Cce, Allahabad vs M/S Anand Transformers (P) Ltd

Excise Appeal Nos. 2388-2389 of 2006 with Cross Objection No. 59 of 2007

(Arising out of the Order-in-Appeal No. 50-CE/ALLD/2006 dated 12/05/06 passed by the Commissioner (Appeals), Central Excise, Allahabad).

For approval and signature:

Honble Mr. Justice G. Raghuram, President

Honble Mr. H.K. Thakur, Technical Member

1 Whether Press Reporter may be allowed to see the Order for publication as per Rule 26 of the CESTAT (Procedure) Rules, 1982?

2 Whether it should be released under Rule 26 of CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?

3 Whether their Lordships wish to see the fair copy of the Order?

4 Whether Order is to be circulated to the Departmental authorities?

CCE, Allahabad . Appellant

vs.

M/s Anand Transformers (P) Ltd. ] . Respondents

M/s Kamla Transformers (P) Ltd. ]

and vice-versa

Appearance:

S/Shri R.K. Gupta and R.K. Mishra, ARs  for the appellant/Revenue.

S/Shri S.P. Ojha, Consultant and R.C. Agrawal, C.A.  for the Respondents

Coram: Honble Mr. Justice G. Raghuram, President

Honble Mr. H.K. Thakur, Technical Member

Final Order No. 52184-52185/2015 dated 07/07/2015

Per. H.K. Thakur :-

Appeal No. E/2388/2006  EX (DB) has been filed by the Revenue with respect to OIA No. 50-CE/ALLD/2006 dated 12/05/2006. Appeal No. E/2389/2006  EX (DB) is also filed by the Revenue with respect to OIA No. 65-CE/ALLD/2006 dated 29/05/2006. As the issue involved in both these proceedings is the same, therefore, both are being taken up for disposal under this common order. M/s Anand Transformers (P) Ltd. also filed Cross Objection No. 59/2007 with respect to appeal No. E/2388/2006 filed by the Revenue.

2. Shri R.K. Gupta, (AR) appearing on behalf of the Revenue argued that appellant has not discharged Central Excise duty with respect to the freight from the factory to the point of delivery when contracts are on FOR destination basis and the transportation charges and transit insurance are also borne by the respondents. Learned AR made the Bench go through the purchase orders and the transportation agreement entered by the respondent with their customers to emphasise that the freight is also paid by the manufacturer. Shri S.P. Ojha, Consultant of M/s Anand Transformers (P) Ltd. and Shri R.C. Agrawal (CA) of M/s Kamla Transformers (P) Ltd. argued that sale of the finished goods is affected at the factory gate, therefore, removal of finished goods takes place at the time of clearance from the factory gate. That only point of delivery of the finished goods is the customers premises even if transportation and transit insurance are paid by the manufacturer. That as per Section 4 of the Central Excise Act, 1944 element of freight from the place of removal to the place of delivery is not required to be added to the assessable value. It was their case that two separate contracts were entered for the sale of the transformers and for transportation of goods. That in view of Honble Apex court judgment in the case of CCE, Noida vs. Accurate Meters Ltd. reported in 2009 (235) E.L.T. 581 (S.C.) appeals filed by the Revenue are required to be rejected.

3. Heard both sides and perused the case records. The issue involved in the present proceedings is whether cost of transportation from the palce of removal to the place of delivery is required to be added to the assessable value or not under Section 4 of the Central Excise Act, 1944. It is observed from the case records that respondent has entered into two separate contracts for sale of transformers and for transportation of transformers. In the case of CCE, Noida vs. Accurate Meters Ltd. (supra) where the product involved was electricity meters supplied to State Electricity Boards and two separate contracts for sale of meters and for transportation and transit insurance were entered with the customers. In para 12 to 15 of the above case law Honble Apex court held as follows :-

12. We have noticed hereinbefore that there were two separate contracts; one for sale of Electricity Meters which was governed by the provisions of the Sale of Goods Act, and the other governing transportation of the goods. The charges for transportation of the goods were not on actual basis. Respondent was bound to transport the goods from the factory gate to the place of the State Electricity Boards at the rates specified in the tender. Prior thereto, the State Electricity Board Authorities were to make inspection of the goods.

