Freight Charges are Inclusive in Sale of Goods on FOR Basis: CESTAT Upholds Refund as Value of Goods Assessed Correctly and Duty Paid [Read Order]

The Kolkata bench of the Customs, Excise & Service Tax Appellate Tribunal (CESTAT) upheld the refund as the value of goods was assessed correctly and duty was paid. It was observed that the freight charges are included in the sale of goods on a Freight on Road(FOR) basis. If goods are ordered on FOR basis, the goods will be transported by road and the client does not need to pay the freight cost. The goods will be transported from the supplier to the client without any transportation charges.

M/s. Satya Megha Ispat Private Limited, the appellant is located in the state of Meghalaya and engaged in the manufacture of Ferro Silicon, MS Ingot and Runner& Risers. The appellant unit was located in the notified area declared under Notification No.32/99-CE dated 08.07.1999 and was eligible for a grant of exemption by way of refund of duty paid out of Account Current for a period not exceeding 10 years from the date of its commercial production.

The appellant used to sell their finished goods to their customers at FOR price which is inclusive of all expenses up to the place of delivery for which the appellant has valued the price of the finished goods including the freight element in the selling price. The buyer is not paying the freight separately and the price fixed by the appellant is the sole consideration for determination of the assessable value of the finished goods.

The appellant paid the duty and claimed a refund during the period from September 2005 to June 2010. All duty was paid in cash. A show cause notice was issued to the appellant alleging that the appellant has erroneously taken the refund of Rs.36,18,110/- by way of overvaluation of the goods by including freight charges in the assessable value in violation of Rule 5 of Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000.

The show cause notice was adjudicated and demand on account of the erroneous refund was confirmed along with interest and a penalty was also imposed. On appeal, the Commissioner(Appeals) also confirmed the adjudication order.

It was submitted by the appellant that the freight charges are not shown separately in the invoice and the appellant is selling goods to their buyers on FOR basis and freight charges are included in the agreed price with the buyers. Further stated that they have valued the goods correctly and paid duty thereon and whatever duty they have paid in cash have sought refund thereof.

A two-member bench comprising Shri Ashok Jindal, Member(Judicial) and Shri K Anpazhakan, Member(Technical)  observed that the appellant has correctly assessed their goods and paid duty thereon in cash and rightly taken the refund thereof. The CESTAT set aside the impugned order and allowed the appeal with consequential relief.

To Read the full text of the Order CLICK HERE

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