Natural justice and valuation hierarchy require disclosure of comparables before resorting to costing data in excise valuation.

Assessable value cannot be fixed without disclosing the material relied on for rejecting declared values, because denial of that basis deprives the assessee of a fair opportunity to respond and vitiates the assessment for breach of natural justice. Valuation under the Central Excise (Valuation) Rules, 1975 must follow the prescribed hierarchy: comparable goods are the primary basis where available, with appropriate adjustments for differences, and costing data is a subsidiary method under Rule 6(b)(ii) only when comparable prices are unavailable. Any additions to costing data or profit margin also require verification and an opportunity to explain. The valuation was therefore set aside and remitted for fresh determination after fair hearing.

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Issues: (i) whether the assessable value had been fixed without giving the applicants a proper opportunity to meet the Department's basis for rejection of their declared values, and (ii) whether the valuation had to be determined first with reference to comparable goods and, only if such comparable prices were unavailable, on the basis of costing data under the Valuation Rules.

Issue (i): whether the assessable value had been fixed without giving the applicants a proper opportunity to meet the Department's basis for rejection of their declared values.

Analysis: The record showed that the applicants were not furnished the material on which the substituted values had been approved, and were therefore denied a fair opportunity to explain their position. The grievance of denial of natural justice was accepted as genuine.

Conclusion: The fixation of assessable value could not be sustained and the matter had to be reconsidered after giving the applicants a proper opportunity.

Issue (ii): whether the valuation had to be determined first with reference to comparable goods and, only if such comparable prices were unavailable, on the basis of costing data under the Valuation Rules.

Analysis: Rule 6(b)(i) required assessment on the basis of the comparable value of similar goods wherever available, with due allowance for differences between the applicants' products and the comparable products. Resort to costing data under Rule 6(b)(ii) was permissible only when comparable prices were not available, and any additions to the costing data or profit margin also required verification and opportunity to explain.

Conclusion: The case was remitted for fresh determination in accordance with the hierarchy laid down in Rule 6 of the Central Excise (Valuation) Rules, 1975.

Final Conclusion: The orders below were set aside and the valuation dispute was sent back for fresh adjudication in accordance with law and after observance of fair hearing requirements.

Ratio Decidendi: Where assessable value is fixed without disclosing the material relied upon, the assessment is vitiated for breach of natural justice; under the valuation rules, comparable goods are the primary basis and costing data is a subsidiary method available only if comparable prices are unavailable.

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