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Commissioner of Customs and Central Excise, Nagpur v. M/s. Ispat Industries Ltd.

Civil Appeal · Neutral citation not assigned (Civil Appeal No. 637 of 2007)Decided 7 Oct 2015
Civil Appeal No. 637 of 2007
Justice A.K. Sikri · Justice Rohinton Fali Nariman

Background

Ispat Industries makes steel sheets and coils and sold them "ex-works", meaning the price was for goods collected at the factory gate. The company arranged transit insurance and transport, and the excise department argued that the buyer's premises was the "place of removal", so the freight charges should be added to the excise duty base. The Commissioner confirmed a demand of about Rs. 2.43 crore plus penalty for 1996 to 2003, but the Tribunal (CESTAT) reversed that order.

Decision Breakdown

The Supreme Court dismissed the department's appeal and upheld the Tribunal. The Court held that for 1996 to 2000 the "place of removal" could only be a place from which the manufacturer itself sells, never the buyer's premises, and that from July 2000 to March 2003 the factory was the only place of removal. It held that taking out transit insurance does not by itself prove the seller still owns the goods in transit, following the earlier Escorts JCB ruling. The Court distinguished the Roofit Industries ruling on the facts, because in that case title passed only on delivery at the buyer's site, whereas here invoices, sales and title all passed at the factory gate. A statement by a company officer that ownership stayed with the company until delivery was held to carry little weight.

Lesson Learnt

Whether a company must pay excise on freight depends on the actual contract terms and on when ownership of the goods passes, not simply on who insured the goods in transit. Businesses that sell ex-works should keep clear invoices and sale terms that show when title passes.

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

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