Custom, Excise & Service Tax Tribunal
Suzuki Motorcycle India Private ... vs Delhi-Iii on 5 December, 2023
1 E/3428, 4102/2012
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL
CHANDIGARH
~~~~~
REGIONAL BENCH - COURT NO. 1
Excise Appeal No. 3428 Of 2012
[Arising out of OIO No. 37/SA/CCE/2012 dated 31.07.2012 passed by the
Commissioner of Central Excise, Delhi-III -Gurgaon]
Suzuki Motorcycle India Pvt. Limited : Appellant (s)
Village Kherki Daula, Badshahpur, NH-8, Link Road, Gurgaon
Vs
Commissioner of Central Excise, Delhi-III Respondent (s)
Plot No. 36-37, Sector 32, Gurgaon, Haryana 122001 with Excise Appeal No. 4102 Of 2012 [Arising out of OIO No. 81/SA/CCE/2012 dated 17.09.2012 passed by the Commissioner of Central Excise, Delhi-III -Gurgaon] Suzuki Motorcycle India Pvt. Limited : Appellant (s) Village Kherki Daula, Badshahpur, NH-8, Link Road, Gurgaon Vs Commissioner of Central Excise, Delhi-III Respondent (s) Plot No. 36-37, Sector 32, Gurgaon, Haryana 122001 APPEARANCE:
Ms. Krati Singh, Shri Aman Garg, Advocates for the Appellant Shri Nikhil Kumar Singh, Shri Narinder Singh, Shri Yashpal Singh, Authorised Representative for the Respondent CORAM : HON'BLE Mr. S. S. GARG, MEMBER (JUDICIAL) HON'BLE Mr. P. ANJANI KUMAR, MEMBER (TECHNICAL) ORDER No. A/60674-60675/2023 Date of Hearing:28.11.2023 Date of Decision:05.12.2023 Per : S. S. GARG These two appeals are directed against two impugned orders dated 31.07.2012 and 17.09.2012 passed by the Commissioner of
2 E/3428, 4102/2012 Central Excise, Delhi-III, Gurgaon whereby the Ld. Commissioner has confirmed the duties alongwith penalties. The details of both the appeals are given herein below:-
Sr. Appeal No. Date of Period Impugned order Amount No. SCN involved involved
1. E/3428/2012 07.10.2011 9/2006 OIO No. Duty:
to 37/SA/CCE/2012 74,67,534/-
dated 31.07.2012
3/2011 Penalty
74,67,534/-
2. E/4102/2012 08.05.2012 4/2011 OIO No. Duty:
to 81/SA/CCE/2012 10,14,305/-
3/2012 dated Penalty:
17.09.2012 10,14,305/-
As the issue involved in both the appeals is identical, therefore, both the appeals are taken up together for discussion and disposal.
2. Briefly the facts of the present case are that the appellant is engaged in the manufacture of motorcycles, scooters and sale of two-
wheeler vehicles and parts thereof and was clearing the same by payment of excise duty to various dealers. The sale is made at the factory gate of the Appellant to various dealers, who in turn sell it to ultimate customers. The terms and condition of sale between the Appellant and dealers are governed by dealership agreement which is on record. As per the agreement, the Appellant is liable for ex-factory sale of the excisable goods i.e., motorcycles etc., and ownership/title of the excisable goods are transferred to the dealers at factory gate of the Appellant. For arranging the transportation of vehicles, the Appellant charges separately from the dealers, which is indicated separately on the invoices.
3 E/3428, 4102/2012 2.1 During the course of Audit, it was noticed that the appellant was not including the amount of excess freight collected from the dealers in the assessable value though this amount was collected from the buyers in connection with the sale of the motorcycles. The department alleged that the excess freight is collected from the dealers on the assessable value of goods. It was alleged that the excess freight collected from the dealers is one of the considerations for sale of excisable goods, thus should form part of assessable value under Rule 5 and 6 of Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000.
2.3 In this background, two show cause notices dated 07.10.2011 and 08.05.2012 were issued to the appellant proposing demand of duty alongwith interest and penalty.
