Ex-factory freight charges separately recovered are excluded from assessable value, and penalty fails when no suppression is shown.

For ex-factory sales, transportation charges separately recovered at actuals and arranged at the buyer's request are not part of the assessable value under central excise valuation principles. Where the price is ex-factory, valuation proceeds under Section 4(1)(a) of the Central Excise Act, 1944, and there is no basis to add freight under Section 4(1)(b) or the Valuation Rules. On that footing, the duty demand based on inclusion of transport charges could not stand. Because the freight was outside assessable value and no excess over actual freight was collected, the alleged suppression or undervaluation was not established, so penalty under Rule 173Q of the Central Excise Rules, 1944 was not sustainable.

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Issues: (i) Whether transportation charges separately recovered for ex-factory sales were includible in the assessable value under the Central Excise law. (ii) Whether penalty was leviable on the assessee.

Issue (i): Whether transportation charges separately recovered for ex-factory sales were includible in the assessable value under the Central Excise law.

Analysis: The sales were found to be on ex-factory basis and transportation was arranged only at the buyers' request. Where the price is ex-factory, valuation falls under Section 4(1)(a) of the Central Excise Act, 1944, and there is no occasion to invoke Section 4(1)(b) or the Valuation Rules. The cost of transportation, when recovered at actuals and shown separately, is not part of the assessable value.

Conclusion: The transportation charges were not includible in the assessable value and the duty demand on that basis could not stand.

Issue (ii): Whether penalty was leviable on the assessee.

Analysis: Once the transportation charges were held to be outside the assessable value, there was no basis for the alleged suppression or undervaluation on which penalty had been imposed under Rule 173Q of the Central Excise Rules, 1944. The record also showed that no excess amount over actual transportation charges had been collected.

Conclusion: The penalty was not sustainable.

Final Conclusion: The demand and penalty were set aside and the appeal succeeded with consequential relief.

Ratio Decidendi: In ex-factory sales, where transportation is arranged at the buyer's request and the actual freight is recovered separately, transportation charges are not part of the assessable value under Section 4(1)(a) of the Central Excise Act, 1944, and penalty cannot be sustained on that basis.

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