Determination of place of removal - CBEC Clarification
PLACE of Removal has been defined in the CENVAT Credit Rules in the last Budget by inserting sub rule "qa” in Rule 2. The definition reads as:
'(qa) "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 wherein the excisable goods have been permitted to be deposited without payment of duty;
(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,
from where such goods are removed;'
This definition is exactly identical to the definition of Place of Removal as per Section 4(3)(c) of the Central Excise Act.
In the CENVAT Credit Rules, input services include certain services up to the Place of Removal.
Now where exactly is this Place of Removal? This has been a long and much revived dispute in Central Excise.
CBEC had issued two Circulars namely 37B order no dt 3-3-2003 and circular no dt. 23.8.2007, which sought to suggest that the place where sale takes place is the place of removal.
Then, where does Sale take place?
The Board clarified that as: the place where the transfer in property of goods takes place from the seller to the buyer.
How do you know where the transfer in property takes place? Board says go to the Sale of Goods Act, 1930. And Board says even the Tribunal said so in Associated Strips Ltd Vs Commissioner of Central Excise, New Delhi , wherein the Tribunal observed,
"17. Now we are to consider the facts of the present case as to find out when did the transfer of possession of the goods to the buyer occur or when did the property in the goods pass from the seller to the buyer. Is it at the factory gate as claimed by the appellant or is it at the place of the buyer as alleged by the Revenue? In this connection it is necessary to refer to certain provisions of the Sale of Goods Act, 1930. Section 19 of the Sale of Goods Act provides that where there is a contract for the sale of specific or ascertained goods the property in them is transferred to the buyer at such time as the parties to the contract intend it to be transferred. Intention of the parties are to be ascertained with reference to the terms of the contract, the conduct of the parties and the circumstances of the case. Unless a different intention appears; the rules contained in Sections 20 to 24 are provisions for ascertaining the intention of the parties as to the time at which the property in the goods is to pass to the buyer. Section 23 provides that where there is a contract for the sale of unascertained or future goods by description and goods of that description and in a deliverable state are unconditionally appropriated to the contract, either by the seller with the assent of the buyer or by the buyer with the assent of the seller, the property in the goods thereupon passes to the buyer. Such assent may be expressed or implied and may be given either before or after the appropriation is made. Sub-section (2) of Section 23 further provides that where, in pursuance of the contract, the seller delivers the goods to the buyer or to a carrier or other bailee (whether named by the buyer or not) for the purposes of transmission to the buyer, and does not reserve the right of disposal, he is deemed to have unconditionally appropriated the goods to the contract.”
The CBEC in its latest clarification issued yesterday reiterates:
The place of removal needs to be ascertained in term of provisions of Central Excise Act, 1944 read with provisions of the Sale of Goods Act, 1930. Payment of transport, inclusion of transport charges in value, payment of insurance or who bears the risk are not the relevant considerations to ascertain the place of removal, the place where sale has taken place or when the property in goods passes from the seller to the buyer is the relevant consideration to determine the place of removal.
Easier said than done. As far as excise officers in the field are concerned, there are only two principles or rules:
1. In the Central Excise Assessments, include the cost of transport in the assessable value irrespective of the place of sale or place of removal.
2. In CENVAT Credit, don't allow credit for outward transport irrespective of the place of removal.
There are hundreds of cases pending at various stages because the Department refuses to understand the concept of valuation or CENVAT Credit.
CBEC CIRCULAR NO. 988/12/2014-CX., Dated: October 20, 2014