Place of removal at factory gate excludes destination freight from assessable value in FOR supply contracts.
Where supply contracts show that ownership passes at the factory gate, freight and transportation charges to the buyer's destination are not includible in assessable value, even if delivery is undertaken at the buyer's stores under an FOR destination arrangement. The separate disclosure of ex-works price, freight, transit insurance, excise duty and sales tax supported the conclusion that the sale was completed at the factory, and recovery of sales tax on a freight-inclusive basis did not make the destination the place of sale. On those facts, the place of removal remained the factory gate and transportation costs were excluded from valuation.
Issues: Whether, on the facts of supply of goods to State Electricity Boards under FOR destination contracts, the freight and transportation charges from the factory to the buyer's stores were includible in the assessable value by treating the stores as the place of removal.
Analysis: The purchase orders separately disclosed ex-works price, freight, transit insurance, excise duty and sales tax, and the contract terms showed that property in the goods passed at the factory gate notwithstanding delivery at the buyer's stores. Mere recovery of sales tax on a price inclusive of freight did not establish that the sale occurred at the destination. Under the valuation rules, where goods are sold for delivery at a place other than the place of removal, the assessable value excludes the cost of transportation from the place of removal to the place of delivery. The earlier and later statutory definitions of place of removal did not alter this result on the facts, since the sale had already taken place at the factory.
Conclusion: The place of removal was the factory gate, and the transportation charges from the factory to the buyer's stores were not includible in the assessable value. The departmental appeals failed and the assessee succeeded.
Final Conclusion: The Tribunal affirmed exclusion of freight from assessable value in an FOR destination supply where the sale was complete at the factory gate and delivery at the buyer's premises was only for performance of the contract.
Ratio Decidendi: Where the contract and supporting documents show that ownership passes at the factory gate, the cost of transportation to the buyer's destination is excluded from assessable value even if freight is recovered on an averaged basis and delivery is made at the buyer's premises.
TaxTMI 
AI Drafter ✕
TaxTMI 