2.4 After following due process, the Adjudicating Authority vide the impugned orders dated 31.07.2012 and 17.09.2012 confirmed the demand proposed in the show cause notices.
2.5 Aggrieved by the said order, the appellant is before us.
3. Ld. Counsel appearing for the appellant submits that the impugned order is not sustainable in law as the same has been passed without properly appreciating the facts and the law and the binding judicial precedents on identical issues. She further submits that freight is recovered from the dealers on the basis of estimation of freight element based on per kilometer basis for each transporter on a standard 44 motorcycle capacity vehicle. However, the freight recovery from the dealers may either be over, or excess recovered depending on whether the capacity of transporting vehicle is less or 4 E/3428, 4102/2012 more than 44 motorcycles. She further submits that as per Section 4(1)(a) of the Excise Act, assessable value of the excisable goods shall be the 'transaction value' where the goods are sold by the assessee for delivery at the time and place of the removal, and price is the sole consideration for the sale. She further submits that the price collected for the sale of excisable goods as separately mentioned on the invoices is the 'sole consideration' and the amount of excess freight collected has no nexus with the manufacturing activity undertaken by the appellant and hence the same is not leviable to Excise duty. She further submits that the allegation of the department that the appellant has realized the additional consideration for the excisable goods in the guise of excess freight, thus includible in the assessable value is not sustainable as there is no evidence which has been put- forth by the department to prove this allegation. She also submits that it is a settled law that in the absence of contrary evidence, the price of the goods cleared is correct and legal and no adverse inference can be drawn. For this submission, she relied upon the following decisions:-
a) Commissioner vs. Electro Steel Castings Ltd. - 2012 (278) E.L.T. 488 (Tri- Kol.)
b) Indica Chemical Industries Pvt. Ltd. vs. Commr. of C. Ex., Meerut-I 2016 (335) E.L.T. 180 (Tri. - Del.)
c) Dhampur Sugar Mills Ltd. vs. Commissioner of C. Ex., Meerut-II 2014 (308) E.L.T. 488 (Tri. - Del.) 3.1 She further submits that in the present case, the place of removal of excisable goods is factory gate of the appellant and the sale is an ex-factory sale and the same is not disputed by the department. She also submits that the lorry receipts and transporter's invoices are all in the name of buyer. She also submits that it is settled law that in the case of ex-factory sale, the freight
5 E/3428, 4102/2012 amount collected is not includible in the assessable value of excisable goods. For this submission, she relied upon the following decisions:-
a) Manchukonda Prakasam & Company vs. Commissioner of Central Tax, Secunderabad GST Commissionerate, Telangana 2020 (3) TMI 701 - CESTAT HYDERABAD
b) Ambhe Ferro Metal Processors Pvt Ltd vs. Commissioner of Central Excise Thane
- I 2019 (3) TMI 604 - CESTAT MUMBAI
c) Indian Oxygen Ltd. v. Collector-1988 (36) E.L.T. 723 (S.C.)
d) Baroda Electric Meters Ltd. v. Collector-1997 (94) E.L.T. 13 (S.C.)
e) Mercedes Benz India Pvt. Ltd. v. Commissioner 2010 (260) E.L.T. 149 (Tri. -
Mumbai)
f) Indian Sugar & General Engineering Corpn. Vs. CCE, Panchkula 2017 (8) TMI 99- CESTAT CHANDIGARH
g) Indian Sugar & General Engineering Corpn. Vs. CCE, Panchkula 2016 (333) E.L.T. 109 (Tri. - Del.)
h) Mercedes Benz India Pvt. Ltd. v. Commissioner 2010 (260) E.L.T. 149 (Tri. - Mumbai)
i) Indian Sugar & General Engineering Corpn. Vs. CCE, Panchkula 2017 (8) TMI 99- CESTAT CHANDIGARH
j) Indian Sugar & General Engineering Corpn. Vs. CCE, Panchkula 2016 (333) E.L.T. 109 (Tri. - Del.)
