Separate freight in factory gate sales excluded from central excise assessable value when transportation is recovered independently.

Freight charged separately in sale invoices for excisable goods is excluded from assessable value where the goods are cleared directly from the factory gate and the place of removal remains the factory. The invoice, purchase order and acknowledgment showed that transportation was recovered separately over and above the price of the goods, and the sale was not from a depot or other place of removal. On that factual basis, the cost of transport from the place of removal to the place of delivery did not form part of transaction value under Section 4 of the Central Excise Act, 1944 read with the Valuation Rules, even though the sale was on FOR basis. The freight component was therefore not includible in central excise valuation.

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Issues: Whether freight charged separately in the sale invoices of excisable goods forms part of the assessable value for determination of central excise duty under Section 4 of the Central Excise Act, 1944 read with the Central Excise Valuation Rules, 2000.

Analysis: The invoice, purchase order and acknowledgment showed that the freight was charged separately over and above the price of the goods. The goods were cleared directly from the factory to the customers, without being sold from a depot or any other place of removal. In such a factory gate sale, the cost of transportation from the place of removal to the place of delivery is excluded from valuation where it is separately shown and recovered as freight. The factual matrix was found to align with the settled principle that the place of removal remained the factory gate and that separate freight in the invoice did not become part of the transaction value merely because the sale was on FOR basis.

Conclusion: Freight charged separately in the invoices was not includible in the assessable value, and the duty demand on that component was unsustainable.

Ratio Decidendi: In a factory gate sale, transportation charges separately recovered and shown in the invoice are excluded from the assessable value for central excise purposes where the goods are delivered from the place of removal to the buyer and no contrary factual basis shows the buyer's premises to be the place of removal.

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