23
Mar PLACE OF REMOVAL IN EXCISE

• (Category: Excise-Jwellery)

Central Excise is a tax on manufacture. The tax on manufacture gets attracted once the goods are manufactured. But the collection of tax from the manufacturer is deferred till the date of actual removal. Date of actual removal and consequently date of accrual of excise liability can be ascertained only if we understand what is considered as ‘place of removal’. Valuation of goods and rate of excise shall also be with reference to the ‘place of removal’ only. Thus the ‘place of removal’ gains significance.

‘Place of removal’defined as per section 4(3)(c) of the Central Excise Act(CEA), 1944 is an inclusive definition to mean a factory or any other place of manufacture of the excisable goods(collectively termed factory for the purpose of this article) and also a warehouse or any other place or premises wherein the excisable goods have been permitted to be deposited without payment of duty(collectively termed warehouse for the purpose of this article). With effect from the budget of 1996-97, the definition was amended to include 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(collectively termed warehouse for the purpose of this article). Thus in a nut shell, a factory, warehouse and a depot qualify as a place of removal.

Factory having been defined as a place of removal, when goods are removed from the factory, excise duty shall be chargeable on the goods. The value on which excise duty is to be charged shall be the transaction value. In such a situation, the transaction value which will be ex-factory price shall be the assessable value for computation of excise duty chargeable.

So the question that arises is, once factory is included in the definition of place of removal which is the place of manufacture, why are warehouse and depot included as place of removal?

It is because transaction value can be adopted only if the following conditions are satisfied. The goods are sold and delivery takes place at the factory gate itself. The sale should be to unrelated personsand price should be the sole consideration. Thus, in situations like transfer of goods to depot/warehouse/job-worker or where the goods are not sold at the factory gate, then the transaction value shall not be determined at the factory gate. So then, what is the assessable value and the point of leviability in these situations?

WARE HOUSE AS PLACE OF REMOVAL

When goods are transferred to warehouse, then Central Excise may be attracted at the time of removal from the warehouse only. This is because warehouse is a place of removal defined in Sec. 4(3)(c) of the CEA. But this provision will not be a right to the assessee as the discretion lies with the Central Excise Officer(CEO). The definition clearly states that warehouse shall be a place of removal only if excisable goods have been permitted to be deposited without payment of duty i.e. only if permission has been sought from the CEO for the removal of goods from factory to warehouse without payment of duty. If permission has been sought and sale takes place from the warehouse and all other conditions envisaged in the previous paragraph are also complied with, then the transaction value shall be the assessable value. In this situation, the transaction value will be ex-warehouse value.

The Central Excise Valuation(Determination of Price of Excisable Goods) Rules, 2000 (the Rules) provide for instances when the transaction value shall not be the assessable value. In the said Rules, Rule 5, Rule 7 and Rule 10A are relevant in this context of ‘Place of Removal’.

There are instances when the goods are not delivered at the place of removal. The seller undertakes to deliver the goods to the buyer at his premises. Rule 5 provides for such instances where all the conditions outlined for adoption for transaction value are satisfied but for the fact that goods are delivered at other than place of removal. In this situation, the assessable value shall be the transaction value reduced by the cost of transportation from the place of removal to the place of delivery i.e., the value of service rendered after the goods are cleared from the place of removal shall be excluded in calculating the assessable value. (Maybe this is a beneficial provision looking just in the light of Central Excise statute. But the Service Tax law will take charge of this value exempted from central excise and consequently the amount received for the service rendered will attract service tax).

Some manufacturers may send the goods to consignees wherefrom the actual sale will take place. In such situations, the goods are neither sold nor delivered at the place of removal. Such situations are covered by Rule 7 of the said Rules – Sale at other than place and time of removal. The rule applies even to situations where goods are transferred to depots and ultimate sale takes place from the depots. In all such situations also, the liability for central excise arises only at the time of removal from the factory.This means for a manufacturer at Delhi sending goods to a depot in Kolkatta, the assessable value shall be determined with the normal transaction value of the goods removed from Kolkatta depot. To further emphasize, the value alone shall be determined as per the normal transaction value at Kolkatta but the point of leviability of Cental excise shall only be the time of removal from the Delhi factory.

But the assessable value shall be the normal transaction value (transaction value at which the greatest aggregate quantity of goods sold) of such goods prevailing at such ‘other’ place. The terms – ‘such’ goods and ‘such’ other place gain importance to clear any ambiguity. The goods should be same goods. If a dealer is dealing in manufacture of two different types of automobile components say, Item A and Item B, for determination of normal transaction value of Item A, the value of clearance of Item A from the depot should only be seen and not that of Item B. In case an assessee manufacturer at Chennai has depots at more than one place, say at Pune and Mumbai, then for removal of goods to Pune depot, normal transaction value of goods removed from Pune depot only should be taken and not that of Mumbai depot. The Rule also clearly provides for instances where such goods are not sold at such other place at or about the same time of removal from the factory. In such a situation, the normal transaction value shall be determined taking into consideration the time nearest to the time of removal of goods under assessment.