Central excise valuation: resale price cannot replace sale price merely because one buyer is related on the facts.

Rule 9 of the Central Excise (Valuation) Rules cannot be applied merely because a single clearance was made to a buyer alleged to be related under Section 4(3)(b) of the Central Excise Act, 1944, when the remaining clearances were to independent buyers at the same price. The assessee's sale price could not be displaced by the buyer's onward resale price on these facts, as the related-party element did not justify automatic adoption of the resale value for assessable value. On that basis, Rule 9 was treated as inapplicable and the proposed differential duty and penalties were not sustainable.

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Issues: Whether Rule 9 of the Central Excise (Valuation) Rules was applicable so as to reject the sale price declared by the assessee and adopt the price at which the buyer resold the goods, on the ground that the buyer was a related person under Section 4(3)(b) of the Central Excise Act, 1944.

Analysis: The clearance pattern showed that only one consignment was sold to the proprietary concern of a director, while the rest of the clearances during the relevant period were made to independent buyers at the same rate. The lower authorities had applied Rule 9 to adopt the buyer's onward sale price as the assessable value on the footing of relationship under Section 4(3)(b). The governing principle applied was that Rule 9 cannot be invoked merely because some clearances are to a related buyer when the bulk of the clearances are to unrelated purchasers, and the related buyer's resale price cannot automatically replace the assessee's sale price for valuation.

Conclusion: Rule 9 was held inapplicable on the facts, and the demand of differential duty and penalties could not be sustained.

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