Freight recovered separately is excluded from assessable value in ex-warehouse sales, while depot valuation needs factual verification.

Freight separately recovered in ex-warehouse sales to other oil marketing companies was excluded from assessable value because the clearances were on delivery terms and transportation cost was reimbursed separately; the demand on that count was set aside. For stock transfers to depots, valuation had to follow contemporaneous depot price principles under Rule 7, so any freight element depended on whether it was already embedded in the depot price. As the necessary factual verification had not been completed, the depot-transfer issue was remanded for de novo examination.

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Issues: (i) whether freight recovered separately from buyers in ex-warehouse sales to other oil marketing companies was includible in the assessable value; and (ii) whether, in respect of stock transfers to depots, further freight could be added when valuation was required to be done on the basis of contemporaneous depot price.

Issue (i): whether freight recovered separately from buyers in ex-warehouse sales to other oil marketing companies was includible in the assessable value

Analysis: The clearances to other oil marketing companies were on ex-warehouse basis and the freight was arranged only as a delivery , with reimbursement taken separately from the buyers. On the sample invoices, freight did not form part of the transaction value. Under Rule 5 of the Central Excise (Determination of Price of Excisable Goods) Rules, 2005, transportation cost up to the place of delivery is excluded where the sale is for delivery at a place other than the place of removal.

Conclusion: Freight recovered separately was not includible, and the demand on this count was set aside in favour of the assessee.

Issue (ii): whether, in respect of stock transfers to depots, further freight could be added when valuation was required to be done on the basis of contemporaneous depot price

Analysis: For depot transfers, valuation had to be made under Rule 7 of the Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000 on the basis of the normal transaction value at or about the same time from the depot. This meant the depot price would ordinarily include the transportation element from the warehouse to the depot. The appellant's claim was that such freight was already built into the depot price, but the verification directed earlier had not been carried out. In the absence of the necessary factual verification, the issue could not be finally concluded on merits.

Conclusion: The matter on depot transfers was remanded for verification, with no final finding on the inclusion of further freight at this stage.

Final Conclusion: The demand was deleted for ex-warehouse sales to other oil marketing companies, while the dispute concerning depot transfers was sent back for de novo verification.

Ratio Decidendi: Where sales are ex-warehouse and freight is separately reimbursed, transportation cost is excluded from assessable value; and depot valuation under Rule 7 must reflect the contemporaneous depot price, subject to factual verification of whether freight is already embedded in that price.

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