Related-person valuation in excise cannot be reopened merely because the buyer resold goods at a lower price.

For clearances of petroleum products to a related or interconnected undertaking, valuation must be determined under the special related-person valuation provisions, not by reopening assessable value through a comparison of the refinery transfer price with the buyer's resale price. The text states that duty had already been paid in accordance with the applicable valuation rules, and that no further demand could be sustained merely because the related buyer resold the goods at a lower price. It therefore treats a differential duty demand based only on resale-price comparison as lacking legal basis under Section 4(1)(b) of the Central Excise Act, 1944 read with Rules 9 and 10(a) of the Central Excise Valuation Rules, 2000.

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Issues: Whether, in the case of clearances of petroleum products to a related/interconnected undertaking, the assessable value could be reopened by comparing the refinery transfer price with the related buyer's resale price and a differential duty demanded.

Analysis: The goods were sold exclusively through the related undertaking, and valuation had to be determined under the special valuation scheme applicable to such clearances. On the facts, duty had been paid on the clearances in accordance with the valuation provisions. The demand was based on an incorrect reading of Section 4(1)(b) of the Central Excise Act, 1944 read with Rules 9 and 10(a) of the Central Excise Valuation Rules, 2000. There was no legal basis to demand duty merely because the refinery transfer price charged to the related buyer was higher than the resale price realised by that buyer.

Conclusion: The demand was not sustainable in law, and the appeal was allowed with the impugned order set aside.

Final Conclusion: Where excisable goods are cleared exclusively through a related person, valuation must follow the prescribed related-person valuation rules, and a differential duty demand cannot be founded only on a comparison between the transfer price and the related buyer's resale price.

Ratio Decidendi: In clearances to a related person, assessable value must be determined under the special valuation provisions for related-person sales, and resale price differentials by the related buyer do not by themselves justify a further duty demand.

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