Excise valuation at factory gate excludes resale price unless the manufacturer's price is shown to be non-arm's length.

For excise valuation under Section 4 of the Central Excises and Salt Act, 1944, the assessable value is the wholesale cash price at the factory gate, reflecting manufacturing cost plus manufacturing profit. Post-manufacturing elements such as selling cost and selling profit are excluded, so a buyer's resale price to independent purchasers cannot be used as the assessable value. A sale to a sole distributor or single wholesale buyer does not, by itself, displace the statutory factory-gate standard. The factory-gate price may be rejected only if it is shown to be concessional, not at arm's length, or influenced by extra-commercial considerations.

---

---

Issues: Whether, for assessment of excise duty under Section 4 of the Central Excises and Salt Act, 1944, the assessable value of the glass shells and tubes should be the price charged by the manufacturer to its wholesale buyer at the factory gate or the price at which that buyer resold the goods to independent purchasers.

Analysis: Section 4 fixes duty reference to the wholesale cash price at the time and place of removal from the factory, which means the price reflecting only manufacturing cost and manufacturing profit. Post-manufacturing elements such as selling cost and selling profit are excluded. A sale to a sole distributor or single wholesale buyer is not, by itself, outside the statutory standard. The price at the factory gate can be rejected only if it is shown to be concessional, not at arm's length, or otherwise fixed by extra-commercial considerations. On the material before it, no such case was made out. The price charged by the buyer to subsequent purchasers was a retail or onward sale price and necessarily included post-manufacturing elements.

Conclusion: The correct assessable value was the price charged by the manufacturer to its wholesale buyer at the factory gate, and not the buyer's resale price.

Final Conclusion: The excise authorities adopted an unlawful basis of valuation, and the writ petition was allowed with consequential relief.

Ratio Decidendi: For excise valuation under Section 4, the assessable value is the factory-gate wholesale cash price representing manufacturing cost plus manufacturing profit, and it cannot be replaced by a subsequent resale price unless the factory-gate price is shown to be not at arm's length or otherwise distorted by extra-commercial considerations.

---