k) Associated Strips Limited vs. CCE, Delhi-IV 2017 (11) ΤΜΙ 1244 - (Tri- Chand.) 3.2 She also submits that the excess freight collected by the Appellant from the buyer is merely a profit which is not subject to excise duty. It is settled law that excess freight collected is merely a profit and excise duty cannot be levied. For this submission, she relied upon the following decisions:-
6 E/3428, 4102/2012
a) ICOMM Tele Ltd. v. Commissioner 2010 (251) E.L.T. 103 (Tri-Bang.) (Appeal filed before Supreme Court dismissed as withdrawn)
b) Commissioner of Central Excise & Cus., Bbsr-l vs. J.K. Paper Ltd. 2012 (284) E.L.T. 706 (Tri. Kolkata) (Appeal filed before Supreme Court dismissed as withdrawn)
c) Kashyap Sweetners Limited vs. Commissioner of Central Excise & St, Vapi 2023 (7) TMI 1111 - CESTAT AHMEDABAD
d) CCE, Delhi-IV vs. Haryana Concrete Products Ltd. 2019 (1) ΤΜΙ 494 CESTAT CHANDIGARH 3.3 Besides this, she also submits that the revenue has invoked the extended period of limitation which is not invokable in the present case because identical issues in respect of demand of excise duty on excess freight collected has been dealt with by various judicial forums clearly shows that the issue involves interpretation of law and legal provisions and hence, the extended period cannot be invoked.
3.4 She further submits that the demand pertaining to extended period of limitation for the period until September 2010 is liable to be set-aside on the ground that the facts were in the knowledge of the department and there was no suppression on the part of the appellant.
3.5 As regards the demand of interest, the Ld. Counsel submits that the demand of interest only be sustained when demand of tax itself is confirmed.
3.6 As regard the penalty, the Ld. Counsel submits that in the present cases interpretation of law is involved and the appellant was under a bonafide belief that no excise duty was payable on the excess freight collected and therefore, there was no mens rea on their part and hence the penalty cannot be imposed.
7 E/3428, 4102/2012
4. On the other hand, the Ld. DR supported the impugned orders and submitted that it is undisputed fact that the appellant was charging excess amount of freight over and above the freight actually incurred for transportation during the period of dispute and they were not including the excess freight collected from the dealers in the assessable value. He further submits that the dispute whether this amount charged over and above is additional consideration for the sale of goods is includible in the assessable value as per section 4 of the Central Excise Act during the relevant period. Ld. DR thereafter referred to clause of the agreement between the appellant and its dealers relating to delivery of goods and submitted that as per clause 23.1 it is provided that the appellant will endeavour to complete delivery of the products or genuine parts in accordance with the dealer's delivery requirements as indicated by the dealer in the purchase orders. He further submits that perusal of clause 23 proves that the delivery of product is as per the requirement of the dealer. 4.1 Ld. DR took us through Section 4 of the Central Excise Act, 1944 relating to valuation and submits that in the present case delivery of goods is not at the time and place of removal and therefore, the valuation in this case will be governed by Rule 5 of the Valuation Rules, 2000.
4.2 Ld. DR thereafter took us through Rule 5 of the Valuation Rules and submitted that any amount paid by the buyer including outward handling but excluding the actual cost of transportation will form part of the transaction value. For this submission, he relied upon the following decisions:-
a) East India Udyog Ltd. - 2017 (354) ELT 147 (Tri.-Del.) 8 E/3428, 4102/2012
b) Wearwell Tyres & Tubes Industries Private Ltd. -2010 (257) ELT 126 (Tri.-Del.) 4.3 Ld. DR also submitted that the decisions relied upon by the appellant are not applicable in the present case as the issue involved in those cases pertaining to the period prior to 1.7.2000 when the relevant section was amended to replace the concept of normal price with concept of transaction value.
4.4 Ld. DR further submits that the appellant has heavily relied upon the decision of the Hon'ble Apex Court in the case of Baroda Electric Meters Ltd. cited (supra) wherein the dispute pertaining to the period prior to 1.7.2000 and the said decision is not applicable to the issue involved in the present case because the provisions during relevant period were different.
