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Commissioner, Customs and Central Excise, Aurangabad v. M/s Roofit Industries Ltd.

Civil Appeal · Neutral citation not assigned (Civil Appeal No. 5541 of 2004)Decided 23 Apr 2015
Civil Appeal No. 5541 of 2004
Justice A.K. Sikri · Justice Rohinton Fali Nariman

Background

Roofit Industries manufactured concrete pipes and had contracts with government bodies (such as the Kerala Water Authority) to design, manufacture, deliver, lay and test the pipes at the buyer's site. Revenue authorities found that the company was deducting freight, insurance and unloading charges from the price used to calculate excise duty, even though, on the facts, the goods were not actually sold at the factory gate but only later, at the buyer's premises. A duty demand was confirmed by the adjudicating authority, but the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) overturned it by relying on an earlier Supreme Court decision (Escorts JCB Ltd.) without properly examining the facts of this case. The Revenue appealed to the Supreme Court.

Decision Breakdown

The Supreme Court explained that under Section 4 of the Central Excise Act, excise duty must be calculated on the "normal price" at the actual "place of removal", i.e., wherever ownership of the goods actually passes from seller to buyer under the Sale of Goods Act, not necessarily the factory gate. Examining the purchase order terms (price inclusive of transport and transit-risk charges, with the assessee bearing transit damage risk, and full payment only due after the buyer received and verified the goods), the Court found that ownership passed only at the buyer's premises on delivery, not at the factory gate, so all the pre-delivery charges, including freight and insurance, were properly includible in the dutiable value. It held CESTAT had misapplied the Escorts JCB precedent without examining these specific facts, set aside CESTAT's order, and restored the original demand confirmed by the adjudicating authority.

Lesson Learnt

For tax and contractual purposes, whether a sale is complete "at the factory gate" or only later "at the buyer's premises" turns on the actual terms of the contract and when ownership genuinely passes, not on a label or a blanket reliance on an earlier case with different facts.

Official source (sci.gov.in)View Judgment (PDF)

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