Custom, Excise & Service Tax Tribunal
Gsc Toughened Glass Pvt.Ltd vs Cce, Jammu & Kashmir on 10 March, 2015
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL,
WEST BLOCK NO.II, R.K. PURAM, NEW DELHI-110066.
DIVISION BENCH
Court-III
Appeal No.E/1506-1508,1543/2006-EX
(Arising out of Stay Order-in-Appeal No.32 to 35-CE/Noida/2006 dt.10.2.2006 passed by the CCE(Appeals), Noida)
Date of Hearing/Decision: 10.03.2015
Honble Mr.Rakesh Kumar, Member (Technical)
Honble Mr.S.K.Mohanty, 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 authoritative report or not?
3
Whether Their Lordships wish to see the fair copy of the Order?
4
Whether Order is to be circulated to the Departmental authorities?
GSC Toughened Glass Pvt.Ltd. Appellant
Shri Sharanjit Singh
Vs.
CCE, Jammu & Kashmir Respondent
Present for the Appellant: Shri Naveen Mullick, Advocate Present for the Respondent: Shri Pramod Kumar, AR Coram: Honble Mr.Rakesh Kumar, Member (Technical) Honble Mr.S.K.Mohanty, Member (Judicial) FINAL ORDER NO.51002-51005/2015 PER: RAKESH KUMAR
The appellant M/s.GSC Toughened Glass Pvt.Ltd. purchased duty paid glass sheets are subjected the same to the process of edge working, etching, bevelling, etc. The glass sheets subjected to these processes are cleared by the appellant on payment of duty. The period of dispute in these appeals is from 1.10.1996 to 31.8.2001. The appellants certain sales were on FOR destination basis and in respect of such sales, the appellant were paying duty on FOR price which included the freight and transit insurance charges. In cases, where sales were not on FOR basis, only on the request of the Customers, the transportation was being arranged by the appellant. In some cases, freight was paid in full, while in other cases, the appellants were paying freight in part and balance amount of freight was being paid by the customers. In some cases the entire amount of freight paid by the customers. The appellants had taken general insurance policy against damage to the goods being sold by them to various customers during transit and proportionate amount of premium was being charged by them from their customers as transit insurance charge. The general insurance policy taken by the appellant is in their name.
2. In the background of the above facts, the department was of the view that during transit, the appellant were the owners of the goods and in terms of Sale of the Goods Act, ownership of the goods is transferred to the buyers at the buyers/customers premises only. Accordingly, show cause notice was issued for inclusion of freight and transit insurance in the assessable value and it is on this basis, that differential duty has been demanded by the show cause notice dt.2.11.2001 which is common SCN in respect of three manufacturing units of the appellant factory. The total duty was demanded by the show cause notice is RS.17,64,495/- for the period from 1.10.1996 to 31.8.2001 alongwith interest under section 11AB. The show cause notice also sought to impose penalty on the appellant company under section 11AC and on the director of the appellant company under Rule 209A of Central Excise Rules, 1944.
3. The show cause notice was adjudicated by Additional Commissioner vide the Order-in-Original dated 27.7.2005 by which the above mentioned duty demand was confirmed alongwith interest and besides this, penalty of equal amount imposed on the appellant company under section 11AC and penalty of Rs.2.50 lakh on the director of the appellant company under Rule 209A of the Central Excise Rules, 1944. On appeals being filed by the appellant before the Commissioner (Appeals), the same were dismissed vide Order-in-Appeal dt.10/02/06. Against this order, these appeals have been filed before the Tribunal.
