Excise valuation based on declared sale price cannot be rejected without proof of non-arm's-length pricing or flow back.

Declared sale price for excise valuation cannot be rejected unless revenue shows that the price was not the sole consideration, the transaction was not at arm's length, or there was flow back or other legally relevant material. Here, the show cause notice contained no such foundational allegations, so the assessable value could not be re-determined merely because it was lower than manufacturing cost. Reliance on customs proceedings for imported raw materials did not justify revaluation of finished goods, and Ujagar Prints was inapplicable because that case concerned contract manufacture and return of goods to the raw material supplier.

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Issues: Whether the assessable value of the goods cleared by the assessee could be re-determined on the basis of the customs proceedings and the demand of differential central excise duty was sustainable; and whether the valuation principle in Ujagar Prints applied to the facts.

Analysis: The proceedings sought to enhance the assessable value of shoes cleared during the relevant period, but the show cause notice contained no allegation that the sale price was not available, that the price was not the sole consideration, that the dealings were not at arm's length, or that there was any flow back from buyers to the assessee. In the absence of such foundational allegations, the declared price could not be rejected merely because it was lower than the cost of manufacture. The reliance on the customs show cause notice for imported raw materials could not, by itself, justify re-determination of the value of the finished goods manufactured and cleared by the assessee. The decision in Ujagar Prints was inapplicable because the factual setting there involved manufacture under contract for return of goods to the raw material supplier.

Conclusion: The demand of differential central excise duty was not sustainable, and the assessable value declared by the assessee could not be rejected on the facts of the case.

Final Conclusion: The impugned order was set aside and the assessee's appeal succeeded with consequential relief according to law.

Ratio Decidendi: Declared sale price cannot be rejected for excise valuation unless the revenue establishes that the price was not the sole consideration, the transaction was not at arm's length, or there was flow back or other legally relevant material justifying re-determination.

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