Ex-works valuation rules exclude separately charged freight and insurance from assessable value when sale is complete at factory gate.

Where goods are sold on ex-works terms, freight and transit insurance separately charged after clearance from the factory are not includible in the assessable value for central excise, because the buyer's premises is not the place of removal when property passes at the factory gate and delivery is made to the transporter. On that basis, the outward transportation charges fall outside valuation, and a demand built on their inclusion cannot be sustained for the relevant period, including any extended-period confirmation.

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Issues: (i) Whether freight and insurance charges incurred for transportation of goods to the buyer's premises were includible in the assessable value for central excise purposes; (ii) whether the demand could be sustained for the relevant period, including the extended period.

Issue (i): Whether freight and insurance charges incurred for transportation of goods to the buyer's premises were includible in the assessable value for central excise purposes.

Analysis: The relevant test was whether the sale was completed at the factory gate or at the buyer's premises, since only charges incurred up to the place of removal form part of the assessable value. On the facts, the contracts were on ex-works basis, the invoices separately showed freight and insurance, and the goods were handed over to the transporter after clearance from the factory. Applying the statutory definition of place of removal and the settled law on delivery to carrier and transfer of property in goods, the buyer's premises could not be treated as the place of removal. Freight and transit insurance charged separately therefore did not form part of the assessable value.

Conclusion: The inclusion of freight and insurance in the assessable value was held to be unsustainable and the finding was against the Revenue.

Issue (ii): Whether the demand could be sustained for the relevant period, including the extended period.

Analysis: Since the demand itself rested on an inclusion of freight and insurance in the assessable value, the consequent confirmation for the entire period, including the month covered by the extended period, could not survive. The order below was also found to have disregarded the binding law on place of removal and valuation.

Conclusion: The demand for the relevant period was not sustainable and the limitation-based confirmation also failed, in favour of the Assessee.

Final Conclusion: The appeal succeeded, the impugned order was set aside, and the assessee obtained full relief.

Ratio Decidendi: Where goods are sold on ex-works terms and freight or insurance is separately charged after clearance from the factory, the buyer's premises is not the place of removal and such outward transportation charges are not includible in the assessable value.

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