Clarification regarding place of removal — Central Excise

Cir­cu­lar No. 999/6/2015-CX (F. No. 267/13/2015 — CX.8)

dat­ed the 28th Feb­ru­ary, 2015

Atten­tion is invit­ed to Cir­cu­lar No. 988/12/2014-CX dat­ed 20.10.2014 issued from F. No. 267/49/2013-CX.8 on the above sub­ject where­in it was clar­i­fied that the place of removal needs to be ascer­tained in terms of pro­vi­sions of Cen­tral Excise Act, 1944 read with pro­vi­sions of the Sale of Goods Act, 1930 and that pay­ment of trans­port, pay­ment of insur­ance etc are not the rel­e­vant con­sid­er­a­tions to ascer­tain the place of removal. The place where sale takes place or when the prop­er­ty in goods pass­es from the sell­er to the buy­er is the rel­e­vant con­sid­er­a­tion to deter­mine the place of removal.

2. In this regard, a demand has been raised by the trade that it may be clar­i­fied that in the case of exports, for pur­pos­es of CENVAT cred­it of input ser­vices, the place of removal is the port or the air­port from where the goods are final­ly exported.

3. The mat­ter has been exam­ined. It is seen that sec­tion 23 of the Sale of Goods Act, 1930 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 pur­pose 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, and there­fore, in view of the pro­vi­sions of the Sec­tion 23 (1) of the Sale of Goods Act, 1930, the prop­er­ty in the goods would there­upon pass to the buyer.

Sim­i­lar­ly, sec­tion 39 of the Sale of Goods Act, 1930 pro­vides that where, in pur­suance of a con­tract of sale, the sell­er is autho­rized or required to send the goods to the buy­er, deliv­ery of the goods to a car­ri­er, whether named by the buy­er or not for the pur­pose of trans­mis­sion to the 2 buy­er, or deliv­ery of the goods to a wharfin­ger for safe cus­tody, is pri­ma facie deemed to be a deliv­ery of the goods to the buyer.

4. In most of the cas­es, there­fore, it would appear that hand­ing over of the goods to the carrier/transporter for fur­ther deliv­ery of the goods to the buy­er, with the sell­er not reserv­ing the right of dis­pos­al of the goods, would lead to pass­ing on of the prop­er­ty in goods from the sell­er to the buy­er and it is the fac­to­ry gate or the ware­house or the depot of the man­u­fac­tur­er which would be the place of removal since it is here that the goods are hand­ed over to the trans­porter for the pur­pose of trans­mis­sion to the buy­er. It is in this back­drop that the eli­gi­bil­i­ty to Cen­vat Cred­it on relat­ed input ser­vices has to determined.

5. Clear­ance of goods for exports from a fac­to­ry can be of two types. The goods may be export­ed by the man­u­fac­tur­er direct­ly to his for­eign buy­er or the goods may be cleared from the fac­to­ry for export by a mer­chant exporter.

6. In the case of clear­ance of goods for export by man­u­fac­tur­er exporter, ship­ping bill is filed by the man­u­fac­tur­er exporter and goods are hand­ed over to the ship­ping line. After Let Export Order is issued, it is the respon­si­bil­i­ty of the ship­ping line to ship the goods to the for­eign buy­er with the exporter hav­ing no con­trol over the goods. In such a sit­u­a­tion, trans­fer of prop­er­ty can be said to have tak­en place at the port where the ship­ping bill is filed by the man­u­fac­tur­er exporter and place of removal would be this Port/ICD/CFS. Need­less to say, eli­gi­bil­i­ty to CENVAT Cred­it shall be deter­mined accordingly.

7. In the case of export through mer­chant exporters, how­ev­er, two trans­ac­tions are involved. First is the trans­ac­tion between the man­u­fac­tur­er and the mer­chant exporter. The sec­ond trans­ac­tion is that between the mer­chant exporter and the for­eign buy­er. As far as Cen­tral Excise pro­vi­sions are con­cerned, the place of removal shall be the place where the prop­er­ty in the goods pass­es from the man­u­fac­tur­er to the mer­chant exporter. As explained in para­graph 4 supra, in most of the cas­es, this place would be the fac­to­ry gate since it is here that the goods are uncon­di­tion­al­ly appro­pri­at­ed to the con­tract in cas­es where the goods are sealed in the fac­to­ry, either by the Cen­tral Excise offi­cer or by way of self-seal­ing with the man­u­fac­tur­er of export goods tak­ing the respon­si­bil­i­ty of seal­ing and cer­ti­fi­ca­tion, in terms of noti­fi­ca­tion no. 19/2004-Cen­tral Excise (N.T.) dat­ed 6.9.2004, etc.

8. How­ev­er, in iso­lat­ed cas­es, it may extend fur­ther also depend­ing on the facts of the case, but in no case, this place can be beyond the Port/ ICD/CFS where ship­ping bill is filed by the mer­chant exporter. The eli­gi­bil­i­ty to CENVAT Cred­it shall be deter­mined accordingly.

(Shankar Prasad Sarma)

Under­sec­re­tary to the Gov­ern­ment of India