 of the Central Excise Act, 1944 effective from 1.7.2000 reads as follows :
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, be 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.
Explanation. - For the removal of doubts, it is hereby declared that the price-cum-duty of the excisable goods sold by the assessee shall be the price actually paid to him for the goods sold and the money value of the additional consideration, if any, flowing directly or indirectly from the buyer to the assessee in connection with the sale of such goods, and such price-cum-duty, excluding sales tax and other taxes, if any, actually paid, shall be deemed to include the duty payable on such goods.
(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) persons 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 that they have interest, directly or indirectly, in the business of each other.
Explanation. In this clause -
(i) inter-connected undertakings shall have the meaning assigned to it in clause (g) of section 2 of the Monopolies and Restrictive Trade Practices Act, 1969 (54 of 1969); and
(ii) relative shall have the meaning assigned to it in clause (41) of section 2 of the Companies Act, 1956 (1 of 1956);
(c) place of removal means
(i) a factory or any other place or premises of production or manufacture of the excisable goods;
(ii) a warehouse or any other place or premises wherein the excisable goods have been permitted to be deposited without payment of duty;
(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;
from where such goods are removed;
(cc) time of removal, in respect of the excisable goods removed from the place of removal referred to in sub-clause (iii) of clause (c), shall be deemed to be the time at which such goods are cleared from the factory;
(d) transaction value means the price actually paid or payable for the goods, when sold, and includes in addition to the amount charged as price, any amount that the buyer is liable to pay to, or on behalf 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.
4. Ld. Advocate stated that only 4% of their total sales is covered in the category which is matter of dispute in this appeal. The main contention of the learned Advocate for the appellant is that in this category, the goods are sold to the customer at factory gate and not at the customers premises as assumed or held in the impugned order. It is only that the customer has requested the appellant to arrange the transport that they arrange the transport and charge certain amount for the freight. Some time the charges are less than actual freight while some time more than actual freight. Learned Advocate further argued that in all such cases the LRs are in the name of consignee and not in the name of appellant. Further any damage or risk during the transit is with the customer and not with the appellant. Learned Advocate also contended that in respect of such transportation even though they have arranged the transportation and paid to the transporter, they have not taken the credit of service tax paid on such transportation. Learned Advocate further stated that the contention of the department that since VAT has been paid inclusive of the freight amount, this shows that goods have been sold not at the factory gate but at the customers premises is not correct. Learned Advocate further stated that as per the Maharashtra Vat Act, VAT is required to be paid including the freight element upto the place of delivery even when the goods are sold at the factory gate. In support of this contention, he drew attention to Section 2(25) of Maharashtra VAT Act, 2002. As per the said proviso:
(25) sale price means the amount of valuable consideration paid or payable to a dealer for any sale made including any sum charged for anything done by the seller in respect of the goods at the time of or before delivery thereof, other than the cost of insurance for transit or of installation, when such cost is separately charged.
The Ld. Advocate also stated that the position in many other states (e.g. Odisha, Gujarat, Harayana) is same but in some states, it is different e.g. U.P. VAT does not stipulate inclusion of freight for payment of VAT. Only in respect of the consignment which are delivered within Maharashtra, freight charges were included for purpose of VAT.. Another contention raised by the learned Advocate is that in respect of goods covered by category (b) (para-1 above) it would be found that the LRs are made in the appellants name and all the risk from the factory to the customers premises are on appellants account only and it is due to this reason that in respect of clearances covered by category (b) that they are paying Central Excise Duty on the total contract value which includes freight upto the customers premises while in respect of category (c) they are not claiming the credit of service tax paid on the transportation charges. Learned Advocate also stated that in respect of the consignments covered by category (b) they are claiming credit of service tax paid on the transportation services upto the customers premises. Learned Advocate also contended that even Rule 5 of the Central Excise Valuation Rules 2000 were amended in 2003. Earlier only actual freight was deductible but after amendment even average of freight is allowed to be excluded. Learned Advocate relied upon the following judgment to support various contentions.
[i] Commissioner of C.Ex., Nagpur Vs. Ramkrishna Electricals Pvt. Ltd.
