Cost-based valuation of free samples and bar on new grounds in second appeal sustained refund entitlement.

Cost-based valuation of free samples under the Board's clarification at 115% of cost of production was treated as applicable for the relevant period, and the Tribunal accepted the assessee's refund claim on excess duty paid. It also held that the Revenue could not introduce a fresh contention in second appeal that valuation should have been determined under the valuation rules, because that issue had not been raised or decided before the lower authorities. The ruling therefore sustained refund entitlement and rejected a new appellate ground not canvassed earlier.

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Issues: (i) Whether the assessee was entitled to refund on the basis of valuation of free samples at 115% of cost of production under the Board's circular; (ii) whether the Revenue could raise, at the second appellate stage, a new contention that valuation ought to have been made under the valuation rules when that issue had not been proposed or decided below.

Issue (i): Whether the assessee was entitled to refund on the basis of valuation of free samples at 115% of cost of production under the Board's circular.

Analysis: The refund claim arose from the assessee's adoption of a pro-rata valuation method for free samples, followed by the Board's clarification requiring valuation at 115% of cost of production. The earlier decision supporting cost-based valuation had already been affirmed by the Supreme Court, and the Tribunal treated that position as governing clearances of the relevant period. On that basis, the assessee's claim for refund on excess duty payment was found sustainable.

Conclusion: The issue was decided in favour of the assessee.

Issue (ii): Whether the Revenue could raise, at the second appellate stage, a new contention that valuation ought to have been made under the valuation rules when that issue had not been proposed or decided below.

Analysis: The Tribunal noted that the dispute before the lower authorities was confined to whether the assessee correctly computed 115% of cost of production in terms of the Board's circular. The applicability of the valuation rules had neither been put in issue nor adjudicated by the original authority or the first appellate authority. A new contention not raised in the earlier proceedings could not be introduced for the first time in second appeal.

Conclusion: The issue was decided against the Revenue.

Final Conclusion: The assessee's refund entitlement was sustained and the Revenue's challenge failed, resulting in allowance of the assessee's appeals and dismissal of the Revenue's appeal.

Ratio Decidendi: A party cannot raise a new valuation contention for the first time in second appeal where the issue was neither proposed nor decided in the proceedings below, and a cost-based valuation supported by binding circulars and affirmed precedent must be applied for the relevant period.

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