Custom, Excise & Service Tax Tribunal
Sterlite Optical Technologies Ltd vs Commissioner Of Central Excise & ... on 1 May, 2015
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL WEST ZONAL BENCH AT MUMBAI COURT NO. II APPEAL NO. E/1779/05-MUM [Arising out of Order-in-Appeal No. BPS(220)16/2004dtd. 10/6/2004 passed by the Commissioner of Central Excise & Customs(Appeals), Aurangabad] For approval and signature: Honble Mr. P.K. Jain, Member(Technical) Honble Mr Ramesh Nair, Member(Judicial) =======================================================
1. Whether Press Reporters may be allowed to see : No
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 : seen
of the Order?
4. Whether Order is to be circulated to the Departmental: Yes
authorities?
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Sterlite Optical Technologies Ltd.
:
Appellants
VS
Commissioner of Central Excise & Customs Aurangabad
:
Respondent
Appearance
Shri. Vishal Agrawal, Advocate for the Appellants
Shri. Ashutosh Nath, Asst. Commissioner(A.R.) for the Respondent
CORAM:
Honble Mr. P.K. Jain, Member(Technical)
Honble Mr. Ramesh Nair, Member (Judicial)
Date of hearing: 1/5/2015
Date of decision: 1/5/2015
ORDER NO.
Per : Ramesh Nair
This appeal is directed against Order-in-Appeal No. BPS(220)16/2004dtd. 10/6/2004 passed by the Commissioner of Central Excise & Customs(Appeals), Aurangabad wherein Ld. Commissioner(Appeals) upheld the order-in-original dated 28/9/2001 and rejected the appeal of the appellant. The facts of the case are that the appellant are engaged in the manufacture of PIJF falling under Chapter 85 of Central Excise Tariff Act, 1985. Appellants have cleared excisable goods viz. Jelly filled cable to the to the department of telecommunication and claimed deduction on account of freight from the assessable value-. Revenue has issued a show cause notice No. F. No. V.Ch. 85(15) 23/SSIL/(JFTC) Adj/2001 dated 2/3/2001 wherein deduction on account of freight was proposed to be denied and consequently demand of duty of Rs. 29,29,426/- for the period from 7/2000 to 1/2001 was issued. In the show cause notice it was contended that the deduction on account of freight is allowed only if the assessee showed freight separately in the invoices and only in the actual cost charged from the buyers. If the assesse had a system of pricing and sale at uniform prices inclusive of equated freight for delivery at the factory gate or otherwise no deduction of freight element would be permissible. On these facts, in the adjudication demand was confirmed and penalty and interest was demanded. Aggrieved by the said order-in-original the appellant filed appeal before the Commissioner(Appeals),who upheld the order-in-original by rejecting appeal of the appellant vide impugned order. Aggrieved by the said order dated 10/6/2004 the appellant is before me.
2. Shri. Vishal Agarwal, Ld. Counsel for the appellant submits that as per the bid documents of Ministry of Communication Department of Telecommunication Service. The price for supply is composite price but as per the condition, while supply the goods in the sale invoice, the appellant required to indicate basic price and other components of the price individually. He submits that as per their system of clearance of the goods they have shown bifurcation of composite price in the sale invoices issued to the department of telecommunication wherein actual amount of freight sales tax, excise duty were shown separately and total bill value represented the total composite price which is fixed as per the tender. This shows that actual amount of freight has been shown separately in the sales invoices. He submits that in the show cause notice, adjudication order and order-in-appeal authorities have misunderstood the nature of freight whether it is actual freight or equated freight and the whole case has proceeded on the apprehension of the officers that freight is equated freight. He submitted some sample invoices from which he pointed out that the freight charges in the sale invoices is actual freight and not equated freight. Since entire case has been proceeded on the assumption that the freight charges by the appellant is equated and not the actual freight, he submits that authorities have proceed on the wrong assumption. He submits that the appellant right from the adjudication stage have been submitting freight charges as actual freight which was not given any heed, hence, whole demand is unsustainable. He submits that as per Section 4 of Central Excise Act, and valuation Rules made there under only condition allowing deduction of freight is freight should be shown separately in the invoices and it should be actual cost of transportation. If these two criterion are fulfilled there is no reason for denying the deduction of freight. He submits that basic concept of valuation is that the transportation should not be made part and parcel of the transaction value, with this concept only statutory provision was made for deduction of transportation charges from the assessable value of the goods for the purpose of charging excise duty. Without prejudice he also submits that in view of the various judgments even if it is presumed that the freight in the present case is equated freight though not admitted, the deduction of said freight is also allowable. He placed reliance on the following judgments:
(a) Goodyear India Ltd. Vs. Commissioner of C. Ex. Delhi-IV [2014(301) ELT 410 (Tri- Del.)]
(b) Filament India Vs. Commissioner of Central Excise, Jaipur[2003(160) ELT 314 (Tr. Del.)]
(c) Bhopal Wires Pvt. Ltd. Vs. Commissioner of Central Excise, Bhopal[2010(253) E.L.T. 681(Tri-Del.)]
3. On the other hand, Shri. Ashutosh Nath, Ld. Asstt. Commissioner(A.R.) appearing on behalf of the Revenue reiterates the findings of the impugned order. He further submits that in the present case the term of sale is at composite price. As per the condition of supply it is obligations on the appellant to ensure the quality testing at the place of delivery with this fact sale of the goods is taken place at the place of delivery and not at the place of removal therefore deduction of transportation is not allowable. In this support, he placed reliance on following judgment:
(a) Hard Castle Petrofer Pvt. Ltd. Vs. Commissioner of C. Ex. Jammu(J&K)[2014(304) ELT 576 (Tri- Del.)]
