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Issues: Whether freight charges recovered separately through debit notes were includible in the assessable value by treating the EPD division at Chennai as the place of removal, and whether duty, penalty and interest could be sustained on that basis.
Analysis: The goods were dispatched directly from the factory to the ultimate customer's site, and the invoices showed that freight and insurance were borne separately. On the evidence in the invoices and the record, the sale was completed at the factory gate and not at the EPD division. The place of removal could not be shifted to the buyer's destination merely because the order was routed through a project division. Rule 5 of the Central Excise Valuation Rules, 2000 excludes transportation from the place of removal to the place of delivery, and the governing valuation principles, as clarified in the Board circular and later decisions, do not permit inclusion of freight where the buyer bears the transportation cost after clearance from the factory.
Conclusion: The freight element was not includible in the assessable value, and the demand of duty, penalty and interest could not be sustained.
Ratio Decidendi: For central excise valuation, freight and transportation expenses are excludible when the goods are sold at the factory gate and the buyer bears the transportation cost, because the buyer's premises cannot be treated as the place of removal absent evidence of sale from that place.
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