Transit insurance recoveries above actual premium were excluded from assessable value under central excise valuation principles.

Differential transit insurance recovered from buyers at a standard rate, above the actual premium paid, was held not includible in the assessable value of manufactured goods for central excise duty. The only supporting material for the demand was a statement suggesting excess recovery covered insurance of raw materials and finished stock, but the insurance policy for the relevant period showed coverage only for transit from the factory to buyers. The principle applied to equalised freight was extended to equalised insurance, so mere recovery in excess of actual expenditure did not justify value addition. The duty demand and impugned orders were therefore set aside in favour of the assessee.

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Issues: Whether the differential amount collected from buyers towards transit insurance at a standard rate, over and above the actual insurance premium paid, was includible in the assessable value of the manufactured goods for central excise duty.

Analysis: The only material supporting the duty demand was a statement suggesting that the excess collection was used for insurance of raw materials and finished stock. The appellant produced the insurance policy for the relevant period, which showed coverage only for transit of the goods from the factory to the buyers, and not for stock or raw materials. The reasoning applied to equalised freight was held applicable to equalised insurance as well, so a standard recovery in excess of actual expenditure did not by itself justify addition to value.

Conclusion: The differential amount collected as transit insurance was not includible in the value of the goods. The demand and the impugned orders were unsustainable and were set aside in favour of the assessee.

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