FOR destination contracts require inclusion of delivery-related costs in assessable value when title and transit risk remain with the supplier.

Under FOR destination contracts, where the supplier retains title and transit risk until safe delivery at the buyer's premises, the buyer's premises constitute the place of removal. Freight, insurance, loading and unloading costs incurred up to that destination must therefore be included in assessable value and cannot be excluded as post-removal transportation. The notes further state that extended limitation and penalty apply where material contractual clauses showing destination-based sale and freight inclusion were not specifically disclosed, and the claimed bona fide belief lacks support from reasonable diligence, legal advice or departmental clarification. The resulting duty, interest and penalty remain enforceable.

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Issues: (i) Whether the FOR destination contractual terms made the buyer's premises the place of removal and required inclusion of freight, insurance, loading and unloading charges in assessable value; (ii) Whether the extended limitation period and penalty were invocable.

Issue (i): Whether the FOR destination contractual terms made the buyer's premises the place of removal and required inclusion of freight, insurance, loading and unloading charges in assessable value.

Analysis: The purchase orders made the supplier responsible for safe delivery, transit loss or damage, insurance, transport and unloading, and expressly retained ownership with the supplier until goods were delivered at the buyer's site in good condition. These terms established that sale was completed at destination rather than at the factory gate. Where the factory is not the place of removal, the transportation cost from the factory to the place of removal is not excludable under Rule 5.

Conclusion: Buyer's premises were the place of removal, and freight, insurance, loading and unloading charges incurred up to destination were includable in the assessable value, against the assessee.

Issue (ii): Whether the extended limitation period and penalty were invocable.

Analysis: The material contractual clauses demonstrating destination sale, retained ownership and inclusion of freight were not specifically disclosed, and the undervaluation emerged only upon detailed scrutiny of the purchase orders. No material showed that the asserted bona fide belief was founded on reasonable diligence, legal advice or departmental clarification. The non-disclosure established suppression resulting in short payment of duty.

Conclusion: The extended limitation period was validly invoked and penalty was sustainable, against the assessee.

Final Conclusion: The valuation was required to include all costs incurred up to delivery at the buyer's premises, and the duty liability with consequential interest and penalty remained enforceable.

Ratio Decidendi: Under an FOR destination contract where title and transit risk remain with the seller until delivery at the buyer's premises, that premises is the place of removal and all costs incurred up to delivery form part of assessable value.

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