Excise valuation and depot freight deductions must reflect only reasonable reductions from retail price where no wholesale market exists.

Where excisable goods are sold through a related person in retail and no wholesale market exists, valuation may proceed under Section 4 of the Central Excise Act, 1944 and Rule 6 of the Central Excise (Valuation) Rules, 1975 by taking the retail price and making only such reduction as is necessary and reasonable to approximate the wholesale price. Freight and insurance from the factory to depots are not automatically deductible in full, but may be allowed to the extent justified by the nature of the goods, trade practice, and other relevant factors. As no reasonable amount had been determined and no deduction had been permitted at all, interference was not warranted.

---

---

Issues: Whether freight and insurance charges incurred for carrying goods from the factory to depots could be deducted as a necessary and reasonable amount while determining the value of excisable goods on the basis of retail price under the valuation provisions.

Analysis: The goods were sold through a related person in retail and had no wholesale market. In such a case, valuation had to proceed under Section 4 of the Central Excise Act, 1944 and Rule 6 of the Central Excise (Valuation) Rules, 1975 by taking the retail price and reducing such amount as is necessary and reasonable to arrive at the wholesale price. The Court held that the rules do not prohibit deduction of freight and insurance from the factory to the depot, but any such reduction must be limited to what is reasonable having regard to the nature of the goods, trade practice, and other relevant factors. Since the question of what amount would be reasonable had not been determined and the assessee had been denied any deduction at all, interference was not warranted.

Conclusion: Freight and insurance from the factory to the depots are not automatically deductible in full, but a reasonable deduction may be allowed on facts. The reference was dismissed, leaving it open to the revenue in future cases to examine necessity and reasonableness.

---