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Issues: (i) Whether footwear whose wholesale price exceeded the exemption threshold could still claim exemption by deducting the duty element to arrive at assessable value under the excise valuation provisions. (ii) Whether, after denial of exemption, the duty demand had to be recomputed by treating the realised wholesale price as a cum-duty price and deducting the duty element for quantification.
Issue (i): Whether footwear whose wholesale price exceeded the exemption threshold could still claim exemption by deducting the duty element to arrive at assessable value under the excise valuation provisions.
Analysis: The exemption notification operated by reference to value, and the valuation provisions required determination of assessable value in accordance with the statutory formula. The wholesale price collected from buyers was only the starting point; if duty was actually payable or embedded in the realised price, the duty element had to be excluded to ascertain the value for excise purposes. The prior Supreme Court rulings in the assessee's own litigation were treated as settling that valuation under the statute could not be separated from the exemption test, and that the assessable value had to be computed first before deciding whether the notification applied.
Conclusion: The exemption could not be rejected merely because the gross wholesale price was above the threshold; the correct approach was to determine assessable value by the statutory method and then test exemption.
Issue (ii): Whether, after denial of exemption, the duty demand had to be recomputed by treating the realised wholesale price as a cum-duty price and deducting the duty element for quantification.
Analysis: The prices collected from customers were found to be the only amounts realised by the assessee, so they were to be treated as cum-duty prices. On that basis, the duty component had to be eliminated before final quantification. The Tribunal also held that the plea relating to Modvat and other quantum-related adjustments had not been examined below and therefore required fresh adjudication by the departmental authority in accordance with natural justice.
Conclusion: The duty demand was not finally quantified and had to be recalculated on a cum-duty basis with further adjudication on the additional quantum-related pleas.
Final Conclusion: The appeal failed on the substantive challenge to liability, but the assessment of the recoverable amount was left open for fresh determination by the lower authority.
Ratio Decidendi: For excise valuation, the realised wholesale price must be treated as cum-duty where no separate duty is collected, and the duty element must be excluded before determining assessable value and testing exemption.
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