Excise valuation of diverted surplus goods must use the original manufacturer's wholesale cash price and the date of actual removal.

Excise valuation of surplus goods diverted and sold by a dealer must reflect the basic character of excise as a duty on manufacture, not on resale. The assessable value is therefore the wholesale cash price at the factory gate of the original manufacturer, or the alternative method under Section 4 where that price cannot be ascertained; the dealer's own market sale price is excluded because it includes post-manufacturing elements and profit. For diverted surplus goods, the relevant valuation date is the date of actual removal from the dealer's premises, not the date of manufacture or original purchase. A demand based on the dealer's resale price cannot stand and requires fresh assessment on the correct basis.

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Issues: (i) Whether the assessable value of surplus excisable goods diverted and sold by the petitioners was to be determined by reference to the petitioners' market sale price or by the wholesale cash price at the factory gate of the original manufacturers under Section 4 of the Act. (ii) If valuation was governed by Section 4, whether the relevant point of time for fixing such value was the date of manufacture, the date of original sale to the petitioners, or the date of diversion and sale by the petitioners.

Issue (i): Whether the assessable value of surplus excisable goods diverted and sold by the petitioners was to be determined by reference to the petitioners' market sale price or by the wholesale cash price at the factory gate of the original manufacturers under Section 4 of the Act.

Analysis: Excise is a duty on manufacture or production and its valuation cannot be converted into a tax on sale. The petitioners were not manufacturers of the original parts, and their own resale price included post-manufacturing elements and profit unrelated to manufacture. The machinery provision in Section 4 had to be applied consistently with the basic character of excise. The proper measure was therefore the wholesale cash price at the factory gate of the original manufacturers, or where that could not be ascertained, the value under the alternative method in Section 4.

Conclusion: The petitioners' market sale price was not the assessable value; valuation had to be made with reference to the original manufacturers' wholesale cash price under Section 4.

Issue (ii): If valuation was governed by Section 4, whether the relevant point of time for fixing such value was the date of manufacture, the date of original sale to the petitioners, or the date of diversion and sale by the petitioners.

Analysis: The date of manufacture was ruled out. The governing rule for diversion of surplus goods indicated that the applicable rate and valuation were those in force on the date of actual removal from the petitioners' premises. That date also furnished the logical reference point for valuation under Section 4. The later diversion and sale, not the earlier purchase by the petitioners, was therefore the relevant point of time for determining assessable value.

Conclusion: The relevant date for determining value was the date of diversion and actual removal from the petitioners' premises.

Final Conclusion: The impugned demand based on the petitioners' resale price could not stand, and the matter required fresh assessment on the correct valuation basis with the relevant date fixed at diversion and removal of the goods.

Ratio Decidendi: For excise valuation of surplus goods cleared from bond or exemption control, assessable value must reflect the wholesale cash price of the original manufacturer and must be determined with reference to the date of actual removal, not the taxpayer's subsequent resale price.

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