Related-party valuation for excisable goods must follow the prescribed rules, not ordinary transaction value, in inter-connected transfers.

Where excisable goods are cleared exclusively to a holding company or other inter-connected undertaking, assessable value is to be determined under the valuation rules applicable to such related transfers, not by treating the declared clearance price as ordinary transaction value under section 4(1)(a). The earlier view in the assessee's own matter was followed, and the contrary Revenue authority was distinguished on its facts because it did not concern the same inter-connected-company valuation matrix. On that basis, the demand founded on transaction value was found unsustainable and the assessee's valuation under the rules was upheld.

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Issues: Whether the assessable value of excisable goods cleared exclusively to a holding company or inter-connected undertaking was required to be determined on the basis of transaction value under section 4(1)(a), or under the valuation rules under section 4(1)(b).

Analysis: The goods were cleared only through a related entity, and the appellant had adopted valuation in terms of the valuation rules applicable to inter-connected undertakings. The earlier decision in the appellant's own case had already held that where excisable goods are not sold except through an inter-connected undertaking, valuation must be made under the relevant valuation rules and not by mechanically adopting the declared clearance price as transaction value. The contrary authority relied upon by the Revenue was found distinguishable because it did not concern valuation between inter-connected companies on the same factual matrix.

Conclusion: The demand based on transaction value was unsustainable. The impugned order was set aside and the appeal was allowed in favour of the assessee.

Ratio Decidendi: Where excisable goods are cleared exclusively to a related or inter-connected undertaking, assessable value must be determined under the valuation rules governing such transfers and not under section 4(1)(a) as ordinary transaction value.

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