Factory-gate sales and passing of title: freight and transit insurance excluded from assessable value under s. 4; duty demands set aside.

The dominant issue was whether freight and transit insurance were includible in assessable value under s. 4 of the Central Excise Act, 1944, turning on the "place of removal" and when property in goods passed. Applying ss. 20-24, especially s. 23 of the Sale of Goods Act, the Tribunal held that unconditional appropriation and delivery for transmission without reserving disposal ordinarily transfer property, and the buyer's insistence on transit insurance indicated that title had already passed, with the seller's transit risk being only an insurable interest. The 10% payment after approval was treated as a condition subsequent, not postponing sale. Consequently, the sale occurred at the factory gate; freight and transit insurance were excluded; differential duty demands were set aside and appeals allowed with consequential relief.

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Issues: Whether, for the purpose of determining the place of removal under Section 4(4)(b) of the Central Excise Act, 1944, the transfer of property in the goods occurred at the factory gate (ex-works) or at the buyer's premises, and consequently whether freight and transit insurance charges are includible in the assessable value.

Analysis: The issue turns on the time at which property in specific goods passes to the buyer under the Sale of Goods Act, 1930 and the statutory concept of "place of removal" under Section 4(4)(b) of the Central Excise Act, 1944. Relevant rules include Section 19 (intention of parties), Section 23 (appropriation of goods to contract and delivery to a carrier without reserved right of disposal), Section 24 (goods sent on approval), Section 26 (risk prima facie follows property subject to agreement) and Section 39 (delivery to carrier deemed delivery to buyer). Factual elements establishing unconditional appropriation and transfer of possession include inspection and identification by buyer's representative at the factory, marking of goods in buyer's name, separate invoicing showing ex-works price and separate freight/insurance contracts, consignor shown as seller and consignee as buyer on transport receipts, and delivery to carrier without reservation of right of disposal. Where the contract requires the seller to insure transit, that obligation indicates allocation of risk but does not necessarily prevent passage of property; parties can separate risk from title by agreement. A contractual clause making final payment conditional on later approval, when the goods have already been appropriated and delivered to the carrier without reserved disposal, operates as a condition subsequent and does not suspend the passing of property.

Conclusion: The transfer of property occurred at the factory gate on appropriation and delivery to the carrier; accordingly the place of removal is the factory gate and freight and transit insurance are not includible in the assessable (normal) value. The appeals are allowed in favour of the assessee.

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