Transaction value in excise valuation must be accepted when the buyer pays the sole consideration and no flowback is shown.

For valuation under section 4 of the Central Excise Act, 1944, the price charged by the assessee to its distributors had to be accepted as the transaction value because it was the sole consideration and no additional flowback was shown. The later free distribution of the small packs by the distributors under a promotional scheme was extraneous to the assessable value, as the relevant transaction was between the assessee and the distributors. The attempt to substitute the price of larger retail packs for the declared Re. 1/- value was therefore unsustainable, and the declared price remained the correct assessable value.

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Issues: Whether the assessable value of small packs of lens care solution sold by the assessee to distributors at Re. 1/- could be rejected and enhanced by reference to the value of larger retail packs.

Analysis: The dispute turned on whether the price charged by the assessee to its distributors represented the transaction value under section 4 of the Central Excise Act, 1944. The smaller packs were sold by the assessee to distributors at a declared price, and there was no allegation or evidence that any additional consideration flowed back to the assessee. The fact that the distributors later supplied the packs free of cost as part of a promotional scheme was held to be extraneous to valuation, because the relevant transaction was between the assessee and the distributors. The reasoning followed the settled principle that, where the price charged is the sole consideration, that price must be adopted for valuation.

Conclusion: The Re. 1/- price adopted by the assessee was the correct assessable value, and the enhancement proposed by the Revenue was unsustainable; the issue is decided in favour of the assessee.

Ratio Decidendi: For valuation under section 4(1)(a) of the Central Excise Act, 1944, the price charged by the assessee to the buyer must be accepted as the transaction value when it is the sole consideration, and subsequent free distribution by the buyer does not justify substitution of a higher assessable value.

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