JUDGMENT
S.L. Peeran, Member (J)
1. By this appeal, appellant is challenging the correctness of the order passed by the Commissioner of Central Excise, Belgaum in Order No. 6/2004 dtd. 28.3.2004- The appellants are engaged in the manufacture of H.R. Coils/sheets/plates of different grades and sizes falling under Chapter 72 of Central Excise Act/1985. The Department has proceeded against the appellant on the ground that there was under-valuation of their excisable goods by mis-declaring the place of removal and not including certain expenses incurred by them upto the buyer’s premises and thereby evading central excise duty. On scrutiny it was found that the appellants were removing the goods from their factory to their depots as well as directly to the customers. In case of sales made directly to the customers from the factory they were adopting two patterns. First, delivery of the goods is made to the customers at the factory gate of the appellant. In such cases, their customers are bringing trucks to the factory and taking delivery of the goods from the factory. They are not collecting any freight/ transit insurance charges from the customers as the goods are delivered at their factory gate itself. Simultaneously in some cases goods are transported by appellant upto their customers’ premises and delivered to the customer at the customers’ premises. It was alleged that in such cases the appellants were collecting the transportation charges from their customers. Therefore, the said transportation charges has not been included in the assessable value of the goods for the purpose of payment of central excise duty. Therefore, the Department initiated proceedings for recovery of these sums, which had not been included for the years 1997-98, 1998-99, 1999-2000. In this regard the statements of the Managing Director, Manager (Excise), Deputy General Manager (Accounts), Senior Accountant, Deputy Manager and Officer (Taxation) has been relied. The transport agreement has also been examined and on the basis of the sales ledger account and various other documents relied, the Department has issued the show cause notice calling upon the appellants to explain as to why the transport and freight charges recovered by the appellants from their customers for supply of goods till the customers’ place should not be added to the assessable value. A payment of Rs. 12,84,99,862 was raised by invoking larger period in the matter Before the Commissioner the appellants made a submission as recorded in Para 14 of the impugned order, which is as follows:-
“14. During the course of personal hearing the Ld. Advocate on behalf of JVSL submitted that in the case under reference, Section 4(4)(b)(iii) is applicable as against Section 4(4)(b)(1) and Section 4(2) of the Central Excise Act, 1944. He further stated that Hon’ble CEGAT’s judgment reported in 2000 (119) ELT 191 (T) is not relevant in the instant case. He stated that in the cited case, sale was not effected at factory gate and also the decision in Para 8 of the said judgment differs from the instant case. He further submitted that Hon’ble CEGAT’s judgment reported in 2000 (118) ELT 650 (T) under Para 4 is relevant to the issue under reference. However, he stated that the instant case is not comparable as sale was complete at factory gate. He further quoted Hon’ble CEGAT’s judgment reported in 2001 (46) RLT 733 (CEGAT, Delhi). He further stated that the declarations were made every year to the department and the department has not raised any objection. Even the departmental audit had taken place in 1999 and no discrepancies were noticed. He further quoted cases reported in 1994 (74) ELT 9 (SC), 1995 (78) ELT 401 (SC), 1989 (43) ELT 195 (SC) and 1989 (40) ELT 276 (SC) and tried to bring home the facts that in view of the above cited judgments, the extended period cannot be invoked. He further stated mat the quantification of duty demanded under para 11 of the impugned show cause notice is totally defective. He stated that in the impugned show cause notice all sates without bifurcating have been clubbed and added whereas these inputs are for export, for depot, etc., which can never form part of the assessable value as alleged in the show cause notice. He further stated that in any case the exemption is involved for a part portion even if the department sticks to the show cause notice (Notfn. No. 13/2000-CE dtd. 1.3.2000). Regarding penalty, the Ld. Advocate stated that mens rea has not been established. In this regard, the Ld. Advocate placed reliance on Hon’ble Tribunal’s judgment reported in 1999 (32) RLT 115 (CEGAT). He further stated in the case under reference, Section 11 AC of Central Excise Act, 1944 cannot be invoked. In the end, he stated that they would be submitting written submission within a fortnight. Subsequently, JVSL submitted their additional submission vide their letter dtd. 14.1.2002.”
The Commissioner after detailed examination of the case and statements noted that the cost of transportation which the assessee had recovered from their buyers for delivery of goods at the buyer’s premises and the insurance has to be included in the assessable value for the purpose of excise. He also held that the larger period was invocable as there was suppression of facts in the matter. He also upheld the imposition of penalty of like sum of duty required to have been paid.
