FREXTON CABLES (INDIA) Vs. COMMISSIONER OF CENTRAL EXCISE,

JUDGEMENT

(1.) THESE appeals at the instance of assessee M/s. Frexton Cables (India) and the Revenue respectively arise out of Order -in -Appeal No. 458 -CE/DLH/2001, dated 24 -4 -2001 passed by the Commissioner of Central Excise (Appeals), New Delhi. The main issue arising in the appeal filed by the assessee is about the 'place of removal' of goods. The appeal by the Revenue is directed against a portion of the order of the Commissioner (Appeals) where he has reduced the quantum of penalty from what had been imposed by the original authority.

(2.) THE brief facts are as follows : Officers of Anti -Evasion branch of the Delhi Commissionerate visited the factory of the assessee on 1 -11 -99. On scrutiny of the invoices in respect of the contract sale, it was revealed that the assessee was deducting expenses on account of freight and insurance from the assessable value for payment of central excise duty. The declaration filed by the party shows their place of removal as factory gate. Taking the view that, in fact, the place of removal is place of destination, show cause notice was issued calling upon the assessee to show cause why central excise duty amounting to Rs. 11,74,859/ - not paid should not be demanded and recovered from them under Rule 9(2) of the Central Excise Rules, 1944 read with Section 11A of the Act invoking the extended period of 5 years; interest as payable under Section 11AB of the Central Excise Act, 1944 be not recovered; and penalty should not be imposed under Rule 173Q of the Central Excise Rules, 1944 read with Section 11AC of the Act for contravention of Rules 9(2), 173C, 173F and 173G of the Central Excise Rules, 1944. In reply the assessee contended that they are manufacturers of Wires and Cables falling under Chapter Heading 8544 of the Schedule to the Central Excise Tariff Act, 1985 and certain Government Departments are the buyers to whom the goods are being supplied on DGS&D Rate Contracts as per terms mentioned therein. One of the terms is that the goods were to be delivered FOR station of despatch. Generally the consignees (Govt. Departments) do not carry cash for freight and to avoid delay and demurrages, as a gesture of goodwill, the assessee offers to deposit the freight with transport (Railways) and claim reimbursement of actual freight paid. No central excise duty on this freight amount is being paid since cost of transportation has to be excluded from the assessable value. The assessee contended that the property in the goods was transferred to the buyer the moment they were inspected, passed and stamped by the buyer and it is only normal practice to ensure safe delivery of the goods and the assessee acts as a custodian till the goods reach the buyer's place. The assessee also contended that there are no circumstances available in the case which would justify application of the extended period of limitation.

(3.) THE original authority did not accept the contentions raised by the assessee. The original authority took the view that since the assessee has declared in his declaration, filed under Rule 173C(3A), that their sales are at factory gate whereas the goods were actually being sold at the place of destination, there is no merit in the contention that the assessee had not suppressed any material fact. It was therefore held that the proviso to Section 11A has been correctly invoked for demanding duty beyond the period of six months. The original authority further held that the ownership of the excisable goods remained with the assessee up to the place of the buyer and, therefore, by applying the principles laid down in the decisions of this Tribunal, namely, Prabhat Zarda Factory Ltd. v. CCE - 2000 (119) E.L.T. 191 (Tribunal -LB) = 2000 (38) RLT 637 and Escorts JCB Ltd. v. CCE, New Delhi - 2000 (118) E.L.T. 650 (Tribunal) = 1999 (35) RLT 9, the place of removal for the purpose of clause (iii) of Section 4(4)(b) of the Act would be the place of such delivery and, therefore, expenses such as freight and insurance charges incurred by the manufacturer has to form part of the assessable value. The original authority therefore confirmed the demand of duty and imposed penalty of an equivalent amount under Section 11AC of the Central Excise Act read with Rule 173Q of the Central Excise Rules. The assessee was also held liable to pay interest at the appropriate rate under Section 11AB of the Central Excise Act.