COMMISSIONER OF CUSTOMS AND CENTRAL EXCISE, NAGPURversusM/S. ISPAT INDUSTRIES LTD.

                    [2015] 15 S.C.R. 259


COMMISSIONER OF CUSTOMS AND CENTRAL EXCISE,                        A
                  NAGPUR
                               v.
               M/S. ISPAT INDUSTRIES LTD.
               (Civil Appeal No. 637 of 2007)                      B
                    OCTOBER 07, 2015
          [A. K. SIKRI AND R. F. NARIMAN, JJ.]
        Excise Laws - Central Excise and Salt Act, 1944 - s.4
- Valuation of excisable goods - Place of removal of goods         C
for purpose of s. 4 of the Act - Period involved being
28.09.1996 to 31.03.2003 - Whether, by virtue of a transit
insurance policy in the name of the manufacturer, excise duty
is liable to be recovered on freight charges incurred for
transportation of goods from the factory gate to the buyer's       D
premises, treating the buyer's premises as the place of
removal - Held: s.4 as substituted by the 1973 Amendment
Act suffered a further amendment in 1996 - The
amendments carried out were to have effect from 28. 9. 1996,
which is also the starting point on facts in the present case -    E
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 th~ buyer's premises - By an               F
Amendment Act which came into effect on 1. 7. 2000, s. 4 was
substituted yet again -'- For the second period in question in
the present case, namely, 1.7. 2000 to 31.3. 2003, the depot,
premises of a consignment agent or any other place from
which excisable goods are to be sold after their clearance         G
from the factory are no longer places of removal -Also, the
definition of "transaction value" makes it clear that freight or
transportation expenses are not included in calculating the
excise duty payable- By an Amendment Act with effect from
 14. 5. 2003, s. 4 was again amended- On and after 14. 5. 2003,    H
                               259
260       SUPREME COURT REPORTS                  [2015] 15 S.C.R.


A the position as it obtained from 28.9.1996 to 1. 7.2000 has
  now been reinstated - r.5 of the Central Excise Rules 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
B the factory is not the place of removal - Thus, 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
c buyer's premises or such other premises as the buyer may
  direct the manufacturer to send his goods - Revenue's
  argument 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
D 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 s.4 on the facts of the
E present case - Central Excise Va/uc.,ion (Determination of
  Price of Excisable Goods) Rules, 2000 - rr. 5 and 7.
          CCE & Customs v. Roofit Industries Ltd., (2015)
          319 E.L.T. 221 (S.C.); Commissioner Central
          Excise, Mumbai-I/Iv. Mis. Emco Ltd. [Judgment
 F        dated July 31, 2015 of-Supreme Court in Civil
          Appeal 3418 of 2004 and Civil Appea: 8966 of
          2011]- distinguished.
          Escorts JCB Ltd. v. CCE (2003) 1 SCC 281;
          Prabhat Zarda Factory Ltd. v. Commissioner of
 G
          Central Excise 2002 (146) ELT 497 (S.C.); Union
          of India v. Bombay Tyre International Ltd. (1984)
          1 SCC 467; and VIP Industries Ltd. v.
          Commissioner of Customs & Centre/ Excise
          (2003) 5 sec 507 - relied on.
 H
   COMMNR. OF CUSTOMS AND CENTRAL EXCISE,                           261
       NAGPUR v. M/S. ISPAT INDUSTRIES

     A.K. Roy v. Valtas Ltd. (1973) 3 SCC 503;                      A
     Government of India v. Madras Rubber Factory
     Ltd. (1995) 4 sec 349 - referred to.
                      Case Law Reference
(2003) 1-SCC 281                     relied on         Para 6       B
2002 (146) ELT 497 (S.C.)            relied on         Para 7
(2015) 319 E.L.T. 221 (S.C.)         distinguished Para 8
(1973) 3 sec 503                     referred to       Para 11
(1984) 1 sec 467                     relied on         Para 13      c
(1995) 4 sec 349                     referred to       Para 14
(2003) 5 sec 501                     relied on         Para 28
     CIVILAPPELLATE JURISDICTION: Civil Appeal No. 637              D
of 2007.
      From the Judgment and Order No. A/1392/WZB/06-C-
lll(EB ), dated 24.07.2006 of the Customs, Excise and Service
Tax Appellate Tribunal, West Zonal Bench at Mumbai in Appeal
No. E/4042/03.                                                      E
      A. K. Panda, Sr. Adv., Arijit Prasad, B. Krishna Prasad,
Adv. for the Appellant.
      S. K. Bagaria, Sr. Adv., Ms. Praveena Gautam, Vipin
Jain, Shiren Khanna, Ajeet Singh.Adv. forthe Respondent.
                                                                    F
     The Judgment of the Court was delivered by
      R. F. NARIMAN, J. 1. The issue involved in the present
appeal is whether, by virtue of a transit insurance policy ih the
name of the manufacturer, excise duty is liab[e to be recovered
on freight charges incurred for transportation of goods from        G
the factory gate to the buyer's premises, treating the buyer's
premises cas the place of removal.
    2. M/s lspat Industries Limited, the respondent herein, is
engaged in the manufacture of H.R. sheets/coils, C.R. sheets/       H
262        SUPREME COURT REPORTS                   [2015] .:15 S.C.R.


