Transaction value governs excise valuation when distributor promotions do not alter the price at clearance

Excise valuation of sample packs sold to distributors must be based on the declared transaction value where the goods are cleared for a genuine price and no evidence shows that the price is not the sole consideration. Later free distribution of those packs by distributors under a promotional scheme does not justify substituting the value of comparable retail packs. The assessable value therefore remains the price charged by the assessee at the time of clearance, absent any additional consideration or price manipulation.

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Issues: Whether the assessable value of 60 ml lens care solution sample packs sold to distributors was required to be taken at the declared transaction value under Section 4 of the Central Excise Act, 1944, or enhanced by adopting the value of comparable 120 ml retail packs.

Analysis: The sample packs were admittedly sold by the assessee to distributors for consideration, and the subsequent free distribution of those packs by the distributors as part of a promotional scheme did not affect valuation at the stage of clearance from the assessee. In the absence of any allegation or evidence that the price charged by the assessee was not the sole consideration or that any additional consideration flowed back, the transaction value could not be discarded. The reasoning followed the settled principle that valuation depends on the price at which the assessee clears the goods, not on the manner in which the distributor later deals with them.

Conclusion: The enhanced valuation proposed by the Department was not sustainable, and the declared transaction value was the correct assessable value.

Ratio Decidendi: Where excisable goods are sold to distributors for a genuine price and there is no evidence that the price is not the sole consideration, their transaction value must be accepted for assessment even if the distributors later distribute them free of cost for promotional purposes.

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