Separate freight deduction allowed where transportation charges are shown separately, even if the amount is estimated rather than exact.

Rule 5 permits deduction of transportation cost from assessable value where freight is shown separately in the invoice. The decisive requirement is that the freight element is separately indicated and represents the amount recovered from the buyer; it is not necessary that the freight figure be contemporaneously exact at the time of clearance. Deduction cannot be denied merely because the freight is estimated or averaged, so long as the price is not inclusive of freight and the separate recovery reflects the freight charged. A departmental circular did not prohibit deduction in such circumstances, and the freight deduction was upheld in favour of the assessee.

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Issues: Whether deduction of freight was admissible under the valuation rules where transportation charges were shown separately in the invoice on the basis of approximate freight and duty had been paid on any excess recovery over actual freight.

Analysis: Rule 5 permits deduction of the cost of transportation where such charges are shown separately. The decisive requirement is that the transportation element is separately indicated and represents the amount recovered from the buyer towards freight; there is no further requirement that only a contemporaneously exact freight figure must be shown in the invoice. Once freight is separately charged and the price is not inclusive of freight, the deduction is not barred merely because the amount is an estimated or averaged figure. The departmental circular also did not specifically prohibit deduction in such a situation.

Conclusion: Deduction of freight could not be denied, and duty was not demandable on the entire freight amount; the finding was in favour of the assessee.

Ratio Decidendi: Where transportation charges are shown separately and the amount recovered is the freight element actually charged from the buyer, deduction cannot be refused merely because the freight is estimated rather than exactly computed at the time of clearance.

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