Valuation on bulk-clearance goods cannot be raised to depot resale price after repacking; demand, penalty and interest fell.

Duty on lubricating oil cleared in bulk to depots could not be assessed on the higher price realised after repacking into smaller containers at the depots, because valuation had to follow the price basis applicable to the goods as cleared from the factory under section 4. The Tribunal also accepted that the demand was barred for the major part of the period on limitation grounds. As the valuation demand failed, the consequential penalty and interest were unsustainable and were set aside. The impugned demand and related consequences were annulled.

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Issues: (i) Whether duty on lubricating oil cleared in bulk to depots could be assessed on the basis of the higher price at which repacked smaller packs were sold from the depots; (ii) whether the demand was barred by limitation for the major part of the period; and (iii) whether penalty and interest could be sustained.

Issue (i): Whether duty on lubricating oil cleared in bulk to depots could be assessed on the basis of the higher price at which repacked smaller packs were sold from the depots.

Analysis: The bulk oil was cleared from the factory to depots, repacked there into smaller containers, and then sold. The relevant valuation principle under section 4 required assessment on the basis applicable to the goods cleared from the factory, and the higher depot sale price of repacked goods could not be adopted merely because the goods were later repacked and sold at a higher price. Prior decisions of the Tribunal, affirmed by the Supreme Court, had already rejected adoption of the depot sale price in such circumstances.

Conclusion: The demand based on the depot sale price was unsustainable and the assessee succeeded on this issue.

Issue (ii): Whether the demand was barred by limitation for the major part of the period.

Analysis: The record showed that the demand covered a period substantially beyond the permissible limitation period, and the objection to timeliness was accepted for the major portion of the demand.

Conclusion: The assessee succeeded on the limitation issue for the major part of the demand.

Issue (iii): Whether penalty and interest could be sustained.

Analysis: Once the valuation basis for the demand was not accepted and the demand itself could not stand, there was no ground to maintain consequential penalty or interest.

Conclusion: Penalty and interest were not sustainable and were set aside.

Final Conclusion: The impugned demand and all consequential reliefs were annulled, leaving the assessee entirely successful.

Ratio Decidendi: Where goods are cleared in bulk to depots and later repacked and sold at a higher price, duty cannot be assessed on the subsequent depot sale price merely because of the later repacking and resale.

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