Custom, Excise & Service Tax Tribunal
M/S. Meghalaya Sova Ispat Alloys Ltd vs Commissioner Of Central Excise, ... on 23 September, 2016
IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE
TRIBUNAL, KOLKATA
EASTERN ZONAL BENCH: KOLKATA
Appeal No.E/616/2007
(Arising out of Order-in-Appeal No.49/CE(A)/GHY/07 dated 11.09.2007 passed by the Commissioner, Customs & Central Excise (Appeals, Guwahati)
FOR APPROVAL AND SIGNATURE
Honble Shri H.K.Thakur, Member (Technical)
Honble Shri P.K.Choudhary, Member (Judicial)
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
Authorative report or not?
3. Whether Their Lordship wishes to see the fair copy
of the Order?
4. Whether Order is to be circulated to the Departmental
Authorities?
M/s. Meghalaya Sova Ispat Alloys Ltd.
Applicant (s)/Appellant (s)
Vs.
Commissioner of Central Excise, Shillong
Respondent (s)
Appearance:
Shri K.K.Banerjee, Advocate for the Appellant (s) Shri S.Mukhopadhyay, Suptd.(AR) for the Respondent (s) CORAM:
Honble Shri H.K.Thakur, Member (Technical) Honble Shri P.K.Choudhary, Member (Judicial) Date of Hearing:-23.09.2016 Date of Pronouncement :- 23.09.2016 ORDER NO.FO/A/76092/2016 Per Shri H.K.Thakur
1. This appeal has been filed by the appellant against Order-In-Appeal No. 49/CE(A)/GHY/07 dated 11.09.2007 passed by the Commissioner, Customs & Central Excise (Appeals), Guwahati as First Appellate Authority. First Appellate Authority under this OIA dt. 11.09.2007 upheld the Order-in-Original dated 30.03.2007, passed by the Adjudicating Authority, by passing following one paragraph order:
I have gone through the case records and considered the averments made in the appeal. The only short question involved in the appeal is whether it was open to the appellants to pay duty on the prices, which were inclusive of freight and the expenses incurred on the freight were known. The admitted position is that the place of delivery was different than the place of removal and therefore, the cost of transportation from the place of removal to the place of delivery was required to be excluded for determination of value in accordance with Rule 5 of Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000. The appellants did not do this and paid more duty than required to be paid under the law, which resulted in excess refund under notification No.32/1999. Regarding time-bar the lower authority has held that the appellants had failed to adduce any evidence of duty. No such evidence has been adduced in the appeal and accordingly the plea has to be rejected.
In view of the above, the impugned order is upheld and the appeal is rejected.
2. Shri K.K.Banerjee (Advocate) appearing on behalf of the appellant argued that appellant is manufacturing various categories of Ferro-Alloys falling under Central Excise Tariff Heading (CETH) 7202.00 and are also availing area based exemption under Notification No.32/99-CE dated 08.07.1999. That officers of Anti-Evasion Unit Central Excise, Guwahati visited the factory cum office of the appellant on 14.12.2004. That after a detailed investigation a show cause notice dated 27.04.2005 was issued to the appellant demanding duty of Rs.17,13,627/- alongwith interest, and also proposed penalty upon the appellant under Section 11 AC of the Central Excise Act, 1944. That the said show cause notice dated 27.04.2005 was confirmed to the extent of Rs.15,07,995/- with interest and equivalent amount of penalty was also imposed under OIO dated 30.03.2007.
2.1. Learned Advocate argued that case of the Revenue is based on the premises that appellant is selling the goods at the factory gate but showing the sale as FOR destination and pay more duty, by including freight from the factory gate to the place of delivery, to get more refund under Notification No.32/99-CE. That as per the purchase order both the transportation charges are borne by the appellant and are included in the price agreed between the appellant and the buyers. Learned Advocate relied upon the following case laws to argue that in the case of FOR destination the place of removal is shifted to the customers place, as per amended Section 4 of the Central Excise Act, 1944, where sale is effected and transportation charges are includable in the assessable value:-
(i) Ultimate Flexipack Ltd.-vs.-Commr. Of Central Excise, J&K.[2014(304) E.L.T. 446(Tri.-Del.).
(ii) Hard Castle Petrofer Pvt. Ltd.-vs.-Commr.of C.Ex., Jammu(J&K).[2014(304) E.L.T.576(Tri.-Del.).
(iii) Krishi Rasayan Exports Pvt. Ltd.-vs.-Commr.of C.Ex., J&K.[2015(326)E.L.T.375(Tri.-Del.).
