Place of removal and transit insurance: freight becomes part of assessable value, extended limitation applies, and penalty remains mandatory.

Where goods remained insured in the manufacturer's name until delivery at the buyer's premises, that premises was treated as the place of removal for valuation, and freight and insurance charges were includible in the assessable value. Non-disclosure of the destination sale arrangement and transit insurance supported invocation of the extended limitation period under the Central Excise Act. Section 11AC was treated as mandatory in principle, so reduction of the penalty was not justified. The discussion therefore confirms that destination-based sale arrangements can affect assessable value, limitation, and penalty exposure in central excise valuation disputes.

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Issues: (i) whether freight and insurance charges were includible in the assessable value on the footing that the buyer's premises constituted the place of removal; (ii) whether the extended period of limitation could be invoked on the ground of suppression of material facts; and (iii) whether the penalty imposed under Section 11AC could be reduced.

Issue (i): whether freight and insurance charges were includible in the assessable value on the footing that the buyer's premises constituted the place of removal.

Analysis: The goods were insured by the assessee till delivery at the buyers' premises, and the insurance policy stood in the assessee's name. On that basis, the property in the goods was treated as having continued with the assessee during transit, so that sale was completed only at the destination. The definition of "place of removal" under Section 4(4)(b) of the Central Excise Act, 1944 was applied to hold that where sale takes place at the buyer's premises, that premises becomes the relevant place of removal for valuation.

Conclusion: Yes. Freight and insurance charges were includible in the assessable value, and the duty demand on that basis was sustainable.

Issue (ii): whether the extended period of limitation could be invoked on the ground of suppression of material facts.

Analysis: The assessee did not establish disclosure to the Department that the sale would take place only at the destination, and the insurance documents showing transit coverage were not made available. On those facts, the case was treated as one warranting recourse to the proviso to Section 11A of the Central Excise Act, 1944.

Conclusion: Yes. The extended period of limitation was rightly invoked.

Issue (iii): whether the penalty imposed under Section 11AC could be reduced.

Analysis: Section 11AC of the Central Excise Act, 1944 was treated as prescribing a mandatory penalty, while leaving discretion only as to the quantum within the permissible limit. The reduction of penalty by the appellate authority was therefore not accepted.

Conclusion: No. The penalty reduction was not justified and the original penalty-related order was upheld.

Final Conclusion: The duty demand, limitation objection, and penalty challenge were decided against the assessee, and the Revenue's challenge to the reduced penalty also failed, leaving the impugned order substantially intact.

Ratio Decidendi: Where excisable goods are insured by the manufacturer during transit and sale is completed only on delivery at the buyer's premises, that premises is the place of removal for valuation purposes, and transit freight and insurance form part of the assessable value; concealment of such facts justifies the extended limitation period, and penalty under Section 11AC remains mandatory in principle.

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