CENTRAL EXCISE CIRCULAR No.533/29/2000-CX Dated 24th May, 2000
Subject: Central Excise Valuation - amended definition of "Place of removal" decision of CEGAT
Kindly find enclosed a copy of CEGAT final order No. 1222/99A dated 24.8.99 in case of M/s Escorts (JCB) Ltd. which has given a new dimension to the term "place of removal,"
used in sec.4 of Central Excise Act and point of time when the goods can be said to have been sold, which is in favour of revenue. You are requested to bring this to the notice of field officers, including Commissioners (Appeals) for their guidance.
Further it may be noted that the CEGAT has given an interpretation of Section 11AC taking a view that the penalty equivalent to the duty determined, provided therein is the maximum limit and it is not mandatory that in all such cases maximum penalty should be imposed, is not acceptable to the Department. A civil appeal against this part of this order has been filed in the Supreme Court. The said CA of the department
(bearing No.D.21121/1999) has also been admitted. (It is understood that the assessee M/s Escorts JCB has also challenged this decision vide their CA No. 7230/99).
For information please.
Sd/-
(K K Jha)
Director (Review)
THE CUSTOMS, EXCISE & GOLD (CONTROL) APPELLATE TRIBUNAL
West Block No.2, R.K. Puram, New Delhi - 110 066
Appeal No.E/2800/98-A
Dated: 31-8-99
CECAT
NEW DELHI
To
M/s. ESCORTS JCB LTD.
CORPORATE LOW DEPARTMENT
15/5 MATHURA ROAD, FARIDABAD.
In the matter of:
M/s. ESCORTS JCB LTD Appellant
VS.
CCE. N. DELHI Respondent
I am directed to transmit herewith a certified copy of Final Order No. 1222/99-A
Dated 24-8-99 passed by the Tribunal under Section 35-G(I) of Central Excise & Salt
Act, 1944 / Section 129(B) of the Customs, Act, 1962.
(B.S. Khanna)
By Order
Asstt. Registrar
Bench
THE CUSTOMS, EXCISE & GOLD (CONTROL) APPELLATE TRIBUNAL
NEW DELHI
E/2800/98-A
(Arising out of Order No.4/98 dated 23.7.98 passed by the Commissioner of Central
Excise, Delhi)
M/s. Escorts JCB Ltd. .... APPELLANT
(Rep. By Shri Dinesh Charak, Advocate)
vs.
CCE, New Delhi .... RESPONDENT
(Re. By Shri P.K. Jain, SDR)
CORAM: Hon"ble Justice Shri K. Sreedharan, President
Shri C.N.B Nair, Member (Technical)
FINAL ORDER NO 1222/99-A
DATED : 24.8.99
Per Justice K. Sreedharan:
Appellant, M/s. Escorts JCB Ltd. are engaged in the manufacture of Excavators Loaders. Central Excise Officers of Anti Evasion Branch, Faridabad visited their premises and came across some invoices. Insurance policies taken out from the appellants premises showed that goods sold by them were insured with National Insurance Company Ltd, till the goods reached buyers premises. On that basis it was held that property in the
goods sold did not pass from the appellants to the buyer till the goods reached the premises of the buyer. So the value of the goods at the place where it was sold should be the basis for assessment to duty under Central Excise Act. Assessments were not made taking note of the said value upto the date of inspection by the Authorities. It was also found that towards transit insurance charges .40% of the invoice value was
realised while .13% alone was actually spent toward insurance charges. On this ground show cause notice dated 24.3.98 was issued to the appellant calling upon them why -
(i) Central Excise duty amounting to Rs. 29,65,532 on value of Rs. 2,61,60,197 (as per details given in Annexure V & VI), not included in the assessable value should not be demanded from them under Rule 9(2) of the Central Excise Rules, 1944 read with Section 11 A of the Central Excise Act, 1944.
(ii) Central Excise, duty amounting to Rs.98,129 voluntarily debited on 18.10.1997 should not be confirmed as having been correctly debited under Rule 9(2) of the Central Excise Rules, 1944 read with section 11 A of the Central Excise Act, 1944.
(iii) Penalty under rule 173Q of the Central Excise Rules, 1944, should not be imposed for the aforesaid contraventions.
(iv) Penalty under section 11AC of the Central Excise Act, 1944 should not be imposed on them.
(v) Interest under section 11AB of the Central Excise Act, 1944, should not be demanded.
(vi) Extended period of 5 years should not be invoked under proviso to Section 11 A of the Central Excise Act, 1944 for demanding the Central Excise duty beyond period of six months as the party suppressed the facts.
2. Appellants submitted their defence. They also filed written objection regarding their defence. They were given personal hearing. After considering the entire facts and circumstances of the case and the contentions realised by the party, the
Commissioner passed Order No.4/98 dated 23.7.98, which is in the following terms:
(i) I confirm the Central Excise duty amounting to Rs.29,65,532 (Rupees twenty nine lacs sixty five thousand five hundred thirty two only) under Rule 9(2) of the Central Excise Rules, 1944 read with section 11A of the Central Excise Act,
1944 as proposed in the show cause notice dated 24.3.98. M/s. Escorts (JCB) Ltd. 23/7, Mathura Road, Ballabgarli (Faridabad) is ordered to pay the aforesaid amount forthwith together with interest leviable as per law.
(ii) I confirm the Central Excise duty amounting to Rs.98,219/- (Rupees ninety eight thousand two hundred nineteen only) voluntarily debited by the party on 18.10.97 as correctly paid under Rule 9(2) of the Central Excise Rules read with Section 11A of the Central Excise Act, 1944.
