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Judgment
The present appeal has been filed by the assessee, M/s. Aditya Birla Chemicals (India) Ltd, formerly known as Bihar Caustic & Chemicals Ltd,
against demand of Central Excise duty of Rs.5,25,70,268/- alongwith equal penalty and applicable interest confirmed by the learned Commissioner,
Central Excise, Ranchi, for the period from April 2004 to September 2008 vide Order dated 14.05.2012 which is impugned herein.
The appellant in this case is engaged in the manufacture of Caustic Soda Lye, Liquid Chlorine and allied goods on which central excise duty is being
paid. Dispute was raised by the Central Excise Department on the ground that the appellant’s contracts with its buyers were at FOR prices and
the possession of goods after clearance from the factory was given to buyers only at destination and that sale in such cases has taken place when
delivery was given at destination and, therefore, destination was the ‘place of removal’. It was also contended that the assessee appellant was
liable to pay Central Excise duty on the amount charged from their customers which would be the ‘transaction value’ as defined in Section 4(1)
(a) of the Central Excise Act, 1944 (the Act). Accordingly, a Show Cause Notice dated 15.04.2009 was issued by invoking extended period of
limitation which culminated into the adjudication order dated 14.05.2012.
Shri B. L. Narasimhan, Shri Deepro Sen and Shri Rahul Tangri, learned Advocates appeared for the appellant. Shri K. Chowdhury, learned
Authorized Representative appeared for the Department.
The learned Advocate for the appellant submitted that the issue is no longer res integra inasmuch as the same has been decided in their favour by
the Hon’ble Supreme Court in the case of CCE vs. Ispat Industries Ltd [2015 (324) ELT 670 (SC)] wherein it has been held that the ‘place of
removal’ as specified in Section 4 of the Act can never be the buyer’s premises and that the place or premises from where excisable goods
are to be sold can only be the manufacturer’s premises. He accordingly submitted that as per the provisions of Section 4 read with Rule 5 of the
Central Excise (Determination of Price of Excisable Goods) Rules, 2000, the freight amount incurred from the place of removal till the buyer’s
premises will not be included in the transaction value and accordingly, the contention of the Department would not sustain in view of the legal position
settled by the Apex Court. He also placed reliance on the following decisions of the Tribunal : Â
· Aditya Birla Insulators Ltd vs. CCE Kolkata 2008 (226) ELT 377 (Tri-Kol)Â
· CGST, Alwar vs. Purna Plast Pvt Ltd. 2019 (3) TMI 848 â€"CESTAT-DelhiÂ
· Sharda Ceramics Pvt Ltd vs. CCE 2018 (8) TMI 732 â€" CESTAT â€" DelhiÂ
· Jost Engineering Co. Ltd vs. CCE 2017 (7) GSTL 344 (Tri-Mum)Â
· Associated Strips Ltd. vs. CCE 2002 (143) ELT 131 (Tri-Del)
As a matter of alternative argument, the learned Advocate also submitted that when the delivery of goods to the carrier / transporter is as good as
delivery to the buyer in terms of Section 39 of the Sale of Goods Act, taking support from the Apex Court’s decision in the case of Escorts JCB
Ltd vs. CCE [2002 (146) ELT 31 (SC)]. He accordingly submitted that as soon as the sold goods are handed over to the transporter at the factory
gate, the transaction is complete and nothing remains to be done. He also contested the demand on limitation since the matter has always been subject
to interpretation by the Courts and hence, there cannot be any willful suppression. On same counts, he also contested the imposition of penalty.
The learned Authorized Representative for the department heavily relied on the decision in the case of CCE vs. Roofit Industries Ltd [2015 (319)
ELT 221 (SC)] to submit that where the intent of the assessee is to sale the manufactured good at the buyer’s premises, who also undertakes the
delivery till the buyer’s premises, the freight element has to be added in the assessable value for payment of Excise duty. He also submitted that
the decision in the above case has been rendered by the Apex Court, distinguishing the facts in the case of Escorts JCB Ltd (Supra) and submitted
that sale in the instant case took place at the buyer’s premises and therefore, the appellant cannot claim exclusion from the assessable value. He
also relied on the recent clarification issued by the CBIC in Circular no. 1065/4/2018-CX dated 08.06.2018, wherein after taking note of the decisions
of the Apex Court in Roofit Industries (Supra) and Ispat Industries (Supra), it has been clarified that each case has to be decided independently
considering the facts appearing in such case. He accordingly submitted that when the goods are being delivered and sold at the buyer’s premises,
the freight amount cannot be excluded from the assessable value. He also relied on the decision of the Tribunal in the case Nalari Ferro Alloys Pvt.
Ltd vs. CCE, Shillng vide Final Order n. 77145 /2018 dated 14.12.2018. On the basis of aforesaid contentions, he prayed that the appeal filed by the
assessee be rejected being devoid of any merit.
Heard both sides through video conferencing and perused the appeal records.
