Customs, Excise and Gold Tribunal - Ahmedabad
Blue Star Ltd. And Sh. B.F. Modi vs Cce on 3 January, 2008
Equivalent citations: 2008(128)ECC148, 2008(154)ECR148(TRI.-AHMEDABAD), 2008(224)ELT258(TRI-AHMD)
ORDER M. Veeraiyan, Member (T)
1. These appeals are against the order of the Commissioner No. 11/MP/VAPI/2003 dt. 10/11/2003.
Heard both sides.
2. The relevant facts, in brief, are as follows:
a. The appellant-company is a manufacturer of Air-conditioners; there are sales from their depots; they also dispatched the air-conditioners from the factory to their customers on door delivery basis. Their Head office of had an umbrella insurance cover in respect of movement of all their goods from any location to any other location. The movements of air-conditioners from the factory premises to the customers' destination got automatically covered by this umbrella insurance policy.
b. On the basis of investigation, show cause notice dt.21/12/2001, was issued and the commissioner by his order dated 10-11-2003 held that the purchase orders were received from their customers directly at their factory; possession of goods were transferred to the buyers only at the buyers' premises; hence no transfer of possession of goods have taken place at the factory gate; the sale price from the depots were found to be more and therefore, the depot should be treated as place of removal, accordingly demanded duty amounting to Rs. 2,79,67,334/- along with interest for the period from July, 1997 to June, 2001. He also imposed equal penalty on the company and a penalty of Rs. 70 lakhs on Shri BF Modi G.M. of the company.
3. Ld. Advocate submitted the following:
a. To avail of sales tax benefit, sale has been made from their Dadra factory itself which is in the Territory of Dadra & Nagar Haveli; substantial sales were effected directly to customers. The orders were placed by their customers directly at the Dadra factory and goods supplied directly from the factory. The price was composite price including freight, transit insurance, octroi/entry tax and installation charges. As individual customers cannot arrange for transportation, Blue Star arranged the transportation of air conditioners to the buyers destination. Since the air conditioners are required to be installed, local branches played a limited role by keeping a tab on the arrival and delivery of the air conditioners to the customers to co-ordinate supply and installation.
b. Demand exclusively relates to sales effected directly from the factory to the customers. The valuation was done u/r 173C on the basis of invoice values. The price charged to the customer is an all inclusive price. No separate recovery towards freight, insurance and other charges were made from the customers even though they were separately shown in the invoices.
c. Demand is also barred by limitation, as i. there was no mis-declaration, as demands are based on direct sales to customers, for which no declaration was ever filed; the declarations filed under Rule 173C was in respect of sale through depots/branches, which is not the subject matter of the show cause notice.
ii. Declarations, marketing pattern as well as copies of invoices [in which deductions were claimed] were submitted to the department from time to time. Hence there was no suppression of any material fact to the department.
d. As the extended period of limitation cannot be invoked penalty Under Section 11AC is not attracted.
e. Even in respect of sales from depots/branches, whenever the actual sale was effected at prices higher than what was declared the appellants had on their own paid the differential duty and submitted copies of invoices to the Department.
4. He also relies on the judgment of the Hon'ble Supreme Court in the case of Escorts JCB Ltd. , wherein it has been held that "ownership in the property may not have any relevance in so far as insurance of goods sold during transit is concerned". He also relies on the CBSE's circular No. 59/1/2003-CX dt.3/3/2003 wherein it has been clarified that insurance of the goods during transit will not be the sole consideration to decide the ownership or the point of sale of the goods.
5. Ld. SDR reiterates the findings of the Commissioner.
6. We have carefully considered the submissions from both sides. The appellant claims to have sold the goods at factory gate to their customers. The invoices have been accordingly prepared. The Department has taken the view that the possession has not been transferred to the customer at factory gate. For coming to such conclusion, the reliance has been placed on the agreement with the transporter and the insurance policy taken by the appellant.
7. It is not disputed by the appellant that they had arranged the transport and also got the insurance cover for the safe transport of the goods to the customers' premises. Not withstanding this, the claim of the appellant is that the sale of the goods has taken place at factory gate itself, but only the risk of transport has been covered up to the place of delivery as a service to their customers. It was claimed that the involvement of branches was limited only to ensure after sales service. In respect of direct sales at factory gate, the purchase orders indicate lower price than the depot price as on such sales, no sales tax becomes payable.
8. The contention by the department that in respect of purchase orders received from different customers, the appellant supplied the goods only through their branches and depots is not proved. The possession and ownership are two distinct concepts. Once the sale was effected at the factory gate on the basis of purchase order, the additional responsibility of arranging transport and physical delivery at a different place cannot make any difference.
9. The judgment of the Hon'ble Supreme Court in the case of Excorts JCB Ltd. cited supra and the clarification of the Board make it clear that the terms of insurance should not be taken as the criteria for determining the ownership of the goods sold.
10. Therefore the decision of the Commissioner enhancing the assessable value and confirming the demand of duty and imposition of penalties is not sustainable.
11. Appeals are, therefore, allowed with consequential relief.
(Pronounced in Court on 3/1/08)