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Duty Demanded on Freight is not Valid when it can’t be included in Assessable Value: CESTAT

March 28, 2023

3 min

The Ahmedabad Bench of the Customs, Excise & Service Tax Appellate Tribunal ( CESTAT ) has held that duty demanded on freight is not valid when it can’t be included in the assessable value. The goods are to be delivered at the buyer’s premises from the factory of the appellant, Idmc Limited on FOR destination basis. The excise invoices have been prepared at the factory directly in the name of customers with the date and time of removal of goods from the factory.  The freight amount was charged separately in the invoice and the same does not part of an integral part of the sale price. The payment terms depend on case to case basis, in some cases, the customers pay in advance and remain after delivery and in some cases, the total amount is paid after delivery. The liability of VAT/CST is discharged as and when the goods are removed from the factory gate considering it to be the sale of goods at the same time. The freight charges incurred beyond the place of removal are not includable in the assessable value. The respondent department observed that since the sale of goods happens at the buyer’s premises on delivery of goods in question and acceptance by buyers at the site the place of removal for determination of assessable value would be the buyer’s premise.  In the case of Commissioner of Customs Vs. Ispat Industries Ltd.-2015-, it was held that “the place of removal is the supplier’s factory premises and in this position there can be no other place of removal other than factory gate of the seller of goods and in this circumstances there cannot be another place of removal.” A Coram comprised of Mr Ramesh Nair, Member (Judicial)  and Mr Raju, Member (Technical) observed that in the invoice the freight was charged separately when the selling invoice was issued from the factory at the time of clearance of goods. The factory gate is the place of removal. Merely because the appellant is under obligation to deliver the goods at the buyer’s premises, the place of removal which is a factory gate cannot be extended and the buyer’s premises cannot be made as a place of removal. Considering various precedents, the CESTAT held that the freight cannot be included in the assessable value, consequently, no demand for duty on freight would sustain. While allowing the appeal, the bench set aside the impugned order.

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