2. We have heard Ld. Advocate Shri K.S. Ravi Shankar and Ld. SDR, Shri P.M. Saleem.
3. Ld. Counsel submitted that it is a well settled proposition of law that in terms of several judgments of the Apex Court the transportation and freight charges are not required to be added in the assessable value where the sale has been effected from the factory gate. In cases where the price has been settled at the depot then addition of the cost of transportation charges does not arise for clearance effective from depot. He referred to the purchase orders of all the customers wherein it is clearly disclosed that the ‘test certificate should be provided indicating chemistry and mechanical properties alongwith each dispatch from your works to our works’. He pointed out to the lorry receipts wherein the driver had clearly accepted the responsibility of taking delivery of the goods. He submits that once the goods have been delivered to the transporter the sale is complete and therefore transportation charges are not required to be added to the assessable value for delivery the goods to the customers’ place. He pointed out to all the lorry receipts wherein the driver of the said lorry had acknowledged that he had received the goods mentioned in the receipt in good condition and he held himself responsible for any shortage/damage in the consignment when in his custody both on his behalf and on behalf of the owner of the company. He pointed out that on mere fact of the admissions made against the position of law it cannot change the situation. It is his submission that as per Section 4(4)(b)(i) of the Act ‘place of removal’ means ‘a factory or any other place or premises of production or manufacture of the excisable goods’ and as per Section 4(4)(b)(iii) of the Act ‘place of removal’ means ‘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’. Therefore, it is his submission that once the goods have been sold at the factory gate at the price fixed thereon and the subsequent charges collected for transportation or freight and insurance cannot be added to the assessable value. He strongly relied on the judgment of the Apex Court-rendered in the case of Kalidas Dhanji Bhai v. State of Bombay, AIR 1955 SC 62 wherein it has been held that mere admissions of a party about the legal effect of those facts is of no consequence in considering the section. It has been further held that no estoppel arises by reason of the party as to such effect. Therefore, he submitted that once the sale has been made at the factory gate by issue of lorry receipt and the goods had been taken delivery of by the driver with all the consequences of its shortages, etc., then the transportation charges effected thereafter cannot be added to the assessable value. He relied on the judgment of the Apex court in the case of Indian Oxygen Ltd. v. CCE, 1988 (18) ECC168 (SC): 1988 (36) ELT 723 (SC) wherein it has been held that when ex-factory price is ascertainable then transportation is not to be added in the assessable value. Likewise he relied on the judgment rendered by the Tribunal in the case of Associated Strips Ltd. v. CCE, New Delhi, 2002 (81) ECC 404 (Tri-Del) : 2002 (143) ELT 131 (Tri-Del) wherein also it has been held that freight and insurance charges and transportation charges effected after the removal of goods from the factory and when the sale has been effected in the factory then the sale is not includible in the assessable value. He pointed out that this judgment has been affirmed by the Apex Court in the case of Escorts JCB Ltd. v. CCE, 2002 (84) ECC 225 (SC) : 2002 (146) ELT 31. He pointed out that ex-factory sales had been effected in the present case at the factory gate in terms of the documents produced and therefore in terms of these judgments the transportation cost paid thereafter is not to be included in the assessable value. He further drew strength from the judgment of the Apex Court in the case of Prabhat Zarda Factroy Ltd. v. CCE, 2002 (146) ELT 497 wherein it has been held that when sales are effected from the depot then freight and insurance charges upto depot is includible but freight and insurance charges for delivery to the customer from depot is not includible. He relied on this Bench judgment rendered in the case of BPL Telecom Pvt. Ltd. v. CCE, 2003 (85) ECC 212 (T): 2003 (153) ELT 193 wherein also it has been held that ownership in property transferred to buyer at factory gate notwithstanding the fact that assessee arranges for transport and transit insurance. Therefore, transportation charges/transit insurance is not includible in the assessable value. He also referred to the Board Circular No. 59/1/2003-CX. dtd. 3.3.2003 which has clarified that when the sale has been effected at the factory gate then freight and insurance charges is not required to be added in the assessable value. The Ld. Counsel also relied on the judgment of the Chennai Bench rendered in the case of Tamilnadu Telecommunications Ltd. v. CCE, 2004 (60) RLT 439 wherein also it has been held that when sale is effected at factory gate then the freight and insurance charges from factory onwards is not required to be added in the assessable value. The Counsel also relied on the judgment of the Apex Court rendered in the case of VIP Industries Ltd. v. CCE, 2003 (88) ECC 232 (SC): 2003 (155) ELT 8 (SC) wherein also it has been held that cost of transportation from the factory to the depot is not includible in the assessable value wherein the manufacturer includes equalized freight in the price of the goods and sells the goods all over the country at a uniform price. The Tribunal in the case of Bajaj Auto Ltd. v. CCE, 2003 (153) ELT 557 (T) has also held that insurance and freight charges incurred in relation to transport of goods from manufacturer’s factory to consignee’s premises, not includible in assessable value. Further reliance was placed on the Apex Court judgment rendered in the case of Mahabir Commercial Co. Ltd. v. C.I.T. West Bengal, AIR 1973 SC 430 with regard to the place of manufacture in terms of Sections 23 and 39 of Central Excise Rules. Ld. Counsel also relied on the provisions of Sale of Goods Act to strengthen his case that once the goods have been delivered to the transporter than the liability shifts on the consignee. He also referred to the various declarations filed from time to time and also the price list wherein they had disclosed that the fact of collecting the transportation and freight charges from customers and therefore it is his submission that there was no suppression in the matter and hence larger period is not invocable.
