Customs, Excise and Gold Tribunal - Mumbai
Vip Industries Ltd. vs Commissioner Of Customs And Central ... on 9 November, 2001
Equivalent citations: 2002(139)ELT439(TRI-MUMBAI)
JUDGMENT Gowri Shankar, Member (T)
1. The question for consideration in this appeal is whether, after amendment to Section 4 of the Act in 1996, the value for assessment of duty of the travel goods manufactured by the appellant, cleared from its sales depots should include the cost of transportation from the factory to these depots. Adjudicating on two notices issued to it, the jurisdictional Assistant Commissioner held that such cost was includable. This appeal is against the order of the Commissioner (Appeals) confirming this conclusion, the therefore the duty payable, and setting aside the penalty that Assistant Commissioner has imposed on the appellant.
2. Prior to amendment in 1996 of Section 4 of the Act, the assessable value was the price at which the goods were sold at the factory gate of the manufacture for sale in the course of wholesale trade. This was the normal price referred to in Clause (a) of Sub-section (1) of Section 4. Sub-section (2) specifically excluded the cost of transportation from the place of removal to the place of delivery, in cases where the value of the excisable goods was to be determined with reference to the price for delivery at the place other than the factory gate. It read, "Where, in relation to any excisable goods the price thereof for delivery at the place of removal is not known and the value thereof is determined with reference to the price of delivery at a place other than the place of removal, the cost of transportation from the place of removal to the place of delivery shall be excluded from such price." Sub-section (4) defined the place of removal to mean "(i) a factory or any other place or premises of production of manufacture of the excisable goods; or (ii) a warehouse or any other place or premises wherein the excisable goods have been permitted to be deposited without payment of duty, from where such goods are removed." Therefore, where the manufacturer removed any goods after payment of duty to a sales depot to other such premises for sale therefrom, the value for assessment was the price of such goods sold for delivery at the factory gate; in those cases where there was no sale at the factory gate, the value was based upon the sale price at the depot, but excluding the cost required for transporting the goods from the factory gate to the depot.
3. The amendment to Section 4 in 1996 brought about significant changes in regard to the determination of the value of goods sold from the depot. Proviso (i)(a) was added to under Sub-section (1) of Section 4 of the Act. This proviso read "Where the price at which such goods are ordinarily sold by the assessee is different for different places of removal, each such price shall, subject to the existence of other circumstances specified in Clause (a), be deemed to be the normal price of such goods in relation to each such place of removal." The definition of the term "place of removal" contained in Sub-section (4) was modified, so as to include "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 gate, and from where such goods are removed."
4. The effect of this amendment would be that where the manufacturer sold part or all of its goods for delivery from depot or any other such place, it is that price that would form the assessable value of those goods. The manufacturer who sold the goods for delivery at more than one place therefore would have as many prices as the places of removal.
5. The contentions of the appellant are these. The amendment made in 1996 did not affect the applicability of Sub-section (2) of Section 4 providing for exclusion of cost of transportation. The judgment of the Supreme Court in UOI v. Bombay Tyre International Ltd. 1983 ELT 1896, considered again by the Supreme Court in GOI v. Madras Rubber Factory Ltd. 1995 (77) ELT 433, permits deduction of averaged freight. The ratio of this judgment in this regard will apply to clearances from the various places of removal now specified in Section 4, as they apply to clearances from the factory gate prior to the amendment. Sub-section (2) of Section 4 was not amended in 1996. Prior amendment of Section 4 in 1996 and subsequent to its further amendment in 2000, the cost of transportation up to the place of removal is not includable. It is therefore clear that it was never intended to include cost of transportation up to the place of removal in the assessable value.
6. Paragraph 49 and 50 of Bombay Tyres contained the court's judgment with regard to freight. We reproduce the relevant portion of paragraph 49 and to 50 below:-
"49. Where the sale in the course of wholesale trade is effected by the assessee through its sales organisation at a place or places outside the factory gate, the expenses incurred by the assessee upto the date of delivery under the aforesaid heads cannot, on the same grounds, be deducted. But the assessee will be entitled to a deduction on account of the cost of transportation of the excisable article from the factory gate to the place or places where it is sold. The cost of transportation will include the cost of insurance on the freight for transportation of the goods from the factory gate to the place or places of delivery.