5. After considering the submissions of both the parties and perusal of material on record, we find that the only issue involved in the present case is whether the excess freight collected is liable to be included in the assessable value or not?
We find that in the present case, it is undisputed fact that the place of removal of excisable goods is a factory gate of the appellant. We also find that in the case of ex-factory sale, the freight amount collected is not includible in the assessable value of the excisable goods in view of the various decisions relied upon by the appellant cited (supra).
5.1 Further, we also find that this issue is no more res-integra that the excess freight collected by the appellant from the buyer is merely a profit and no excise duty can be levied on such profit as held in the various decisions relied upon by the appellant cited (supra).
9 E/3428, 4102/2012 5.2 Further, we find that the appellant has sold the vehicles to the dealers at the ex-factory price and the title is transferred to the buyer at the factory gate and the appellant made arrangement for the transportation of vehicles on the request of the dealers. Since, the title in the vehicles is transferred at the factory gate, all the risk of damage during the transportation is that of the dealer and therefore, the assessable value is the transaction value in terms of Section 4(1)(a) of the Act and the provisions of Section 4(1)(b) and Valuation Rules are not applicable.
5.3 We also find that the amount of excess freight recovered over and above the total cost of transportation is for totally independent activity and hence no connection with the manufacture or the sale of vehicles and therefore, there is no connection of the excess freight recovered with the transaction value of the vehicle sold by the appellant as the sale was on ex-factory basis.
5.4 Further, we find that the case laws relied upon by the Ld. DR are not relating to the excess freight recovered by the appellant, and therefore, the ratio of those decisions are not applicable and are distinguishable from the case laws relied upon by the appellant in support of their submissions. The objection of the Ld. DR that the case laws relied upon by the appellant relates to the period prior to 1.7.2000 is not correct.
5.5 Here, we may refer to the decision in the case of Mercedes Benz India Pvt. Ltd. cited (supra) wherein the issue of duty liability on excess freight recovered from the customers has been settled by the Tribunal and the Tribunal has held as under:-
10 E/3428, 4102/2012
"6. We have perused the agreement between the assessee and one of the dealers and we find that the sale of goods took place at factory gate and the dealer was liable to take delivery of the goods at factory gate. In other words, the dealer was liable to incur the cost of transportation from the factory gate to his own premises. It is also on record that the cost of transportation was initially incurred by the assessee and subsequently recovered from the buyer. What was actually paid by the assessee to the transporter will, of course, be the actual cost of transportation and the same was liable to be excluded from the assessable value even as per Rule 5 relied on by the Revenue. The question which now arises for consideration is whether the amount collected by the assessee from the dealer in excess of the actual cost of transportation should be held to be includable in the assessable value of the goods by virtue of Rule 5. The rule only provides that actual cost of transportation has to be excluded from the assessable value where the goods are sold in the circumstances specified under Section 4(1)(a) of the Act. In the present case, the place of delivery is the factory gate and, even according to the Revenue, the cost of transportation from the factory gate to the buyers' premises is liable to be excluded from the assessable value of the goods. The rule does not provide for inclusion of any excess freight in the assessable value in the circumstances specified under Section 4(1)(a) of the Act. We do not think that the proposal to include the excess freight in the assessable value is corollary to exclusion of the actual cost of transportation from the assessable value. It has been argued that the excess freight collected by the appellant from their dealers is an additional consideration flowing directly or indirectly from the latter to the former and hence should be included in the assessable value of the goods under Rule 6. The term "additional consideration" appears to be referable to the additional amount referred to in the definition of "transaction value" given under Section 4(3)(d) of the Act. This definition indicates that, in addition to the amount charged as price of the excisable goods, 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 would also be includable in transaction value. We find that the excess freight collected by the appellant from their dealers was not an amount which the dealers were liable to pay to, or on behalf of the assessee, be reason of, or in