2011 (272) E.L.T. 149 (Tri. Mumbai) [ii] Mercedes Benz India Pvt. Ltd. Vs. Commr. Of C. Ex. Pune-I 2010 (260) E.L.T. 149 (Tri. Mumbai) [iii] Baroda Electric Meters Ltd. Vs. Collector of Central Excise 1997 (94) E.L.T. 13 (S.C.) [iv] Icomm Tele Ltd. Vs. Commissioner of C. Ex. Hyderabad 2010 (251) E.L.T. 103 (Tri.Bang.)
5. Learned Commissioner A.R. on the other hand contended that the transaction covered by category (b) and category (c) are exactly same. In both the situations, delivery is given at the customers premises and all the risk upto the customers premises are with the appellant. Under the circumstances it would be incorrect to state that the goods are sold at the factory premises. Goods are sold at the customers premises. Learned A.R. contended that as per the Central Excise Act, Sale means any transfer of the possession of goods and in the present case transfer of possession of goods takes place at the customers premises Section 2(h) of the Central Excise defines Sale 2(h) sale and purchase, with their grammatical variations and cognate expressions, mean any transfer of the possession of goods by one person to another in the ordinary course of trade or business for cash or deferred payment or other valuable consideration 5.1. Learned A.R. also relied upon the following case laws:
[i] Ambuja Cements Ltd. Vs. Union of India 2009 (236) E.L.T. 431 ( P & H) [ii] Bhushan Steels Ltd. Vs. Commissioner of Central Excise, Ghazibad 2009 (243) ELT 239 (Tri.-Del.) [iii] Commissioner of C. Ex. Vs. Gujarat Narmada Fertilizers Co. Ltd.
2009 (240) E.L.T. 661 (S.C.) Learned A.R. particularly emphasized para 2 of the Tribunals judgement in their own case, (supra) which reads as under
2. The appellant is a manufacturer of excisable goods. The dispute relates to the period from January 2005 to November 2005. During the said period, they incurred freight for outward transportation involved in supply of the excisable goods to their customers. There are two categories of sales and accordingly two types of invoices are prepared by them in respect of such sales. In the first category of cases, they claimed that invoices were raised on FOR destination basis and the freight was not shown separately in the invoices. In other cases, they have raised invoices wherein the amounts towards freight were separately indicated. It is the submission of the learned Advocate for the appellant that in both the cases ownership of the goods rested with them till the goods were delivered to the customers at the premises of the customers and that the risk like damage, loss of the goods in transit was also that of the appellant. Under these circumstances, he submits that the conditions in Boards Circular No. 97/8/2007-S.T. dated 23.8.2007 are satisfied in their case and the transportation involved till delivery of the goods to the customers has to be considered as input service. He also relies on the decision of the Honble High Court of Punjab and Haryana in the case of Ambuja Cements Limited Vs. Union of India reported in 2009 (236) E.L.T. 431 (P & H) = 2009 (14) S.T.R. 3 (P & H).
Learned A.R. also drew support from Boards 37 B Order No.59/1/2003-CX dt. 3.3.2003 which deals about the includibility of freight and insurance charges.
6. We have carefully considered the rival submissions. The issue is relating to transaction value of the goods, whether or not the transaction value will include the freight charges which are shown in the invoices and collected by the appellant from his customers. In Iron and Steel trade, goods after clearance from the factory are transferred to manufacturers stockyards or depots or to a premises of a consignment agent for sale purpose. As and when customer is located, price and other terms and conditions of sale are negotiated. Sometime customer may take delivery at such stockyards or depot or premises of the consignment agent itself and act of sale as well as delivery will get completed there itself. In other cases, it will be as per the agreed terms and conditions. In respect of cases before us, when the goods are cleared from the factory the purchaser/customer as also terms and conditions such as price etc. are already negotiated. The basic price is known, excise/VAT is to be added/charged as per law. In addition, certain amount is to be collected/charged towards freight from the appellants factory to the customers premises. The issue to be decided here is whether point of sale or transfer of the possession of goods from appellant to customer is appellants factory or customers premises as per Section 2(h) of the Central Excise Act, 1944. We find that the impugned order details that an issue was raised in the context of availment of credit on input services in appellants own case in respect of show cause notice bearing F.No.V/Adj.(SCN) 15-0512/RGB/10-11/2744 dated 30.3.2011. In reply to the show cause notice appellant has described the factual position as enumerated in para 43 of the impugned order and reproduced below:-
17.. In Catena of cases cited herein after it has been specifically held by various Courts of Law and Tribunals that place of removal will be customers place when sales are made on FOR destination basis and similarly in case of exports the port of shipment when exports are made on FOR basis. The place of removal is further clarified by CBEC in para 8.2 of the Master Circular No.97/08/2007 (F.No.137/85/2007-CX.4) dated 23.08.2007 subject to certain conditions. Needless to mention, that the circular is binding on the department.
