Freight and Insurance Included in Assessable Value for FOR Destination Sales: CESTAT [Read Order]

The Hyderabad Bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) ruled that in cases of FOR (Free on Road) destination sales, the cost of freight and insurance must be included in the assessable value, as the sale concludes at the buyer’s premises, not the factory gate.

Pawan Power & Telecom Ltd, the appellant, is a manufacturer of PVC/HDPE/XLPE insulated and sheathed aluminium copper cables and AAA conductors. The goods were supplied to various electricity boards under contractual purchase orders, which, according to the department, obligated the appellant to bear costs such as packing, forwarding, freight, insurance, and unloading up to the point of delivery.

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The department issued multiple show cause notices demanding duty on the ground that the sales were not on an ex-works basis, and that ownership of the goods remained with the appellant until delivery was completed at the customer’s site.

The appellant’s counsel argued that the sales were on an ex-works basis, with the price fixed at the factory gate. They argued that freight was billed separately as a commercial arrangement, not as a condition of sale, and that insurance charges, although contractually mentioned, were not actually incurred due to short delivery distances.

The department’s counsel argued by referencing various clauses in the purchase orders, especially those from Eastern Power Distribution Company. These clauses stated that prices were inclusive of excise duty, freight, and insurance; payment was linked to receipt of goods in acceptable condition at the buyer’s store; and ownership remained with the appellant until goods were received at destination.

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The two-member bench comprising A.K. Jyotishi (Technical Member) and Angad Prasad (Judicial Member) observed that the appellant argued the existence of a separate ex-works price and denial of insurance costs, but the contract terms showed that both freight and insurance were contractually included and the buyer’s premises was the final point of acceptance.

The tribunal further observed that the risk and responsibility of the goods rested with the appellant until delivery and found that this was not an ex-works sale but a FOR destination sale, and the assessable value must include the costs incurred till the point of delivery.

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The tribunal distinguished the Ispat Industries precedent, holding that it applied only in specific factual contexts, whereas in the present case, the facts aligned more closely with the Roofit Industries and Emco Ltd judgments.

The tribunal ruled that the place of removal was the buyer’s premises and that freight and insurance costs were rightly includable in the assessable value. Finding no infirmity in the Commissioner (Appeals)’s orders, the tribunal upheld the demand and dismissed the appeals.

To Read the full text of the Order CLICK HERE

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Pawan Power & Telecom Ltd vs Commissioner of Central Tax , 2025 TAXSCAN (CESTAT) 526 , Excise Appeal No. 30076 of 2016 , 16 May 2025 , Shri Lalit Mohan Chandna , Shri V.R. Pavan Kumar