Excise valuation excludes post-manufacturing costs, with freight, secondary packing, and trade discounts deductible from assessable value.

Excise valuation under the amended scheme remains confined to manufacture, so assessable value cannot include post-manufacturing costs, expenses or trading profit. Costs arising after manufacture, including selling, distribution, publicity and marketing expenses, are excluded because the valuation rule cannot convert excise into a tax on sale. Packing used only for transit or secondary handling, freight, storage, insurance and similar post-manufacturing expenses are deductible where not intrinsic to manufacture. Trade discount allowed under normal wholesale practice is also deductible. Sales to related persons do not displace a genuine arms-length wholesale price where independent buyers are also sold to on commercial terms.

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Issues: (i) Whether, on a true construction of the amended valuation provision, the assessable value of excisable goods can include post-manufacturing costs, expenses and profits; (ii) whether packing charges, freight, godown charges, trade discount and prices attributable to sales through related persons are deductible or excludible while determining the normal price.

Issue (i): Whether, on a true construction of the amended valuation provision, the assessable value of excisable goods can include post-manufacturing costs, expenses and profits.

Analysis: The charging provision continues to impose duty on manufacture or production, and the valuation provision is only the machinery for quantification. The amended language preserving sale at the time and place of removal did not alter the basic character of excise. The normal price must therefore be read consistently with the constitutional concept of excise and cannot be loaded with elements arising after manufacture, such as selling costs, distribution expenses, publicity, marketing expenses or trading profit. To the extent necessary, the provision had to be read down to avoid converting excise into a tax on sale.

Conclusion: The assessable value cannot include post-manufacturing costs, expenses or profits; the contention of the assessees succeeds.

Issue (ii): Whether packing charges, freight, godown charges, trade discount and prices attributable to sales through related persons are deductible or excludible while determining the normal price.

Analysis: Packing costs that are not part of the manufacturing process, including secondary packing and packing used only for transit or handling, are not to be treated as part of the assessable value on the facts found. Freight, transportation to depots or places of delivery, storage at godowns, insurance, advertisement and similar expenses are post-manufacturing expenses and are deductible where actually incurred and unconnected with manufacture. Trade discount allowed in accordance with the normal practice of wholesale trade is deductible even if credit sales are also made. Sales to related persons do not displace a genuinely commercial price where the assessee also sells to independent buyers at arms length; in such a situation the independent wholesale price remains the proper basis.

Conclusion: Packing used only for transit or secondary packing, freight and similar post-manufacturing expenses are excludible, trade discount is deductible, and the related-person objection fails on the facts.

Final Conclusion: The writ petitions were allowed to the extent indicated, the impugned valuation and demand orders were quashed where inconsistent with these principles, and the excise authorities were directed to reassess on the basis of the ex-manufacturer price after lawful deductions.

Ratio Decidendi: Under the excise valuation scheme, duty is confined to the manufacturing cost and manufacturing profit, and any element wholly attributable to post-manufacturing activity must be excluded from the assessable value unless it forms an intrinsic part of manufacture.

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