Excise valuation turns on the actual sale price to the buyer, not the buyer's later distribution of goods.

Excise valuation depends on the actual sale between the assessee and the buyer: where goods are sold to non-related distributors for a price that is the sole consideration at the time and place of removal, Section 4(1)(a) applies and valuation under Section 4(1)(b) read with Rule 6(b)(ii) is excluded. The buyer's subsequent distribution or use of the goods is irrelevant to valuation. A demand cannot be sustained on a ground not alleged in the show-cause notice, so a tribunal cannot uphold liability on a different factual basis than the one noticed.

---

---

Issues: (i) Whether the Tribunal, in the assessee's appeal, could sustain the demand on a ground not set out in the show-cause notice. (ii) Whether physician samples sold by the assessee to distributors at a price were liable to valuation under Section 4(1)(b) of the Central Excise Act, 1944 and Rule 6(b)(ii) of the Central Excise Valuation Rules, 1975, or whether Section 4(1)(a) applied.

Issue (i): Whether the Tribunal, in the assessee's appeal, could sustain the demand on a ground not set out in the show-cause notice.

Analysis: The show-cause notice proceeded only on the basis that the goods were not sold and therefore Section 4(1)(a) was inapplicable. It did not allege that the price charged by the assessee to the distributors was not the sole consideration, nor did it dispute the genuineness of that price. The Tribunal, however, upheld the demand on a different premise, namely that the distributors did not sell the samples to physicians. That line of reasoning was outside the notice and could not support the demand.

Conclusion: The demand could not be sustained on a ground beyond the show-cause notice, and the assessee's appeal was allowed.

Issue (ii): Whether physician samples sold by the assessee to distributors at a price were liable to valuation under Section 4(1)(b) of the Central Excise Act, 1944 and Rule 6(b)(ii) of the Central Excise Valuation Rules, 1975, or whether Section 4(1)(a) applied.

Analysis: The relevant transaction was the sale by the assessee to the distributors. Between those parties, a price was actually charged, and that price was not shown to be anything other than the sole consideration. What the distributors did with the goods thereafter was irrelevant for valuation. Where goods are sold for delivery at the time and place of removal, the buyer and assessee are not related, and price is the sole consideration, the transaction falls within Section 4(1)(a). In that situation, valuation under Section 4(1)(b) and the Rules does not arise.

Conclusion: The case was covered by Section 4(1)(a) of the Central Excise Act, 1944 and Rule 6(b)(ii) of the Central Excise Valuation Rules, 1975 had no application; the Revenue's appeals were dismissed.

Final Conclusion: The decision affirms that excise valuation must be determined by the actual sale transaction between the assessee and its buyer, and not by the buyer's subsequent distribution or use of the goods.

Ratio Decidendi: For excise valuation, the decisive inquiry is whether the assessee sold the goods for a price that was the sole consideration to a non-related buyer at the time and place of removal; subsequent disposal of the goods by the buyer does not affect applicability of Section 4(1)(a).

---