Central excise valuation excludes excess freight where removal is at the factory gate or bonded warehouse.

Where the place of removal was the factory gate or bonded warehouse, freight from that point to the buyer's premises was excluded from central excise assessable value, and excess freight recovered from buyers remained outside valuation even if it exceeded actual transport cost. Applying Baroda Electric Meters Ltd., the text states that differential freight was not includible and the related demand failed. It also states that price lists had been filed and approved, and in the absence of positive evidence of deliberate suppression or intent to evade duty, the extended demand and penalty based on suppression could not be sustained. The demand and penalty were therefore set aside.

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Issues: (i) Whether differential freight collected from buyers, over and above actual freight incurred, was includible in the assessable value for central excise duty when the place of removal was the factory gate or bonded warehouse. (ii) Whether the duty demand and penalty were sustainable on the allegation of suppression of facts.

Issue (i): Whether differential freight collected from buyers, over and above actual freight incurred, was includible in the assessable value for central excise duty when the place of removal was the factory gate or bonded warehouse.

Analysis: For the relevant period, the place of removal was the factory gate or the warehouse where goods were permitted to be stored without payment of duty. On that footing, the assessable value had to be determined at the place of removal, and freight from that point to the customer's premises was not includible. The fact that the amount recovered towards freight exceeded the actual expenditure did not change this position. The decision in Baroda Electric Meters Ltd. was also applied to hold that excess freight recovered by the manufacturer was not part of the assessable value.

Conclusion: The differential freight was not includible in the assessable value and the demand on that basis was not sustainable.

Issue (ii): Whether the duty demand and penalty were sustainable on the allegation of suppression of facts.

Analysis: The price lists had been filed under the applicable excise procedure and approved by the jurisdictional Assistant Commissioner. There was no positive evidence of deliberate suppression or of inflation of freight with intent to evade duty. In the absence of such evidence, invocation of the penal consequences and the extended demand on the ground of suppression could not be sustained.

Conclusion: The allegation of suppression was not established and the penalty and demand could not be upheld on that ground.

Final Conclusion: The duty demand and penalty were set aside, and the appeal succeeded.

Ratio Decidendi: Where freight is not part of the assessable value because the place of removal is the factory gate or bonded warehouse, any excess freight recovered from buyers is not includible in central excise valuation, and a demand based on suppression cannot stand without positive evidence of deliberate withholding of material facts.

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