A coils, and Galvanized/colour coated/sheets, falling under
  Chapter 72 of the First Schedule to the Central Excise Tariff
  Act, 1985. Intelligence revealed that M/s Ispat were indulging
  in evasion of central excise duty by a mis-declaration that their
  factory gate was the place C?f removal, and not the buyer's
B premises, consequent to which freight charges recovered from
  their buyers was sought to be added in determining the amount
  of central excise duty payable by them. The period involved in
  the present appeal is from 28.9.1996 to 31.3.2003. Five show
  cause notices were issued to the respondents stating that the
c property in goods manufactured by them remained with Ispat
  while the goods were in transit as !spat had taken out an
  insurance policy to cover the risk of loss or damage to the
  goods while in transit. Purchase orders as well as agreements
  with transporters did not suggest that the transporters were
 otaking delivery on behalf of the buyers. All this was corroborated
  by a statement made by Shri S.P. Dahiwade, Deputy General
  Manager, stating that the ownership of the goods in transit
  remained with !spat. It was thus stated that the buyer's place
  or the place of delivery should be treated as the place of
E removal of the goods for the purpose of Section 4 of the Central
  Excise Act, and this being so, the necessary consequence
  would be that the freight charges paid by the buyers to !spat
  ought to be included in the excise duty payable by Ispat.
         3. In reply to the five show cause notices, M/s. Ispat stated
 F that all their prices were ex-works, and that th"e goods were
   cleared from the factory on payment of central or local sales
   tax. Most of their sales were against Letters of Credit opened
   by the customer or through Bank discounting facilities. lnvoic~s
   were prepared at the factory directly in the name of the
 G customers, and the name of the Insurance Company as well
   as the number of Transit Insurance Policy were both mentioned.
   Based on the details mentioned in the invoice, the lorry receipt
   was prepared by the transporter and was in the buyer's name.
   This receipt carried a caution notice as well a notice to the
 H
  COMMNR. OF CUSTOMS AND CENTRAL EXCISE,                             263
NAGPUR v. M/S. ISPAT INDUSTRIES [R. F. NARI MAN, J.]

effect that deliveries were to be made to the buyer alone, and       A
to nobody else.
      4. M/s. Ispat further stated that these transactions were
entered in their sales register and were booked as sales, the
stock or inventory of finished goods being reduced by such
sales. In the event that there was an insurance claim, recovery      B
was credited to the customer's ledger account against the
recovery due from the customer in respect of the sale of the
said goods. Excise invoices were prepared at the time that
the goods left the factory in the name and address of the
customers, and once the goods were handed over to the                C
transporter, the respondent did not reserve any right of disposal
of the goods in any manner. It had no right to divert the goods
so handed over to the transporter and meant for a particular
customer to anybody else.
                                                                     D
       5. The learned Commissioner, by his order dated
3.10.2003, held that as the insurance agreement with the
transporter was entered into by lspat who had taken out an
Insurance Policy to cover risk to the loss or damage of the
goods while in transit, the property in goods remained with          E
lspat and was not transferred to the buyer at the factory gate.
It was also held that in the order acceptance form, it was
mentioned that the transport would be by !spat. Thus, lspat
had assumed responsibility of transportation of the goods up
to the door of the customers. Further, that the purchase orders      F
as well as the agreement with the transporters did not suggest
that the transporters were taking delivery on behalf of the buyer.
Above all, Shri S.P. Dahiwade, Deputy General Manager,
Excise, had clearly admitted in his statement dated 5.2.2001,
that till the material is delivered to the customer, ownership of    G
the goods remains with Ispat. Further, since payment terms
were 30 days after the receipt of the material and not 30 days
after dispatch of the material, it is clear that property in the
goods remained in lspat until payment was made. The
Commissioner, therefore, held:
                                                                     H
264       SUPREME COURT REPORTS                   [2015] 15 S.C.R.


A         "In the facts and circumstances of the case as discussed
          above, the charges framed under the said Show Cause
          Notices remain substantiated.
          (i) I hold Customers premises as actual place of removal
          instead of factory gate of Mis. Ispat of terms of sub clause
8         (iii) of Section 4(4) (b) of Central Excise Act, 1944 and
          in term of Sub Clause (3) (c) of Section 4 of the Central
          Excise Act, 1944 for the period from 28.09.96 to
          30.06.2000 and from 01.07.2000 onwards respectively.

 c        (ii) I confirm demand of Central Excise duty amounting
          to Rs. 2,43,31,003/-(Rs. Two Crores Forty Three Lakhs
          Thirty One Thousand Three only), (Rs.2, 16,09,006.00/-
          + Rs.1,77,828/- + Rs.8,97,780/- + Rs.12,91,700/-) and I
          order recovery of the same from them under Rule 9(2) of
          the Central Excise Rules, 1944 read with Section 38A of
 D
          the Central Act, 1944 and the first proviso to Section 11 A
          of the Central Excise Act, 1944 by invoking extended
          period of limitation of five years.
          (iii) I impose Penalty of Rs.2,43,31,003/- (Rs. Two Crores
 E        Forty Three Lakhs Thirty One Thousand Three only), upon
          them under Rule 1730 and 9(2) of the erstwhile Central
          Excise Rules, 1944 read with Section 11 AC of the Central
          Excise Act, 1944.
          (iv) I order recovery of appropriate interest from them
 F        under Section 11AB of the Central Excise Act, 1944."
         6. On appeal by the respondents herein, CESTAT, by its
   judgment dated 24.7.2006, reversed the order of the
   Commissioner holding that, on the facts of the case, this
 G Court's judgment in Escorts JCB Ltd. v. CCE, (2003) 1 SCC
   281 concluded the issue in favour of !spat. CESTAT also relied
   upon a Board's circular dated 3.3.2003 which acknowledged
   that the question of ownership of goods in transit cannot be
   determined solely with reference to an Insurance Policy taken
 H out by the manufacturer. As regards the statement of Shri
  COMMNR. OF CUSTOMS AND CENTRAL EXCISE,                            265
NAGPUR v. MIS. !SPAT INDUSTRIES [R. F. NARIMAN, J.]

