Custom, Excise & Service Tax Tribunal
Commissioner Of Central Excise & ... vs M/S.J.K.Paper Ltd on 2 May, 2012
IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE
TRIBUNAL, KOLKATA
EASTERN ZONAL BENCH: KOLKATA
Appeal No. Ex.Ap.434/06
(Arising out of Order-in-Appeal No.48/B-I/06 dated 24.04.06 passed by the Commissioner(Appeals), Central Excise & Customs, Bhubaneswar.)
FOR APPROVAL AND SIGNATURE
HONBLE SHRI S.K. GAULE, MEMBER(TECHNICAL)
HONBLE DR. D.M.MISRA, 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?
Commissioner of Central Excise & Customs, BBSR-I
Applicant (s)/Appellant (s)
Vs.
M/s.J.K.Paper Ltd.
Respondent (s)
Appearance:
Shri S.Misra, Addl.Commr.(A.R.) for the Revenue Shri P.K.Jena, Advocate for the Respondent CORAM:
Honble Shri S.K. Gaule, Member(Technical) Honble Dr. D.M.Misra, Member(Judicial) Date of Hearing :- 02.05.2012 Date of Pronouncement :- 02.05.2012 ORDER NO.
Per Dr. D.M.Misra.
1. This is an appeal filed by the Revenue against Order-in-Appeal No.48/B-I/06 dated 24.04.06.
2. Briefly stated the facts of the case are that the respondents are engaged in the manufacture of paper and paper board falling under chapter 48 of CETA, 1985. The respondents have received 3% gross freight charges from their transporters which is in excess of the freight incurred in transferring the finished goods from their factory to their customers premises. The excess amount thus collected from the transporters are alleged to be added to the value of the goods during the period from 01.07.2000 to 31.03.2005. Consequently, differential duty of Rs.36,16,292/-(Rupees Thirty Six Lakhs Sixteen Thousand Two Hundred and Ninety Two only) was demanded from the respondents on the ground that excess of actual freight collected from the transporters @3% of the total transport charges should not be added to the assessable value of the finished goods. The said demand was later confirmed by the adjudicating authority and equivalent amount of penalty was imposed. Aggrieved by the said order-in-original dated 27.12.2005 the respondents had preferred an appeal before the Commissioner of Central Excise(Appeals). The ld.Commissioner(Appeals) allowed the appeal by setting aside the order of the adjudicating authority. Hence the Revenue is in appeal.
3. The ld.Advocate appearing for the respondents has submitted that the condition of sale is ex-factory. In support of which he has produced copies of invoices of the relevant period. Further he has submitted that by an agreement with the transporters, they received a discount of 3% of the total freight charges incurred for transporting the goods from their factory to their customers from the said transporters. He has submitted that this excess amount of freight collected cannot form part of the assessable value of the finished goods. In support of the said submission he has referred to the judgements of the Honble Supreme Court in the case of Indian Oxygen Ltd.v.CCE 1988 (36) ELT 723 (S.C.) and Baroda Electric Meters Ltd.v.CCE 1997 (94) ELT 13 (S.C.).
4. Ld.A.R.(Addl.Commr.) appearing for the Revenue submitted that the transporters engaged by respondents for transport of the goods from their factory to their customers premises were collecting freight charges from the buyers and after retaining the actual freight the excess amount collected was passed on to the Appellant @3% of the gross freight charges. Thus, the excess amount of freight collected by the respondents from the transporters is required to be added to the assessable value of the finished goods in terms of section 4(1)(a) of Central Excise Act, 1944. The ld.A.R. has referred to the clause (3) and (7) of the Letters of Award (LOA) by the respondents to various transporters wherein it is stipulated that the transporters should offer a discount of 3% on the freight turnover for the calendar month and the said amount shall be paid by an amount paid by 10th of the succeeding month. He has submitted reasons for the said discount to be offered to the respondents had not been mentioned in the said letters. Further he has submitted that the said 3% is nothing but storage, loading and un-loading of goods meant for the buyers and for such services the transporters collected and passed on to the respondents an amount 3% of the gross freight which is an excess of the actual freight charges and is not included in the assessable value of their finished goods.
5. Heard both sides and perused the record. Undisputedly the respondents are collecting/receiving 3% of the total freight turnover for 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 Honble 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. The ld.Commissioner(Appeals) after examining all the aspects has recorded a cogent finding in the impugned order at para 6.4 which reads as under:-
6.4 Regarding the ex-factory sale made by the appellant, I find the issue is no more resintegra after the decision of the Honble Tribunal in the case of Frexton India vs. CCE reported in 2002 (142)ELT-694 which was subsequently upheld by the Apex Court reported in 2002(146)ELT-A-102. The ratio of the decision was also relied upon in the case of Associated Stips Ltd. reported in 2002(143)ELT-131 and also in the case of Himalayan Pipe Industries reported in 2003(151)ELT-574. Going by the said decisions, I find the sale takes place at the factory of the appellant. As per sub-section (2) of Section 23 of the Sale of Goods Act, where in pursuance of the contract, the seller delivers the goods to the buyer or to a carrier for the purpose 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. The facts in the present case are identical and thus I hold that the sales by the appellant had taken place at their factory gate. In the case of Indian Oxygen Ltd. reported in 1988(36)ELT-723 Honble Apex Court has held that the value under Section 4 is to be determined,, on the basis of wholesale price at which goods are sold at the factory gate (i.e.place of removal), thus the cost of transportation from the factory gate to the place of delivery and transport expenses cannot be added to wholesale price at factory gate because the duty of excise is a tax on manufacture and not on the profits made on transportation charges. The ratio of the judgment has been followed in the case of Baroda Electric Metres Ltd. reported in 1997(94)ELT-13 and in the case of Escorts JCB Ltd. reported in 2002(146)ELT-31. The lower authority has distinguished these decisions from the facts of the present case on the ground that freight and insurance charges is not the issue of debate in the subject case. While the transportation charges has been held as non-includible in the assessable value in the above cited orders, over which there is no dispute by the lower authority since the wholesale price is ascertainable and there is factory gate sale, I do not find any cogent reason as to how the flow back of 3% received by the appellant from the transporter as per the contract, on account of transportation and accruing from transportation will be treated as an additional consideration. Further the contention of the lower authority that the transporter allows rent-free storage charges, is no ground to treat the same as an additional consideration in relation to sale of goods, since it is a deal in relation to transport of goods where the buyer is not a party to it and while all the paraphernalia relating to sales is complete at the factory gate. Thus the appellant admittedly sold their goods at the factory gate to the independent wholesale buyers and the Revenue has not been able to produce any evidence on record that apart from the consideration received by the appellant for the sale of such goods at the factory gate, any other consideration flowed back to them from the independent wholesale buyers. As such I hold that the 3% flow back is not liable for inclusion in the assessable value and accordingly, the appeal succeeds on merits.
6. We do not find any deficiency in the said reasoning of the ld.Commissioner nor any contrary evidence is produced by the Revenue before us. In these circumstances we uphold the impugned order-in-appeal passed by the ld.Commissioner(Appeals) and dismiss the appeal filed by the Revenue. Appeal is dismissed.
(Operative part of the order was pronounced in the open court.) Sd/ sd/ (S.K. GAULE) (D.M.MISRA) MEMBER(TECHNICAL) MEMBER(JUDICIAL) sm 6 Appeal No.Ex.Ap.434/06