The issue before us is whether the appellant can claim exclusion of the freight amount from arriving at the assessable value for the purpose of
payment of central excise duty. We have perused the decisions rendered by the Apex Court in the case of Escorts JCB, Roofit Industries as well as
Ispat Industries (Supra). The Hon’ble Supreme Court in Ispat Industries case after taking note of its earlier decisions in Roofit Industries as well
as Escots JCB, and the various amendments introduced in Section 4 of the Act from time to time, has categorically observed that the buyer’s
premises can never be the “place of removal†as has been defined in Section 4 of the Act. The Hon’ble Court also made a very important
observation that the words used in Section “place or premises from excisable goods are to be sold†can only be the manufacturer’s premise
and if the contention of the Revenue is accepted, the said words will have to be substituted by the words “have been sold†which would only then
have possibly have reference to the buyer’s premises. The Court also gave a specific finding in para 32 with regard to the decision in Roofit
Industries case, wherein it observed that the attention of the Court was not drawn to Section 4 as originally enacted and as amended to demonstrate
that the buyer’s premises cannot, in law, be the place of removal under the said provisions. Relevant paragraphs of the judgment is reproduced
below:-
“16. It will thus be seen that where the price at which goods are ordinarily sold by the assessee is different for different places of
removal, then each such price shall be deemed to be the normal value thereof. Sub-clause (b)(iii) is very important and makes it clear that a
depot, the 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 are all places of removal. What is important to note is that each of these premises is referable only to the
manufacturer and not to the buyer of excisable goods. The depot, or the premises of a consignment agent of the manufacturer are obviously
places which are referable only to the manufacturer. Even the expression “any other place or premises†refers only to a
manufacturer’s place or premises because such place or premises is stated to be where excisable goods “are to be soldâ€. These are
the key words of the subsection. The place or premises from where excisable goods are to be sold can only be the manufacturer’s
premises or premises referable to the manufacturer. If we are to accept the contention of the revenue, then these words will have to be
substituted by the words “have been sold†which would then possibly have reference to the buyer’s premises.
It is clear, therefore, that as a matter of law with effect from the Amendment Act of 28-9-1996, the place of removal only has reference
to places from which the manufacturer is to sell goods manufactured by him, and can, in no circumstances, have reference to the place of
delivery which may, on facts, be the buyer’s premises......
It is clear, therefore, that on and after 14-5-2003, the position as it obtained from 28-9-1996 to 1-7-2000 has now been reinstated. Rule
5 as substituted in 2003 also confirms the position that the cost of transportation from the place of removal to the place of delivery is to be
excluded, save and except in a case where the factory is not the place of removal.
It will thus be seen that, in law, it is clear that for the period from 28-9-1996 up to 1-7-2000, the place of removal has reference only to
places from which goods are to be sold by the manufacturer, and has no reference to the place of delivery which may be either the
buyer’s premises or such other premises as the buyer may direct the manufacturer to send his goods. As a matter of law therefore, the
Commissioner’s order and Revenue’s argument based on that order that freight charges must be included as the sale in the present
facts took place at the buyer’s premises is incorrect. Further, for the period 1-7-2000 to 31-3-2003 there will be no extended place of
removal, the factory premises or the warehouse (in the circumstances mentioned in the Section), alone being places of removal. Under no
circumstances can the buyer’s premises, therefore, be the place of removal for the purpose of Section 4 on the facts of the present
case....
It will be seen that this is a decision distinguishing the Escorts JCB’s case on facts. It was found that goods were to be delivered only
at the place of the buyer and the price of the goods was inclusive of transportation charges. As transit damage on the assessee’s account
would imply that till the goods reached their destination, ownership in the goods remained with the supplier, namely, the assessee, freight
charges would have to be added as a component of excise duty. Further, as per the terms of the payment clause contained in the
procurement order, payment was only to be made after receipt of goods at the premises of the buyer. On facts, therefore, it was held that the
sale of goods did not take place at the factory gate of the assessee. Also, this Court’s attention was not drawn to Section 4 as originally
enacted and as amended to demonstrate that the buyer’s premises cannot, in law, be “a place of removal†under the said
Section.â€
In view of the aforesaid, since the legal position has been clearly settled by the Hon’ble Supreme Court that place of removal would necessarily
be the manufacturer’s factory, depots or warehouse belonging to the manufacturer from where the excisable goods are to be sold which is not the
case herein. The buyer’s premises can never be the place of removal so as to merit inclusion of the freight amount incurred for delivery of goods
from the factory to buyer’s premises. Further in any case, the very Rule 5 of the Valuation Rules, as also noted by the Supreme Court in above
decision, clearly provides for deduction of the cost of transportation from the place of removal to the place of delivery. Thus, the contention of the
Department to include the freight amount in the assessable value does not meet the test of law and hence not legally sustainable. In so far as the
decision of the Tribunal in the case of Nalari Ferro Alloys Pvt. Ltd. (Supra) relied by the learned Authorized Representative for the department, we
note that the said case pertained to demand proceedings initiated after sanctioning of refund by the lower authorities in terms of Notification No.
32/1999-CE by considering the law and precedents available at that point of time. The facts in that instant case, in essence, were that the assessee
had paid the duty by including freight amount. Considering the judgment of the Hon’ble Supreme Court in Ispat Industries Case (supra), the duty
paid on freight was legally not payable. So the duty amount paid legally as well as the amount legally not payable but paid, both were entitled for
refund if the refund claim was filed as per law. Hence, the facts in the said case are clearly distinguishable and has no applicability to the instant case.
In the instant case before us, the issue whether or not place of removal can be manufacturer’s premises or buyer’s premises has since been
settled by the Apex Court in Ispat Industries (Supra), which has to be respectfully followed for the purpose of assessment of duty as per law. Since
the instant case is being decided on merits, we are not inclined to go into the aspect of limitation.
The impugned order dated 14.05.2015 passed by the learned Commissioner thus cannot be sustained and hence set aside. The appeal is allowed with
consequential relief as per law.
(Order pronounced in the open court on 19 January 2021.)