CESTAT Ahmedabad: Freight, Insurance Includable in Assessable Value When Sale is at Buyer’s Premises

April 7, 2026 : The Ahmedabad Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has upheld the inclusion of freight and insurance charges in the assessable value of goods where delivery is made at the buyer’s premises, dismissing the appeal filed by Nishant Organics Private Limited.

The dispute arose following an audit which revealed that the appellant, engaged in manufacturing aromatic chemicals, had collected freight and insurance charges for delivering goods to customers’ premises but excluded these amounts from the assessable value for central excise duty. A show cause notice dated 21 August 2019 demanded duty of ₹2.69 lakh along with interest and penalty. The demand was confirmed by the adjudicating authority and subsequently upheld by the Commissioner (Appeals).

Before the Tribunal, the appellant argued that such charges were mere reimbursements and that sales were on an ex-factory basis. Reliance was placed on judicial precedents, including rulings of the Supreme Court, to contend that freight and insurance are not includable where delivery occurs at the factory gate.

Rejecting these submissions, the Tribunal found that the invoices clearly stipulated “door delivery” and showed separate recovery of freight and insurance charges. The terms of delivery and payment indicated that ownership and risk in the goods remained with the appellant until delivery at the buyer’s premises.

Interpreting Section 4 of the Central Excise Act, 1944 and the concept of “place of removal,” the Tribunal held that where sale is completed at the buyer’s premises, all costs incurred up to that point form part of the transaction value. It relied on settled principles laid down by the Supreme Court, particularly in cases like CCE v. Roofit Industries Ltd., to conclude that transportation, insurance, and related charges are includable when ownership transfers at the destination.

The Tribunal distinguished the precedents cited by the appellant, noting that those cases involved either ex-factory sales or separate contractual arrangements showing that transportation was undertaken on behalf of the buyer. In the present case, no such evidence existed.

On limitation, the Tribunal upheld invocation of the extended period, observing that the non-inclusion of freight and insurance charges was detected only during audit and was not disclosed in statutory returns. The penalty imposed under Section 11AC was also sustained, though the appellant was granted the statutory option to pay a reduced penalty of 25% subject to compliance.

Accordingly, the Tribunal dismissed the appeal and affirmed the order of the Commissioner (Appeals).

Case Title: Nishant Organics Pvt Ltd v. CCE & ST, Vadodara-I
Case No.: Excise Appeal No. 10505 of 2020-DB