Dahiwade, according to CE STAT, such statement would not            A
carry the revenue much further as whether the property in the
goods passed at the factory gate to the buyer was a question
of law which was determined in favour of Ispat by the aforesaid
judgment of this Court in Escorts JC B's case. It was further
held that at least two of the Commissioner's grounds, namely,       B
that the payment terms were 30 days after receipt of the
materials and that the order acceptance form shows that it
was the obligation of !spat to arrange transportation of goods
to the buyer's premises, were beyond the show cause notices
issued as no such charge was leveled against Ispat in any of        C
the five show cause notices mentioned herein3bove.
      7: Shri A.K. Panda, learned senior counsel appearing
on behalf of the revenue, extensively read from the order of the
learned Commissioner and stated that the facts in the present
case being different from the facts in Escorts JCB's case,          D
the Tribunal was in error in relying on Escorts JC B's case.
According to learned counsel, the circular dated 3.3.2003
which referred to both the Escorts JCB's case and to
Prabhat Zarda Factory Ltd. v. Commissioner of Central
Excise, 2002 (146) ELT 497 (S.C.), clearly laid down that for       E
the period in question Section 4 of the Central Excise and
Salt Act, 1944 made it clear that since the buyer's place was
in fact the place of removal of Ispat's goods, freight payments
being payments made prior to the goods being sold to the
buyers are liable to be included in the central excise duty         F
payable by M/s. lspat. He relied on two recent judgments
delivered by this Court to buttress his submissions.
      8. Shri S.K. Bagaria, learned senior counsel appearing
on behalf of lspat, painstakingly took this Court through Section   G
4 of the Central Excise and Salt Act as originally enacted
together with all the amendments made thereto, up to date.
According to learned counsel, the period involved in the present
case divides itself into two periods-the period from 28.9.1996
to 30.6.2000 and the period 1:1.2000 to 31.3.2003. According        H
266         SUPREME COURT REPORTS                    [2015] 15S.C.R.


A     to learned counsel, on a correct construction of Section 4 as it
      stood at the relevant time in both periods and on a reading of
      Rule 5 of the Central Excise Rules, it is clear that the buyer's
      premises can never in law be the place of removal of excisable
      goods. So far as the first period is concerned, the place of
B     removal can extend only up to a manufacturer's depot or other
      premises from which the manufacturer is to sell his goods,
      and no further. So far as the second period is concerned, after
      Section 4 was substituted completely by the Amendment Act
      which came into force on 1. 7 .2000, even a depot or other
c     premises could not be considered to be a place of removal,
      the only place of removal being the factory premises of the
      manufacturer. This being so, learned counsel argued that he
      ought to succeed on first principle as all the show cause notices
      and the findings of the Commissioner are based on the fact
 o    that in the present case the buyer's premises is the place of
      removal of goods. He argued that this would involve
      conceptual confusion inasmuch as the place of removal can
      never be equated with the place of delivery and the place of
      removal alone is relevant for the purpose of Section 4
 E    throughout its chequered history. He further argued that on
      facts his case came within the ratio of Escorts JCB and not
      within the ratio of two other judgments of this Court, namely,
      Commissioner Central Excise, Mumbai-Ill v. M/s. Emco
      Ltd., dated July 31, 2015 in Civil Appeal 3418 of 2004 and
 F    Civil Appeal 8966 of 2011, and CCE & Customs v. Roofit
      Industries Ltd., (2015) 319 E.L.T. 221 (S.C.). He also argued
      that the learned Commissioner was in error because he had
      ignored altogether the reply made by the assessee which would
      show that the assessee's facts are in pari materia with the
 G    facts in Escorts JCB and not the facts in either Emco or Roofit
      Industries, supra. He further supported the Tribunal's
      judgment by stating that not only did the Commissioner not
      give any heed to Ispat's reply, but that it also entered into areas
      which were no part of the show cause notices, and thus several
 H    findings of the Commissioner were rightly held by the Tribunal
  COMMNR. OF CUSTOMS AND CENTRAL EXCISE,                               267
NAGPUR v. M/S. ISPAT INDUSTRIES [R. F. NARIMAN, J.]

to be beyond the show cause notices issued in the present              A
case.
       9. As this case involves the correct interpretation of
Section 4 as it stood at the relevant time, it is necessary to
recapitulate the history of the said provision insofar as it relates
to freight charges being part of excise duty.                          8

    10. Section 4, as it stood before the 1973 amendment
made to the Central Excise and Salt Act, provided as follows:-
      "Section 4. Where under this Act, any article is chargeable
      with duty at a rate dependent on the value of the article,       C
      such value shall be deemed to be-
      (a) the wholesale cash price for which an article of the
      like kind and quality is sold or is capable of being sold at
      the time of the removal of the article chargeable with duty
      from the factory or any other premises of manufacture or
                                                                   0
      production for delivery at the place of manufacture or
      production, or if a wholesale market does not exist for
      such article at such place, at the nearest place where
      such market exists, or
                                                                   E
      (b) where such price is not ascertainable, the price at
      which an article of the like kind and quality is sold or is
      capable of being sold by the manufacturer or producer,
      or his agent, at the time of the removal of the article
      chargeable with duty from such factory or other premises F
      for delivery at the place of manufacture or production, or
      if such article is not sold or is not capable of being sold
      at such place, at any other place nearest thereto.
      Explanation.-ln determining the price of any article
      under this section, no abatement or deduction shall be           G
      allowed except in respect of trade discount and the
      amount of duty payable at the time of the removal of the
      article chargeable with duty from the factory or other
      "premises aforesaid."
                                                                       H
268         SUPREME COURT REPORTS                    [2015] 15 S.C.R.


