Invoice price and freight exclusion guided excise valuation, while technical non-compliance could not bar merits-based appeal review.

For goods under Item 68 covered by Notification No. 120/75, invoice price was taken as the assessable value after excluding freight and insurance separately shown in the invoices, because the exemption operated on the basis of invoice value. The Government also held that an appeal should not be rejected for non-compliance with Rule 173-I(2) without first giving an opportunity to comply, and that the requirement ought to have been relaxed where merits could otherwise be examined. The revision succeeded, the appellate order was set aside, and consequential relief followed in favour of the assessee.

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Issues: (i) Whether, for goods falling under Item 68 and covered by Notification No. 120/75, the assessable value was to be taken on the invoice value excluding freight and insurance charges; (ii) Whether the appeal could be rejected for non-compliance with Rule 173-I(2) without affording an opportunity to comply.

Issue (i): Whether, for goods falling under Item 68 and covered by Notification No. 120/75, the assessable value was to be taken on the invoice value excluding freight and insurance charges.

Analysis: The notification granted exemption from central excise duty on sales of goods under Item 68 to the extent duty exceeded that calculated on the basis of invoice price, subject to the stated conditions. The Government applied the ratio of its earlier revision order and treated the invoice value for this purpose as the value exclusive of freight and insurance shown separately in the invoices.

Conclusion: The assessable value was to be determined on the invoice value excluding freight and insurance charges, in favour of the assessee.

Issue (ii): Whether the appeal could be rejected for non-compliance with Rule 173-I(2) without affording an opportunity to comply.

Analysis: The appellate rejection rested only on the technical ground that the demand for differential duty had not been honoured before filing the appeal. The Government held that such rejection was unjustified, particularly because no opportunity had been given to comply with Rule 173-I(2), and that the provision ought to have been relaxed so that the appeal could be decided on merits.

Conclusion: The rejection of the appeal on the ground of Rule 173-I(2) non-compliance was unwarranted, in favour of the assessee.

Final Conclusion: The revision succeeded, the appellate order was set aside, and the assessee obtained consequential relief.

Ratio Decidendi: Where a notification bases excise duty on invoice price, freight and insurance separately shown in the invoices are excluded from the assessable value, and a procedural pre-deposit or compliance requirement should not defeat adjudication on merits when relaxation is justified.

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