Royalty excluded from bulk-stage excise valuation where retail pricing already captured it and valuation remained revenue neutral.

Royalty paid under the agreement was held not includible in the assessable value at the bulk stage for central excise valuation. Bulk horlicks was valued on a cost-construction basis under Rule 8 of the Central Excise Valuation Rules, 2000, while retail packs were assessed on MRP under Section 4A of the Central Excise Act, 1944. The royalty was linked to sales and already formed part of the retail price. The Tribunal also noted compliance with CAS-4 principles and treated the valuation as revenue neutral because any duty paid at the bulk stage would be available as Cenvat credit. The appeals succeeded.

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Issues: Whether royalty paid under the agreement was includible in the assessable value at the bulk stage for central excise valuation.

Analysis: The bulk horlicks was cleared on cost-construction basis under Rule 8 of the Central Excise Valuation Rules, 2000, while the retail packs were assessed on MRP basis under Section 4A of the Central Excise Act, 1944. The royalty was linked to sales and was already reflected in the retail price. The Tribunal noted that the field formations had followed CAS-4 principles and that the valuation exercise remained revenue neutral because any duty incidence at the bulk stage would be available as Cenvat credit. On that basis, the inclusion of royalty at the bulk stage was found unwarranted.

Conclusion: The royalty charges were not includible in the assessable value at the bulk stage, and the appeals succeeded.

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