A           11. It will be seen that the value of an article chargeable
      with excise duty is deemed to be the wholesale cash price for
      which an article of the like kind and quality is sold or capable
      of being sold at the premises of manufacture or production. In
      A.K. Roy v. Voltas Ltd., (1973) 3 SCC 503, this Court had
 B    occasion to deal with the said provision and in para22 thereof
      stated:-
            " ... The section postulates that the wholesale price should
            be taken on the basis of cash payment thus eliminating
            the interest involved in wholesale price which gives credit
c           to the wholesale buyer for a period ?f time and that the
            price has to be fixed for delivery at the factory gate
            thereby eliminating freight, octroi and other charges
            involved in the transport of the articles." [at para 22]
           12. By an amendment Act of 1973, which came into force
0
      on 1.10.1975, Section 4 was substituted as follows:-
            " Section 4. Valuation of excisable goods for
            purposes of charging of duty of excise. - (1) Where
            under this Act, the duty of excise is chargeable on any
 E          excisable goods with reference to value, such value, shall,
            subject to the other provisions of this section, be deemed
            to be-
               (a) The normal price thereof, that is to say, the price at
               which such goods are ordinarily sold by the assessee
 F             to a buyer in the course of wholesale trade for delivery
               at the time and place of removal, where the buyer is
               not a related person and the price is the sole
               consideration for the sale:

G           Provided that-
               (i) Where, in accordance with the normal practice of
               the wholesale trade in such goods, such goods are
               sold by the assessee at different prices to different
               classes of buyers (not being related persons) each
 H             such price shall, subject to the existence of the other
  COMMNR. OF CUSTOMS AND CENTRAL EXCISE,                         269
NAGPUR v. M/S. ISPAT INDUSTRIES [R. F. NARIMAN, J.]

      circumstances specified in clause (a), be deemed to        A
      be the normal price of such goods in relation to each
      such class of buyers;                             ·
      (ii) Where such goods are sold by the assessee in
      the course of wholesale trade for delivery at the time
      and place of removal at a price fixed under any law for    B
      the time being in force or at a price, being the
     -maximum, fixed under any such law, then,
      notwithstanding anything contained in clause (iii) of
      this proviso, the price or the maximum price, as the
      case may be, so fixed, shall, in relation to the goods     C
      so sold, be deemed to be the normal price thereof;
      (iii) Where the assessee so arranges that the goods
      are generally not sold by him in the course of wholesale
      trade except to or through a related person, the normal
                                                                 0
      price of the goods sold by the assessee to or through
      such related person shall be deemed to be the price
      at which they are ordinarily sold by the related person
      in the course of wholesale trade at the time of removal,
      to dealers (not being related persons) or where such       E
      goods are not sold to such dealers, to dealers (being
      related persons), who sell such goods in retail;
    (b) Where the normal price of such goods is not
    ascertainable for the reason, that such goods are not
    sold or for any other reason, the nearest ascertainable      F
    equivalent thereof determined in such manner as may
    be prescribed.
    (2) Where, in relation to any excisable goods the price
    thereof for delivery at the place of removal is not known
    and the value thereof is determined with reference to the    G
    price for delivery at a place other than the place of
    removal, the cost of transportation from the place of
    removal to the place of delivery shall be excluded from
    such price.
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270        SUPREME COURT REPORTS                    [2015] 15S.C.R.


A         (3) The provisions of this section shall not apply in respect
          _of any excisable goods for which a tariff value has been
          fixed under sub-section (2) of section 3.
          (4) For the purposes of this section, -

B            (a) "assessee" means the person who is liable to pay
             the duty of excise under this Act and includes his agent;
             (b) "place of removal" means -
               (i) a factory or any other place or premises of
               production or manufacture of the excisable goods;
c              or
               (ii) a warehouse or any other place or premises
               wherein the excisable goods have been permitted
               to be deposited without payment of duty,
 D             from where such goods are removed."
         13. It will be seen that three important changes have been
   made in the amended Section 4 so far as the present case is
   concerned. First, the value of excisable goods is deemed to
 E be the "normal price" thereof that is the price at which such
   goods are ordinarily sold by the assessee to a buyer in the
   course of wholesale trade. Where the goods are sold at
   different prices to different classes of buyers, each such price
   shall be deemed to be the normal price. "Place of removal"
 F has been defined for the first time to mean not only the premises
   of production or manufacture of excisable goods but also a
   warehouse or any other place or premises wherein such goods
   have been permitted to be deposited without payment of duty
   and from where such goods are ultimately removed.
 G Interestingly, in Section 4(2), which is introduced for the first
   time, where in relation to excisable goods the price thereof for
   delivery at the place of removal is not known, and the value is
   determined with reference to the price for delivery at a place
   other than the place of removal, the cost of transportation from
 H the place of removal to the place of delivery is statutorily
  COMMNR. OF CUSTOMS AND CENTRAL EXCISE,                             271
NAGPUR v. M/S. ISPAT INDUSTRIES [R. F. NARIMAN, J.]

excluded. As the law stood thus, this Court in Union of India A
v. Bombay Tyre International Ltd., (1984) 1SCC467, after
extracting the substituted Section 4 by the Amendment Act of
1973, held:-
     "Where the excisable article or an article of the like kind
     and quality is not sold in wholesale trade at the place of      8
     removal, that is, at the factory gate, but is sold in the
     wholesale trade at a place outside the factory gate, the
     value should be determined as the price at which the
     excisable article is sold in the wholesale trade at such
     place, after deducting therefrom the cost of transportation     C
     of the excisable article from the factory gate to such place.
     The claim to other deductions will be dealt with later." [at
     para 27]
The Court further went on to say:                                    D
     "Where the sale in the course of wholesale trade is
     effected by the assessee through its sales organisation
     at a place or places outside the factory gate, the
     expenses incurred by the assessee upto the date of
     delivery under the aforesaid heads cannot, on the same          E
     grounds, be deducted. But the assessee will be entitled
     to a deduction on account of the cost of transportation of
     the excisable article from the factory gate to the place or
     places where it is sold. The cost of transportation will
     include the cost of insurance on the freight for                F
     transportation of the goods from the factory gate to the
     place or places of delivery." [at para 50]
      14. This view of the law was reiterated in Government
of India v. Madras Rubber Factory Ltd., (1995) 4 SCC 349.
Interestingly, in paragraph 39 of the judgment, cost of G
transportation from the factory gate to the place of removal not
forming part of excise duty was conceded by the revenue.
      15. Section 4 as substituted by the 1973 Amendment
Act suffered a further amendment in 1996. Ttie' amendments           H
272         SUPREME COURT REPORTS                  [2015] 15 S.C.R.


