2025 (3) TMI 953 - AT - Central Excise

Calculation of Exicse duty - inclusion of freight and insurance charges in the assessable value for the purpose of determining central excise duty when the sale is conducted on a FOR basis (Free on Road/Free at Destination) - HELD THAT - It is an admitted fact that appellants were showing ex-works price and freight and insurance charges separately on their invoices. However it is also an admitted fact that as per purchase order the delivery was free at destination . Therefore even though they might be recovering these freight and insurance charges separately by way of reimbursement at a later date it would not affect the terms of the purchase order which is apparent from plain reading of the purchase order. Further merely because they have paid the VAT on ex-works value that in itself cannot become the basis for payment of central excise duty on the ex-works value. Therefore in this case as apparent from the terms and conditions and various submissions made sale is on FOR basis. Much emphasis has been laid on the judgment of Hon ble Supreme Court in the case of Ispat Industries 2015 (10) TMI 613 - SUPREME COURT . It is found that in this case the Hon ble Court was dealing with a situation where the sale was ex-works and the issue was not concerning to FOR sale. Therefore that case is distinguished on facts. Conclusion - In FOR sales the buyer s premises could be considered the place of removal necessitating the inclusion of freight and insurance charges in the assessable value for excise duty purposes. Appeal dismissed.

1. ISSUES PRESENTED and CONSIDERED

The core legal issue in this case is whether freight and insurance charges should be included in the assessable value for the purpose of determining central excise duty when the sale is conducted on a "FOR basis" (Free on Road/Free at Destination). The Tribunal needed to consider whether the buyer's premises could be considered the place of removal under Section 4 of the Central Excise Act, thus necessitating the inclusion of these charges in the assessable value.

2. ISSUE-WISE DETAILED ANALYSIS

Relevant Legal Framework and Precedents:

The relevant legal provision is Section 4 of the Central Excise Act, which defines the assessable value for the purpose of excise duty. The key precedents considered include the Supreme Court judgment in CCE Vs Ispat Industries Ltd., which held that the buyer's premises could not be the place of removal, and the Larger Bench decision in Ramco Cement Ltd., which considered the inclusion of freight and insurance charges in the assessable value when the sale is on a FOR basis.

Court's Interpretation and Reasoning:

The Tribunal noted that the appellant was supplying equipment on a FOR basis, meaning the delivery was "free at destination" as per the purchase order. Despite the appellant's argument that the charges were shown separately and the sale was ex-works, the Tribunal found that the terms of the purchase order indicated a FOR sale, thereby making the buyer's premises the place of removal.

Key Evidence and Findings:

The Tribunal considered the purchase order and invoices, which showed that the delivery was "free at destination," and the freight and insurance charges were separately mentioned. Despite the separate mention, the Tribunal found that the nature of the sale as FOR necessitated the inclusion of these charges in the assessable value.

Application of Law to Facts:

Applying the legal principles from the precedents, the Tribunal concluded that in a FOR sale, the place of removal could be the buyer's premises, and thus, freight and insurance charges should be included in the assessable value. The Tribunal distinguished the Ispat Industries case on the grounds that it dealt with ex-works sales, not FOR sales.

Treatment of Competing Arguments:

The appellant relied on the judgment in Ispat Industries and other Tribunal decisions to argue against the inclusion of freight and insurance charges. However, the Tribunal found these cases distinguishable as they did not address FOR sales. The Tribunal gave weight to the decisions in Roofit Industries and other cases cited by the Department, which supported the inclusion of such charges in FOR sales.

Conclusions:

The Tribunal concluded that the freight and insurance charges should be included in the assessable value for determining central excise duty in FOR sales. The appeal was dismissed, upholding the Adjudicating Authority's order.

3. SIGNIFICANT HOLDINGS

Preserve Verbatim Quotes of Crucial Legal Reasoning:

"Therefore, in the light of submissions made by both the sides and the factual matrix as well as various citations and judgments submitted, we find that, in this case, the freight and insurance charges are liable to be included in the assessable value for the purpose of determination of central excise duty."

Core Principles Established:

The Tribunal established that in FOR sales, the buyer's premises could be considered the place of removal, necessitating the inclusion of freight and insurance charges in the assessable value for excise duty purposes.

Final Determinations on Each Issue:

The Tribunal determined that the nature of the sale as FOR required the inclusion of freight and insurance charges in the assessable value, and the appeal was dismissed, affirming the Adjudicating Authority's decision.

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