The Allahabad Bench of the Customs, Excise & Service Tax Appellate Tribunal (CESTAT) has set aside a central excise demand holding that while the issue of including freight charges in the assessable value for FOR destination sales was decided against the assessee on merits, the demand itself was barred by limitation because the Department could not invoke the extended limitation period after it was already aware of the relevant facts through earlier proceedings.
The bench of Justice P.K. Choudhary (Judicial Member) and P. Anjani Kumar (Technical Member) has observed that where goods are sold on FOR destination basis, the buyer’s premises become the place of removal, and therefore transportation charges up to that point are includible in the assessable value for levy of excise duty.
The appellant is engaged in the manufacture of Pre-fabricated Concrete Cement (PCC) Poles falling under Central Excise Tariff Heading 6810 99 90. The company supplied its products both through factory-gate sales and on FOR destination basis, where the goods were delivered directly to customers’ premises.
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The Department conducted an audit and found that the appellant had not included transportation charges incurred from the factory to buyers’ premises while determining the assessable value for payment of central excise duty in cases involving FOR destination sales. According to the Department, this resulted in short payment of excise duty.
A Show Cause Notice dated 16 March 2020 was issued invoking the extended period of limitation, demanding differential duty along with interest and proposing an equivalent penalty under Section 11AC of the Central Excise Act, 1944. The adjudicating authority confirmed the demand of ₹69.53 lakh, along with interest and penalty, and the Commissioner (Appeals) subsequently upheld the order.
Before the Tribunal, the appellant argued that the buyer’s premises could never constitute the “place of removal”, relying upon the Supreme Court’s judgment in Commissioner of Customs & Central Excise v. Ispat Industries Ltd.
The appellant also challenged the invocation of the extended limitation period, submitting that there was no suppression of facts since all returns had been regularly filed and the Department had already examined the very same issue in earlier proceedings.
It further contended that exclusion of freight charges would also keep its turnover within the prescribed threshold for claiming SSI exemption, making denial of the exemption unsustainable. A turnover computation placed before the Tribunal showed that after excluding freight and excise duty, the gross value of clearances remained below the ₹4 crore threshold for the relevant year. The financial details were reproduced by the Tribunal in a table on page 5 of the order.
The department maintained that where goods are sold on an FOR destination basis, the buyer’s premises become the place of removal, making freight charges includible in the assessable value for central excise purposes. Accordingly, it argued that the demand had been correctly confirmed.
Consequently, the Tribunal observed that the issue on merits stood against the assessee.
However, the Tribunal drew a clear distinction between the merits of the demand and its enforceability.
It noted that an earlier Show Cause Notice dated 9 July 2018, covering an overlapping issue relating to inclusion of freight charges, had already been issued by the Department. That earlier dispute had ultimately been decided in favour of the appellant by the Tribunal in February 2026, which had held that due to conflicting judicial decisions on the concept of “place of removal”, no mala fide intention could be attributed to the assessee.
Since the Department had already investigated the same factual issue in the earlier proceedings, it could not subsequently allege suppression of facts for invoking the extended limitation period in the present case.
Relying upon the Supreme Court’s decision in Nizam Sugar Factory v. Collector of Central Excise, the Tribunal held that once all relevant facts are already within the knowledge of the Department, the same facts cannot again be treated as suppression merely to justify invocation of the extended period of limitation.
The Tribunal observed that the impugned Show Cause Notice dated 16 March 2020 sought to recover duty for the period April 2015 to March 2017.
It held that the entire demand fell beyond the normal limitation period, and since the Department was not entitled to invoke the extended limitation period, the demand was legally unsustainable.
The Tribunal set aside the impugned order and allowed the appeal with consequential relief.
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