Factory-gate valuation to independent buyers governs excise assessment; resale price of alleged related buyer cannot be used.

Where factory-gate sales to independent buyers were available, valuation had to be based on that actual transaction price, even if the principal buyer was treated as related. The alleged relationship did not alter valuation once a genuine independent market price existed during the relevant period, and the goods had already been assessed on that basis. On that footing, no further duty was payable. Because the duty demand failed, the excise penalties also could not be sustained and were set aside.

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Issues: Whether clearances made to an alleged related buyer were assessable on the basis of the price at which that buyer resold the goods, or on the basis of the factory gate price charged to independent buyers, and whether the duty demand and consequential penalties were sustainable.

Analysis: The factual pattern was found to be substantially the same as an earlier decision of the same Bench, which had applied the Supreme Court principle that, where sales to independent buyers at the factory gate are available, that price constitutes the basis for valuation even if the principal buyer is treated as related. The existence of a relationship, if any, was held to be irrelevant for valuation once an actual factory gate price to independent buyers was available during the relevant period. Since the assessee had valued the goods on that basis and paid duty accordingly, no further duty was payable. With the duty demand failing, the penalties imposed under the excise provisions also could not survive.

Conclusion: The clearances were required to be valued on the basis of the factory gate price charged to independent buyers, not on the resale price of the alleged related buyer. The duty demand and penalties were set aside.

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