2026-VIL-1416-CESTAT-KOL-CE
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CENTRAL EXCISE CESTAT Cases

Central Excise - Valuation - Place of removal – Inclusion of Freight and insurance - Show Cause Notice proposing to add freight and insurance charges to the assessable value on the ground that buyer's premises constitute the place of removal. The adjudicating authority confirmed the demand invoking extended period of limitation - Whether freight and insurance are includible in assessable value when already in-built in the price charged and not separately collected from customers - HELD - The cost of freight and insurance cannot be included in the assessable value when the same is in-built in the price of goods and is not separately collected. The burden lies on the department to prove that extra amount towards freight and insurance has been collected by appellant in addition to price charged. No such proof has been provided except a bald statement in an internal report. The issue of includeability of freight and insurance is settled law in favour of appellant by Supreme Court judgment in Escorts JCB Ltd. case and Ispat Industries Ltd. case which hold that customer's premises cannot be the place of removal. The demand confirmed by including cost of freight and insurance is not sustainable - Demand set aside and the appeal is allowed - Place of removal - Buyer's premises - Appellant sold goods both at factory gate and to depots with uniform prices. The adjudicating authority held buyer's premises as the place of removal and included freight and insurance in assessable value. Relying on the amended definition of place of removal in Section 4, the Revenue contended that since goods were insured in transit, place of removal should be deemed as buyer's premises - Whether buyer's premises can be treated as place of removal for purpose of including freight and insurance in assessable value - HELD - Buyer's premises cannot be treated as place of removal since there is no further removal from the buyer's premises. The ownership passing to buyer and transit insurance do not determine the place of removal. The Supreme Court in Escorts JCB Ltd. case held that mere arrangement of transport and transit insurance by seller does not mean ownership is retained by seller till delivery. In Ispat Industries Ltd. case, Supreme Court categorically held that cost of transportation from place of removal to place of delivery is to be excluded from assessable value. Sales from factory were made FOR Works and not FOR Destination. Therefore, factory or depot from which goods were sold remains the place of removal - Demand set aside - Show Cause Notice - Vague allegations - Hypothetical methodology - The Show Cause Notice computed demand assuming 80% of goods attracted freight at Rs. 6 per kg. and 20% at Rs. 45 per kg. The basis for applying different values was not clear. The Notice did not specify whether quantities related to factory to depot or depot to actual customer movements. The Notice did not refer to price list filed on 18-09-1996 which stated freight would not be deducted from assessable value post Finance Bill 1996. Subsequent price declarations clearly reflected no deduction of freight or insurance was claimed - Whether a vague Show Cause Notice based on hypothetical methodology of computation denies proper opportunity of defence - HELD - The Show Cause Notice is vague and adopted hypothetical methodology for computation of demand which is not permissible. The basis of applying different freight rates to 20% and 80% of clearances is not clear. No actual determination of freight or insurance amount was done. The SCN is the foundation on which department must build its case and if allegations are vague, it is sufficient to hold that noticee was not given proper opportunity to meet the allegations as per Supreme Court judgment in CCE vs. Brindavan Beverages. The demand being vague is liable to be set aside on this ground itself - Demand set aside - Extended period of limitation - Absence of fraud or suppression - Whether extended period of limitation can be invoked where there is no fraud, collusion, suppression or wilful misstatement and all facts were known to department - HELD - There has been no fraud, collusion, suppression or wilful misstatement by appellant on the part of appellant. The fact regarding inclusion of freight in price was informed to department as early as September 1996 in price list and in subsequent correspondences. All facts were in the knowledge of department as yearly audits were conducted. No evidence of separate collection of freight from customers has been produced except bald statement in internal report. Appellant has been regularly filing price lists with jurisdictional officers. Extended period of limitation cannot be invoked where facts were known to department at the time of filing of price lists - Demand set aside.
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