Customs, Excise and Gold Tribunal - Bangalore
M/S Rado Tyres Ltd., Kothamangalom ... vs The Commissioner Of Central Excise, ... on 21 September, 2001
Equivalent citations: 2001(78)ECC315, 2001(138)ELT1121(TRI-BANG)
ORDER Shri Brahma Deva, Member (J)
1. These are eight appeals. These appeals arise out of and are directed against respective three Orders-in-Appeals passed by the Commissioner of Central Excise (Appeals), Cochin. Since the issue involved herein in these appeals is common they are taken together and are being disposed of by this common order.
2. Shri A.K.J. Nambiar, learned Advocate appearing for the appellants submitted that the issue relates to denial of Modvat credit on 28 invoices issue under Rule 57G of Central Excise Rules, 1944 by M/s Appollo Tyres Ltd. and M/s CEAT Tyres Ltd. got registered as dealers in respect of excisable goods. The authorities below have disallowed the credit on the ground that the agreement with the above concerned tyre companies and the assessee makes it clear that the above dealers have supplied the goods to the appellants for job work. They held that companies are suppliers and all raw materials and goods have to be returned by the appellants on completion of job work. According to the department there is no sale of raw materials to the appellants for entitlement of credit since ownership remains vested with suppliers of raw material at all point of (SIC)m contended that to construe 'sale' there need not be change in ownership, but there must be transfer of possession of goods by one person to another. He said that the term 'sale' has been defined under Section 2(h) of the Act which is as under:-
(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".
3. Accordingly, he said that there must be transfer of 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. Since the 'goods' has been transferred from one person to another for valuable consideration it is to be construed as 'sale' as defined in the provisions of the Act. In support of his contention he referred to the decision of the Tribunal in the case of Collector of Central Excise Vs. Modern Food Industries (India) Ltd. reported in 1998 (37) ELT 294 (Tribunal). In that case it was held that merely because no payment is made in cash or because there is book adjustment it cannot be said that there is no sale. Book adjustment is also a form of payment. Words and Phrases - Sale -"Ordinarily intended for Sale" it was held that goods transferred to sister concerns by book adjustment ordinarily intended for sale in terms of Section 2(h) of the Act. Further he relied upon the Tribunal's Order in the case of Commissioner of Central Excise, Meerut-II Vs Prabhat Zarda Factory Ltd. reported in 2000 (38) RLT 637 (CEGAT - L.B.) wherein it was observed that-
"According to Section 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. Thus, the transfer of the possession of the goods is the essence of sale. Accordingly, the place of removal for the above purpose will be the place from where the transfer of the possession of the goods is effected by the manufacturer to his buyer"
3. Shri Nambiar argued that there must be transfer of possession of goods as defined under Section 2(h) and need not be change in ownership. The Commissioner (Appeals) in the respective orders has observed that there is no change in the ownership of raw material which sent for conversion and therefore no sale of raw material to the appellants and total ownership remains vested on M/s Appollo Tyres Ltd. and M/s CEAT Tyres Ltd. at all point of time.
4. He contended that since change of ownership is not envisaged the definition, the finding of the Commissioner holding that there should be change of ownership is contrary to the provisions of the law.
5. On the other hand, Smt. Radha Arun, learned SDR appearing for the Revenue submitted that there must be a 'sale' of goods for entitlement of credit. Referring to Section 2(h) of the Act, she said that while transferring the goods there need not be payment by cash but it must be supported by valuable consideration to treat the transaction as 'sale'. She submitted that the decision of the Tribunal in the case of Modern Food Industries (India) Ltd. (supra) is in favour of the Revenue wherein it was held that merely because no payment is made in cash, it can not be said that there is no 'sale' since there was book adjustment in the form of payment while transferring the goods from one concern to another. She contended that the authorities below were just right in disallowing the credit on the ground that no sale has taken place since it was a transfer of goods for doing conversion work and payment of conversion charges cannot be taken as valuable consideration for transfer of possession of goods.
6. I have carefully considered the matter. The Lower Authorities below have disallowed the Modvat credit on the ground that there was no sale involved in the transaction. It was held that the document issued is an invoice covering not the 'sale of goods' but for removal of goods for purpose other than sale. It was observed that the agreement with the said units and assessee makes it clear that the appellants were supplied with necessary raw materials by M/s Appollo Tyres Ltd and M/s CEAT Tyres Ltd on a stock transfer basis for doing conversion work and return of product for further process. There was no change in the ownership of raw materials which is only sent for conversion and therefore there is no sale of raw materials to the appellants and total ownership remain vested with M/s Apollo Tyre Ltd and M/s CEAT Tyre Ltd at all point of time. It was the contention of the party that there need not be changed in ownership of the goods but there must be transfer possession of goods by one person to another and the term 'sale' as defined in the Excise Law in totally different meaning than under the 'sale' of goods. I find that as per the definition of sale under Section 2(h) of the Act, the transfer of 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. Change in the title to the goods is not forthcoming. Thus the transfer of the possession of the goods in the essence of 'sale'. That transfer of possession of goods must be supported by payment of cash or valuable consideration. The party also concedes that there must be valuable consideration for the purpose of transfer of possession of goods and it was submitted by the Counsel that if the matter is remanded they will submitted by the Counsel that if the matter is remanded they will substantiate that transfer of good were taken place in the instant case supported by valuable consideration. I find that the issue involved herein has not been examined with this angle. In the facts and circumstances and in view of the submissions made by both sides, I am of the view that the matter is required to be re-examined in detail by lower authorities. In the view I have taken I am remanding this matter to the original adjudicating authority to examine the issue whether the term 'sale/transfer of possession of goods' is in conformity with the Section 2(h) of the Act and whether transfer of possession of goods is supported by valuable consideration. With these observations the matter is remanded to the adjudicating authority to examine the issue afresh and to pass an appropriate order in accordance with law on providing an opportunity to the party.
7. Thus all these appeals are disposed of in the above terms.
(Pronounced and dictated in the open court)