Case: Commissioner Central Excise, Mumbai-III Vs. M/s. EMCO Ltd

1) The respondent/assessee herein manufactures transformers. The supply of these transformers by the assessee is primarily to the State Electricity Boards. The assessee is exigible to the levy of Central Excise under Central Excise Act, 1944 (hereinafter referred to as the Act). Goods, namely, the transformers which are cleared by the assessee were supplied to the State Electricity Boards. These are subject to excise duty which the assessee has been paying to the appellant herein (hereinafter referred to as theThe dispute in the present case, however, is about the transaction value on which the excise duty is payable under Section 4 of the Act. The assessee is paying the duty on the price at which the said transformers are sold to the Electricity Boards. However, the Revenue wants that while arriving at the price of the said goods, transportation cost and transit insurance cost be also included to arrive at the correct transaction value in terms of Section 4(3)(d) of the Act.2) Since the assessee was not including the transportation and transit insurance cost, a show cause notice was issued on 24.07.2001 proposing to recover a sum of Rs. 1,17,36,766/on account of short excise duty paid for the period 28.09.1996 to 31.12.2000. In this show cause notice, it was, inter alia, alleged that the transit insurance policies reveal that the assessee had been keeping the custody of the goods with it during the transit. Further, the agreement with various customers nowhere suggested that the transporter was to take the delivery of goods on behalf of the customers. The transit insurance from the assessees works upto the stores sites where the goods were to be delivered at the buyers premises under the contract, was on assessees account. On that basis, the show cause notice contended that the transaction value would include the amount charged on account of transportation and transit insurance as it was covered by the definition of transaction value contained in Section 4(3)(d) of the Act. The assessee refuted the aforesaid averments in the show cause notice with the plea that sale of goods to the customers took place at the factory gate of the assessee which was the place of removal of the goods. Merely because the assessee arranged for transportation as well as transit insurance at the request and instance of the customers, there was no reason to include the cost thereof as transaction value had to be calculated upto the place of removal and the expenses incurred thereafter were not to be included.3) The aforesaid defence of the assessee did not cut any ice with the adjudicating authority and repelling the contention of the assessee, demand in the show cause notice was confirmed by the Commissioner, Central Excise vide hisdated 18.08.2002. This order was challenged by the assessee in the form of appeal before the Customs Excise and Gold (Control) Appellate Tribunal (for short, CEGAT). CEGAT has allowed the appeal simply by mentioning that the issue stands settled in favour of the assessee by the decision of the Tribunal which has been approved by the SupremeThe Commissioner, Central Excise while deciding that the transportation charges as well as transit insurance charges are to be included for fixing the transaction value. The order reveals that the Commissioner had scanned through the agreements entered into between the assessee and with various customers and other documents on the basis of which the Commissioner concluded that the property in goods was passed on to the customers only at the destination. According to him, there was a specific condition in the contracts that the goods will be dispatched from freightby road and up to the destination of the customers. It was also stated that material should be dispatched duly insured by the assessee up to the customers destination and the cost towards obtaining insurance was included in the price. These contracts further contain a clear stipulation that in case of any damage to the goods during transit, the supplier will lodge the claim and obtain compensation from the insurance company. So much so, one Deputy Manager of the assessee, viz. Shri D.K. Bhattacharya in his statement, recorded under Section 14 of the Act, had specifically stated thatresponsibility of the goods lies on M/s. Emco till the delivery of the said goods to the customers premises and, therefore, freight incurred and transit insurance charges were recovered from the customers......for covering the transit risk they had taken out transit insurance policy and whenever there was a loss or damage to goods M/s. Emco claims the same from the insurance company.....the possession of the goods is transferred only at the premises of theThe Commissioner also noted that the aforesaid statement was even confirmed by the General Manager of the assessee.17) The Tribunal did not bother to look into any of the aforesaid aspects and/or discussed the same. In a crypticorder, the Tribunal allowed the appeal. To be precise, the following order iswere issued a notice proposing to levy duty in the value of amount of freight and transit insurance recovered by them but the same suppressed from the department as it appears from page 10G the show cause notice.2. It was confirmed after hearing both sides, it is found that the issue is well settled in favouring the assessee by the decision in the case of Associated Strips Ltd. [2002 (143) ELTwhich has been approved by the Apex Court in the case of Escorts JCB Ltd. Vs. Collector of Central Excise [2002 (146) ELT 31 (SC)]. Being bound by the same, this order impugned cannot be restrained and is to be set aside and appeal

Court's reasoning:
