Ex-factory sale valuation excludes separately charged freight and transit insurance from excise assessable value.

Where electric meters were sold on an ex-factory basis under separate contracts for transportation and transit insurance, freight and insurance were not part of the assessable value for excise duty. The transaction value under Section 4 of the Central Excise Act applied to the place of removal, and Rule 5 of the valuation rules excluded transport costs charged separately from that point to the buyer's destination. Delivery to the carrier under the contract was treated as delivery to the buyer, and transit insurance did not change the place of removal or the character of the sale. The excise demand based on adding freight and insurance was therefore unsustainable.

---

---

Issues: Whether freight and transit insurance charges were includible in the assessable value of electric meters for levy of excise duty.

Analysis: The supply arrangement consisted of separate contracts for sale of the meters and for transportation and transit insurance. The price was quoted on an ex-factory basis, while freight and insurance were shown separately and were not part of the price at the place of removal. Under Section 4(1)(a) of the Central Excise Act, 1944, transaction value is taken where goods are sold for delivery at the time and place of removal, and Section 4(3)(c) defines the place of removal. Rule 5 of the Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000 excludes the cost of transportation from the place of removal to the place of delivery where it is charged separately. Delivery to the carrier under the contract was treated as delivery to the buyer, and arranging transit insurance did not alter the character of the sale or shift the place of removal to the buyer's premises.

Conclusion: Freight and transit insurance charges were not includible in the assessable value.

Final Conclusion: The excise duty demand based on addition of freight and insurance to the value of the goods was unsustainable, and the assessee succeeded.

Ratio Decidendi: Where goods are sold on an ex-factory basis and transportation and transit insurance are separately contracted and separately charged, the cost of transport from the place of removal to the buyer's destination is excluded from assessable value under the valuation rules.

---