Equalized freight separately shown in invoices remains deductible from assessable value under excise valuation rules.

Freight charged separately in addition to the price and attributable to transportation from the place of removal to the place of delivery is excludible from assessable value under Rule 5, even where it is computed on an equalized basis. The valuation scheme focuses on actual transportation cost as a deductible element, and averaging the freight across sales does not change its character when it is separately shown in the invoices. On that basis, freight and transit insurance so charged were deductible, and the demand, interest and penalty founded on disallowance of the exclusion were unsustainable.

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Issues: Whether freight and transit insurance charged on an equalized basis and shown separately in the invoices could be excluded from the assessable value under Rule 5 of the Central Excise (Valuation) Rules, 2000.

Analysis: Rule 5 permits exclusion of the actual cost of transportation from the place of removal to the place of delivery where such cost is charged to the buyer in addition to the price of the goods and shown separately in the invoices. The dispute turned on whether the expression "actual cost of transportation" excludes only freight worked out with reference to the exact destination, or also covers freight charged on an averaged or equalized basis. The reasoning accepted that the statutory scheme is concerned with transportation cost as a deductible element, and that equalized freight, when separately charged in addition to the price, does not cease to be freight merely because it is averaged across sales. The earlier and later valuation principles were treated as supporting the same conclusion.

Conclusion: Equalized freight shown separately in the invoices was deductible from the assessable value. The demand, interest and penalty based on disallowance of such exclusion were unsustainable.

Ratio Decidendi: Freight charged separately in addition to the price and attributable to transportation from the place of removal to the place of delivery is excludible from assessable value even when computed on an equalized basis.

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