18) The perfunctory manner in which the appeal of the assessee is allowed, cannot be countenanced. If the Tribunal was confirming the decision of the Authority below, may be detailed discussion was not required as the reasons given in detail could be found in the order appealed against, though even in such a case brief reasons are to be given by the Tribunal, in particular, to meet the arguments which are advanced by the appellant while challenging such an order. However, in the instant case, we find that there is a detailed discussion in the order of the Commissioner on the facts of the case. Those facts are not adverted to or dealt with. The decision of the Commissioner is overruled with single observation that the case is covered by the judgment in Escorts JCB Ltd., without discussing as to how it was so covered. This is notwithstanding the fact that the decision as to which is the place of removal depends upon the facts of each case.19) The consequence of the aforesaid discussion would be to set aside the order of the Tribunal and remit the case to it for fresh consideration after looking into the facts of the present case, namely, the terms and conditions of the sale with the buyer and determination on that basis as to which was the place of removal, that is whether it was the factory gate of the assessee or the place of delivery. We may record that as per the Commissioner, place of removal was the place of delivery at the buyers premises. However, since no documents are produced before us, we are not in a position to comment as to whether the aforesaid view taken by the Commissioner is proper orWe have extensively discussed the judgment in Escorts JCB Ltd. because of the reason that the Tribunal has allowed the appeal of the respondent herein with the observations that case of the respondent is covered by this judgment. We would like to point out at this stage that in Commissioner of Central Excise, Noida v. Accurate Meters Ltd. ((2009) 6 SCC 52 ), the Court took note of few more decisions, including the case of Escorts JCB Ltd., and reiterated the aforesaid principles but at the same time also emphasizing that the place of removal depends on the facts of each case.14) In a recent decision of this Court in Commissioner, Customs and Central Excise, Aurangabad v. M/s. Roofit Industries Ltd. ((2015) 5 SCALE 470 ), the position in law was summarized in the followingThe principle of law, thus, is crystal clear. It is to be seen as to whether as to at what point of time sale is effected namely whether it is on factory gate or at a later point of time i.e. when the delivery of the goods is effected to the buyer at his premises. This aspect is to be seen in the light of provisions of the Sale of Goods Act by applying the same to the facts of each case to determine as to when the ownership in the goods is transferred from the seller to the buyer. The charges which are to be added have put up to the stage of the transfer of that ownership inasmuch as once the ownership in goods stands transferred to the buyer, any expenditure incurred thereafter has to be on buyers account and cannot be a component which would be included while ascertaining the valuation of the goods manufactured by the buyer. That is the plain meaning which has to be assigned to Section 4 read with ValuationHaving stated the legal position, we now revert to the facts of the present case.16)The Commissioner, Central Excise while deciding that the transportation charges as well as transit insurance charges are to be included for fixing the transaction value. The order reveals that the Commissioner had scanned through the agreements entered into between the assessee and with various customers and other documents on the basis of which the Commissioner concluded that the property in goods was passed on to the customers only at the destination. According to him, there was a specific condition in the contracts that the goods will be dispatched from freighty road and up to the destination of the customers. It was also stated that material should be dispatched duly insured by the assessee up to the customers destination and the cost towards obtaining insurance was included in the price. These contracts further contain a clear stipulation that in case of any damage to the goods during transit, the supplier will lodge the claim and obtain compensation from the insurance company. So much so, one Deputy Manager of the assessee, viz. Shri D.K. Bhattacharya in his statement, recorded under Section 14 of the Act, had specifically stated thaty of the goods lies on M/s. Emco till the delivery of the said goods to the customers premises and, therefore, freight incurred and transit insurance charges were recovered from the customers......for covering the transit risk they had taken out transit insurance policy and whenever there was a loss or damage to goods M/s. Emco claims the same from the insurance company.....the possession of the goods is transferred only at the premises of thee Commissioner also noted that the aforesaid statement was even confirmed by the General Manager of the assessee.17) The Tribunal did not bother to look into any of the aforesaid aspects and/or discussed the same. In a cryptic, the Tribunal allowed the appeal. To be precise, the following order ise issued a notice proposing to levy duty in the value of amount of freight and transit insurance recovered by them but the same suppressed from the department as it appears from page 10G the show cause notice.2. It was confirmed after hearing both sides, it is found that the issue is well settled in favouring the assessee by the decision in the case of Associated Strips Ltd. [2002 (143) ELTwhich has been approved by the Apex Court in the case of Escorts JCB Ltd. Vs. Collector of Central Excise [2002 (146) ELT 31 (SC)]. Being bound by the same, this order impugned cannot be restrained and is to be set aside and appeal