Freight charges must be included in the transaction value for excise duty assessment where the sale is on FOR basis.

ORDER No. 50197/2026 JUSTICE DILIP GUPTA:

The department has filed this appeal to assail the order dated 08.02.2019 passed by the Commissioner (Appeals) of Central Excise & CGST, Jaipur, the Commissioner (Appeals). This order allows the appeal filed by the respondent M/s Veekay Plast, the respondent

2. The order dated 03.11.2017 passed by the Additional Commissioner confirmed the demand of duty and ordered for recovery with interest and penalty.

3. Case has been called out but no one has appeared on behalf of the respondent despite service of notice on 25.09.2025.

4. It transpires from the records that the respondent had not included the value of freight charges in the transaction value of the goods even though the goods were supplied on FOR basis. The finding recorded by the Additional Commissioner for confirming the demand is as follows:

“11.3 As per the PO received from M/s 181W Infrastructure Pvt. Ltd., the Scope of Work also included transportation of material to site including transit insurance.

11.4 As per the delivery terms of the PO with M/s Larsen & Toubro Ltd. the goods shall be delivered at their site stores. I also find that the net rates of the goods are inclusive of freight charges.

11.5 In the Supply Order received from M/s Western Coalfields Ltd., I find that the prices are FOR destination basis and the Clause no. 5 says that the transportation by road shall be arranged by the assessee on freight paid basis. In Clause no. 10, I further find that the final inspection shall be carried out by the consignee at destination/stores.

11.6. It is thus clear from the terms and condition as contained under the POs, which are available on record, that the buyers have placed the orders as FOR/ destination basis, i.e. it was the responsibility of the assessee to deliver the goods at the buyer's destination. It is evident that the buyers require the supplier to deliver the goods at the destination of their factory gate and have asked them to transport the goods to their destination. The buyers will make payments to them only on successful delivery of the required material at the required destination and any discrepancy would be to the account of the supplier i.e. the assessee. In this situation, the assessee's contentions that the contract prices were ex works is not correct and therefore, not acceptable. The delivery of the goods at the buyers premises was responsibility of the assessee and the delivery of the goods cannot be considered to be at the factory gate or Ex-factory as being claimed.

(emphasis supplied)

5. The Additional Commissioner held that the factory gate would not be the place of delivery since the purchase orders mention search delivery of the goods at the premises of the buyer.

6. The Commissioner (Appeals), however, allowed the appeal after noticing that even if the contract was on FOR terms, freight was separately mentioned in the contract. It was for this reason that the Commissioner (Appeals) held that the cost of the transportation from the place of removal upto place of delivery of the goods had to be excluded.

7. The Commissioner (Appeals) was not justified in excluding the cost of transportation from the transaction value for this reason. The cost of transportation was included in the contract amount and therefore, was required to be included in the transaction value.

8. The contention of the department is that since the „place of removal‟ is the premises of the buyer, the cost of transporta