4. Heard both sides.
5. Shri Naveen Mullick, Advocate, the learned Counsel for the appellant, pleaded that in these cases the transportation of the goods is arranged by the appellant at the request of the customers, that in some cases, the appellant had paid full transportation charges which were recovered from the customers and in other cases either part transportation charges were paid by the appellant and the balance amount paid by the customers or the entire amount of transportation charges were paid by the customers, that throughout during the period of dispute ,invoices were issued by the appellant clearly mentioned that while the appellant have taken every care in packing and forwarding, they do not accept the responsibility for loss, breakage or shortage after the goods have left their units, and that the goods are despatched at the buyers risk, that this shows that the sales were not on FOR basis, and that though the appellant have taken general insurance policy against the loss of the goods during transit to their customers and the policy is in the appellants name, that the appellant do not become owner of the goods during transit and it cannot be said that the transfer of the property has taken place at the customers premises, that in case there is loss of the goods during transmit, survey is arranged by the customers and the customer sends survey report to the appellant on the basis of which the appellant apply to the insurance company and whatever claim is received against the loss of the goods and damage to the goods, the same is passed on to the customers, that the Tribunal in the case of Associated Strips Ltd. Vs.CCE, New Delhi-2002 (143) ELT 131 (Tri.-Del.) has held that just because the goods were insured by the manufacturer during transit at the buyers instance, it cannot be viewed that there is no transfer of title of property to the buyers at the factory gate, and in this regard, in para 23 of its judgement, the Tribunal, in view of the provisions of section 23 and section 39 of Sale Goods Act, 1930, has held that delivery to the carrier has to be taken as delivery to the buyers and accordingly, the Tribunal held that element of freight and transit insurance charges are not to be included in the assessable value; that this judgement of the Tribunal has been approved by the Apex Court in the case of Escort JCB Ltd. Vs. CCE, Delhi-II-2002 (146) ELT 31 (SC) wherein the apex court has held that even where the goods transit insurance was arranged by the assesse, it cannot be inferred that ownership of the goods was retained by the assessee untill it was delivered to the buyers and that in view above submissions, the impugned order is not sustainable.
6. The learned Joint DR defended the impugned order by reiterating the findings of the Commissioner (Appeals) in the impugned order and emphasised that the appellant not only arranged the transportation and took responsibility of despatch of goods but also paid freight and the insurance premium for transit insurance which amply proves that they deliver the goods at the destination at their own risk. He also pleaded that there is no evidence to show that transit insurance cost was borne by the customer. Besides this, he cited Boards circular No.988/2014-CX, dated 20.10.2014 wherein it has been clarified that place of removal needs to be ascertained in terms of provisions of Central Excise Act, 1944 read with provisions of Sale of Goods Act, 1930 and payment of transport, inclusion of transport charges in value, payment of insurance or who bears the risk are not the relevant consideration to ascertain the place of removal. He pleaded that according to this circular, the place of where sale has taken place or when the property in goods passes from the seller to the buyer is the relevant consideration to determine the place of removal. He pleaded that accordingly, just because as per declaration in the invoices, the appellant were not responsible for damage to the goods or loss of the goods during transit, it cannot be said that the sale has taken place at the factory gate. He also pointed out to para 14 of the show cause notice wherein it has been stated that the appellant had full right to dispose of goods even after the delivery to the transporter, as the goods, in question, are under the cover of transit insurance taken in their name and hence sale is deemed to have taken place where the appellant delivered the goods to the buyer at the destination and when the obligation of sellers insurance policy is discharged.
7. We have considered the submissions made from both sides and perused the records.
8. The appellant have certain quantum of sale on FOR destination basis in respect of which they have paid duty on FOR destination price which included the element of freight and transit insurance. The dispute in the present case is, in respect of non- FOR sales. In these sale, the appellant, on the request of the customers arranged the transportation of the goods and while in some cases, they have paid freight which was recovered from the customer, in other cases, part of freight was paid by the appellant and balance was paid by the customer and part of the freight paid was recovered from the customer and in some cases the entire freight was paid by the customers. The appellant, in all such cases, have taken general insurance policy against the loss of the goods despatched by them to the customers during the transit and proportionate amount of premium is charged by the appellant from their customers as transit insurance. The departments contention is that since the appellant have taken general insurance policy for the loss of the goods during transit in their name, they have full right to dispose of the goods even after the delivery of the same to the transporter and hence the ownership of the goods is transferred to the customers only at the premises of the customers. It is only on the basis of this allegation, that the department seeks to include freight and transit insurance in the assessable value of the goods. However, on perusal of some of the invoices issued by the appellant which have been placed on record, it is seen that each invoice mentions that though the appellant take every care for packing and forwarding, but they do not accept liability for any loss, breakage or shortage of the goods once, the goods have left the units and that the goods are always despatched at the buyers risk. This fact is not disputed by the department. The department also does not dispute that in case of loss of the goods or damage to the goods during transit, it is the customers who get survey conducted and on the basis of survey report sent by the customers to the appellant, the appellant claim compensation amount from the insurance company for the goods lost/damaged during transit and thereafter pass on the same to the customers.
