M/S. ESCORTS JCB LTD. versus COMMISSIONER OF CENTRAL EXCISE, DELHI-II

Citation: [2002] SUPP. 3 S.C.R. 261 · Decided: 24-10-2002 · Supreme Court of India · Bench: S.N. VARIAVA
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Judgment (excerpt)

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MIS. ESCORTS JCB LTD. 
A 
v. 
COMMISSIONER OF CENTRAL EXCISE, DELHI-II 
OCTOBER 24, 2002 
[S.N. VARIA VA AND BRIJESH KUMAR, JJ.] 
B 
Central Excise Act, 1944; Sections 2h, 4 & JJA: 
Assessment of duty on transit insurance of goods sold-Payment of duty-
Liability of seller-Held, sale was complete at the gate of factory of assessee- C 
manufacturer when the goods were handed over to buyer-Hence, it is not 
appropriate to include freight and insurance in the normal value of the goods 
for the purpose of assessment of duty. 
Sale of Goods Act, 1930; Sections 23 and 39. 
Goods delivered to carrier/Buyer's representative-Transit Insurance 
on goods arranged by seller-Ownership in goods in transit-Held, it is not 
lawful to draw an inference that ownership in the goods is retained by the 
seller. 
Revenue-respondent visited the factory of the assessee-appellant and 
found that amount of transit insurance charges was not added to the value 
of certain goods sold and, after issuing show cause notice, imposed excise 
duty and levy of penalty. On appeal, CEGAT confirmed imposition of duty 
but reduced the penalty. Hence these cross appeals. 
It was contended for the appellant that ownership rights in the goods 
sold passed on to the buyer during transit. The seller is not liable to pay 
duty on transit insurance only because it was arranged by the assessee-
seller. 
D 
E 
F 
Allowing the appeal of the assessee and dismissing the appeal of the G 
Revenue, the Court 
HELD: I.I. The possession of the sold goods is handed over to the 
buyer at the factory gate. The transaction is full and complete and nothing 
remains to be done after the goods leave the factory premises. The 
261 
H 
262 
SUPREME COURT REPORTS [2002) SUPP. 3 S.C.R. 
A Tribunal's reasoning that since the transit insurance was arranged by the 
assessee, the ownership of the goods was retained by the assessee until it 
reaches to the buyer on the reasoning that otherwise there would be no 
occasion for the seller, namely, the assessee to take risk of any kind of 
damage to the goods during transportation, seems to be untenable. The 
B two aspects have been mixed up-one relating to the transaction of sale of 
the goods and the other arranging for the transit insurance for the buyer 
and charging the amount expended for the purpose from him separately. 
[266-E; 267-F, GI 
Prudential Staff Union v. Hall, (1947) K.B. 685 and Hepburn v. A. 
C Tomlinson (Hauliers) Ltd H.L. (E), (1966) 451, referred to. 
"Chitty on Contracts" Twenty-Eighth Edition Vol.2 Special Contracts 
P. 978, referred to. 
1.2. It would not be lawful to draw an inference of retention qf 
D ownership in the property sold by the seller merely by reason of the fact 
that the seller had insured such goods during transit to buyer. It is not 
necessary that insurance of the goods and the ownership of the property 
insured must always go together. It may be depending upon various facts 
and circumstances of a particular transaction and t!lrms and conditions 
of sale. [268-F, G) 
E 
Sale of Goods (Fourth Edition) by Benjamain, referred to. 
2. When sale of goods had taken place at the factory gate, the place 
of removal was not the premises of the buyer. In view of the provisions of 
Sections 23 and 39 of the Sale of Goods Act, 1930 the goods are to be 
F treated as delivered to buyer and property and possession of the goods 
passed on to buyer when the goods· were handed over to transporter. In 
such a case element of freight and transit insurance were not to be included 
In the normal value of the goods. Thus, in the instant case, the 
Commissioner of Central Excise and the CEGAT erred in drawing an 
G inference that the ownership in the property continued to be retained by 
the assessee till it was delivered to the buyer at his place for the reason 
that the assessee had arranged for the transport and the transit Insurance. 
Such a conclusion is not sustainable. [269-F, G, H; 270-AI 
Union of India and Ors. etc. etc. v. Bombay Tyre International Ltd. etc. 
H etc., (1983) E.L.T. 1896 (S.C.), referred to. 
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MIS. ESCORTS JCB LTD r. COMMR. OF CENTRAL EXCISE [BRIJESH KUMAR, .I.] 263 
Associated Strips ltd. and Anr. v. CCE, New Delhi, (2002) (49) RLT A 
506, approved. 
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 7230 of 
1999. 
From the Judgment and Order dated 24.8.99 of the Central Excise, B 
Customs and Gold (Control) Appellate Tribunal, New Delhi in A.No~ El 
2800/98-A in F.O. No. 1222 of 1999-A. 
WITH
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