In “For” Destination Cases Freight & Insurance Includable In Assessable Value For Payment Central Excise Duty
The CESTAT, Hyderabad, decision 16.05.2025, in the case of M/s Pawan Power & Telecom Ltd, has held that freight, insurance etc charges are includable in the assessable value for payment of Central Excise Duty. This, brings to light once again the above issue to the forefront. There are many turns, on the issue of includability of freight, insurance etc in the assessable value for payment of Excise Duty though the Hon’ble Supreme Court has tried to give clarity through various decisions and also by the Hon’ble CESTAT (Larger Bench). Also, the CBEC Board Circular dated 08.06.2018, tried to visualize different scenarios and applicability of different Supreme Court decisions in different scenarios.
2. On the issue of the includability of freight, insurance, etc., there are catena of judgments passed by Hon’ble Supreme Court, High Courts and Tribunals. Essentially, it is normally presented as if, one set of judgments have been relied on the judgment of Hon’ble Supreme Court in the case of Ispat Industries CC & CE, Nagpur Vs Ispat Industries Ltd [2015 (324) ELT 670 (SC)], whereas, another set of judgments have been relied on the judgment of Hon’ble Supreme Court in the case of Roofit Industries CCE Vs Roofit Industries Ltd [2015 (319) ELT 221 (SC)] and Emco Ltd CCE, Mumbai-III Vs Emco Ltd [2015 (322) ELT 394 (SC)]
3. While, as per Ispat Industries (supra) judgment, in last line at para 32, says buyer’s premises can never be the place of removal but as per the judgment in Roofit Industries and Emco Ltd (supra), the place of removal has to be determined on the basis of factual matrix including the point at which sale has actually taken place. Further, Ispat Industries decision which is later dated than Roofit Industries decision, at para 33 of judgement, does not overrule Roofit Industries decision, but tries to clarify that in different set of circumstances i.e. if sale is on FOR basis and Place of Removal is not Ex-Works, then Roofit Industries decision is applicable. Therefore, when the sale is clearly on FOR (Free On Road) basis, following the judgments in the case of Roofit Industries and Emco Ltd (supra), the place of removal will be at the buyer’s premises and obviously the cost of transportation, insurance, etc., if any, incurred by the assessee are required to be included in the assessable value. This stand is further, fortified by CBEC Circular dated 08.06.2018, at para 3 & 4.
4. However, it is always important to decide as to what shall be the place of removal having regards to the factual matrix of the case and relevant documents. Therefore, in case it is clearly established that the sale has not taken place at the factory and it has been effected only at the buyer’s premises then such costs would be includable in the assessable value, as the place of removal would buyers’ place.
5. In this regard, recent decision of CESTAT, Larger Bench in the case of Ramco Cements Ltd Vs CCE, Puducherry vide Ramco Cement Ltd., Vs CCE, Puducherry [2023 (12) TMI 1332 (CESTAT-Che-LB)], inter alia, examined the issue of eligibility of Cenvat credit of Goods Transport Agency services on outward transportation and determination of “Place of removal”. It is to be noted that “Place of removal” for the purpose of Valuation for payment of Central Excise Duty under Section 4 of Central Excise Act, 1944 as well as for Cenvat Credit Rules, 2004, for availing Cenvat Credit is one and the same. After going through catena of judgments including Hon’ble Supreme Court’s judgment in the case of Roofit Industries (supra) and Emco Ltd (supra) as well as Ispat Industries (supra), it was held at para 35 of said Larger Bench decision in Ramco Cement, that wherever the clearance of goods is against FOR contract basis, the authority needs to ascertain the “place of removal” by applying the judgment of Hon’ble Supreme Court in the case of Roofit Industries (supra) and Emco Ltd (supra), apart from the decision of the Karnataka High Court in Bharat Fritz Werner 2022 (66) G.S.T.L. 434 (Kar.) and the CBEC Circular dated 08.06.2018. In the case of M/s HD Wires Pvt Ltd Vs CCGST & CE, Indore [Final Order No.57985/2024 dt.08.08.2024], the CESTAT Bench at Delhi, inter alia, examined the applicability of judgment of Roofit Industries and Emco Ltd (supra) in a similar factual matrix where the appellant had not included the freight charges in the transaction value. The Tribunal also relied on the judgment of Hon’ble Supreme Court in the case of CCE & ST Vs Ultra Tech Cement [2018 (9) GSTL 337 (SC)], to come to the conclusion that in the given set of facts, point of sale (place of removal) was where the ownership of goods was transferred to the buyer or customer and therefore, all the expenses incurred and collected till the buyer’s premises shall be part of the assessable value . The Tribunal also relied on the judgment of Hon’ble Supreme Court in the case of CCE & ST Vs Ultra Tech Cement [2018 (9) GSTL 337 (SC)], to come to the conclusion that in the given set of facts, point of sale was where the ownership of goods was transferred to the buyer or customer and therefore, all the expenses incurred and collected till the buyer’s premises shall be part of the assessable value.
6. If it has been brought out that the contract was on FOR basis, it would be clear that thus in the factual matrix, the issue is more clearly covered by the judgment in the case of Roofit Industries (supra) and Emco Ltd (supra). Similarly, in the case of Principal Commissioner, Raipur Vs M/s Unique Structures & Towers Ltd [Final Order No.51254/2019 dt.24.09.2019], the factual matrix as above was decided by including the freight and insurance in the assessable value for payment of Central Excie duty. Further, in Unique Structures the Tribunal considered various judgments including Ispat Industries (supra), Roofit Industries (supra) and M/s Ultra Tech Cement (supra) and distinguished the judgment in the case of Ispat Industries (supra). Similar, view is taken by CESTAT, Hyderabad in the case of Schneider Electric India Pvt Ltd Excise Appeal No. 31344 of 2017 vide Final Order No. A/30105/2025, dated 18.03.2025.
7. In view of the above, after review of above cited decisions and explanation, it appears that the issue of includability of freight and insurance charges in the assessable value in FOR cases for payment of Central Excise Duty has attained finality.
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