.
26. That Honble Punjab and Haryana High Court in the case of Ambuja Cement Ltd. Vs. UOI in CEA 87/2007 order dated 10.02.2009 reported in 2009 (014) STR 003 (HC. P & H) has held that the Circulars issued by the Board are binding on the department
30. That, from the clarification given above it is clear that, cenvat credit on all the services received till title of the goods passes on to the buyer is available to the manufacturer. In our case Domestic clearances are made on FOR destination basis (sample copies of few L/R (lorry receipts) are enclosed as Exhibit-A) showing freight has been paid us), where freight is being paid by us to the transporters for transportation of goods up to the buyers place as per terms of sale and contract (Copies of few purchase orders/contracts are enclosed as Exhibit-B) and the title in goods is with us till the delivery is being made by the transporter to the buyer as the losses on account of shortages or other losses in transit if any are to be borne by us as we have taken marine insurance policy for transportation of goods (Copy of marine insurance policy is enclosed as Exhibit-C), further the freight is integral part of prices charged in Invoices on which Central Excise duty is paid (Copy of few invoices are enclosed as Exhibit-D). Therefore, the above said conditions are satisfied in terms of the above referred circular issued by CBEC; hence we are entitled to avail service tax credit on GTA service availed for transportation of finished goods upto customers place. The department if so desires may verify the entire Lorry Receipts which are available with notice.
7. We also note that appellant in their own case before Principal Bench, Delhi reported in 2009 (243) ELT 239 (Tri.-Del.) quoted by learned A.R. has clarified the factual position, as under:
2. The appellant is a manufacturer of excisable goods. The dispute relates to the period from January 2005 to November 2005. During the said period, they incurred freight for outward transportation involved in supply of the excisable goods to their customers. There are two categories of sales and accordingly two types of invoices are prepared by them in respect of such sales. In the first category of cases, they claimed that invoices were raised on FOR destination basis and the freight was not shown separately in the invoices. In other cases, they have raised invoices wherein the amounts towards freight were separately indicated. It is the submission of the learned Advocate for the appellant that in both the cases ownership of the goods rested with them till the goods were delivered to the customers at the premises of the customers and that the risk like damage, loss of the goods in transit was also that of the appellant. Under these circumstances, he submits that the conditions in Boards Circular No. 97/8/2007-S.T. dated 23.8.2007 are satisfied in their case and the transportation involved till delivery of the goods to the customers has to be considered as input service. He also relies on the decision of the Honble High Court of Punjab and Haryana in the case of Ambuja Cements Limited Vs. Union of India reported in 2009 (236) E.L.T. 431 (P & H) = 2009 (14) S.T.R. 3 (P & H).
(Emphasis supplied)
8. We find that factual position as enumerated by Learned advocate for the appellant in the present case and briefly described in para 4 above are at variance with the stand taken in the above mentioned two cases. The second case referred above gives contrary impression. Claim of the Ld. Advocate therefore needs detailed examination with reference to purchase orders, invoices, L.R.s transit insurance policy, etc. to arrive at the place of sale or place of transfer of possession from appellant to customer as per Section 2(h) of the Central Excise Act. Learned Advocate has also pointed out differences in category (b) and category (c) sale. For example name of consignor/consignees, transit insurance/risk etc. These claims will have to be first verified, particularly when no such claim was made by the appellant in the two cases referred above. After factually verifying above claim of the appellant, matter will have to be examined with reference to Section 4 and 2(h) of the Central Excise Act. We do not consider it necessary to go into other issues such as limitation etc. at this point of time, as the result of above exercise may have bearing on the same.
9. We therefore remand the matter for denovo examination, keeping all issues open. Appellant will produce all the earlier mentioned documents including those of category (b) and any other document required by the adjudicating authority within two months from the receipt of order. Needless to state, adjudicating authority will grant opportunity of personal hearing and also follow principles of natural justice before arriving at any conclusion.
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