connection with, the sale inasmuch as the relevant agreement of sale did not provide for such payment, the transportation of the 11 E/3428, 4102/2012 goods having been undertaken under a separate agreement between the assessee and the transporter concerned. The buyer was not a party of this agreement. If any excess amount was collected by the assessee from a dealer towards freight, it cannot be considered to be an amount collected by the assessee by a reason of, or in connection with, the sale of the goods. It would be an amount collected by the assessee in connection with the transportation of the goods. The nexus is not between the amount and the sale of the goods but between the amount and the transportation. This aspect was noted by their lordships in the case of Baroda Electric Meters (supra) and it was held that any excess amount collected by the assessee from their customers would be a profit made on transportation and hence such amount would not be includable in the assessable value of the goods since the duty of excise was a tax on manufacture and not on any profit made on transportation. The character of the excess amount collected by the assessee from their dealers stands determined vide Baroda Electric Meters (supra) and therefore, in our considered view, the Revenue is precluded in the present case from contending that such amount represents additional consideration flowing directly or indirectly from buyer to the seller. We are also of the view that the decision of the Hon'ble Supreme Court with regard to the nature of the excess freight would not have been different, had their lordships considered the case for any period after 1-7-2000. The reason is that the crucial question is one of fact rather than of law. The question of fact as to the nature of the excess freight stands determined for all times by the Apex Court and accordingly, we hold that the excess freight collected from the dealers was only a profit on transportation and not an "additional consideration" within the meaning of this expression used in Rule 6, nor an "additional amount" within the meaning of the definition of "transaction value" under Section 4(3)(d) of the Act. In this view of the matter, we further hold that the distinction drawn by the learned Consultant for the Revenue between "normal value" and "transaction value"
is not relevant in this case."
5.6 The decision of Mercedes Benz India Pvt. Ltd. was followed by the coordinate benches of the Tribunal in the case of Ambhe Ferro Metal Processors Pvt. Ltd. vs. Commissioner of Central Excise, Thane-I
- 2019 (3) TMI 604-CESTAT Mumbai and it was held that the excess 12 E/3428, 4102/2012 amount collected from the customers cannot be considered as additional consideration to form part of the assessable value. 5.7 Further, the coordinate bench of the Tribunal in the case of Commissioner of Central Excise & Cus. BBSR-I vs. J. K. Paper Ltd. cited (supra) relying upon the decision of the Hon'ble Apex Court in the case of Baroda Electric Meters Ltd. and has held in Para 5 as under:-
"5. Heard both sides and perused the record. Undisputedly the respondents are collecting/receiving 3% of the total freight turnover or the service rendered by the transporters to the buyers of respondents in transporting their finished goods from the factory till the premises of the buyers. Also, it is not in dispute that the condition of sale reflected in the respective invoices is ex-factory. The excess amount of freight collected by the transporters from the customers are passed on to the respondent also not in dispute. The issue of inclusion of excess freight is no more res integra. The Hon'ble Supreme Court in the case of Baroda Electric Meters Ltd. (supra) has held that duty of excise is a tax on the manufacture and not a tax on the profits made by a dealer on transportation."
5.8 Further, we find that this issue has recently been considered by the coordinate bench of the Ahmedabad in the case of Kashyap Sweetners Limited cited (supra), wherein the Tribunal has held as under:-
"5. As held in the above judgment by the apex court that excess amount of freight from the customer is profit on account of transportation and not part and parcel of the value of the goods therefore, same cannot be included in the assessable value. We observe that this judgment was given with reference to un-amended Section 4 and Rules made thereunder prior to 01.07.2000. However, in the identical case for the period post 01.07.2000, in various judgments a view was taken that the Baroda Electric Meters (supra) prevails even after amended Section 4 and Rules made thereunder after 01.07.2000."
13 E/3428, 4102/2012
6. In view of above discussion and by following the ratio of the decisions cited (supra), we are of the considered opinion that the impugned orders are not sustainable in law and consequently we set- aside the same by allowing both the appeals of the appellant with consequential relief, if any, as per law.
(Pronounced on 05.12.2023) (S. S. GARG) MEMBER (JUDICIAL) (P. ANJANI KUMAR) MEMBER (TECHNICAL) G.Y.