13. In the case of Associated Strips Ltd. vs. Commissioner of Central Excise, New Delhi reported in [2002 (143) E.L.T. 131], the Tribunal distinguishing its earlier decision in Commissioner vs. Prabhat Zarda Factory Ltd. [2000 (119) E.L.T. 191] held :

18. In the case of Associated Strips Ltd. the goods manufactured are inspected by the representative of the buyer (Electricity Board) and thereafter the manufacturer had to mark the name of the buyer on the poles before they are handed over to the transporter. So also in the case of Mauria Udhyog Ltd. the LPG cylinders manufactured by the appellant are inspected by the representatives of the oil companies. After getting test certificate from the Bureau of Indian Standards Cylinders are to be marked with the name of the oil companies before they are handed over to the transporter for the purpose of transmission to the buyer. In the light of the provisons contained in Section 23, it has to be taken that the goods are unconditionally appropriated to the contract when the above procedure was followed and goods handed over to the carrier thus passing on the property in the goods to the buyer.

19. We may also refer to the provision contained under Section 39 of the Sale of goods Act which refers to the legal effect of delivery of the goods to a carrier by the seller. It is provided that where, in pursuance of a contract of sale, the seller is authorised or required to send the goods to the buyer, delivery of the goods to a carrier, whether named by the buyer or not, for the purpose of transmission to the buyer, is prima facie deemed to be a delivery of the goods to the buyer AIR 1966 Patna 346, admittedly, in the present case after appropriation of the good to the contract they were delivered to the carrier as per terms of the contract. Therefore, delivery to the carrier has to be taken as delivery to buyer. Revenue has no case that the goods are not sent to the buyer through carrier. On the other hand, as mentioned earlier, the only contention raised is that since the insurance of the goods in transit. At this juncture we may point out that in the case of Maria Udyog Ltd. there is no insurance taken by the seller.

14. The said decision of the Tribunal has been approved by this Court in M/s Escorts JCB Ltd. (supra), stating :

5. The contention is that the fact that the assessee arranged for the transit insurance would in no way lead to an inference that the ownership in the goods was retained by the assessee during the period of the transit until the delivery of the goods at the place of the buyer. The terms and conditions of the sale are clear that the sale is Ex-works at Ballabgarh, Haryana. The payment is to be made before despatch of the goods from the factory premises. The machinery, handed over to the carrier/transporter is as good as delivery to the buyer in terms of Section 39 of the Sale of Goods Act apart from terms and conditions of sale. Section 39 of the Sale of Goods Act reads as under :

39. Delivery to carrier or wharfinger :

(1) Where, in pursuance of a contract of sale, the seller is authorised or required to send the goods to the buyer, delivery of the goods to a carrier, whether named by the buyer or not, for the purpose of transmission to the buyer, or delivery of the goods to wharfinger for sale custody, is prima facie deemed to be a delivery of the goods to the buyer.

(2) Unless otherwise authorised by the buyer, the seller shall make such contract with the carrier or wharfinger on behalf of the buyer as may be reasonable having regard to the nature of the goods and the other circumstances of the case. If the seller omits so do, and the goods are lost or damaged in course of transit or whilst in the custody of the wharfinger, the buyer may decline to treat the delivery to the carrier or wharfinger as a delivery to himself, or may hold the seller responsible in damages.

(3) Unless otherwise agreed, where goods are sent by the seller to the buyer by a route involving sea transit, in circumstances in which it is usual to insure, the seller shall give such notice to the buyer as may enable him to insure them during their sea transit, and if the seller fails to do, the goods shall be deemed to be at his risk during such sea transit.

The factual matrix involved in this case is squarely applicable to the ratio of the decisions in M/s Associated Strips Ltd. (supra) as also M/s Escorts JCB Ltd. (supra)

15. In that view of the matter and for the reasons stated hereinbefore, we have no doubt in our mind that the authority in appeal as also the Tribunal were correct in their view that the amount claimed by way of transportation charges and insurance cannot be considered for determining the value of the electric meters supplied.

4. The ratio laid down by the Honble Apex court in the case of CCE, Noida vs. Accurate Meters Ltd. (supra) is squarely applicable to the present proceedings and it has to be held that transportation charges cannot be added to the assessable value as the same are charged by the appellant under separate contracts. Accordingly, appeals filed by the Revenue are dismissed and Cross Objection filed by M/s Anand Transformers (P) Ltd. is disposed of.

(Operative part of the order pronounced in the open court.)

andl

(Justice G. Raghuram)

President

(H.K. Thakur)

Technical Member

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