Freight charges must be included in transaction value for excise duty when goods sold on FOR basis under Section 4

CESTAT New Delhi upheld inclusion of freight charges in transaction value for central excise duty where goods were sold on FOR basis. Following SC precedents in Roofit Industries and Emco Ltd, the tribunal determined that since ownership transferred at buyer's premises rather than factory gate, all expenses including freight collected from customers must be included in assessable value under Section 4. The tribunal rejected appellant's reliance on rescinded circulars, noting Circular 1065/4/2018-CX specifically addressed FOR contracts as exceptions. Penalty under Section 11AC was upheld at 25% for suppression of facts with intent to evade duty, as non-payment was discovered during departmental audit despite settled law from Ultra Tech Cement case.

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Issues Involved:
1. Inclusion of freight charges in the transaction value for central excise duty.
2. Determination of the 'place of removal' for the purpose of valuation.
3. Applicability of rescinded circulars.
4. Entitlement to CENVAT credit on Goods Transport Agency (GTA) services.
5. Imposition of penalty under Section 11AC of the Central Excise Act.

Detailed Analysis:

1. Inclusion of Freight Charges in the Transaction Value for Central Excise Duty:
The primary issue was whether the freight charges paid for transporting goods from the appellant's premises to the customer's premises on a FOR (Free on Rail/Road) basis should be included in the assessable value of goods for the purpose of charging central excise duty. The Tribunal noted that the sale took place at the buyer's premises, making it the 'place of removal.' Consequently, all expenses incurred and collected by the appellant until the buyer's premises should be part of the assessable value under Section 4 of the Central Excise Act.

2. Determination of the 'Place of Removal' for the Purpose of Valuation:
The Tribunal referred to multiple Supreme Court judgments, including CCE vs. Roofit Industries Ltd. and CCE, Mumbai-III vs. Emco Ltd., which established that the 'place of removal' is where the ownership and risk transfer to the buyer. In this case, the ownership and risk remained with the appellant until the goods were delivered to and accepted by the buyer. Therefore, the buyer's premises were deemed the 'place of removal' for valuation purposes.

3. Applicability of Rescinded Circulars:
The appellant argued that the impugned order was based on rescinded circulars dated 20.10.2014 and 23.08.2007. The Tribunal clarified that only specific clauses of the 2007 circular were rescinded and not the entire circular. The Tribunal also noted that the 2018 circular provided exceptions for FOR contracts, which applied to this case, making the reliance on the rescinded circulars irrelevant.

4. Entitlement to CENVAT Credit on Goods Transport Agency (GTA) Services:
The Tribunal referred to the Supreme Court's decision in CCE & ST vs. Ultra Tech Cement, which held that CENVAT credit on GTA services used for transporting goods from the 'place of removal' to the buyer's premises was not admissible after the 2008 amendment. The amendment changed the definition of 'input service' to include services only 'up to' the place of removal, not beyond. Therefore, the appellant was not entitled to claim CENVAT credit for the outward transportation of goods.

5. Imposition of Penalty under Section 11AC of the Central Excise Act:
The Tribunal upheld the imposition of a penalty under Section 11AC, noting that the appellant had suppressed facts with the intent to evade payment of central excise duty. The non-payment was discovered during a departmental audit, indicating deliberate suppression of the value of excisable goods. The penalty was reduced to 25% by the Commissioner (Appeals) and was affirmed by the Tribunal.

Conclusion:
The Tribunal dismissed the appeal, affirming the inclusion of freight charges in the assessable value for central excise duty, the determination of the buyer's premises as the 'place of removal,' and the imposition of penalty under Section 11AC. The Tribunal relied on Supreme Court judgments and clarified the applicability of circulars, ultimately ruling against the appellant.

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