Freight charges excluded from excise duty assessable value for EX-WORKS sales despite insurance payment

The CESTAT Ahmedabad held that freight charges are not includible in assessable value for excise duty when goods are sold on EX-WORKS basis. The tribunal found that mutual agreement between parties established ex-factory pricing, and transfer of property occurred at factory gate despite appellant bearing insurance charges. Following Supreme Court precedent in Ispat Industries Limited, the place of removal is determined by facts, not payment of freight/insurance. The tribunal distinguished the case from Unique Structures where freight was contractually included in price. Demand was rejected and appeal allowed.

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Issues Involved:
1. Whether freight charges are includible in the assessable value for payment of central excise duty.

Summary:

Issue: Inclusion of Freight Charges in Assessable Value

The issue to be decided is whether the freight charges are includible in the assessable value or not. The appellant argued that the goods are sold at the factory gate on an 'EX-WORKS' basis, and therefore, the freight charges need not be included in the assessable value. The department contended that since the appellant delivered the goods on a FOR basis to the buyer's premises and took transit insurance, the sale did not happen at the factory gate, and thus, freight charges should be included in the assessable value.

The Tribunal referred to the Purchase Order which showed a mutual agreement on 'EX-WORKS' price and noted that the insurance charges borne by the appellant cannot be the criteria to decide the place of removal. The Tribunal relied on the Hon'ble Apex Court's decision in Commissioner of Customs, Nagpur vs. Ispat Industries 2015-TIOL-238-SC-CX, which held that the payment of insurance or freight charges cannot determine the place of removal. The Tribunal also referenced Circulars issued by the Board which clarified that the place of removal is where the property in goods passes from seller to buyer, not where the insurance or freight charges are paid.

The Tribunal further cited its own decision in IDMC Limited vs. CCE & C Anand and CCE & ST, Vadodara - 2023 (3) TMI 735 - CESTAT AHMEDABAD, where it was held that if the sale takes place at the factory gate, the freight charges collected separately are not to be included in the assessable value, even if the goods are delivered at the buyer's place.

After examining the facts and the legal precedents, the Tribunal concluded that in the present case, the goods were sold on an 'EX-WORKS' basis, and the freight charges are not to be included in the assessable value. The Tribunal set aside the impugned orders, allowed the appeals, and granted consequential relief to the appellant.

(Pronounced in the open court on 18.01.2024)

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