A     carried out were to have effect from 28.9.1996, which is also
      the starting point on facts in the present case. Three important
      changes were made to Section 4. First a new sub-section
      (ia) was added to Section 4(1) which reads as follows:-
           "(ia) Where the price at which such goods are ordinarily
B          sold by the assessee is different for different places of
           removal, each such price shall, subject to the existence
           of other circumstances specified in clause (a), be
           deemed to be the normal price of such goods in relation
           to each such place of removal;"
c           Also, for the first time, "the place of removal" had one
      more category added to it. Section 4(4)(b)(iii) and 4.(4)(ba)
      state as follows:-
           "(4 )(b )(iii) a depot, premises of a consignment agent or
D          any other place or premises from where the excisable
           goods are to be sold after their clearance from the factory
           and,
           "(4 )(ba) "time of removal", in respect of goods removed
           from the place of removal referred to in sub-clause (iii)
 E         of clause (b ), shall be deemed to be the time at which
           such goods are cleared from the factory;"
        16. It will thus be seen that where the price at which goods
  are ordinarily sold by the assessee is different for different
F 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
G 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
H the manufacturer. Even the expression "any other place or
  COMMNR. OF CUSTOMS AND CENTRAL EXCISE,                              273
NAGPUR v. M/S. ISPAT INDUSTRIES [R. F. NARI MAN, J.]

premises" refers only to a manufacturer's place or premises A
because such place or premises is stated to be where
excisable goods "are to be sold". These are the key words of
the sub-section. 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 B
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.
       17. It is clear, therefore, that as a matter of law with effect
from the Amendment Act of 28.9.1996, the place of removal C
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.
                                                                       D
       18. By an Amendment Act which came into effect on
1.7.2000, Section 4 was substituted yet again as follows:-
      "Section 4. Valuation of excisable goods for
      purposes of charging of duty of excise. -(1) Where
      under this Act, the duty of excise is chargeable on any         E
      excisable goods with reference to their value, then, on
      each removal of the goods, such value shall -
      (a) In a case where the goods are sold by the assessee,
         for delivery at the time and place of the removal, the
         assessee and the buyer of the goods are not related          F
         and the price is the sole consideration for the sale, by
         the transaction value;
      (b) In any other case, including the case where the goods
         are not sold, be the value determined in such manner G
         as may be prescribed.
      (2) The provisions of this section shall not apply in respect
         of any excisable goods for which a tariff value has
         been fixed under sub-section (2) of section 3.
                                                                      H
274   SUPREME COURT REPORTS                   [2015] 15 S.C.R.


A     (3) For the purpose of this section,-
      (a) "asses~ee" means the person who is liable to pay
        -the duty of excise under this Act and includes his agent;
      (b) Person shall be deemed to be "related" if-
 B       (i) they are inter-connected undertakings;
         (ii) they are relatives;
         (iii) amongst them the buyer is a relative and a
         distributor of the assessee, or a sub-distributor of such
         distributor; or
 c       (iv) they are so associated that they have interest,
         directly or indirectly in the business of each other.
         Explanation. - In this clause -
         (i) "inter-connected undertakings" shall have the
 0       meaning assigned to it in clause (g) of section 2 of
         the Monopolies and Restrictive Trade Practices Act,
         1969 (64of1969); and
         (ii) "relative" shall have the meaning assigned to it in
         clause (41) of section 2 of the Companies Act, 1956
 E       (1 of 1956);
      (c) "place of removal" means-
         (i) a factory or any other place or premises of
         production or manufacture of the excisable goods;
         (ii) a warehouse or any other place or premises
 F       wherein the excisable goods have been permitted to
         be deposited without payment of duty,
         from where such goods are removed;
      (d) "transaction value" means the price actually paid or
 G       payable for the 'goods, when sold, and includes in
         addition to the amount charged as price, any amount
         that the buyer is liable to pay to, or on behalf of, the
         assessee, by reason of, or in connection with the sale,
         whether payable at the time of the sale or at any other
 H       time, including, but not limited to, any amount charged
  COMMNR. OF CUSTOMS AND CENTRAL EXCISE,                              275
NAGPUR ".· M/S. ISPAT INDUSTRIES [R. F. NARIMAN, J.]

        for, or to make provision for, advertising or publicity,      A
        marketing and selling organization expenses, storage,
        outward handling, servicing, warranty, commission or
        any other matter; but does not include the amount of
        duty of excise, sales tax and other taxes, if any, actually
        paid or actually payable on such goods."                      B
       19. A cursory reading of the substituted provision makes
it clear that the concept of "normal value" has given way to the
concept of "transaction value". Thus, no longer is there a
normative price for purposes of valuation of excisable goods.
The actual price that is paid or payable on each removal of C
goods becomes the transaction value. Interestingly, it will be
noticed that under Section 4(3)(c), the place of removal is
defined as it had been defined in the substituted Section 4 (by
the 1973 Amendment) before its further amendment in 1996.
What is conspicuous by its absence in the present Section is D
Section 4(2) and sub-section (b)(iii) in the previous Section 4
(after its amendment in 1996). It is clear therefore that for the
second period in question in the present case, namely,
1.7.2000 to 31.3.2003, the depot, premises of a consignment
agent or any other place from which excisable goods are to E
be sold after their clearance from the factory are no longer
places of removal. Also, the definition of "transaction value"
makes it clear that freight or transportation expenses are not
included in calculating the excise duty payable.
     20. It is necessary also to refer to Rules 5 and 7 of the        F
Central Excise Valuation (Determination of Price of Excisable
Goods) Rules, 2000 which came into force on the same date
as the amendment to Section 4 i.e. 1.7.2000. These Rules
read as under:-
                                                                      G
     "Rule 5.
     Where any excisable goods are sold in the
     circumstances specified in clause (a) of sub-section (1)
     of section 4 of the Act except the circumstances in which
     the excisable goods are sold for delivery at a place other       H
276        SUPREME COURT REPORTS                   [2015] 15 S.C.R.


