Excise duty refund on freight-included price must be computed by backing out duty from the wholesale price first.

Where excise duty is refundable on freight charges wrongly included in price, the refund must be worked out by treating the amount as part of the sale proceeds or cum-duty price and then backing out the duty element. The refundable sum should be added to the wholesale price first, and only then should the assessable value and net duty refund be calculated. Directly adding the refund to the assessable value would wrongly make duty payable on the refund itself. The correct method ensures the assessable value reflects the normal price under Section 4 and the duty element is computed accurately.

---

---

Issues: Whether, while working out the refundable duty on freight charges wrongly included in the assessable value, the amount refundable should be added to the assessable value or to the wholesale price first and the duty element then worked out.

Analysis: Under Section 4 of the Act, the assessable value is the normal price, and where the price is a cum-duty price the effective duty element has to be deducted to arrive at the assessable value. The amount found refundable represents part of the consideration or sale proceeds that was retained and not returned to the buyer. If that amount is directly added to the assessable value, duty is effectively calculated on the refund itself. The correct method is to add the refundable amount to the wholesale price, work out the assessable value on that basis, and then determine the actual refundable duty after deducting the duty element.

Conclusion: The refund computation must be made by adding the deductible freight-related amount to the wholesale price, not directly to the assessable value; the assessee succeeded on this issue.

Ratio Decidendi: Where excise duty is to be refunded on an amount wrongly included in the price, the amount must first be treated as part of the sale proceeds or cum-duty price and the duty element then worked back to determine the correct assessable value and net refund.

---