(iv) Uflex Ltd.-vs.-Commr. Of C.Ex. & Cus., Jammu.
(v) Commr. Of Customs and Central Excise, Nagpur-vs.- M/s. Ispat Industries Ltd.[2015-TIOL-238-SC-CX] 2.2. Learned Advocate also relied upon certain purchase orders to argue the price agreed upon is FOR destination and transportation charges are required to be included in the assessable value as per above relied upon case laws.
2.3. Learned Advocate also relied upon CBEC Circular No.6/59/2000-CX.1 dated 19.12.2000 and argued that freight is required to be excluded only if separately shown in the invoices. Appellant was specifically asked by the bench during earlier hearing fixed to demonstrate that transit insurance is borne by the appellant but appellant failed to adduce any such demonstrating documentary evidence.
3. Shri S.Mukhopadhyay, Suptd.(AR) appearing on behalf of the Revenue argued that sale of the goods in the present proceedings is taking place at the factory gate of the appellant as sales tax is paid at the factory gate. Learned AR also brought to the notice of the bench Purchase Order No.PO/0011 and PO/0020 both dated 04.08.2003, received by the appellant from M/s. Oswal Minerals, which convey that insurance of goods is on account of the buyer. That all the payments against deliveries are received by the appellant in advance. That as per purchase order dated 22.09.2003 from M/s. Jay Iron Store submitted by the appellant any difference in freight is required to be adjusted by adding or subtracting from the agreed upon prices. That as per copy of another relied upon purchase order dated 07.05.2004 from M/s. HBR Sales Pvt. Ltd. sales tax is included in the rate which gives indication that sales takes place at the factory gate. Learned AR relied upon larger Bench case law of Associated Strips Ltd.-vs.-Commr. Of C.Ex., New Delhi[2002(143)E.L.T.131(Tri.-Del.) by reading out paragraph-17 of the relied upon case law. He also relied upon the following case law where non-inclusion of freight was decided when assessee M/s. Guwahati Carbon Ltd. was also availing area based exemption Notification No.32/99-CE, CCE-vs.-Guwahati Carbon Ltd.[2009(243) E.L.T. 307(Tri.-Kolkata)] 3.1. Learned AR thus strongly defended the OIA dated 11.09.2007 passed by the First Appellate Authority.
4. Heard both sides and perused the case records. The issue involved in these proceedings is whether or not appellant was eligible to inclusion of freight from the factory gate to the place of delivery. It is the case of the appellant that the contracts for goods in their case are FOR destination and the place of removal is the place of delivery where goods are sold.
4.1. Place of Removal as defined in Section-4(1)(a) and 4(3)(C ) of the Central Excise Act, 1944 are relevant and are reproduced below:
SECTION 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; (3) For the purpose of this section,-
(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. 4.1.1. Section 4(3) (C)(iii) of the Central Excise Act, 1944 was inserted with effect from 14.05.2003 by Section 136 of the Finance Act, 2003. The period involved in the present proceedings is 2003-2004 and 2004-2005 as per facts stated in the OIO dated 30.03.2007.
5. The moot point for determination in the present proceedings is as to what is the point of sale. Whether point of sale is the factory gate of the appellant or the doorsteps of the customers. Appellant has provided copies of certain purchase orders to claim the point of sale is customers premises and that the said purchase invoices represent FOR destination sales. It is observed from photocopy of purchase orders No.PO/0020 and PO/0011 both dated 04.08.2003, from M/s. Oswal Minerals, Bangalore that price indicated is Ex Our Works of M/s. Oswal Minerals but insurance of goods is also indicated in the said orders to be on account of the buyer. Another purchase order dated 22.09.2003 of M/s. Jay Iron Store, New Delhi convey the price is subject to freight variations and buyer can seek deductions on account of actual freight incurred. This clause in the purchase order indicate that sale is at the factory gate as appellant can stake claim on the excess freight if recovered by the buyer from the payments already made. The entire payment is made by the buyers in advance. Purchase order dated 07.05.2004 from M/s. HBR sales Pvt. Ltd. convey that agreed rates are inclusive of sales tax. It is not clear whether the sales tax applicable is at factory gate or at the place of destination. For considering a sale on FOR basis following elements have to be satisfied in appellants case.
(i) The invoice price is inclusive of freight.
(ii) Ownership of the goods lies with the appellant till the goods are delivered at the footsteps of the buyers and transit insurance is also borne by the appellant because appellant need to secure the goods till the right of goods is transferred to the buyers at their premises.
(iii) CST will have to be paid at the point of sale by the appellant which in case of FOR sales will be the doorsteps of the buyers and not the factory gate of the appellant.