A          than the place of removal, then the value of such excisable
           goods shall be deemed to be the transaction value,
           excluding the actual cost of transportation from the place
           of removal upto the place of delivery of such excisable
           goods provided the cost of transportation is charged to
 B         the buyer in addition to the price for the goods and shown
           separately in the invoice for such excisable goods.
           Rule7.
           Where the excisable goods are not sold by the assessee
c          at the time and place of removal but are transferred to a
           depot, premises of a consignment agent or any other
           place or premises (hereinafter referred to as "such other
           place") from where the excisable goods are to be sold
           after their clearance from the place of removal and where
 D         the assessee and the buyer of the said goods are not
           related and the price is the sole consideration for the
           sale, the value shall be the normal transaction value of
           such goods sold from such other place at or about the
           same time and, where such goods are not sold at or
           about the same time, at the time nearest to the time of
 E
           removal of goods under assessment."
        21. The actual cost of transportation from the place of
   removal up to the place of delivery of excisable goods is
   excluded from the computation of excise duty provided it is
 F charged to the buyer in addition to the price of goods and shown
   separately in the invoices for such goods. Interestingly, despite
   the substituted Section 4 not providing for a depot or other
   premises as a place of removal, Rule 7 deals with the normal
   transaction value of goods transferred to a depot or other
 G premises which is said to be at or about the same time or the
   time nearest to the time of removal of goods under
   assessment.
            22. To complete the picture, by an Amend merit Act with
      effect from 14.5.2003, Section 4 was again amended so as
 H
  COMMNR. Of CUSTOMS AND CENTRAL EXCISE,                             277
NAGPUR v. M/S. ISPAT INDUSTRIES [R. F. NARIMAN, J.]

to re-include sub-clause (iii) of old Section 4(3)(b) (pre 2000)     A
as Section 4(3)(c)(iii). This amendment reads as follows:-
     "(3)(c)(iii) 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;"                                                       B
     Also, Rule 5 of the Central Excise Rules was substituted,
     with effect from 1.3.2003, to read as follows:
     "Rule 5. Where any excisable goods are sold in the
circumstances specified in clause (a) of sub-section (1) of C
section 4 of the Act except the circumstances in which the
excisable goods are sold for delivery at a place other than the
place of removal, then the value of such excisable goods shall
be deemed to be the transaction value, excluding the cost of
transportation from the place of removal upto the place of D
delivery of such excisable goods.
      Explanation 1 - "Cost of transportation" includes -
      (i) the actual cost of transportation; and
      (ii) in case where freight is averaged, the cost of            E
          transportation calculated in accordance with generally
          accepted principles of costing.
      Explanation 2 - For removal of doubts, it is clarified that
      the cost of transportation from the factory to the place of    F
      removal, where th~ factory is not the place of removal,
      shall not be excluded for the purposes of determining
      the value of the excisable goods."
      23. It is clear, therefore, that on and after 14.5.2003, the
position as it obtained from 28.9.1996to 1.7.2000 has now            G
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.
                                                                     H
278        SUPREME COURT REPORTS                    [2015] 15 S.C.R.


A        24. 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
 B 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
 c 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
 D on the facts of the present case.
          25. It now remains to deal with some of the judgments
    cited at the Bar. Escorts JCB Ltd. v. CCE, (2003) 1 SCC
    281, was-strongly relied upon by Shri Bagaria and sought to
    be distinguished by Shri Panda. The facts of Escorts JCB's
 E case are similar to the facts in the present case. The show
    cause notice in that case alleged that freight and transit
    insurance were charged from buyers but no central excise duty
  · was paid by mis-declaring the place of removal as the factory
    gate instead of the buyer's premises. It will be noted that just
 F as in the present case, the price was "ex-works" and exclusive
    of freight insurance etc. After setting out Section 4 post its
    amendment in 1996, this Court held:-
           "A perusal of the orders passed by the authorities and
           CEGAT shows that since transit insurance was arranged
 G
           by the assessee, therefore it was inferred and held that
           the ownership of the goods was retained by the assessee
           until it was delivered to the buyer on the reasoning that
           otherwise there would be no occasion for the seller,
           namely, the assessee to take risk of any kind of damage
 H
  COMMNR. OF CUSTOMS AND CENTRAL EXCISE,                            279
NAGPUR v. M/S. ISPAT INDUSTRIES [R. F. NARI MAN, J.]

