CESTAT Quashes ₹1.08 Cr IGST Demand on Limitation, Upholds Inclusion of Freight & Insurance in Assessable Value [Read Order]

The Customs, Excise and Service Tax Appellate Tribunal (CESTAT) Kolkata Bench has quashed a demand of ₹1.08 crore towards IGST on the ground of limitation while upholding the legal requirement of including freight and insurance charges in the assessable value under the Customs Valuation Act, 2007

The appellant RimjhimIspat Ltd.had been engaged in the business of manufacture of iron and steel goods and he had brought the goods viz. Ferro Silicon from Bhutan via Jaigaon Land Customs Station. The goods were valued based on FOB price without taking into consideration the freight and insurance cost.

The Department had made a claim regarding the under-payment of IGST during July 2017 to April 2018 amounting to ₹1.08 crores. It was contended by the assessee that because of a special agreement between India and Bhutan there was no actual freight and insurance cost as the point of export/import was the same for India and Bhutan.

Therefore, the FOB value itself is equivalent to the CIF value.According to Rule 10(2) if the freight and insurance costs were not ascertainable then there must be an inclusion of 20% and 1.125% respectively.

The Tribunal comprising R. Muralidhar (Judicial Member) and Rajeev Tandon (Technical Member). held that the appellant failed to substantiate its claim that FOB value equaled CIF value due to lack of documentary evidence. It observed that invoice terms indicated goods were dispatched at buyer’s risk, supporting inclusion of freight and insurance.

The Bench also found that the importer had clearly declared FOB value and indicated NIL freight in the Bills of Entry. In the absence of suppression or wilful misstatement, invocation of extended period was held unsustainable. The Tribunal also noted revenue neutrality and absence of intent to evade duty.

The Tribunal allowed the appeal setting aside the impugned order on limitation. However, it upheld that on merits, addition of freight and insurance to FOB value is legally justified under Rule 10(2) of the Customs Valuation Rules, 2007.

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