4. Ld. SDR strongly argued for upholding the Commissioner’s order. He submitted that the delivery in the present case was effected upto the customers’ place. The price and transportation charges was to have been effected at the customers’ place therefore, he submits that in view of the admissions made of the appellants with regard to taking the responsibility to transfer the goods upto the customers’ place, the charges have been rightly included in the assessable value.
5. On a careful consideration of the submissions made and perusal of the entire documents relied it is very clear on the rulings of the Supreme Court relied that when the sale has been effected at factory gate then the transportation and freight charges for delivery of the goods at the customers’ place is not to be added in the assessable value as held in Escorts JCB Ltd. (supra), Associated Strips Ltd. (supra), Prabhat Zarda Factory Ltd. (supra), BPL Telecome Pvt. Ltd. (supra), Tamilnadu Telecommunication Ltd. (supra), Indian Oxygen Ltd. (supra). In view of these judgments cited by the Counsel and also having shown us the entire transport receipts and invoice it was very clear that the sale has been effected only on the factory gate. Mere fact of the customers’ insisting on delivery upto their doors by their assessee would not make the sale to have been made at the customers’ place. Once the goods have been handed over to the transporter through the driver including the consignment and the invoice having been handed over then the sale is deemed to have been effected at the factory gate. This is the position also in terms of the provisions of Sale of Goods Act. There is no reason to hold that the appellants have sold the goods at the customers’ point. The mere fact of assessee agreeing for giving some additional facility to the customers to arrange the transportation is not a fact for the purpose of adding the transportation charges to the assessable value as has been held by the Apex Court in the case of Kalidas Dhanjibhai v. State of Bombay (supra).
Mere fact of the appellants having given statements will not change the legal position when in terms of Section 4(4)(b)(i) and 4(4)(b)(iii), the place of removal is the factory or the place where the transaction is completed then any statement given to the contra will not have any effect. The documentary evidence relied by the appellants that is the invoice and other documents tendered to the transporter excludes the oral statements. Thus the documents produced by the appellant clearly indicated that the sale has been effected at the factory gate itself. In terms of Section 23(2) of the Sale of Goods Act which stated that ‘where, in pursuance of the contract the seller delivers the goods to the buyer or to a carrier or other bailee (whether named by the buyer or not) 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 sale is completed on delivery of goods and documents to the transporter.
Therefore, in terms of this section, the goods are deemed to have been delivered to the customer when the goods were handed over to the transporter. Even in terms of Section 2(b) of the Central Excise Act, the transfer of the possession of goods by one person to another in the ordinary course of trade or business in cash or deferred payment and other valuable consideration is deemed to be sale and purchase. In the case of CCE v. Purisons Engineers (P) Ltd., 2002 (141) ELT 672 it has been held that delivery to Railways for transport amounts to delivery to the customer. It has been held that since the Railways receipt shows that the consignee is the buyer the sale takes place and the goods are handed over to the buyers and there is no reasons to hold that the place of removal of goods under the Section 4 of the Act is the outstation buyer premises. As has been noted from the judgment of the Indian Oxygen Ltd. v. CCE (supra) it has been held that once ex-factory price is ascertained, ex-factory prices shall be the basis for determination of value under the Section 4 of the Central Excise Act then the question of transportation charges to be added in the assessable value has been held to become irrelevant. In view of the legal position and the facts having disclosed that the contract had come into effect on the goods satisfying the test results and the same having been handed over to the transporter, therefore subsequent transportation charges collected to the customers’ place is not required to be added in the assessable value. The appellants had also declared to the Department in their price list and in the declarations about the fact of the appellant collecting the transportation and freight charges. Therefore, it cannot be said that the appellants have suppressed any fact for the purpose of evading excise duty. From this point of view also the demands are time barred. On an overall consideration, we are of the considered opinion that the citation relied are covered in the appellants’ favour and in view of the fact that the ex-factory price is determinable at the factory gate and therefore the transportation charges collected from the customers for delivery at the customers’ place is not required to be added in the assessable value. The appellants succeed in the appeal. The impugned order is set aside and appeal is allowed.