Excise valuation includes free-supplied components, while invoice-price exemption applies to duty above the sale price.

For excise valuation, the intrinsic value of wagon-bodies cleared as complete units includes the value of wheel-sets supplied free by the Railways, so assessable value cannot be limited to the invoice price of the wagon-body alone. The exemption under Notification No. 120/75-C.E. applies where duty exceeds the invoice price, and clause (iv) does not require the invoice price to include the value of buyer-supplied wheel-sets. Relief is therefore available on the excess duty over the invoice price, consistent with the notification's purpose of mitigating the gap between assessable value and sale price.

---

---

Issues: (i) Whether the assessable value of wagon-bodies cleared with wheel-sets supplied free by the Railways could include the value of the wheel-sets; (ii) Whether the manufacturer was entitled to exemption under Notification No. 120/75-C.E. for the duty payable in excess of the invoice price.

Issue (i): Whether the assessable value of wagon-bodies cleared with wheel-sets supplied free by the Railways could include the value of the wheel-sets.

Analysis: The value for excise purposes is the full commercial or intrinsic value of the manufactured goods, and it is immaterial that part of that value relates to components supplied free by the customer. Since the wagons were cleared as complete units mounted on wheel-sets, the assessable value could not be confined to the invoice value of the wagon-bodies alone.

Conclusion: The assessable value was liable to include the value of the wheel-sets, even though they were supplied by the Railways free of cost.

Issue (ii): Whether the manufacturer was entitled to exemption under Notification No. 120/75-C.E. for the duty payable in excess of the invoice price.

Analysis: The notification contemplated a situation where the invoice price may be lower than the assessable value and granted relief from duty on the excess. Clause (iv) did not require the invoice price to include the value of wheel-sets supplied by the buyer, and the condition of the notification was satisfied where the invoice reflected the true sale price of the manufacturer's supply. The exemption was intended to mitigate the burden arising from the gap between assessable value and invoice value.

Conclusion: The manufacturer was entitled to exemption under Notification No. 120/75-C.E. from the duty component in excess of the invoice price.

Final Conclusion: The appeals succeeded and the duty demand could not be sustained to the extent the notification protected the excess over the invoice price.

Ratio Decidendi: For excise valuation, free-supplied components form part of the assessable value, but an exemption notification granting relief on duty in excess of invoice price must be construed to operate according to that price without compelling inclusion of such free-supplied components in the invoice itself.

---