Normal price under excise valuation may reflect lower prices to distinct industrial buyer classes when trade practice supports it.

Where excisable goods are sold to industrial consumers as original equipment at a lower price, that class of buyers may be treated as a distinct class under section 4, and the price charged to them can be accepted as the normal price if the dealings are at arm's length and consistent with normal wholesale trade practice. Once the statutory conditions for determining normal price under section 4(1)(a) are satisfied, valuation need not be shifted to cost of production. The lower price to original equipment buyers was therefore accepted as the assessable value, and cost-based valuation was rejected.

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Issues: Whether the price charged to industrial consumers buying spark plugs as original equipment could be accepted as the normal price for central excise valuation under section 4, and whether the assessable value had to be fixed with reference to cost of production.

Analysis: Proviso (i) to section 4(1)(a) recognizes that where goods are sold at different prices to different classes of buyers in accordance with the normal trade practice of the wholesale trade, each such price is deemed to be the normal price. Industrial consumers purchasing the goods as original equipment constituted a distinct class of buyers. In the absence of evidence that such dealings were not at arm's length, the lower price charged to that class had to be accepted as the normal price. Once the ingredients for determination of normal price under section 4(1)(a) were satisfied, resort to cost of production was unnecessary.

Conclusion: The lower price charged to original equipment buyers was rightly accepted as the normal price, and valuation could not be shifted to cost of production. The revision succeeded.

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