50. Where freight is averaged and the averaged freight is included in the wholesale cash price so that the wholesale cash price at any place or places outside the factory gate is the same as the wholesale cash price at the factory gate, the averaged freight included in such wholesale cash price has to be deducted in order to arrive at the real wholesale cash price at the factory gate and no excise duty can be charged on it."
7. Let us begin by considering the case of freight which is not averaged. In that case, the freight would not be an element of the assessable value of the goods sold for delivery at the factory gate, i.e. the place of removal. The freight that is incurred by the assessee for transporting the goods from the factory to the place of delivery, say depot would not be includable. This was the position prior to amendment. The position would be the same after the amendment for delivery as far as the factory gate is concerned. Where the goods are sold for deliver, say at the customer's premises, from the factory gat, the freight incurred for transportation from the factory gate to customer's premises could not be includable. Similarly, where they are removed from any other place of removal, say a depot, for delivery at any other place, the freight between that place of removal and the place of delivery would not be includable. Where, however, the delivery is at a place of removal other than the factory gate, or a place where the goods have been permitted to be kept without payment of duty, the freight from the factory to the place of removal could not be excluded. This is by reason of the fact that Sub-section (2) of Section 4 provides for exclusion of the cost of transportation "for the place of removal to the place of delivery." By application of the relevant provisions of paragraph 49 of the Bombay Tyres judgment, the cost of transportation from the factory to the place of removal would not be excluded and would have to be included. The position would remain unchanged in the case of delivery at the factory gate not because of any change in the law but because not cost would be incurred in the transportation. Prior to the amendment of Section 4 in 1996, there were only two places of removal i.e. the factory or other such place of production or manufacture or warehouse or any every place where the goods were permitted to be deposited without payment of duty. By the amendment made in 1996, a place such as depots from which the manufacturer delivered the goods after sale also became place of removal. The distinctive character of a place of removal prior to 1996 being one in which the goods were kept without payment of duty was lost. Any place to which the goods were removed for sale after clearance from the factory became the place of removal. Sub-section (2) of Section 4 however was not amended in 1996 and continued to exclude only the cost of transportation from the place of removal to the place of delivery. Any expenses for transportation other than those incurred for this purpose therefore would not be excludable by application of this sub-section.
8. Let us now consider paragraph 50 of the Bombay Tyres judgment. The court said in that paragraph "In order that where the wholesale cash price at the place outside the factory price is same at the factory gate, the averaged freight has to be deducted in order to arrive at the real wholesale cash price at the factory gate." No expenses would be incurred on goods delivered at the factory gate on account of transportation; therefore, whereas the assessee has the same price for delivery and the factory gate and elsewhere, it would follow that, as a result of the average of freight, part of the freight that is actually incurred by the assessee for delivery at places outside the factory is passed on, by the process of averaging, to the sales made at the factory gate, the factory gate price therefore includes in this situation, and element of freight on account of transportation of goods not at the factory gate but elsewhere. Therefore, in order to arrive at "real wholesale cash price at the factory gate", that element of averaged freight has to be deducted. The judgment therefore merely clarifies the position where the freight is average, the element of average freight would have to be deducted at the factory gate to arrive at the real assessable value. The judgment cannot be interpreted to mean that it took different stands with regard to unaverage freight and with regard to average freight. The provisions of Section 4 would apply with equal force to average freight and freight that is not so averaged. After the amendment, therefore, the assessee may be entitled to ask for inclusion the element of averaged freight from the price at the place or places or removal, if he is able to show that he has averaged the cost of transportation for delivery beyond the places of removal. Where, however this is not the case, the question of averaging would not arise. This is not the case and price of the goods for transportation does not include in element of freight from the place of removal to the place of delivery, such a deduction would not be permissible because Sub-section (2) of Section 4 does not permit such a deduction. In the light of this clear position of law, it is not necessary for us to speculate upon any hidden meaning and motive of legislation. If after the amendment in 1996, the legislation wished to exclude from the assessable value the cost of transport from the factory to every place of removal, it could have said so by suitably amending Sub-section (2) of Section 4.
9. This is the reasoning that the Commissioner (Appeals) advanced and we are unable to interfere with his conclusion.
10. Appeal is dismissed.