6. In the present proceedings before us prima-facie the freight is included in the agreed upon prices but actual freight incurred is also known to the appellant and the buyer. That is why some of the buyers have a specific clause in purchase order that adjustment on account of freight charged and actually incurred has to be allowed by the appellant. If sale is FOR destination based then where is the requirement for such an adjustments/compensation. In certain cases insurance of goods is borne by the buyers. It has also not been brought on record by the appellant as to where sales tax is paid. The onus is on the appellant to establish the point of sale with documentary evidences to stake claim for exemption and refund under Notification No.32/99-CE. Inspite of the specific directions from the bench appellant has not been able to bring on record that ownership of the goods, till their delivery at the doorsteps of the buyers, lies with them and that insurance of goods in transit is borne by the appellant.
7. In the case of Associated Strips Ltd.-vs.-Commr. C.Ex., New Delhi (Supra), CESTAT bench sitting at Delhi held as follows in paras 13,17, 19 and 26 :
13.The primary question that has to be considered is? whether the facts of Escorts JCB and Prabhat Zarda are different from the appellants case as contended by the appellants or whether they are similar so that the dictum laid down therein would be directly applicable to the appellants case as contended by the Revenue. In Escorts JCB the departmental authorities proceeded to hold that the property in the goods sold did not pass to the buyer till it reached the premises of the buyer in view of the fact that insurance policies were taken out by the seller to cover the goods till it reached the buyers premises. Even though the contention of the seller, that the sale of the goods took place at the factory gate was considered in the above decision, there is no reference to the terms of the contract between the parties. It is not seen contended that as per the terms of the contract the seller was duty bound to insure the goods in transit thus retaining insurable interest in the goods even though title to the goods had already been passed to the buyer at the factory gate. In the absence of any of these contentions it is seen that the Tribunal applied the general rule that risk follows property. Since the seller was found insuring against risk of loss or damage of the goods in transit, it was held that the seller continued to be the owner of the goods till it reached the buyers premises. In Prabhat Zarda, a decision rendered by the Larger Bench, the issue referred for consideration was whether in a case where the ownership of the excisable goods remained with the manufacturer up to the place of the buyer from where the said goods were delivered to the buyer, what would be the place of removal for the purpose of Clause (iii) of Section 4(4)(b) of the Central Excise Act. In Paragraph 8 of the order it is noted that it was an admitted position that there was no factory gate sale in the concerned case. The goods were transported on account of M/s. Prabhat Zarda Factory Ltd. the manufacturer to the destination of the buyer through the transport agency. The goods were stored on behalf of the seller in the godown of the transport agency at the destination of the buyers. The goods were insured in the name and on the account of the seller for covering the risk of loss/damage during transportation of the goods to the godowns of the transport agency. If damage occurred during transit it was the loss of the manufacturer. The manufacturer was both the consignor and consignee. Goods were delivered to the buyers by the transport agency only when so instructed by the seller. Till then no documents were given to the buyer and no legal title in the goods was passed on to him. It was therefore held that the ownership of the goods remained with the seller, that the goods were actually sold at such place from where delivery was effected to the buyers which is to be treated as the place of removal.
17.Now we are to consider the facts of the present? case as to find out when did the transfer of possession of the goods to the buyer occur or when did the property in the goods pass from the seller to the buyer. Is it at the factory gate as claimed by the appellant or is it at the place of the buyer as alleged by the Revenue ? In this connection it is necessary to refer to certain provisions of the Sale of Goods Act, 1930. Section 19 of the Sale of Goods Act provides that where 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. Intention of the parties are to be ascertained with reference to the terms of the contract, the conduct of the parties and the circumstances of the case. Unless a different intention appears; the rules contained in Sections 20 to 24 are provisions for ascertaining the intention of the parties as to the time at which the property in the goods is to pass to the buyer. Section 23 provides that where there is a contract for the sale of unascertained or future goods by description and goods of that description and in a deliverable state are unconditionally appropriated to the contract, either by the seller with the assent of the buyer or by the buyer with the assent of the seller, the property in the goods thereupon passes to the buyer. Such assent may be expressed or implied and may be given either before or after the appropriation is made. Sub-section (2) of Section 23 further provides that where, in pursuance of the contract, the seller delivers the goods to the buyer or to a carrier or other bailee (whether named by the buyer or not) for the purposes of transmission to the buyer, and does not reserve the right of disposal, he is deemed to have unconditionally appropriated the goods to the contract.
