Ex-works freight and factory-gate removal: valuation excludes post-removal freight, and demands cannot travel beyond the show cause notice.

Freight charges for ex-works clearances, separately recovered from buyers, were held not includible in assessable value where goods were booked after factory clearance and the railway receipt stood in the buyer's name, making the factory gate the place of removal. Freight beyond that point did not form part of central excise valuation. The adjudicating authority's demand was also unsustainable because it proceeded on a factual basis different from the show cause notice, moving from ex-works clearances to stockyard clearances. The demand was therefore set aside and the matter remanded for fresh adjudication on the correct basis of removal and valuation.

---

---

Issues: (i) Whether freight charges incurred for ex-works clearances and recovered separately from buyers were includible in the assessable value for central excise duty; (ii) Whether the adjudicating authority could sustain a demand on a factual basis different from the show cause notice.

Issue (i): Whether freight charges incurred for ex-works clearances and recovered separately from buyers were includible in the assessable value for central excise duty.

Analysis: The disputed goods were booked through railways after clearance from the factory and the railway receipts stood in the buyer's name. The railway receipt was treated as a document of title and delivery to the carrier was treated as delivery to the buyer. On that footing, the sale was held to take place at the factory gate, making the factory the place of removal. Where the place of removal is the factory gate, freight beyond that point is not required to be added to assessable value.

Conclusion: Freight charges for the disputed ex-works clearances were not includible in the assessable value.

Issue (ii): Whether the adjudicating authority could sustain a demand on a factual basis different from the show cause notice.

Analysis: The show cause notice proceeded on the basis of ex-works clearances covered by the CAG objection, whereas the adjudicating authority decided the matter as though it concerned stockyard clearances and treated the stockyard as the place of removal. Since the order was founded on a case different from the one set out in the notice, the demand could not be sustained.

Conclusion: The adjudicating order was unsustainable because it travelled beyond the case made in the show cause notice.

Final Conclusion: The impugned demand was set aside and the matter was sent back for fresh adjudication in accordance with the observations on the correct basis of removal and valuation.

Ratio Decidendi: For central excise valuation, freight is not includible where the sale is complete at the factory gate and the place of removal is not the buyer's premises, and an adjudication cannot be upheld if it is founded on a factual case different from the show cause notice.

---