Freight and insurance in FOR destination contracts are excluded from transaction value when sale concludes at the factory.

Freight and insurance charges in a FOR destination contract were excluded from transaction value where the sale was completed at the manufacturer's factory before clearance. Under Section 4 of the Central Excise Act, transaction value covers amounts payable in connection with the sale, and the place of removal and passing of property determine whether post-sale expenses form part of assessable value. Applying Section 19 of the Sale of Goods Act, the sale was treated as concluded at the factory on contractual approvals and verifications, so freight did not alter valuation. The charges were therefore not includible in the transaction value.

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Issues: Whether freight and insurance charges in a FOR destination contract were includible in the transaction value of excisable goods when the sale was completed at the manufacturer's factory before clearance.

Analysis: The relevant inquiry was whether the amount formed part of the price up to the stage when the sale was completed. Under Section 4(3)(d) of the Central Excise Act, 1944, transaction value includes amounts payable in connection with the sale, while Section 4(3)(c) defines the place of removal. The Court also relied on Section 19 of the Sale of Goods Act, 1930 to determine when property in the goods passed. On the facts, the contractual verifications and approvals were completed at the manufacturer's factory and the sale stood concluded before clearance, so freight merely because the contract was FOR destination did not alter the position.

Conclusion: Freight and insurance charges were not includible in the transaction value. The assessee's appeal before the Commissioner (Appeals) was rightly allowed and the Revenue's challenge failed.

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