     to the goods during transportation. To us, the whole           A
     reasoning seems to be untenable. The two aspects have
     been mixed up - one relating to the transaction of sale
     of the goods and the other arranging for the transit
     insurance for the buyer and charging the amount
     expended forthe purpose from him separately." [at para         B
     8]
     "From the above passage it is clear that ownership in
     the property may not have any relevance insofar as
     insurance of goods sold during transit is concerned. It
     would therefore not be lawful to draw an inference of C
     retention of ownership in the property sold by the seller
     merely by reason of the fact that the seller had insured
     such goods during transit to the buyer. It is not necessary
     that insurance of the goods and the ownership of the
     property insured must always go together. It may be D
     depending upon various facts and circumstances of a
     particular transaction and terms and conditions of sale.
     A reference has also been made to Colinvauz's Law of
     Insurance, 6th Edn. by Robert Merkin to indicate that
     there may be insurance to cover the interest of others, E
     that is to say, not necessarily the person insuring the
     interest must be the owner of the property." [at para 1OJ
     26. This Court then went on to follow Bombay Tyre
lnternational's case and ultimately held:-
                                                                    F
     "In view of the discussion held above, in our view the
     Commissioner of Central Excise and CEGAT erred in
     drawing an inference that the ownership in the property
     continued to be retained by the assessee till it was
     delivered to the buyer for the reason that the assessee        G
     had arranged for the transport and the transit insurance.
     Such a conclusion is not sustainable." [at para 12]
     27. We are inclined to the opinion that the Tribunal was
correct in relying upon this judgment on the facts in the present
                                                                    H
280         SUPREME COURT REPORTS                   [2015] 15 S.C.R.


A     case and on the circular dated 3.3.2003, which specifically
      stated, following the said judgment, that insurance of goods
      during transit cannot possibly be the sole consideration to
      decide ownership or the point of sale of goods.
           28. Similarly in VIP Industries Ltd. v. Commissioner
B     of Customs & Central Excise, (2003) 5 SCC 507, this Court
      was faced with the following question:-
           "The question for consideration in both these appeals is
           whether in cases where a manufacturer includes
c          equalised freight in the price of the goods and sells th~
           goods all over the country at a uniform price, the
           Department is entitled to compute value by including the
           cost of transportation from the factory to the depot. This
           question was decided by this Court in the case of Union
D          of India v. Bombay Tyre International Ltd. [(1984) 1 SCC
           467 : 1984 SCC (Tax) 17 : 1983 ELT 1896] It was
           thereafter confirmed in the case of Govt. of
           India v. Madras Rubber Factory Ltd.[(1995) 4 SCC 349
           : (1995) 77 ELT 433]" [at para 3]
E          29. Like the Escorts JCB's case this judgment was also
      concerned with Section 4 as it stood after the amendment of
      1996 but before the amendment of 2000. This Court held:-
           "After the amendment, the Department sought to include
           in the value the cost of transport from factory to the depot,
 F         even in case where the manufacturer sold the goods at
           a uniform price all over the country by including the
           element of equalised freight. The Tribunal has upheld the
           view of the Department on the reasoning that by this
           amendment the definition of the term "place of removal"
G          has been extended to include the depot. The Tribunal
           has also held that Section 4(2) which excluded the cost
           of transportation from the place of removal to the place
           of delivery was not amended when the definition of the
           term "place of removal" was extended. According to the
H
  COMMNR. OF CUSTOMS AND CENTRAL EXCISE,                          281
NAGPUR v. M/S. ISPAT INDUSTRIES [R. F. NARIMAN, J.]

    Tribunal the result was that only the transport charges       A
    from the place of removal to the place of delivery were to
    be excluded from the value.
    We have heard the parties at length. In our view, Section
    4 has to be read as a whole. Under Section 4(1 )(a), the
    normal price is the price at which goods are ordinarily B
     sold by the assessee to a buyer in the course of wholesale
    trade for delivery at the time and place of removal, where
     the buyer is not a related person and price is the sole
     consideration for sale. Therefore, the normal price is the
     price at the '1ime of delivery" and "at the place of removal". C
     Before the amendment, the place of removal was only
     the factory or any other place or premises where the
     excisable goods were produced or manufactured or a
     warehouse or any other place or premises where any
     excisable goods have been permitted to be deposited D
     without payment of duty. Thus, the price would be the price
     at that place. By the amendment proviso (i-a) to Section
     4(1 )(a) has been added. Under Section 4(1 )(a)(i-a)
     where the price of the goods is different for different
     places of removal, each such price was deemed to be E
     the normal price of such goods in relation to "such place.
     of removal". Thus, if the place of removal was the factory,
     then the price would be the normal price at the factory. If
     the place of removal was some other place like a depot
     or the premises of a consignment agent and the price F
     was different then that different price would be the price.
     It is because the newly added proviso (i-a) to Section
     4(1 )(a) was now providing for different prices at different
     places of removal that the definition of the term "place of
   . removal" had to be enlarged. Thus the amendment was G
     not negativing the judgments of this Court. If that had been
     the intention it would have been specifically provided that
     even where price was the same/uniform all over the
     country, the cost of tran"rortation was to be added.
                                                                   H
282         SUPREME COURT REPORTS                    [2015] 15S.C.R.



A          Thus in cases where the price remains uniform or
           constant all over the country, it does not follow that value
           for the purpose of excise changes merely because the
           definition of the term "place of removal" is extended. The
           normal price remains the price at the time of delivery
 B         and at the place of removal. In cases of equalised freight
           it remains the same as per the judgments of this Court
           set out hereinabove.
           In our view, the amendments have made no difference to
           the earlier position as settled by this Court. In this view of
c          the matter, we are unable to uphold the judgments of the
           Tribunal. They are accordingly set aside. The appeals
           are allowed with consequential relief. There shall be no
           order-as to costs." [paras 5 to 8] .