19.We may also refer to the provisions contained under? Section 39 of the Sale of Goods Act which refers to the legal effect of delivery of the goods to a carrier by the seller. It is provided that where, in pursuance of a contract of sale, the seller is authorized or required to send the goods to the buyer, delivery of the goods to a carrier, whether named by the buyer or not, for the purpose of transmission to the buyer, is prima facie deemed to be a delivery of the goods to the buyer AIR 1966 Patna 346. Admittedly, in the present cases after appropriation of the goods to the contract they were delivered to the carrier as per terms of the contract. Therefore, delivery to the carrier has to be taken as delivery to buyer. Revenue has no case that the goods are not sent to the buyer through carrier. On the other hand, as mentioned earlier, the only contention raised is that since the insurance of the goods in transit has been taken by the seller, the seller is deemed to hold the title to the goods in transit. At this juncture we may point out that in the case of Mauria Udyog Ltd. there is no insurance taken by the seller.
26.In the light of the terms and conditions of the? contract between the parties in the present appeals we come to the conclusion that sale of the goods has taken place at the factory gate and therefore, even by applying the dictum in Escorts JCB and Prabhat Zarda the place of removal is not the premises of the buyer as contended by the Revenue. Under these circumstances, we hold that the element of freight and transit insurance are not to be included in the normal value of the goods. We, therefore, set aside the orders impugned and allow the appeals. The appellants will be entitled to consequential reliefs.
8. The case law of Aditya Birla Insulators Ltd.-vs.-Commr.of C.Ex.,Kolkata-IV[2008(226)E.L.T.377(Tri.-Kolkata)] relied upon by the Revenue is not applicable as the period involved in this case was 28.09.1996 to 30.09.2000 i.e. prior to Section -4(3)(c)(iii) insertion effective from 14.05.2002. However, case law of this bench Commr. C.Ex., Shillong vs.-Guwahati Carbon Ltd. (Supra) relied upon by the Revenue was after amendment where following observations and order was passed by the Kolkata Bench in paragraphs 7 and 8:
7.?In view of the above, the argument of the learned Advocate for the Respondents for inclusion of the freight and insurance charges in the assessable value cannot be accepted. The reliance on the case of Jindal (India) Ltd. (cited supra) is also misplaced. The Tribunal in the case of Jindal (India) Ltd. merely holds that where transport charges are shown separately, the same cannot be included in the assessable value. Such a decision is not an authority to include transportation charge in the assessable value, where it is not shown separately. We are also of the view that the reliance placed by the learned Advocate for the Respondents on -
(i) Yamaha Motors India Pvt. Ltd. v. CCE, Delhi-IV - 2008 (231) E.L.T. 677 (Tri.-Del.);
(ii) CCE, Jaipur v. Rajasthan Spg. & Wvg. Mills Ltd. - 2007 (218) E.L.T. 641 (S.C.);
(iii) Indian Oil Corporation Limited v. CCE, Kolkata-II - 2007 (217) E.L.T. 134 (Tri.-Kolkata).
is entirely misplaced and not relevant to the case at hand. In our view, the ratio of the Honble Supreme Courts decision of the Three Judges Bench in the case of CCE, Noida v. Accurate Meters Ltd. (cited supra) more appropriately covers the case at hand, in terms of which freight and insurance charges cannot be included in the assessable value.
8.?Accordingly, we hold that the Respondents are not entitled to include freight and insurance charges in the assessable value and the duty on the impugned goods requires to be re-calculated accordingly. The Respondents would be entitled to the refund of duty paid on such re-calculated value in terms of the Notification No. 32/99-C.E. and their customers would only be entitled to duty credit of that amount, provided it has been paid in cash, as stipulated under the said Notification. The Respondents are also entitled to refund of the excess duty paid on the remaining portion representing freight and insurance charges as such duty in the first place is not required to be paid by them. Their customers would also not be eligible for taking credit of that portion of the duty on freight and insurance charges paid by the Respondents. The appeals of the Department are allowed in the above terms. Cross-objection filed by the Respondents also stands disposed off. 8.1. Case laws relied upon by the appellant are not applicable to the factual matrix existing before us because in the relied upon case law there was no dispute that sales were not on FOR destination basis.
9. In view of the above observation appellant is not able to establish that the sales/clearances effected by them are on FOR destination basis. Accordingly, appeal filed by the appellant is dismissed.
(Operative Portion of the order was pronounced in the open court.)
S/d. S/d.
(P.K.Choudhary) (H.K.Thakur) MEMBER MEMBER (JUDICIAL) MEMBER(TECHNICAL)
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Appeal No.E/616/07