Factory-gate sale price controls excise valuation when goods are sold to an unrelated buyer on principal-to-principal terms.

Assessable value under Section 4(1)(a) of the Central Excise Act, 1944 must be based on the factory-gate sale price where goods are sold by the assessee to an unrelated buyer on a principal-to-principal basis and price is the sole consideration. The buyer was not a related person, so the contractual sale price constituted the normal price for valuation. A mere view that the price was low did not justify rejecting the declared price or substituting another value. On that basis, the valuation re-determination and resulting duty demand were held unsustainable, and the assessee succeeded on the valuation issue.

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Issues: Whether the assessable value of the excisable goods could be rejected and substituted on the ground that the sale price under the agreement was not the real normal price under Section 4(1)(a) of the Central Excise Act, 1944.

Analysis: The goods were found to have been manufactured by the assessee in its own capacity and sold under an agreement on a principal-to-principal basis. The buyer was categorically held to be not a related person. In such a situation, the price at which the goods were sold at the factory gate to the buyer constituted the normal price for valuation under Section 4(1)(a). The mere fact that the adjudicating authority considered the price to be low did not justify discarding the contractual sale price, since the statute required adoption of the ordinary wholesale price where the buyer was unrelated and price was the sole consideration.

Conclusion: The rejection of the declared sale price and the resulting duty demand were unsustainable. The assessee succeeded on the valuation issue and the appeal was allowed.

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