Inclusion of Outward Freight in Assessable Value: CESTAT Allows CENVAT Credit Citing FOR Sale Basis [Read Order]

The Customs,Excise and Service Tax Appellate Tribunal (CESTAT) of Chandigarh Bench allowed the appeals filed by the assessee, holding that CENVAT credit was rightly claimed on outward freight included in the assessable value, as the goods were sold on a FOR (Free on Road) basis.

Montage Enterprises Pvt Ltd,appellant-assessee,   manufactured Printed Plastic Laminates under the Central Excise Tariff Act, 1985. They claimed benefits under Notification No. 56/2002-CE. Two show cause notices were issued for the periods March to May 2008 and December 2008 to March 2009.

The notices alleged that the assessee wrongly included freight in the assessable value, paid excess duty, and claimed excess refund on returned goods. It was also alleged that they took excess CENVAT credit. The adjudicating authority confirmed a demand of Rs. 2,41,683 with interest and imposed an equal penalty.

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The assessee appealed, and the Commissioner (Appeals) partially allowed the appeal. The Commissioner ruled that the demand related to returned goods was not justified since the appellant had taken CENVAT credit and paid duty on clearance, making them eligible for refund. However, the demand regarding freight was upheld. The appellant then filed the present appeals.

The assessee counsel said the order was wrong and should be canceled because it did not look at the facts and law properly. He said the department claimed the assessee included freight wrongly in the value, causing extra duty to be paid. The department also said the appellant increased the value to get more refunds.

The counsel said sales were made on an FOR basis, so the place of removal was the customer’s place, and freight up to there should be included in the value.He said this issue was already decided by higher courts in other cases.

The department’s representative disagreed and supported the order.

The two member bench comprising S.S.Garg(Judicial Member) and P.Anjani Kumar(Technical Member) considered the submissions from both parties and reviewed the record. It noted that the only issue was whether outward freight should be included in the assessable value.

The appellate tribunal found that the assessee sold goods on an FOR basis and included freight in the assessable value, which the department disputed. The CESTAT held that this issue was already settled by the Larger Bench of the Tribunal in M/s Ramco Cements Limited and by the Himachal Pradesh High Court in M/s Inox Air Products Pvt Ltd.

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The Himachal Pradesh High Court, after reviewing various Supreme Court judgments and the Larger Bench decision, ruled that in an FOR sale where freight is included in the value, the appellant was entitled to CENVAT credit on service tax. The tribunal referred to the CBIC circular dated 8.6.2018, which supported this view and was binding on the department.

The appellate tribunal also noted Supreme Court decisions that gave statutory status to Board instructions for uniform assessment practices. It observed that earlier cases involving FOR contracts supported this position and that similar pleas were accepted in related cases, including one involving the assessee.

Relying on these precedents, the tribunal held that the place of removal in an FOR sale is the customer’s premises, and freight charges included in the taxable value qualify for credit. It found the earlier order unjustified in denying this.

Therefore, the CESTAT set aside the impugned order and allowed the appellant’s appeals.

To Read the full text of the Order CLICK HERE

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