Excise valuation must reflect open-market price, not a special contractual price fixed under a non-market arrangement.

Excise valuation under Section 4 requires the assessable value to reflect the ordinary open-market price, not a special or notional price fixed under a contract. In the context of silver oxide zinc batteries supplied to Defence, the lower silver price agreed for a special arrangement was treated as non-market-based because it was tied to a controlled contractual mechanism rather than comparable goods. The discussion also notes that limitation depends on whether invoices and RT-12 returns disclosed the relevant pricing and whether suppression with intent to evade duty was established; on that point, the matter required fresh factual examination.

---

---

Issues: (i) Whether the assessable value of silver oxide zinc batteries supplied to the Defence could be based on the lower silver price fixed under the special contract, or whether a notional valuation had to be rejected in favour of the comparable market price; (ii) Whether the demand was barred by limitation in view of the disclosures made in invoices and returns.

Issue (i): Whether the assessable value of silver oxide zinc batteries supplied to the Defence could be based on the lower silver price fixed under the special contract, or whether a notional valuation had to be rejected in favour of the comparable market price.

Analysis: Under Section 4, the assessable value must reflect the price at which the goods are ordinarily sold in the course of business. The lower price adopted for the Defence supplies was linked to a special arrangement under which life-expired batteries were supplied, silver was retrieved and used again, and the price of silver was fixed at a figure determined by the Defence. That figure was not the open market price and represented a notional workout rather than a true market-based price. Since comparable goods were available and the contract price was special to the arrangement, the lower valuation could not be accepted as the transaction value for excise purposes.

Conclusion: The lower contractual silver price was not acceptable for valuation, and the assessable value had to be determined on the basis of comparable goods. This issue is decided against the assessee.

Issue (ii): Whether the demand was barred by limitation in view of the disclosures made in invoices and returns.

Analysis: The record showed that invoices and RT-12 returns were filed, and the department was aware that similar batteries were being cleared to another buyer at a higher price. The lower authority did not adequately examine whether the differential pricing was disclosed through the available records and whether any suppression with intent to evade duty was established. The limitation question therefore required a deeper factual examination.

Conclusion: The limitation issue required reconsideration and was remitted for de novo decision. This issue is decided in favour of the assessee.

Final Conclusion: The valuation dispute was answered against the assessee, but the limitation question was left for fresh consideration by the lower authority, resulting in a remand on that limited aspect.

Ratio Decidendi: For excise valuation, a special contractual or notional price that does not reflect the ordinary open-market price cannot be accepted as the assessable value under Section 4.

---