The Chandigarh Bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) ruled that when goods are sold on a Free on Road (FOR) basis, the buyer’s premises is treated as the place of removal, and the cost of freight forms part of the assessable value for excise duty.

Jain Metal Works, the appellant, manufactured copper ingots and cleared them on payment of excise duty by availing Notification No. 56/2002-CE dated 14 November 2002.

The audit objected that the appellant had wrongly included freight in the assessable value, leading to an alleged excess refund of Rs. 10,09,684. A show cause notice was issued alleging inflation of assessable value to claim a higher refund.

The appellant’s counsel argued that under Rule 5 of the Central Excise Valuation Rules, when the sale is on an FOR basis, ownership of goods remains with the seller until delivery to the buyer, and the buyer’s premises becomes the place of removal. The appellant’s counsel also argued that freight incurred up to that point forms part of the assessable value.

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The revenue counsel argued that outward freight could not be included in assessable value and that the buyer’s premises could not be treated as the place of removal.

The bench comprising S.S. Garg (Judicial Member) and P. Anjani Kumar (Technical Member) observed that when goods are sold on an FOR basis, the seller retains ownership until delivery, and the place of removal is the buyer’s premises.

The tribunal explained that freight charges are rightly includable in the assessable value, and duty paid on such value is proper. It also pointed out that the refund sanctioned earlier had attained finality and could not be reopened under Section 11A of the Central Excise Act. The appeal was allowed with consequential relief.