FOR contract valuation: outward freight forms part of assessable value when sale completes at buyer's premises, but penalty and extended limitation failed.

Under an FOR contract where the supplier undertook delivery, unloading, insurance and related obligations up to the buyer's premises, sale was treated as completed at the buyer's site rather than at the factory gate, so freight and allied transportation charges were includable in assessable value for central excise duty and the demand on merits was upheld. However, because the valuation dispute involved conflicting judicial views and there was no positive material showing suppression or intent to evade duty, invocation of the extended period of limitation and penalty under section 11AC(1)(b) was held unsustainable and set aside.

---

---

Issues: (i) Whether freight and allied transportation charges incurred for delivery of goods to the buyer's premises under the contract were includable in the assessable value for central excise duty. (ii) Whether invocation of the extended period of limitation and penalty under section 11AC(1)(b) was sustainable.

Issue (i): Whether freight and allied transportation charges incurred for delivery of goods to the buyer's premises under the contract were includable in the assessable value for central excise duty.

Analysis: The contract was read as a whole and found to be on FOR basis, with the supplier undertaking delivery, unloading, insurance, and related obligations till handing over at the buyer's site. On those facts, the sale was held to have been effected at the buyer's premises and not at the factory gate. The judgment applied the line of authority that turns on the factual point of sale and distinguished the contrary view applicable where the sale is complete at the factory gate.

Conclusion: The freight and related charges were includable in the assessable value, and the demand on merits was upheld against the assessee.

Issue (ii): Whether invocation of the extended period of limitation and penalty under section 11AC(1)(b) was sustainable.

Analysis: The controversy on includability of outward freight had generated conflicting judicial views, and the matter involved interpretation of the relevant valuation principles. No positive material was found to establish deliberate suppression or intent to evade duty.

Conclusion: The extended period and penalty under section 11AC(1)(b) were held unsustainable and set aside in favour of the assessee.

Final Conclusion: The valuation demand was sustained, but the assessee obtained relief against the extended limitation and penalty, resulting in a partial allowance of the appeal.

Ratio Decidendi: Where the contract is on FOR basis and the factual matrix shows that sale is completed only at the buyer's premises, outward freight and allied delivery expenses form part of the assessable value; however, an interpretational dispute on valuation, without evidence of suppression or intent to evade, does not justify extended limitation or penalty.

---