9. Board in its Circular No.97/8/2007 dt.23.8.2007 in the context of admissibility of cenvat credit of the service tax paid on outward transportation of the finished goods from the factory to the customers premises, has clarified that customers premises would be treated as place of removal when the sales are on FOR destination basis in the serve during transit of the goods to the customers premises, the ownership remains with the assessee till the delivery of the goods in acceptable condition to the customer at his door step, risk of loss or damage to the goods during transit is with the assessee and freight amount is integral part of the price of the goods.
9.1 Boards circular No.988/2014-CX, dated 20.10.2014 has further clarified that place of removal needs to be ascertained in terms of provisions of Central Excise Act, 1944 read with provisions of Sale of Goods Act, 1930 and payment of transport, inclusion of transport charges in value, payment of insurance or who bears the risk are not the relevant considerations to ascertain the place of removal. According to this circular, the place of where the sale has taken place or when the property in goods passes from the seller to the buyer is the relevant consideration to determine the place of removal.
10. During the period of dispute, in terms of provisions of section 4 of Central Excise Act, 1944, expenses incurred on account of freight and transit insurance from the place of removal to the place of delivery are not includible in the assessable value of the goods and the assessable value of the goods is the normal price/ transaction value of the goods at the time and place of removal. Place of removal as defined in section 4 (3) (c) included depot, premises of consignment agent or any other place from where excisable goods are to be sold after clearance from the factory. Thus, in the case where after removal of the goods from factory, transfer of property in the goods takes place at the customers premises, it is the customers premises which would be the place of removal and in that case freight and transit insurance upto the customers premises would be includible in the assessable value.
11. The question is as to how to determine as to where the transfer of property in goods has taken place. In our view, for this purpose, what is relevant is at whose risk the goods were despatched from the factory and who is liable for loss of goods or damage to the goods during transit and the sale will be treated FOR sale only when during transit, the seller is liable for loss or damage during transit and freight and transit insurance is part of the value of the goods However, in this case, where the goods were insured by the appellant for loss of goods or damage to the goods during transit and the appellant claimed the compensation in case of loss or damage but passed on the entire compensation amount to the buyers, the Appellant have only arranged transit insurance on behalf of his customers for arranging the transit insurance cannot be treated as owner of the goods during transit.
12. In the present case, it is not disputed that every invoice mention that the goods have been despatched at the buyers risk and that the appellant do not accept any responsibility for loss or damage or shortage of the goods after the goods left from the works. The department also does not dispute that in case of loss of goods during transit it is customer who gets the survey done and on the basis of survey report, the appellant receive compensation for the loss of the goods from the insurance company but the entire compensation is passed on to the buyers without retaining any part of the same.
13 In view of these circumstances, we are of the view that even though the appellant have taken transit insurance policy of the goods in their name, they cannot be treated as owner of the goods during transit. We find that the Tribunal in the case of Associated Strips Ltd. (supra) has held that merely because at the instance of the buyer, the assessee has taken transit insurance it does not indicate that the ownership of the goods remained with the assessee during transit. This judgement of the Tribunal has been affirmed by the apex court in the case of Escort JCB Ltd. (supra) wherein the apex court in para 12 of its judgement held that in view of section 23 and 39 of the Sale of Goods Act, 1930, the goods would be treated as delivered to the buyer and property of possession of the goods and passed on to the buyer when the goods have been handed over to the transporter and that the assessee arranging for transit insurance would nowhere lead to inference that the assesse had retained the ownership of the goods during transit until delivery of the goods at the buyers premises.
14. In view of the above discussion, the impugned order is not sustainable. The same is set aside and the appeals are allowed.
(Pronounced in the open court)
(S.K.MOHANTY) (RAKESH KUMAR)
MEMBER (JUDICIAL) MEMBER(TECHNICAL)
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