Compounded levy linked to printed retail sale price cannot be raised on notional valuation for export pouches.

Under Notification No. 38/2007-C.E., duty under the compounded levy scheme was linked to the retail sale price printed on pouches, and the Revenue could not enhance liability by imputing a notional retail sale price to export pouches that were not required to bear such marking. The scheme did not authorise adoption of a deemed retail sale price merely because the packing machine was also used for export goods. As the demand rested on that unsupported calculation, the duty demand, interest and penalty were set aside.

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Issues: Whether, under Notification No. 38/2007-C.E., duty under the compounded levy scheme could be enhanced by imputing a retail sale price to pouches manufactured for export on which no retail sale price was required to be printed, and whether the resulting duty demand, interest and penalty were sustainable.

Analysis: The notification fixed duty per packing machine only with reference to the retail sale price printed on pouches. The exported pouches were not required to bear a retail sale price, and the Revenue's attempt to determine a notional retail sale price by its own method had no statutory basis. The scheme did not contemplate adding a deemed retail sale price to export clearances merely because the machine was also used for such goods. In these circumstances, the demand founded on such calculation could not be sustained.

Conclusion: The duty demand, interest and penalty were set aside in favour of the assessee.

Ratio Decidendi: Where a compounded levy notification links duty liability to the retail sale price printed on pouches, the Revenue cannot substitute a notional retail sale price for goods not required to carry such marking unless the notification expressly authorises that method.

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