(iii) I also impose a penalty of Rs.30,63,751 (Rupees thirty lakhs sixty three thousand seven hundred fifty one only) on M/s Escorts (JCB) Ltd. 23/7, Mathura Road, Ballabgarh (Faridabad) under section 11AC of the Central Excise Act, 1944.
3. Learned Representative representing the appellant raised three contentions before us. The first one is that sale of the goods took place at the factory gate and the price for the goods at the factory gate which is the place of removal, should be the basis for assessment under section 4 of the Central Excise Act. The second contention is that 40% of the invoice value was realised as insurance charges and that was proper
quantification even though in fact. 13% alone was utilised, thereby no amount should have been added to the value for assessment as had been done in the impugned order. The third contention was that penalty imposed under section 11AC is excessive on the facts and circumstances of the case. According to him, even though section 11AC provides that penalty may be equal to the duty determined therein, it is not mandatory
that the same amount should be imposed as penalty.
4. Section 4(4) (b) of the Central Excise Act, 1944 define "place of removal". Sub-clause (iii) of Section 4(b) is the one with which we are concerned in this appeal.
It states "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".
Place where excisable goods are sold can be a place of removal. A place where the goods are sold can be place where the property in the goods sold passes from seller to the buyer. The property in the goods passed from the seller to the buyer at the factory gate as contended by the Representative of the appellant. Then the value of the goods at factory gate must be the basis for assessment to duty. So, the question that arises for consideration is whether property in the goods sold did, in fact, pass from the appellant firm to the buyer when the goods left the factory gate. It is an admitted case that the appellant got the goods insured when it was sent to the
purchaser. Policy was taken in the name of the appellant. In the course of transit if the goods are lost, it is conceded before us, insurance company was to reimburse the appellant. Insurance company was reimbursing the appellant only because the appellant continued to have the property in the goods which were in transit. In this view of the matter it can be said that thought the goods were in transit, the appellant continued
to be the owner of the goods. In other words, no sale took place till it reached the buyers destination. Only when the goods reached buyers destination, the sale takes place. In such a situation the goods belonging to the appellants were sold at the premises of the buyer. As per definition of place of removal referred to earlier that places is the relevant place with reference to which value of the goods is to be assessed . In these circumstances we do not find any infirmity in the conclusion reached by the Commissioner in the impugned order in imposing duty amounting to Rs.29,65,532 under Rule 9(2) of the Central Excise Rules, 1944 read with section 11A of the Central Excise Act.
5. Before parting with this issue, we are to consider the arguments advanced by the Representative of the appellant regarding invocation of Section 11A of the Act. According to him authorities were not justified in availing extended period of limitation for, the appellant did not conceal any fact in order to suppress payment of central excise duty. Actually, the appellants have no case that documents showing insurance taken by them while the goods were sent to the purchasers premises was made available to the Department. Only when they got it on inspection of the premises of the appellant, they came to know the actual place where the goods were sold. These circumstances justify the authorities taking recourse to extended period of limitation under section 11A of the Act.
6. On the second issue, namely, practice of taking .40% of the invoice value towards insurance and utilising only .13%
,the Department has taken the view that unused portion must be liable for excise duty. It was on this basis that the Commissioner in the impugned order imposed central excise duty amounting to Rs.98,219. We are not in a position to support this part of the order in view of the Tribunals"s decision in Sri Kaliswari Fireworks Vs. CCE, Madurai 1998 (98) ELT 93. In that decision this Tribunal observed:
3. The show cause notice proceeds merely on the ground that the appellant collected 1% of the price as insurance charges and paid much less to the insurer. The show cause notice did not allege any deliberate depression
of the price by adjusting a part of the price as transit insurance charges. The question of transit insurance arises only where the manufacturer arranges transport of the goods to the premises of the buyer. This is a separate activity of not having direct relationship with the activity of manufacture. Appellant has been collecting insurance charges at the same rate from all customers situated at different places. This would indicate that the charges collected were equalised charges. In the case of Baroda Electric Meters Ltd. 1997 (94)
ELT 13 Supreme Court held that the difference between the equalised freight charges collected from buyers and the freight actually paid to the transporter cannot be included in the assessable value. The same principle would apply in the case of equalised insurance charges also. The Tribual has held so in Final Order No.553/97-A, dated 2.4.1997.
Following this view we hold that there is no justification to demand duty on the differential amount."
The above observation is squarely applicable to the facts of the case. Consequently, we set aside the order imposing duty of Rs.98,219.
7. By way of penalty under section 11AC of the Act an amount of Rs.30,63,751 has been imposed on the appellant. Section 11AC provides that in cases falling under that provision a person shall also be liable to pay a penalty equal to the duty determined therein. According to us the limit fixed therein is the maximum limit and it is not mandatory that in all cases such maximum should be imposed as penalty. Authority is
having a discretion to impose lesser penalty. On the facts and circumstances of the case we feel that a lesser amount is to be imposed as penalty on the appellants. We reduce the penalty to Rs. 10 lakhs.
8. In the result we dispose of this appeal by confirming the order of the Commissioner imposing a duty of Rs.29,65,532 under Rule 9(2) of the Central Excise Rules, 1944 read with section 11A of the Act, set aside that part of the order which imposed duty amounting to Rs.98,219 and reduce the penalty to Rs. 10 lakhs under section 11AC of the Act.
9. Subject to, above modification, the appeal is disposed of in the above terms.
(C.N.B. Nair)
(Justice K, Sreedharan)
Member (Technical) President
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