(b) Commissioner of C. Ex. Chandigarh Vs. Punjab Tractor Ltd. [2010(259) ELT 123(Tri. Del.)] He also taken support of Central Board of Excise & Customs, New Delhi M.F. (D.R.) F. No. 354/81/2000-TRU dated 30/6/2000. He submits that in view of the judgments and Board circular, deduction on account of transportation is allowed only when sale is at factory gate or at depot/warehouse but if sale takes place at doorstep of buyer then the deduction of transportation shall not be allowed.
4. We have considered the rival submissions.
5. Before arriving at conclusion it is necessary to go through the factual matrix, on perusal of Bid documents particularly para 9 thereof which is reproduced below:
9.1 The bidder shall give the total composite price inclusive of all levies & taxes, packing forwarding, freight and insurance etc. The basic unit price and all other components of the price need to be individually indicated against the goods it proposes to supply under the contract as per price schedule given in Section VII. Prices of incidental services should also be quoted. The offer shall be firm in Indian Rupees. No Foreign exchange will be made available by the purchaser.
9.2 Prices indicated on the price schedule shall be entered in the following manner:
(i) The Basic Unit price of the goods, Excise duty, Sales Tax, Freight, Forwarding, packing, insurance and any other levies/charges already paid or payable by the supplier shall also be quoted separately item wise.
(ii) The supplier shall quote as per price schedule given in Section VII for all the items given in schedule of requirement.
9.3 The prices quoted by the bidder shall remain fixed during the entire period of contract and shall not be subject to variation on any account. A bid submitted with an adjustable price quotation will be treated as non-responsive and rejected.
9.4 The unit prices quoted by the bidder shall be in sufficient detail to enable the purchaser to arrive at prices of equipment/system offered.
9.5 DISCOUNT, if any, offered by the bidders shall not be considered unless they are specially indicated in the price schedule. Bidders desiring to offer discount shall therefore modify their offers suitable while quoting and shall quote clearly net price taking all such factors like Discount, free supply, etc. into account. 9.6 The price approved by the Department for procurement will inclusive of levies and taxes, packing, forwarding, freight and insurance as mentioned in para 9.1 above. Break-up in various heads like ED, sales tax, insurance, freight and other taxes paid/payable as per clause 9.2(i) is for the information of the purchaser and any change in these shall have no effect on price during the schedule period of delivery.
9.7. The freight by sea for transportation of equipments/Stores from the nearest port in the main land to Andaman & Nicobar Islands will be reimbursement to the supplier a the concessional rates levied by Ministry of Water and Surface Transport on production of proof.
9.8 The prices will be quoted at Copper wire prices of Rs. 1,21,000 per MT excluding excise duty as on 1/2/2000. Price variation will be applicable on copper as per standard price variation table given in Section XI of the bid documents.
From the above terms of bid documents, it is revealed that though the price is composite but it is explicitly mentioned, that the said price should be inclusive of basic price, excise duty, sale tax, freight forwarding, packing, insurance and any other levies /charges that shows that basic prices was recognized. There is also a condition in the said terms that all these elements shall be quoted separately, item wise. Since component like freight, service tax, insurance varies from destination to destination, basic price does not remain uniform and it keeps on changing depending upon the different quantum of these components. It is also observed that condition of the bid that the testing of the product shall be carried at the place of delivery even if it is so that alone can not be deciding factor, that the goods sold at place other than place of removal. It is general trade practice whenever any technical equipment is sold, the supplier is duty bound to erect, install and test the function of the equipment at the consumers place. For example Air Condition, refrigeration, telephone, computer etc.. In all such technical equipment the installation and testing is invariably carried out at the place of consumer. Therefore depending upon the nature of the product this installation/testing cannot be criteria that the goods are sold at the consumers place. When the terms of the bid as mentioned above, as regard fact of place of sale, it is clear that sale of the goods has taken place at the time of removal of the goods from the appellants factory and therefore it is factory gate sale hence the deduction on account of transportation must be allowed. The deduction of transport from the value of the goods is mandatory under Rule 5 of Central Excise Valuation (determination of price of excisable goods) Rules, 2000 which is reproduced below:
[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.?
Explanation 1. - Cost of transportation includes -
(i) the 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.] From the above rule it can be seen that when goods are sold for delivery at a place other than place of removal, transaction value of excisable goods shall not include actual cost of transportation from the place of removal up to the place of delivery of such excisable goods. As per the rule reproduced above, in order to allow the deduction of the cost of transportation following criterion should be fulfilled:
(a) The goods should be sold for delivery at a place other than place of removal.
(b) Cost of freight should be in addition to the price for the goods.
(c) Cost of transportation should shown separately in the invoices.
To ensure the above, it is pertinent to look at the invoices scanned copy which is reproduced below:-
As regard 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 steps.
From the above invoices it can be seen that the freight shown in the invoices in addition to basic price of the goods. It is clear from the terms of the bid documents also that basic price and other components have to be indicated separately. Therefore, there is no dispute that basic price and the freight 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. Since Revenue could not bring any material on record that the freight equated or actual, we have no option except to agree with the Ld. Counsel and also it can be seen from the amount of transportation shown in the invoices that the same is actual. Moreover, even if freight is equalized then also deduction is permissible in view of decisions relied upon by the Ld. Counsel of the appellant. As regard the judgment relied upon by the Ld. A.R., in those judgments the main issue was regarding place of removal but in the present case the place of removal which in our view is the factory gate therefore those judgments are not applicable.
5.1 In view of our discussions, we are of the considered view that appellant are entitled for deduction of cost of transportation from the value of the goods hence the impugned order is not sustainable. We therefore allow the appeal with consequential relief, if any, in accordance with law.
(Operative part pronounced in court) P.K. Jain Member(Technical) Ramesh Nair Member (Judicial) sk 12