Freight and insurance in assessable value upheld where door delivery terms and no buyer-side transport arrangement were shown.

Freight and transit insurance separately charged from customers were held includable in the assessable value where invoices showed door delivery at the buyer's premises and no independent arrangement proved that the carrier and insurer acted merely on the buyer's behalf. Applying Section 4 of the Central Excise Act, 1944, the place of removal and Rule 5 of the Central Excise Valuation Rules, 2000, the charges were treated as part of the sale value. Non-disclosure of this treatment in ER-1 returns, later found from audit of invoices and records, supported invocation of the extended period of limitation and penalty under Section 11AC, with reduced penalty relief left subject to compliance.

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Issues: (i) Whether freight and insurance charges collected separately from customers were includable in the assessable value of excisable goods when the invoices stipulated door delivery at the buyer's premises; (ii) Whether the extended period of limitation and penalty under Section 11AC of the Central Excise Act, 1944 were invokable.

Issue (i): Whether freight and insurance charges collected separately from customers were includable in the assessable value of excisable goods when the invoices stipulated door delivery at the buyer's premises.

Analysis: The transaction was governed by Section 4 of the Central Excise Act, 1944, read with the definition of "place of removal" and the clarification in Rule 5 of the Central Excise Valuation Rules, 2000. The invoices recorded "door delivery", and the payment terms showed that delivery was to the customer's premises with freight and insurance separately charged. There was no separate contract or buyer's letter showing that transportation and transit insurance were undertaken merely on behalf of the buyer. On these facts, the sale was treated as taking place at the buyer's premises and the transportation-related charges formed part of the assessable value.

Conclusion: The freight and insurance charges were includable in the assessable value, against the assessee.

Issue (ii): Whether the extended period of limitation and penalty under Section 11AC of the Central Excise Act, 1944 were invokable.

Analysis: The non-inclusion of freight and insurance charges was not reflected in the ER-1 returns and was detected from audit of invoices and records. The absence of disclosure supported invocation of the extended period, and the same factual foundation sustained penalty. The option of reduced penalty was left open on compliance with the conditions stated in the order.

Conclusion: The extended period and penalty were upheld, against the assessee.

Final Conclusion: The demand, interest, and penalty were sustained, and the appeal failed.

Ratio Decidendi: Where the sale terms and invoices show delivery at the buyer's premises and no independent arrangement proves transportation and transit insurance to be merely on the buyer's behalf, freight and insurance charges are includable in the assessable value; suppression from returns can justify the extended period and penalty.

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