Comparable price valuation and excise limitation: non-marketable destroyed goods could not be valued by market comparables, while notice remained timely.

Limitation under Section 11A of the Central Excise Act was computed from the date on which the relevant monthly return was required to be filed, and the show-cause notice issued within six months was therefore in time. The valuation issue turned on marketability: goods that had lost marketability after transfer of brand names and were destroyed could not be valued by adopting the price of comparable goods under Rule 6(b)(ii) of the Central Excise (Valuation) Rules, 1975. Comparable price valuation was held inapplicable to non-marketable goods, and the demand set aside below was sustained.

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Issues: (i) Whether the show-cause notice and demand were barred by limitation under Section 11A of the Central Excise Act, 1944; (ii) Whether the assessable value of goods destroyed due to non-marketability could be determined by adopting the price of comparable goods under Rule 6(b)(ii) of the Central Excise (Valuation) Rules, 1975.

Issue (i): Whether the show-cause notice and demand were barred by limitation under Section 11A of the Central Excise Act, 1944.

Analysis: The notice was issued within six months from the relevant date. The period had to be computed from the date on which the return for the relevant month was required to be filed, and on that basis the notice dated 3-6-1995 was within time.

Conclusion: The demand was not barred by limitation.

Issue (ii): Whether the assessable value of goods destroyed due to non-marketability could be determined by adopting the price of comparable goods under Rule 6(b)(ii) of the Central Excise (Valuation) Rules, 1975.

Analysis: The goods had lost marketability because the brand names had been transferred and the goods were destroyed for that reason. Comparable price valuation is appropriate only where the goods are marketable, and therefore the price of comparable goods could not be adopted for such goods.

Conclusion: Comparable price valuation was not permissible.

Final Conclusion: The appeal of the Department failed and the order setting aside the demand was sustained.

Ratio Decidendi: Comparable price valuation cannot be applied to goods which are not marketable, and limitation under Section 11A must be computed from the relevant date for the return so filed or required to be filed.

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