D          30. In Prabhat Zarda Factory Limited v. CCE, 2002
      (146) E.L.T. 497 (S.C.), this Court held:-
           "ln these matters, the question is whether freight and
           insurance charges are to be included in the assessable
           value for the purposes of excise. This question is covered
 E         by the judgment of ttiis Court in the case of Escorts JCB
           Ltd. v. Commissioner of Central Excise, Delhi-I/ [2002
           (146) E.L.T. 31 (S.C.)]. The only difference which has
           been pointed out is that in the Escorts case (supra) the
           sale was at the factory gate whereas in these cases, the
 F         sale is from the depot. Learned counsel forthe appellants
           admit that the freight and insurance charges up to the
           depot would be includible in the assessable value for
           the purposes of excise. However, the sale being at the
           depot, the freight and insurance for delivery to the ·
G          customers from the depot would not be so includible as
           per the said judgment."
            This judgment, therefore, also holds that even in a depot
      sale, freight and insurance for delivery to customers from the
      depot to their premises cannot possibly be included, and
 H    followed the Escorts JCB case supra.
  COMMNR. OF CUSTOMS AND CENTRAL EXCISE,                           283
NAGPUR v. M/S. ISPAT INDUSTRIES [R. F. NARI MAN, J.]

     31. With this we come to two recent judgments of this          A
Court. In CCE & Customs v. Roofit Industries Ltd., (2015)
319 E.L.T. 221 (S.C.), this Court, after distinguishing the
Escorts JCB's case, stated:- ·
     'The 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, 8
     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 th~
     buyer at his premises. This aspect is to be seen in the
     light of the provisions of the Sale of Goods Act by applying
     the same to the facts of each case to determine as to C
     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 D
     thereafter has to be on buyer's 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 the Valuation Rules.                        E
     In the present case, we find that most of the orders placed
     with the respondent assessee were by the various
     government authorities. One such order i.e. order dated
     24-6-1996 placed by Kerala Water Authority is on record. F
     On going through the terms and conditions of the said
     order, it becomes clear that the goods were to be
     delivered at the place of the buyer and it is only· at that
     place where the acceptance of supplies was to be
     effected. Price of the goods was inclusive of cost of
     material, Central excise duty, loading, transportation, G
     transit risk and unloading charges, etc. Even transit
     damage/breakage on the assessee account which would
     clearly imply that till the goods reach the destination,
     ownership in the goods remain with the supplier, namely,
                                                                 H
284   SUPREME COURT REPORTS                   [2015] 15S.C.R.



A     the assessee. As per the "terms of payment" clause
      contained in the procurement order, 100% payment for
      the supplies was to be made by the purchaser after the
      receipt and verification of material. Thus, there was no
      money given earlier by the buyer to the assessee and
 B    the consideration was to pass on only after the receipt of
      the goods which was at the premises of the buyer. From
      the aforesaid, it would be manifest that the sale of goods
      did not take place at the factory gate of the assessee
      but at the place of the buyer on the delivery of the goods
 c    in question.
      The clear intent of the aforesaid purchase order was to
      transfer the property in goods to the buyer at the premises
      of the buyer when the goods are delivered and by virtue
      of Section 19 of the Sale of Goods Act, the property in
 D    goods was transferred at that time only. Section 19 reads
      as under:
           "19. Property passes when intended to pass.-
      ( 1) Where there is a contract for the sale of specific or
      ascertained goods the property in them is transferred to
 E
      the buyer at such time as the parties to the contract intend
      it to be transferred.
      (2) For the purpose of ascertaining the intention of the
      parties regard shall be had to the terms of the contract,
 F    the conduct of the parties and the circumstances of the
      case.
      (3) Unless a different intention appears,. the rules
      contained in Sections 20 to 24 are rules for ascertaining
      the intention of the parties as to the time at which the
 G    property in the goods is to pass to the buyer."
      These are clear finding of facts on the aforesaid lines
      recorded     by    the Adjudicating          Authority.
      However, CESTAT did not take into consideration all these
      aspects and allowed the appeal of the assessee by
 H
    COMMNR. OF CUSTOMS AND CENTRAL EXCISE,                            285
  NAGPUR v. M/S. ISPAT INDUSTRIES [R. F. NARIMAN, J.]

        merely referring to the judgment in Escorts JCB               A
        Ltd. [(2003) 1SCC281 : (2002) 146 ELT 31] Obviously
        the exact principle laid down in the judgment has not been
        appreciated by CEsTAT." [at paras 12 - 15]
        32. It will be seen that this is a decision distinguishing
  the Escorts JCB's case on facts. It was found that goods were 8
  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 C
  charges would have to be added as a componentof 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 D
  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.
                                                                      E
          33. As has been seen in the present case all prices were
    "ex-works", like the facts in Escorts JCB's case. Goods were
    cleared from the factory on payment of the appropriate sales
    tax by the assessee itself, thereby indicating that it had sold
    the goods manufactured by it at the factory gate. Sales were      F
  . made against Letters of Credit and bank discounting facilities,
    sometimes in advance. Invoices were prepared only at the
    factory directly in the rame of the customer in which the name
    of the Insurance Company as well as the number of the transit
    Insurance Policy were mentioned. Above all, excise invoices       G
    were prepared at the time of the goods leaving the factory in
    the name and address of the customers of the respondent.
    When the goods were handed over to the transporter, the
· · respondent had no.right to the disposal of the goods nor did it
    reserve such rights inasmuch as title had already passed to
                                                                      H
286         SUPREME COURT REPORTS               [2015] 15S.C.R.


A   its customer. On facts, therefore, it is clear that Roofit's
    judgment is wholly distinguishable. Similarly in Commissioner
    Central Excise, Mumbai-Ill v. M/s. Emco Ltd, this Court re-
    stated its decision in the Roofit Industries' case but
   'remanded the case to the Tribunal to determine whether on
 B facts the factory gate of the assessee was the place of removal
    of excisable goods. This case again is wholly distinguishable
    on facts on the same lines as the Roofit Industries case.
         34. In the view of the law that we have taken as well as
   the facts detailed above, the statement made by Shri S.P.
 C Dahiwade pales into insignificance as has been correctly held
   by the Tribunal. We, therefore, dismiss this appeal with no
   order as to costs.


      Bibhuti Bhushan Bose                         Appeal dismissed.